Dose 4. What does it really mean to have a market with short and fast cycles (Liquid markets and why they are the most interesting?)

Do it right in Real estate investment; wealth creation at its best

Cycles are evidence of evolving, growing, moving, thus are some of the most important elements of life.

Some of the property markets globally have matured into very slow long cycles, mostly investors refer to them as dead markets. Slow growth if any, saturation which results in below average returns, none or difficultly liquid and many more of the dynamics that tell us; invest elsewhere.

On the other hand young, vibrant markets, far from maturity or saturation are known to have faster, shorter cycles. High growth and giant drops, good annual returns, very liquid. The same reasons that make this market appealing make it scary to few.

Let’s pause a question to ourselves:

Do you prefer to earn 1.5% annually in rental returns, and make 4% capital appreciation annually, while when the drop comes prices go down by 10% only. While this cycle takes place once every ten years.

Or would you rather earn 6 to 9% annually in rental returns, and 10 to 30% in capital appreciation annually while when the market drops it goes down by 20 to 40% and this cycle takes place twice during the same period.

Mathematically it makes more sense to be part of the second scenario. Logically liquid markets with fast cycles are better in sustaining and increasing wealth if held for the right reason and right period.

As a conclusion investors always consider the following elements when investing and all show a bigger opportunity in markets with fast cycles:

Properties are of higher liquidity
Higher growth ratios although the bigger drops the final result still keeps an investor with descent returns
Taking into consideration faster cycles recover after drops faster more often generally

Those are all elements we will deal with in this series:

Dose 1. Real state a component of every portfolio.

Dose 2. Step buying to crunch busts and booms (Afloat in a cyclical industry)

Dose 3. Opportunities within every part of every cycle

Dose 4. What does it really mean to have a market with short and fast cycles (Liquid markets and why they are the most interesting?)

Dose 5. Have your money work for you.

By Makram H. Hani
C.E.O. Arms &McGregor International Realty®

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