Commercial Property and The “Property Clock”

A recent survey by the Australian property institute (API) shows that the East Coast property market, all sections commercial and residential, at the bottom or near the bottom of the property cycle. They demonstrate this by using what’s called a property clock.

What is a property clock?

Typically surveys like this use property clocks to show where they believe the market to be.

They usually run like this:

Noon to 6 PM is a downswing and 6 PM to midnight is upswing.

propertyclock1

It’s interesting to note that the survey found that commercial property in Sydney and Brisbane has started on the upswing. They believe that Melbourne is at the bottom of the cycle.

Industrial properties in all three cities are seen as being on the upswing. Retail is seen as being is nearing the bottom of the cycle in the three major cities. Leading real estate agents still believe sales are to remain slower than in the past for the next 12 months or so.

What does this mean for the commercial property investor?

I believe that really does not matter where we are on the property clock to find a good deal.

After all it’s really impossible to predict exactly where we are on the clock at any given time and usually only you will know after a year or so after the bottom or top ,that was actually the bottom or the top of the market.

If you’re an investor that is waiting for the perfect time to buy – you will probably never buy.

When I started my investment career in the early 1980s I decided that it was not a good idea to focus on the “noise” in the market.

To me the best way to find a good investment was to focus on the fundamentals ,the numbers and potential upsides.

When I look back some of the best properties I bought were when market sentiment was negative.

The properties I have invested in have withstood the test of time and have been through several ups and downs of the market. I put this down to focusing on the fundamentals, location, type of tenant, correct rent and upsides.

Ongoing focus on the management will also help you maintain your investment returns.

Many investors suffer from analysis paralysis, I see this to be a major problem when you’re starting to invest this is why I believe that it’s best to focus on a small market area initially so that you can become more confident in the different type of properties that you are interested in .

This way you’ll quickly become an expert in it in the top of property you are focusing on and will be more easily go to sort out good potential properties from not so good ones.