How_Money_Works_-_The_Facts_Visually_Explained

178 179

PERSONAL FINANCE

Wealth-building investments

THE 18-YEAR REAL-ESTATE CYCLE

The idea that ups and downs in the real-estate market

run in an 18-year cycle is based on US studies into the

property market over the last two centuries by economic

forecaster Phillip J Anderson. He demonstrated that land

sales and property construction peak on average every

18 years – 14 years up and four years down.

HOUSE PRICES

7 years 7 years 4 years

TIME (YEARS)

Property

investors buy

Rents

stabilize

Too many houses;

construction

slows; rents fall Abundance of

tradespeople as

construction

prices fall

Valuations

fall

Affordability

crisis; too hard to

get mortgage

than buyersMore sellers

No confidence in market

Rents

increase

Hardly any construction

work

Se

lle

r’

s^ m

ar

ke

t Sell

er

’s

m

ar

ke

t

❯❯Appreciation Rise in the value of a property over time.

❯❯Depreciation Fall in the value of a property over time.

❯❯Capital gain The increase in value of a property (or

other asset) from its purchase price; this can be short

term (under one year) or long term.

❯❯BRR Buying, Refurbishing, and Refinancing strategy.

NEED TO KNOW

B
uy
er
’s
m
ar
ke
t

SALEFOR SALEFOR

SALEFOR

R e c o v e

ry

(^)
S
lu
m
p
B
o
o
m
(^) S
lo
w
(^) d
o
w
n
Bu
ye
r’s
m
ar
ke
t
8.75%
annual rise in UK
house prices over
47 years between
1968 and 2015
178-179_Buying_selling_property_for_profit.indd 179 13/10/2016 16:09