Business & Investment

Know when the Australian real estate market will pop

It is no exaggeration to say that I work with many bears.

It comes with the territory of being president Australia’s oldest economic organization — And those who spend a lot of time advocating tax switching to lower land prices.

Psychology is understandable.

In other words, real estate prices cannot go up forever.

Ask a realtor this question and you’ll get a standard answer.

“We haven’t experienced a real estate crash for 30 years!”

This means that whenever the market is likely to be “pop”, some more buyer subsidies and stamp duty cuts will be thrown at it, creating a “boom”.

What’s more, if COVID didn’t disrupt the market, what could it do?

This is one of the reasons I’ve helped more than a few of the first homebuyers in their 40s buy real estate in the last 12 months.

These are the people who finally gave up waiting for the “property crash we have to do” and attended the real estate pongee party.

Still, I can’t help wondering how long this will last.

The country’s top economists question the same.

The worst prediction (which I can find) is from Christopher Joy, Portfolio Manager and Chief Investment Officer at Coolaba Capital.

He is proposing 15-25% reduction At the median housing, the RBA needs to raise the cash rate by 100 basis points.

If the RBA tries to normalize the cash rate, the price should drop because the night will be the next day.
And if the RBA could raise interest rates by more than 100 basis points, that would probably be the biggest revision on record …

25% isn’t the highest on record, but it’s close.

Let’s put it in the context …

  • The worst property busts we experienced were in the 1840s and 1890s. The 1890s surpassed all of them. According to the data, from 1887 to the peak of 1891, house prices rose 32%, but fell another 31% over the next 50 years. Because of that, I missed the next cycle.
  • Median prices remained stagnant until the early 1920s. They rose 25% before the Great Depression, but fell 26% in the subsequent recession.
  • House prices rose 70% from 1961 to the peak of the 18-year cycle in 1974, and then fell 16% by 1979, before the market changed.
  • The recession in the early 1990s caused the housing market to collapse, but the median decline in Melbourne and Sydney was recorded at just over 10%.
  • The Royal Commission’s entry into the banking sector and APRA’s macroprudential credit control-induced lending restraints were similar to the recent recession in 2018.

These are the most serious recessions in Australia. However, keep in mind that the median price hides a lot.

The median is just in the middle of a series of sales.

For example, in the recession of the 1970s, a median recession of 16% did not come close to telling the story of the devastation felt on earth.

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Agents at the time reported a 75% failure rate to achieve a book real estate sale. There was a shortage of buyers.

New home approvals fell by 7.9%.

Several commercial real estate developers have become trustees.

Some building-and-loan unions went wild, forcing the state government to guarantee support for financial institutions.

It’s a familiar story.

The same thing happened in the recession of the 1990s.

The median price recorded a drop of only 10%, but for some properties the pre-crash selling price was eliminated by almost 50%.

One thing for sure is that you don’t want to buy at the top.

Still, much of the mainstream is unaware that all of the above “crash” dates could have been predicted years ago.

This is the knowledge we are teaching Cycles, trends, forecasts..

So I was able to foresee a COVID-related panic six years ago.

In June 2014, we made the following predictions (in the first issue!).

The tallest buildings have a consistent practice of opening in the midst of a recession. They usually open in the sky …’This allows us to date the slowdown in the middle cycle of the new real estate cycle that has just begun. Midpoint of 14 years. 2019 will peak during the recession of 2020/21 and will be at a low level in 2021 …

Yes, you are reading it correctly.

and Cycles, trends, forecasts, Forecasts a recession in 2020, dating back to 2014.

And it was easy!

That is, if you have a comprehensive understanding of the real estate cycle and, more importantly, the economics behind it.

Having the same understanding is Fred Harrison, a British economist and fellow Georgist.

Fred succeeded in predicting a real estate crash over the last two years in 1991 and 2008.

In his book The power of the landHarrison, published in 1983, predicts a real estate peak in 1989 and the subsequent recession.

He did the same in his 2005 publication — Boom Bust: Home Prices, Banking, 2010 Recession — Well predicted the peak home prices in 2007 and the recession in 2008-10.

He has accumulated and studied hundreds of years of data, so he can make these predictions.

And this same cycle happens very predictably in the Australian real estate market.

If the cycle runs as expected, it will still be several years before the next real estate crash in Australia.

And in the meantime, if you know how to play Monopoly games, there are many opportunities to generate considerable wealth.

However, be careful, it will cause a crash. And, as we warned readers in 2014 about the 2020 panic, readers have long known when the next recession will occur.

nice to meet you,

Catherine Cashmore Signature

Catherine Cashmore,
Editor, Daily Reckoning Australia

PS: Australian real estate expert Catherine Cashmore reveals why she thinks we’ll see the biggest real estate boom in our lives over the next five years. Click here for more information.

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