Lifestyle
The Real Estate Cycle Explained
Discover the four phases of the real estate cycle—recovery, expansion, hyper supply, and recession—and how they impact property values.
What is it?
The real estate cycle is a predictable pattern of market fluctuations that property markets experience over time. It consists of four distinct phases: Recovery, Expansion, Hyper Supply, and Recession. Recovery is the market bottom, characterized by low demand and falling vacancies. Expansion sees growing demand, rising rents, and new construction. Hyper Supply occurs when supply outpaces demand, leading to increased vacancies and slowing price growth. Finally, Recession is marked by falling prices and rents as supply significantly exceeds demand, completing the cycle before it begins anew.
Why is it trending?
Understanding the real estate cycle is trending due to global economic uncertainty and shifting interest rates. After a period of rapid price appreciation, many are trying to predict whether the market is entering a Hyper Supply or Recession phase. Homebuyers, sellers, and investors are closely monitoring market indicators to time their transactions effectively, trying to avoid buying at a peak or selling at a trough. The discussion is fueled by media reports on housing affordability and potential market corrections.
How does it affect people?
This cycle directly impacts personal wealth and housing decisions. During the Expansion phase, homeowners see their property values increase, while buyers face higher prices and more competition. In a Recession, buyers may find better deals and less competition, but sellers might struggle to get their desired price or even sell at a loss. For investors, recognizing the cycle's phase is crucial for maximizing returns and minimizing risk. It influences when to buy, sell, or hold properties, affecting everything from mortgage rates to rental income.