The 18 year real-estate clock

Phill Anderson- economist/author/researcher, also writes for the daily reckoning, believes property cycles work in 18 year cycles. He believes we have another 10 years of growth ahead before a downward trend which is part of the cycles built in course.

Some info and vids below,

Booming into the Future

The 18 Year Real Estate Cycle | Phil Anderson

Books written- the secret life of real estate. There might be more written, not sure.

Has anyone followed up on his theory's, Read his books, Or believe in his 18 year property cycle?

 

Yeah did read that some time ago, probably makes some sense as some markets have kind of flatlined for some time even though some analysts say "its risen by 3%" or something like that.
I would like to know where that growth is a I have not seen it in some S E Qld properties ?

 

It's one of those neat ideas that is quite easy to understand but ultimately flawed and stops brains working.

If it were true then why are there areas that are just flat? Why are there areas of rapid growth that don't flatline?

If you're looking at it from a scientific perspective of establishing a model that explains reality, sadly the model doesn't describe reality at all!

The geographic and economic character of suburb might keep prices high permanently because the rich want to live there. Drought hits the country, people leave and a town goes backwards - this isn't captured by the property clock.

He's also making the error of fitting a model to a single country history and that looks great and all but does it apply outside the US?

That's how you know if a model is useful and describes reality - you could look at the Spanish house market and see the same cycle or the Tasmanian market.

At the moment it's like saying water boils at one hundred degrees at sea level in Australia but over in Japan it boils at a different temperature at sea level but don't worry - the model is accurate!

I think it's useful in the way of getting people to think about macro factors and why prices rise and fall but not useful in making a claim of an eighteen year cycle. If that were true then everyone would just invest at a certain point, sell at a certain point and wait... and that's impossible because those actions would distort the market.

 

Plenty of 18 year cycle work right back to Henry George in the 1800's. Seen the real estate super cycle theory though?
Armstrong Economics

 

This clock might need it's batteries changed.

 

Funny considering the DR's attitude to property over the years

 

Makes sense to me.
Having been caught out in the recession of the early nineties (homeless and jobless) I became very open-minded to the notion of cycles. When I started teaching at TAFE 18 years ago I saw a diagram on the wall of an economics/business class room showing a cycle of 7-10 years x 2 and saw that it was true.
The waves at the beach they come in cycles of 7 - 3 strong ones and 4 weak. Perhaps human nature is actually part of the law of nature. I'm open to considering 18 years - two cycles and one hell of a crash ...

 

For what state?
For what city?
Lots of different markets doing different things.
Top of market in Sydney, bottom of market plenty of other places.

 

From his link above,

For over 25 years I’ve studied economics and markets. And I can say categorically that the Western economies exhibit an 18 year real estate cycle. Generally this averages out as 14 years up and 4 years down.

A study of US history, for example, reveals a very clear (average) 18 cycle in US real estate prices, measured from trough to trough or peak to peak. The actual cycle has never been shorter than 17 years, never longer than 21.According to my research, the Australian market follows the US.

The good news is that once you understand the real estate cycle, you can forecast it. History, I assure you, does repeat. And if you can forecast correctly, you can make money.

Understanding this real estate cycle is the absolute key to becoming and staying wealthy. Once you see it, you’ll have an incredible advantage few other investors ever see or understand. You’ll also rarely need to worry about the barrage of conflicting data we all receive every day. As a subscriber, you’ll soon discover why

 

His graph is of America, he states what's happens there follows Australia about 12 months later. He's predicting another 10 years of growth for Australian property, before bust cycle.

 

So 10 more years to work on it then sell out? Works for my timeline.

 

He allows 4 years either side. So go with 6 years best case if you believe his findings.

 

It doesn't really make sense though.
There are plenty of markets in Australia that are in the crapper at the moment.

 

I think it would be fair enough to say we've broken off from the US now and are on our own trajectory. In particular, much of our prime real estate is connected to mining, other to tourism. They don't necessarily run on the same cycle. But run on a cycle they do.

 

I tried to read this some time ago but my head hurt after 2 pages.

I never really get into analysing stats, past history etc ..... much of it can be flawed because there is never enough information, or a snapshot of a certain period which does not capture the full picture, its also not reliable and therefore just adds confusion and nothing meaningful for me.

History does not necessarily always repeat which is what we have recently evidenced in Australia.

Generally Sydney booms then Melbourne and then Brisbane. Well what happened is Sydney and Melbourne and Perth were booming at the same time, length of the boom varied with each State. Brisbane we are still waiting for the boom. Also from past history boom cycles start from the inner city and ripple out, not so in recent booms in Sydney, Melb and Perth, the booms did not start in inner city for any of these Capital Cities.

The most powerful tool I think to working out markets is to understand the signs and more important understand what it means and then take action. You may not get it right all the time but I reckon your odds are greatly improved.

I have heard many times that US has 18 year cycles, yet do we see this today?

US market crashed 2007
Moving on.....US many markets started booming in 2011 and still continue and its not just foreclosure market

Am I missing something? probably, US should be booming in 2025, that will make it 18 years after the crash??

MTR

 

A lot of smart local money around me (ie $10m+ portfolios) have left Syd and Melb already

 

To go where though? That is the $10m+ question.

 

Can you tell us where the smart money is going?

 

Maybe they're not going anywhere.
Waiting...

 

The 'smart money' people I know, are putting their capital into opportunistic markets, deals where equity can be manufactured in the 10s or 100s of thousands. Some are also reducing debt but still buying good deals with lower LVRs.