Forecasts
It’s been an absolute pleasure and honour to bring readers information about the land cycle over the years. Despite the work and diligence involved, it’s no exaggeration to say I’ve loved every moment! I’ve also enjoyed personal correspondence with many readers who have been bold enough to act on my recommendations and made significant changes to their lives and wealth with the knowledge shared. The underpinning of that research is an understanding of the role of economic rent in the economy. I dare say, that the root of all evil and our ills, is not money - as a simple translation of the biblical proverb would suggest. But rather the chase for economic rent – nature’s free lunch. However, collecting the economic rent is also the key to creating immense wealth! Here, at Catherine Cashmore’s Land Cycle Investor, I’ll continue to guide you through the most important part of the land cycle – the final two years – the “winner’s curse” with weekly, and monthly editions. Whilst the land cycle exhibits similarities in how it plays out across nations – in both the stock market, and land market, Australia has more opportunities to create wealth from increasing land values, than anywhere else in the world. Our economy is choreographed around the land market. Due to the concentration of population around the capital cities, and tax policies that are favourable to landlords, the atmosphere is ripe if you know how and when to take advantage. I believe my experience through my own work as a real estate agent, as well as my role as president of the oldest Henry George association in Australia, ‘Prosper Australia’ – (where we have conducted a vast amount of research into the land cycle) – places me in the best position to continue to educate on the subject. In short – I believe the information is too important not to continue! These final two years, not only hold the greatest wealth making opportunities – but also give forewarning of the crash that comes after the peak in 2026. That’s if you know the leading indicators to look for!! This is what I’ll be disclosing as we march through the months ahead. If you’ve been following me for a while – you’ll know how important and profitable land cycle forecasting can be. Over the years forecasts I’ve made - with the help of contributors such as Philip Soos, and Kalvert K Clark - have been very accurate. I’ve documented a few of them below.
2015
In ‘The Cashmore Files’ in 2015, I forewarned of a recession in 2020.
I also forecast that the smaller states and territories by population would turn as we entered the second half of the cycle 2021 onwards.
At that point, property gains outside of Melbourne and Sydney had been flat.
"..2020 will mark a period of depressed economic activity. If you’re a savvy investor - it could be an excellent time to buy land in preparation for the second half of the real estate cycle beginning 2021."
"The current ‘boom’ is largely contained to Sydney and Melbourne (for now). Other states are not seeing the same gains. ...
The second half of the 18 year cycle is typically stronger than the first half.
This is demonstrated on the charts above that show strong price gains in each state between 2000 and 2004.
Just as the second half of the last cycle spread into other states, so will the gains in this cycle — once we’ve past the midway point (in 2020). "
In early 2015 I did two podcasts with Callum Newman.
These are still available at Episode 8 and 9 of The Newman Show . In them, I highlighted that Hobart was a key city to watch for real estate gains. It’s not an area that traditionally attracts much speculation.
However, following that, between 2015 and 2019, median prices increased over 40%.
Even the downturn in 2018 didn’t affect the trend – the gains continued through and following the economic downturn produced by COVID.
2019
When I took over CTF in Sep 2019, I warned investors not to get into the stock market despite it reaching record highs.
I forecast the approaching peak in the U.S. stock market.
I advised to steer clear of REITS
“Property makes up a large percentage of stock market value. Real estate leads the business cycle. Therefore, it’s not surprising to see property related stocks turn prior to other sectors…
Currently however, my cycle analysis says now isn’t the time to be stepping into REITs.
There was a fall in cross boarder investment into the Australian commercial sector at the beginning of this year — indicating we have already passed the peak.
Commercial real estate is closely tied to the business cycle. That means returns will be closely correlated to our likely midcycle correction due in 2020….”
In Dec 2019 I warned members again via email that Trump is leading stock investors into a trap and that we were approaching the peak in stocks.
"Prior to the mid-cycle slowdown, historically markets will exceed their previous peak, super tall buildings will open, and attention-grabbing initial public offering (IPOs) hit the press.
We’re witnessing all of this now.
In fact, every time Trump’s critics attack him, the DOW seems to reach a new all-time high.
It is now trading at over 100% of GDP.
Warren Buffet once said this metric is ‘probably the best single measure of where valuations stand at any given moment.’
In other words, the US market looks significantly overvalued.”
In Dec 2019 I showed that the potential fall on the S&P that would occur in 2020, could be significant..
The charts showed that the 10 year returns on the S&P were at that time
“… booming. It marks the 2009–19 boom in the S&P 500.”
BUT!
“… as we have predicted previously in Cycles, Trends & Forecasts, it also suggests a downturn is due between 2020 and 2021/early 2022. An event similar to the dotcom crash... "
- with the charts in that edition showing a potential 50–60% drop on the S&P. I initially called the turn in the Perth market in Oct 2019 - prior to COVID.
"Perth is now approaching the bottom of its cycle. There are several indicators that a turn is ahead. It won’t be this year, but by mid-2020 we should see a change."
In Dec 2019 I said that despite any slowdown expected in the stock market real estate prices would continue to rise from 2019 through to 2022.
"The indicator shows a definite rise in (real estate) prices through to 2022. This is for nationwide prices. Based on my recent updates, this is precisely what we should expect.”
I then said - that prices would stall after that initial rise into 2022, in Melbourne and Sydney 'potentially' impacting a winner’s curse of speculation in these regions and keeping gains outside of the central/inner rings.
"After 2022... charts show a diversion between Sydney and Melbourne Affordability constraints at some point have to kick in. As they did in Sydney in 2004.
This could prevent a ‘winners curse’ of speculation into 2027.
… In Melbourne, where sprawl is possible, strong infation will most likely be limited to the middle to outer rings, and the larger regional cities.
A natural ripple effect as buyers seek out cheaper options.
However, in other states that have seen very little inflation in the first-half of the cycle, by 2027 the CAPE (gains) will be very high.”
Also in that edition - I foreshadowed "there is potentially a massive boom ahead in WA/Perth."
It’s the only state that continued to show gains through 2022 - evidencing little impact from the steep rate hiking cycle. The top ten suburbs in Perth have had in excess of 20% gains year on year in their median house price since 2020.
2020
I made similar warnings about the stock market reaching a peak in Jan 2020 – telling subscribers not to get swept away in the bullish news, and rush into the stock market.
“According to the RBA, in the three months to September, money tied up in margin lending rocketed from $11 billion — where it had been for several years — to $17 billion....
When it comes to stock speculation — buyers beware. The cycle suggests now is not the time to be rushing in!”
In the same edition, I forecast that the forthcoming downturn (mid -cycle) would not have as big an impact on the property market, as the Royal Commission into the banking sector in 2018.
I also, that it the recession would not bring a sharp downturn in property prices as we had witnessed over the Royal Commission into the banking sector in 2019 - and it didn't.
“... the big and enduring downturns (real estate) — that lead to potential depressions — ALWAYS happen at the end of the cycle. In a set pattern averaging 18 years.
Needless to say, I don’t see property prices falling as sharply as they did in 2018 for a few years yet.”
Another warning in Jan 2020 indicated that the downturn could come mid-year and that market was reaching its peak.
“Of years starting in zero Gann tells us:
‘The tenth year is a bear year. A rally often runs until March and April; then a severe decline runs to November and December, when a new cycle begins, and another rally starts.’
Typically, this would be close to what we could expect to happen this year (2020)….
… A lot of money is being pumped into the global economy. Therefore, even as the economic data gets worse, world events could have the effect of keeping the markets higher, for longer.
… 2020 is a year that falls close to a panic and low stock prices. This means, as per the economic cycle, markets are reaching their peak...'
In March 2020 - just as the COVID panic hit - I forecast there would be a shortage of accommodation that would follow the recession – inevitably leading to a boom.
"We’ll likely have a housing shortage by the time this downturn is played out. No doubt there’ll be other changes too. Already we’re seeing a shift to online auctions and virtual inspections. This is where the boom from 2021–26 will be seeded…
I also emphasised that it would be a sharp mid-cycle dip with a V-shaped recovery.
“Our conclusion is we’re in for a sharp mid-cycle dip that’s likely to last 12–18 months…before we resume our upward march into the biggest boom of all time."
Also, in March 2020 I warned that the stimulus would lead to a real estate boom - which did in fact begin to turn, and occur from Oct 2020
" It seems bleak out there currently with the COVID-19 outbreak.
The current panic is forcing governments into urgent stimulatory measures.
Both monetary and fiscal policies are being implemented.
This will inevitably feed into land prices. This sets us up for an extraordinary anticipated real estate boom between 2021–25.”
In May, I told subscribers again, that the real estate market was about to turn – and that the cycle had not been disrupted forever by COVID as many economists were suggesting.
"On Saturday morning, I missed out on an auction against five other bidders — a suburban house in Epping, 23km north of Melbourne’s CBD.
The price was around $20K less than it would have sold pre-COVID — not a bad result considering — but not unexpected if you understand the drivers behind the real estate cycle.
My client: an investor looking to get in before the market ‘takes off again’.
He’s not the only one.
In Sydney, two first-home buyers battled it out for a $1.585 million Newtown townhouse in the first weekend of onsite auctions for six weeks.
$1.585 million sounds like a pretty grand budget for a first home buyer.
Right now, ‘the second Great Depression’ is not currently deterring buyers from the sector that underpins the real estate cycle…
…residential real estate, including cashed-up Gen Ys.
Commentators have said that COVID will change the way we behave ‘forever’.
If the above stories don’t convince you how foolish that statement is, a study of history should shoot it out the water ‘forever’.
Of course, it doesn’t mean we don’t have to be alert for the unexpected. However, right now, it looks like history is going to repeat — and it’s going to be one hell of a ride into 2026."
2021
In March 2021 during the boom, I forecast that property markets could see a pull back in their gains, but markets would recover with an immigration boom to follow. (This occurred right at the beginning of 2022)
“Bear in mind, we’re only at the start of the second half of the cycle.
We have a long way to go yet.
The stimulus payments being withdrawn mid-year could produce a short-term pullback.
But there’s plenty to offset that with record investment in infrastructure and a return of overseas immigration at some point.”
In May 2021 I forecast the following in land price inflation for the remainder of the cycle – to date, this has pretty much tracked out.
“• Western Australia and the Northern Territory are forecast to have the biggest increases in land inflation. The gains may push past the forecast 2025/26 peak.
• Queensland is showing strong gains ahead of South Australia, Tasmania, and the ACT.
• Sydney is likely to slow or stagnate after a strong initial run (into 2022/23).
• Melbourne is in a similar position to Sydney. However, because it has a range of more affordable options, gains may continue at a slower pace through to the end of the cycle.”
In Sep 2021 - prior to the start of the rate hiking cycle. I said interest rates would rise sharply in the second half of the cycle (although I expected it later than it occurred)
“When rates rise at the end of the 18.6-year cycle... Increases are frequent throughout the period.
This always occurs around two years out from the peak — once again, during the ‘winner’s curse’ phase of the cycle.
To quote Fred Harrison: ‘In 2004, The bank of England’s monetary policy committee (MPC) raised interest rates without a full understanding of the impact on the housing market. ‘Its economists did not know what the consequences would be on people’s consumption decisions or the direction in which house prices would move. ‘It was no comfort to be told by Mervyn King – the governor of the bank of England. “I do not know where house prices are going – but I also know that no one else does either.”’ Boom Bust: House prices, Banking and the Depression of 2010
This pattern is very predictable — and applies equally to Australia..."
In Oct 2021 I said the that the Evergrande panic in China would not impact the cycle or pull it up early.
"…It’s being compared to the ‘Lehman moment’ — which toppled the market at the end of the last 18-year cycle in 2008.
However, China has a closed financial system.
The Western banks don’t have huge exposure to Chinese property.
The land market functions very differently to Australia. Buyers don’t ‘own’ land — they lease it. Right now, China doesn’t ring to the Western 18-year property cycle (at least not yet).
As it is, I expect China to make overseas investors the primary loss-takers, while balancing the outcome for domestic buyers. The arms of the business that can be cut off will likely be put into bankruptcy proceedings.
For our purposes, we need to view this event in the context of where we are in the cycle.
We’re at the end of the mid-cycle.
If we look back some 20 years ago, to the last mid-cycle that spanned between mid-2000–03, several major events shook markets:
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The dotcom bubble in March 2000
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9/11 fall of the Twin Towers
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Enron’s bankruptcy (20 years ago, December 2001)
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The announcement of the war on Iraq
It took until 2003 for the stock market to make a sustained turn.
20 years is a significant period in market cycles.
I made the case for this last year in this monthly edition — and explained why.
Whilst we haven’t seen have any significant lows in the market — it should be expected that we would continue to see events rock the markets at this point.
However, the cycle will play out as forecast.
The biggest real estate boom in history is upon us — marching to an expected peak in 2026. "
Future Forecasts
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The stock market to pick up strongly through 2024 into 2025 – with a global downturn, recession, and dramatic rise in unemployment between mid 2026 into 2028.
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Property markets globally to peak between 2025-2026.
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Perth’s market to continue to perform strongly into the peak – potentially pushing past the 2026 peak in other states and territories into 2027.
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A dramatic rise in copper prices and commodity prices through to the end of the cycle (2026)– potentially pushing to 2027 peak in the commodity market.
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Regional wars escalating into what could be termed World War III at the end of this cycle (2025-2027).
However it may unfold, it means the last two years (the ‘winner’s curse’) into the peak of this cycle is going to be intense both locally — and globally.
Not least, because we are potentially facing World War Three.
The seeds have already been planted.
Oil prices are likely to rise as war escalates from here until Israel restores the Middle East power balance and Saudi comes to the table to supply more oil to world market.
Iran will do everything to thwart Saudi as arch enemies for a long time and to stop them normalising relationships with Israel and the US and rebalancing oil prices.
It could be that Russia will be dragged down to Israel and Egypt to disrupt this new war and unsettle the Saudi US and Israel relationship to restore the oil price and their economies.
Knowing how to protect and increase your wealth over this period is not going to be easy.
Where better to guide you through the next few years of the Cycle than a subscription to Catherine Cashmore’s Land Cycle Investor?