As you can see, the movement of property values tends to be cyclic in nature. Understanding the various factors that influence the rise and fall of prices will help you choose the right time to buy into a specific area, and when it might be better to pass on what looks like a good deal.

PRICES GO UP

Popularity of a certain area leads to an increase in demand and an increase in prices. Rising prices mean owners enjoy high returns on their investment, which in turn makes the area even more attractive to new buyers, driving demand and prices even higher. Land owners, builders and everyone else associated with the process are in high demand, so their prices increase too. More builders move into an area, more land changes hands, more new properties are built. Values rise and rise.

Until …

Something happens to slow down, stop and even reverse the trend.

PRICES GO DOWN

Most often it’s simply that the market becomes saturated. There are no longer enough new customers for all the new properties being built, so prices fall.

As prices fall, the value of existing properties falls too. Owners with a strong investment motivation see the value of their assets falling, and sell up – driving prices down further.

Saturation also means more competition for visitors and rentals and a tendency for rental rates to be reduced to attract customers. It also means there are simply not enough visitors to fill all the properties to break-even levels. Losing just a couple of bookings a year can put some owners below their break-even point, so they are forced to sell up as they can’t cover the mortgage. More people selling means prices continue to move downwards.

Until …

Again, something happens to slow down, stop and even reverse the trend.

A major new visitor attraction or a landmark development might inject new interest into an area, stimulating new interest in properties within easy traveling distance.

A certain price level may make it of particular interest to a certain type of customer, creating demand for a particular type of property that can ripple outwards to affect the whole area.

Or it might simply become more fashionable due to some change in lifestyle choices, a media event, or high profile residents.

These cycles may happen slowly over many years and there are never any guarantees that the cycle will rise as far as it falls, or even that it will complete the cycle within a typical lifetime.

RIDE THE ROLLER COASTER
That might all sound very scary, like I’m warning that your investment is bound to ride a roller coaster over the coming years, causing you alternating heart attacks and bouts of elation, but it’s unlikely to be as dramatic as that.

Rather, what I want to encourage you to do is be wise and keep your eyes open and your brain switched on at all times. As you evaluate an area and the properties within it, you should be assessing not only what is happening in the area today, but also how that might pan out over the next few years.

For example, an area with many new developments is a good sign that an area is “hot” – but you have to be sure you haven’t arrived too late in the cycle and buy one of the last full-price properties before the developer starts handing out discounts, incentives and guaranteed income packages to make his sales. A developer offering agents 10% commission on sales can have a dramatic impact on the local marketplace and create a false impression of just what the local property market is like.

Your agent can help you understand things like this as they will have an idea how many properties were being sold on this kind of development last month, three months ago, six months ago – how prices are trending locally, and how quickly properties are selling when they come on the market.

It’s also worth remembering that any of these trends can be bucked by buying wisely and financing carefully. Leverage all of the advice and resources available to you to make wise choices rather than simply following the herd and it is certainly possible to find, finance and operate a property that will be substantially trend-proof.

JUST ANSWER THE QUESTION!
Ok, in spite of all this talk of cycles, ups and downs, caveats and warnings, everyone looking at buying property in Florida wants to know the same thing, will prices rise. It is not however a plan we would recommend to the man or woman in the street who are gambling with their nest egg.

Firstly, it has to be said that experts agree you should not base any property purchase on the expectation of capital appreciation and therefore the correct answer to the original question would be something like “Don’t base your calculations on that assumption.”

However, the same kind of experts also say that if you look at the past trends and make an informed forecast into the future, it seems realistic to expect that prices over the next 10 years will rise at a similar rate to the increases over the last 10 years – around nine to 10% per annum.

Be very, very aware that those are averages, at the moment prices in some areas are falling fast due to over supply whereas other areas are starting to rise again. A problem is all to often Brits are steered towards the properties which are falling in value as desperate developers and agents are offering high commission rates.