FINALLY, GOOD NEWS ON HOUSING! The amazing new data that proves you can trust the real estate cycle timing

The Australian housing market has turned around it seems. Both for embattled property developers and new buyers.

You might be surprised by both pieces of news but if you believe the Housing Minister it’s happening.

It’s a good day for “aspiring homeowners on low and middle incomes across the country”, after her help-to-buy bill passed the Senate.

“The help-to-buy legislation will help 40,000 low and middle-income Australians get into home ownership,” O’Neil said during question time.
The news on housing has been dire for the past two years. So what’s driving this uptick in sentiment?

And what does this future hold?

And, most importantly, was it predictable beforehand with a little bit of real estate cycle knowledge and (stock) chart reading?

The Australian Bureau of Statistics (ABS) released a slew of data recently. Among many surprises was that housing construction rose to a three-year high in third quarter of the year.

As the Australian Financial Review put it:

From the above article.

The value of residential construction grew 1.8 per cent in the third quarter – at a faster rate than June’s 1.2 per cent gain and March’s 0.9 per cent increase – to $23.4 billion in seasonally adjusted terms. It was the biggest quarterly reading since September 2021.

The pick-ups in housing and engineering construction – which jumped to 2.6 per cent growth from 1 per cent in June – were partly offset by a 1 per cent decline in non-residential construction. Even so, they pushed total construction output in the September quarter up 1.6 per cent to $73.3 billion, a seven-year high.

This includes engineering construction rising to $34.7 billion (reflecting the booming national and state infrastructure spend) while commercial construction fell to $15.3 billion.

Any way you cut it, that’s an awful lot of money and new money being pumped into the economy.

Was it a surprise given the news of the past two years.

Not for me it wasn’t.

Back in August of this year I wrote to the readers of my Boom Bust Bulletin (BBB) about the then state of the US, the UK, Canadian and Australian property markets.

I covered the problems and potential opportunities for the construction industry in new-build housing.

From BBB #41 – Your 2024 review of the US, Canadian, UK and Australian housing markets:

A combination of researching data plus being aware of the timing of the real estate cycle made me confident in telling my readers that the odds of a recovery in these sectors was very likely to be occurring. Certainly, it was time for it to start.

And this would have provided some confidence for folks who were considering buying that more stock would come into the market.

Economists are now suggesting residential building investment should rise about 1.5 per cent quarter on quarter in next week’s Q3 GDP release, which would represent the strongest result since the March quarter of 2021. But there were other clues as well.

I’ve been monitoring a lot of charts lately. Two of those charts provided some further credence that the trends in this space were moving higher a time went on. As we are now at three year highs, let’s examine the following charts over that time span.

Take a look at the following chart.

Above is a chart for Brambles (ASX – BXB), a company that has a global footprint, not just Australia, and is a logistics company that offers pallets, crates, and containers for many industries, including manufacturing industries.

Here is another.

This is the chart of James Hardie Industries (ASX – JHX), a manufacturer and seller of fiber cement, fiber gypsum, and cement bonded building products for commercial and residential new construction markets, to name two.

In brief, James Hardie makes critical building materials for home construction while Brambles provides the palletised solutions to enable those materials to get on site.

If you visit any new build development, you will notice the sheer number of empty pallets lying alongside those same new houses. Most belong to Brambles. $BXB has been rising for years, whilst $JHX broke its September 2021 highs in January this year.

In other words, the share price was rising on the back of stronger positive earnings….which could only mean one thing: the construction industry outlook was improving even as the news was dire.

This is a good example of how some chart reading can inform the news you hear or read. And an additional layer that further convinced me the cycle was still turning, all I need do was await the news that justified the price rises.

So, if we are looking for further proof of the overall direction of the Australian construction and property development industry, then of course you must study this….nuclear submarines!

A critical component of tracking the cycle it seems.

You think I’m joking, right?

Well, take a look at the following headline:

The Australian government’s decision will see several brand-new nuclear submarines enter service with the Royal Australian Navy in the coming decades.

From the above article.

Between $35 billion and $40 billion of warehouses, apartments, offices, shops and hotels will be needed around Port Adelaide and south-west Perth over the coming years to support the construction and operation of the AUKUS nuclear submarines… about 1 million square metres of warehouses will be required as part of the infrastructure to support the enormous defence project.

Naturally, your average real estate expert is ecstatic about all this cash flying around.

Real estate consultancy CBRE’s Pacific head of research, Sameer Chopra, likened the impact of AUKUS on local real estate and infrastructure demand to that of the Brisbane Olympics and Sydney Metro.

I mean, these subs are present, and in greater numbers, across parts of Europe and the US, however they don’t build the bases that will anchor these vessels anywhere near major population centers. However, Australia will do just that.

“It’s going to be a cracker,” Mr Chopra was quoted.

Indeed it is.

The numbers involved are very impressive. For the construction of nuclear submarines at Osborne Naval Shipyard in Adelaide, about 40,000 square metres of office space, 13,500 residential units and new childcare centres and hotels in the surrounding precinct will be needed.

On the west coast, the creation of a new submarine maintenance and operational hub at the HMAS Stirling naval base is expected to create demand for an additional 150,000 square metres of logistics space, 30,00 square metres of office space, 20,000 square metres of retail space and 11,000 residential units.

Of course, the surrounding areas are expected to boom, including commercial, industrial and residential spaces near these brand-new facilities. It’s another A$30-40 billion on top of the A$24 billion worth of new residential construction.

So, you see, Australia is indeed in the midst of an infrastructure and new build housing boom.

With initiatives like “Help-to-buy” government schemes once again rearing their head, much like in 2009. And arguably with equal chance of success.

The thing is most people will have completely missed all this had they not been paying attention. Instead, their social media feeds were filled with weekly (and I can confirm this, as I received them too) news about the latest large, medium or small property developer or construction company going under, owing millions, and the loss of dozens of jobs.

Yes, it’s tragic news for those involved, and there will be more to come. Neither will everything I have detailed here run smoothly. There are still huge, maybe unsolvable, issues still to be overcome to turn these stories into reality.

Beneath it all, out of sight, the real estate cycle continues to turn. And that is ultimately what matters. So, you need to be following it. Hopefully I have shown you a way to do just that here.

Ignore the noise, bring up the charts of companies most closely linked to the economy today, and see what the market is saying about them. It will be there, in the price action. If future earnings are forecast, the price will rise.

Only then, much later, will the news justifying the rise in price be printed.

This is what gave me confidence to write what I did to my valued BBB members in August this year. I would dearly love to write the Boom Bust Bulletin (BBB) for you too, as our newest member.

Whether it’s via our vast archive section or each monthly edition, you’ll have the opportunity to immerse yourself in research dedicated to the study of the economy where land is placed at the centre of such research.

Discover the secrets behind why the real estate cycle lasts 18.6-years on average, why it repeats and how it unlocks the hidden order of the economy, and thus its unique timing.

Such lessons are found nowhere else, I can assure you. And all for just $4USD a month.

It does appear, slowly, somewhat painfully, that things on the ground are slowly turning around.

It should also tell you this: you can trust the timing of the cycle.

Ultimately, that is what I have laid out for you here.

Once you learn the timing, you can then use it. And ignore the noise. We still have a bit of time left before the ultimate peak in land values, which brings the peak of the cycle.

But we don’t have a huge amount of time left before we get to the end of the cycle. So if you want to join me on that journey, the time is now.

You can sign up here.