By Indhira Desangles
I recently participated as a speaker in a webinar, in which future real estate specialists participated and where I talked about the real estate cycle.
The real estate market doesn't behave randomly; it follows a cyclical process related to supply and demand, which can last between one and ten years. It is at this point that real estate professionals must be able to detect the position and movement of each stage, as this allows them to identify the optimal time to recommend investment to their clients.
However, for this identification to be possible, the real estate agent must have skills to detect the balance between supply and demand, which is affected by demographic and economic variables of each country, impacting its equilibrium and creating market opportunities for clients.
Below I share the four phases of the real estate cycle, to serve as a guide and support in selecting the best real estate investment plan and to know when the opportune moment is to take commercial action:
1 – Recovery, also called the upward cycle or wave. This is characterized by a low number of projects or new construction, high demand, and low supply. It usually occurs during a crisis. Here, the few available projects tend to be successful. It is characterized by growth in demand, investment, production, profits, and employment.
2 – Expansion is the phase that follows a period of crisis and generates high activity and economic growth. It is often called "the most optimistic moment" after a difficult period and is characterized by widespread enjoyment of growth. Its features include new construction, increased investment, high demand for space, and increases in profits, wages, and costs. It is important to keep in mind that, after this "boom," there is likely to be oversupply and competition.
3 – Hypersupplyidentified by having an increase in the availability of spaces and a high quantity and boom of new constructions.
4 – Recession, characterized by a slowdown in the availability of real estate. It is, in fact, the lowest point of the cycle, as there are no new projects or demand to incentivize investment. Its characteristics typically include decreased demand and investment, and declining wages.
Understanding these four phases of the real estate economic cycles will be crucial when deciding on the best real estate investment plan, since investors or project developers with sufficient vision and knowledge will be able to identify the opportune moment for the commercial actions they should recommend to their clients.
At Desangles Properties, we have the expertise to provide the best business recommendations for any of your investment assets. Contact us
