How will Market Cycle Timing indicate the next property Boom and Bust?
Hi, I’m Jeremy Shepherd and I’m talking about Market Cycle Timing.
This is one of the statistics we use in our research at Empower Wealth to uncover top growth locations for our clients to invest in.
It’s rare that you’ll see a property market follow a stereotypical slow smooth exponential growth curve.
The Market Cycle Timing — or MCT as we call it — is a score out of 100 for the likelihood that a property market is about to enter its next growth phase.
The MCT is not a precise indicator.
It can’t pick the exact start of the next growth phase or the peak of the market. It’s about probabilities and likelihood.
The concept of scoring the MCT out of 100 goes something along these lines:
For every year of above-average growth, we get closer and closer to the peak of the market, and the MCT score gets lower and lower. Conversely, at the start of the growth phase, for every year of below-average growth, we get closer and closer to the start of the next growth phase and the MCT gets higher and higher.
Now, you combine that with some recent price growth over, say the last six months, and that’s when the MCT really starts to spike.
Some growth phases can be quite short lasting — only a couple of years — others can go on for more than five years. Every market has a different cycle and every cycle is different from the one before.
The MCT is valuable to us because it can help us avoid buying at the peak of the market. It helps us time entry into the market, which is really important because you don’t want to buy a negatively geared property, hang on to it for two, three, five and even more years, not getting any capital growth and making the whole exercise seem unworthy.
MCT is just one of the indicators we use. If you’re interested in looking at all the indicators we use you can check out our Research page.
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