P.S. – If you would like to receive weekly updates like this, sign up here.

Dear Readers,

Here’s a simple question for you.

Do you think the following is something you would do?
 
Source – Realestate.com.au
 

That isn’t a misprint. Half a million Australian dollars for what, in the local market, amounts to a large garage.

(It doesn’t really matter if you’re an Australian resident or not, this issue applies just about everywhere).

Call me cynical but I really question the motives behind such articles. Sure, the website needs to produce interesting stories – aligned with its own vested interests. And in this it is hardly alone.

But are they promoting this as sensible thing to do? Or is it an example of what you absolutely must not do at this late stage of the18.6-year real estate cycle?

For me: I have another angle on this.

And that is what I’m going to write about to you today.

And it contains a stark warning about where we are in the cycle and just how little time you have left before it ends.

Plus, it is genuine proof the 18.6-year Real Estate Cycle is turning before your eyes.
Is this juice worth the squeeze?
 
So, let’s begin with the obvious. What’s the deal here?
From the above article:

A family of three on the property hunt for six years are the new owners of arguably the smallest vacant block of land ever sold in Queensland.

Catherine Leon and her husband Nick, who have a 22-month-old daughter called Astrid, recently bought an 89sq m block of land at Southport for $550,000.

“We have been renting an apartment in Southport for nine years,” Catherine said, adding they had been actively looking to buy for the past six years.

Now hindsight is unbeaten right. A quick review of real estate reports back in 2020 such as a local update for the area (Southport) in the second half of 2020. From that report:

Southport recorded a median house price of $545,000 and a median unit price of $382,000 in Q2 2020.

They also included this graphic.
 
Source – PRD Real Estate
 

The median house for sale back then was larger than 89 sq m. Fast forward six years and the median house in the same area is approaching $1.6 million, three times higher.

I mean, what a great snapshot in general of just how the very best locations in Australia have performed in that time.

But it demonstrates another thing. In those past six years, the borrowing capacity for those looking for their first home has drastically changed. A house in Southport in 2020 cost what they have just paid for an empty plot of land today.

The real question though is what was the borrowing capacity for people like Catherine and Nick in 2020?

Clearly, it was not enough to buy the median house back then.

And as the article articulates, the search didn’t get any easier.

“We have been renting an apartment in Southport for nine years,” Catherine said, adding they had been actively looking to buy for the past six years.

“In 2020, everything was perfect, but work was uncertain (due to the Covid-19 pandemic), so the timing wasn’t right.

“But then prices just went up and up and it hasn’t stopped.”

It is this fact that has seen governments across the world feel obligated to step in and help.

And I could easily write an entire newsletter devoted to every single policy change designed to assist first home buyers enter the markets since 2020 there have been so many. Perhaps you have benefitted from one of them even?

Along with many banks changing the minimum deposit needed to secure a mortgage getting smaller. Evidence the 5% Australian government backed deposit scheme introduced last year.

So, there has been no shortage of help worldwide.

And yet, something simply continued to turn regardless.
 
The value of informed patience.

This really does represent a classic example of how the 18.6-year Real Estate Cycle turns. Which means there is a valuable lesson in all this.

From the US perspective, 2026 is year 14 of rising land prices. These will then peak, stall, then begin to retrace. Everywhere else on earth, the timing will be slightly behind. Australia, for instance, should still enjoy solid growth this year should history repeat there.

But years 13 to 14 of rising land prices in the US brings something else. It triggers the mania phase of the cycle, or what world-renowned economist Fred Harrison labelled the ‘winners curse.’  And believe me, it has also manifested everywhere else too.

So, why the term winner’s curse? Simply because it describes the time in each real estate cycle where Johnny-come-lately finally capitulates and accepts that house prices aren’t coming down. Even though those prices are at historic highs. Fortunately for him (or her), he also finds the availability of credit to be far easier than it has been in years.

Lending conditions improve on the back of falling regulations originally designed to protect both the lender and borrower, plus much less stringent eligibility requirements – and the ability to borrow above the normal 80% loan to value ratio.

Well, if you’re a first-time buyer this all sounds grand, right? Well, as stated, behind all this the cycle continues to turn and that means land prices just keep getting higher. This dynamic means less desirable land on the margins – or a much smaller plot (of, say, 89sq m) – is the only available land left to bid on.

And let’s not forget that should you need to then build upon that vacant land, take a guess what has happened to construction costs over the last six years.

Or, to put it another way, today it apparently makes sense for someone to bid $6200 per square metre for a tiny block and for bank to agree to finance it, then pay much more to construct a house on it.

Whereas until now it didn’t make sense for anyone to get involved in such deals. And soon now, the abject folly of borrower and lender agreeing to this will become stark.

Now, let’s be fair here. There were reasons behind this purchase. Yes, they were emotional but when it’s your first home it’s fine to be emotional about the decision. It’s a great feeling to love your first ever house.

Here is what the article said:

Catherine said they had been tirelessly looking at both existing houses and vacant land but prices “were out of control.”

“And we obviously had to build on top of that,” she said.

“We wanted to have a home for her (daughter) and wanted to stay in the area because of the schools and university in the future,” she said.

“At least now we are in (the market),” she said.

Regardless of where you live, houses within catchment zones of select desirable schools and universities attract a premium, sometimes 20% or more, compared to the exact same profile of house outside that catchment.

So, I believe this is a rational and sensible decision. My question to you is whether the sentiment “at least now we are in (the market)” is worth the price of possible financial destruction should you get your timing wrong?

That is the ‘winners curse.’ Is there an antidote? I believe so.

It’s something I call informed patience.

What if, thanks to your knowledge and research of the real estate cycle, you could remain patient and time your entry into the property market when there is less personal risk, where the speculative froth priced into houses today cools off.

In fact, at a time when prevailing interest rates are likely to be far lower than they are today.

You could either wait a few years to see if indeed what I’ve stipulated happens. Or you can have that same knowledge now and prepare.

For those of you who simply can’t wait any longer, then today is the right time to become our latest Boom Bust Bulletin (BBB) member.

The time for you to understand that where we sit now in the cycle is just so important. Not purely for land prices, but government actions, future interest rates, investor behaviour. All driven by a structured and repeatable cycle.

Through monthly editions and regular videos, you can now discover the hidden order of the economy and allow this history to position your financial investments correctly, at the right time.

Informed patience: what could ‘that’ be worth to you?

Sign up now.

 
Best wishes,
Darren J Wilson
and your Property Sharemarket Economics Team

P.P.S – Find us on Twitter here and go to our Facebook page here. 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.