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How Important is a Property Clock?

Regardless of whether you’re an experienced investor or a first home buyer, there is such a thing as “the right time” in buying or selling property that you need to be mindful of. And this is not just a thing in the Australian property market, as it proves to be true in the real estate industry all around the world.

So how can you tell when it is a good time to buy or sell property? And how will you know when the market is in its cycle?

The Property Clock

The property clock is a very effective approach to keeping track of the property market cycle. It is loosely based on the “boom”, the “bust” and the “recovery” stages of the property market.

The cycle is demonstrated in the form of a clock to better understand it. As you can see on the illustration above, when the hour hand of the clock is pointed at 12, it means that the property market is at its peak, or otherwise known as the “boom” phase. And as the hand rotates clockwise, it moves on to when it starts to decline until it reaches the bottom at 6 when there is an oversupply of properties in the market. The hand then makes its way up again until it reaches the next boom phase.

The Use of the Property Clock

Apart from being a useful tool that’s easy to understand, the property clock also has an equally important purpose: telling you the proper timing. The first thing you need to do is to find out where your suburb sits on the clock. When you’ve had it figured out, use it as a guide to sell at the peak and buy when the prices are at their lowest.

How to Find Out Where Your Suburb Sits on the Property Clock

It may come as a surprise, but the task of figuring out where your suburb/region sits on the property clock is not as simple as it seems. This is because the property market is influenced by a lot of factors. While there are many methods of determining the rise and fall of the prices, it’s still just a matter of hit or miss.

One thing you need is the ability to identify which signs to look for to let you know the right “time”. Take this as an example: when properties sell for higher than the asking price but are on the market for only a short time, it may indicate that the market is at its “boom” phase. On the other hand, when prices rise and the auction clearance rates soar up to more than 50%, it may mean that the market is growing.

It’s a good thing that property market data is now readily available, especially through listings sites. And much better, your property agent can also be a good source of updates and advice regarding the property clock.

However, no matter which part of the cycle the market is at, what’s important is that you always know what you’re doing. At the end of the day, the property clock will only serve as your guide to help you make informed decisions about when to or when not to invest.