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Dear Readers,

Well now, haven’t I got a corker of a tale to bring you this week.

Courtesy of the recently held Financial Review Property Summit. Now, this summit isn’t aimed at mum and dad investors or owner – occupiers. Oh no, this is for the big end of town.

The absolute elite of the commercial and industrial sectors, both in Australia and globally, are the ones who frequent such summits.

Which means it has global implications. After all, one of the hallowed guests who attended was Blackstone’s local boss, Chris Tynan, a New York-based capital giant and one of the largest landlords in the world.

So, pray tell, what were they all discussing here?
Source – Australian Financial Review

That’s interesting.  I have rallied on these very pages for years now that those at the very top making decisions should make themselves aware of the bigger picture.

That is; the existence of the 18.6-year Real Estate Cycle.

Is it possible these people have come forward with genuine attempts at land market reform? Sadly, not all is as it seems.

What actually went on here is quite profound.

And let me just say this up front; these people have learnt absolutely nothing!

Instead, and right on time, they are about to lead their investors and companies into ruin. Again.

I’m not kidding when I say that what I read in the articles was shocking.

And reinforces once again why you cannot be thinking the way they are about the land market today.

Anyway, let’s dive into this.

Wait; she said “what” exactly?
How did the above article articulate the mood present amongst attendees?
Source – Australian Financial Review

Right on cue, the first bombastic hubris rears its head as Charter Hall’s CEO David Harrison weighs in by placing bets with $85 billion worth of client wealth.

Oh, but it gets better. From the above article, bolded text my own.

Harrison… says investors of all shapes and sizes can see what’s coming.

“They want to get in in the early part of the cycle, which is why FOMO emerges, and people want to get in and get invested. Because, you know, in any cycle, whether it’s property or listed equities, you make most of your money in the early part of the cycle, rather than investing at the later part of the cycle.”

Um…excuse me?

Here I was thinking that the first headline gave me a sliver of hope that people like David understood the cycle.

That quote above completely contradicts that theory.

But that wasn’t the end of Charter Halls’ input at this summit. Oh no. We also had the head of office property at Charter Hall (and president of the Property Council of Australia) Carmel Hourigan interviewed.

She was quoted saying below; bolded text again is mine.

Carmel Hourigan…said it’s unthinkable that the iconic Chifley Tower in Sydney’s CBD could be built today.

“It’s getting increasingly harder to actually build new stock, particularly of prime quality. For us to build a Chifley now, it’s near impossible, the type of economic rent that we would need to charge to get Chifley up and running.”
I literally fell out of my chair. And it’s here where the obvious seems inescapable. 99% of people reading said article wouldn’t even appreciate what economic rent is, let alone what it means in relation to this answer.

Carmel is saying that (economic) rent that productive land produces naturally, and should be available for everyone, actually should simply be hoarded by Charter Hall.

But she is upset because land is now so expensive there is little surplus left after production costs are factored in left for them to capture.

Finally, there’s the elephant still sitting idly by itself in the corner of the conference hall.

Can’t see the forest for the trees.

On the one hand we have David Harrison with his 3 bets (convenience retail, industrial property, and office property), to the other where Dexus chief executive Ross Du Vernet believes an active approach – the property version of stock picking – will be crucial in the next few years.

Great and all. But who on earth is going to build any of them?

Construction here in Australia for instance is on its knees. The middle tier of construction has been hollowed out, what remains is heavily unionized. Oh, and the price of the land they’ll need is at historic highs and rising.

Folks, the PSE team call this time in the real estate cycle the ‘mania’ or winner’s curse for a damn good reason. Over-leveraged buyers and developers are going to be ruined in short order.

And these people are highly credentialed: CEO’s, president of the Property Council of Australia. You’d think they would know what they are doing – right?

There’s just one small problem; the current 18.6-year Real Estate Cycle is almost about to peak.

This is absolutely the wrong time to be pledging billions of clients’ funds on ‘winning bets.’ This is the wrong time to think a stock-picking strategy will work in real estate.

Instead, these same people are blowing the ‘Everything bubble’ up even higher with their hopium and stirring the embers of speculative fervor. Right on time too.

I assume most of you reading this aren’t the CEO of multi-billion-dollar property conglomerates. How would it feel though if you knew you possessed a market edge they completely lack?

This is why I want you as our latest Boom Bust Bulletin (BBB) member. Learn how not to fall for spin and inaccurate assessments when it comes to the timing of the land markets.

Instead, rely upon over 220 years of history to place you and your family on the correct side of the trend to both profit and protect.

They say there is nothing more powerful than a good idea whose time has come. But there is a flip side to that too. This is but one example when those same ideas “don’t” enjoy the benefit of good timing.

I trust you too can see why being a CEO is no substitute for having a little knowledge of history by your side.

Sign up now.
Best wishes,
Darren J Wilson
and your Property Sharemarket Economics Team

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This content is not personal or general advice. If you are in doubt as to how to apply or even should be applying the content in this document to your own personal situation, we recommend you seek professional financial advice. Feel free to forward this email to any other person whom you think should read it.