Several speculations have circled around this trend, however, does it hold water?
Is it applicable to all real estate developments across the globe, even in Australia?
Do investors base their investment plans for this trend?
First, what is this 18-year Real Estate Cycle?
The 18-year cycle denotes that it involves two market movements- 14 years up and the remaining 4 years down. A good number of investors subscribe to this cycle. If such a cycle is indeed a fact, then housing markets are said to be stable for 14 years or more. This is, of course, patterned after the Global Financial Crisis.
The Global Financial Crisis made history. The US, alongside other developed countries in the west, suffered severely between 2000 and 2010, with 2007 and 2008 as the worst times. Rewind to 1990, a great recession also took place. Add the years, it totals to 18. Well, it may just be more coincidence but still stays related to the year 18.
Applicable to Australia?
While the US and other Western countries suffered, did Australia experience the same fate? Well, truth is Australia was spared altogether. In fact, the aggregated Australian capital city annual house prices in Australia did not crash between 1990 and 1998.
The only notable event related to this so-called 18-year real estate cycle took place after the 2nd World War (between the 1940s and 1950s). It was during this period when about 14 years of prices increased and followed by a significant drop on the remaining four years.
Australian market: Independent from the rest
The Australia market is independent on its own. Australia’s market moves without being patterned after the US, UK, and other nations.
Such independence from the rest of the world’s market trend is attributed to the following:
• People moving to larger cities when the economic recession is in place,
• Market growth is experienced during mining expansions and other infrastructure projects.
Only three years out of the past 50 did Australia experience housing prices’ erratic movement as it slightly dropped but gained its momentum faster than expected. The reason behind this is contributed by growth in capital cities, which obviously increased the demand for housing when there is a shortage in supply. In short, the Law of Supply and Demand.
Recent Elections and its relevance or non-relevance to the cycle
One of the contributing factors to the Australian real estate movement (which does not necessarily follow the 18-year real estate cycle) are its elections. The appointed officials have definite plans to address the real estate market as there is a high clamor for it.
Given this, each time an Election takes place in Australia, real estate cycle changes. Governmental platforms and reforms significantly affect the movement which should not wait 14 years of growth and 4 years of decline.
As this year’s Elections is won by PM Scott Morrison, Leader of the Liberal National Party since 2018, Morrison’s victory means there will be no changes to national property taxes. It is also expected to bring more stability in the property market, particularly that of Western Australia’s.
Morrison also announced that LNP plans to make the Australian real estate market more accessible especially to first home buyers. This is made possible through loan guarantees with a five percent deposit. Given this accessibility, the real estate forecast is up and is going to remain that way (if followed through). Such an occurrence does not follow the so-called 18-year cycle.
The real estate market is dynamic and fast moving. Such dynamism and robust yearly movement are interesting to study and analyze. Investors need to make the most informed decision to realize profitability.
However, not all real estate market trends are valid or “etched in stone.” This 18-year real estate cycle may have resurfaced several times in history to prove its viability, but it can’t be taken as anything solid for a trend.
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