Like anyone interested in the economy, I’ve observed that investment markets go through cycles of highs and lows.
A bull market is a market on the rise, usually when the economy is in good heart, while a bear market exists when most stocks are declining in value and the economy is in decline. In between, things can fluctuate, but indicators are usually on the way up or the way down.
The trick is to hold your nerve while these patterns come and go. To date, the cycles have continued – and the property market has been no exception in this regard. The cycles are marked by significant price movements and corrections.
Typically in New Zealand, property market cycles have been anywhere from three to six years in length, depending on a number of influences, such as social and economic factors as well as interest rates and government and Reserve Bank policies.
Market sentiment is also key. It can lead to overreactions in the property market, causing it to overheat during booms or crash during slumps. There’s nothing like panic buying or selling to tip things out of balance.
If you recognise each upswing is setting up for the next downturn, and vice versa, you can ride out the storms by taking a long-term view.