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 of the

property market over 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
u
ye
r’

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
5 %
annual housing
price increase
in US in 2015
US_178-179_Buying_selling_property_for_profit.indd 179 13/10/2016 16:20