The downturn of 2019 continued...

17/01/2019

(Due to a temporary site technicality, See catherinecashmore.wordpress.com for picture of the index.)

As many know, I'm President of Prosper Australia.  One of Prosper Australia's executive members is Bryan Kavanagh, a former valuer and resident expert on real estate cycles.

Mr Kavanagh and Prosper Australia researcher, Dr Gavin Putland, have developed the K-P index to predict economic declines from real estate speculation.

The latest update of the K-P index points toward the 18 year mid-cycle downturn which I referenced a few posts ago.

The index shows the total value of Australian real estate sales to GDP.

The Kavanagh-Putland Index demonstrates that recessions usually ensue within 12 months of the year-on-year index declining by more than 25%.

The index did this mid 2018.

Since 1984, Australia's total land values increased by a factor of 23.5, averaging an increase of 10% per annum, whereas seasonally-adjusted nominal GDP growth has tracked at just 6.6% per annum.

Whilst this represents a great return for buyers and landholders, it has been counterproductive because wages and demand have languished.

Quite simply, the more we spend on real estate, the less we have to spend as consumers. This hurts small business, wage growth and employment.

Australians have been doing what the tax system has encouraged them to do: to invest in real estate, because their increase in real estate wealth tends to dwarf the wages they’re able to earn,

As Mr Kavanagh comments, In 2010 "The Henry Tax Review" (Australia's Future Tax System) recommended getting rid of 100 taxes in favour of four: income tax, the GST, the resource super profits mining tax and an all-in land tax. Implementing those reforms would have gone some way to redressing the imbalance between real estate investment and productivity" he said. "Except for a failed attempt at the new mining tax, these recommendations have not been taken up."

The Progressive Era, from the late 1890s to the early 1920s, when much of Australia's infrastructure and its regions were developed, carried lessons for Australia. Some 50% of all revenue at the time was real estate-based whereas it now represents less than 10%. Over the last six years, Australia's income tax has ranged between 57.0% and 59.1% of all revenues and property-based taxes are now only between 8.6% and 10.8%.

 

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Catherine Cashmore has accrued many years experience working in the Australian real estate market. She is President of Australia's oldest economics organisation (Prosper Australia) and has lectured widely on the real estate cycle and the economics of land.

it's this knowledge that sets Cashmore & Co apart from other real estate agencies. 

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About Catherine

Catherine Cashmore

Owner & Director

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Catherine Cashmore has been working in the Australian real estate market for over 14 years.

Originally from the UK, and having also lived in the US, Catherine has extensive experience across a range of international real estate markets.

As a buyer and seller advocate, Catherine has assisted hundreds of home buyers, investors, and developers, find, assess, and negotiate, quality real estate for great prices throughout Australia.

She is President of Australia's oldest economics organisation, Prosper Australia - an organisation that has conducted vast amounts of research into the economics of land, market cycles, and the intricacies of how tax and government policy affect the markets.

Catherine is a regular and highly respected media commentator. She has often been called upon to guest lecture at universities and educational institutions (including RMIT and Sydney University) on how tax policy affects the real estate market, the design of cities, and the economy.

She is the editor of Fat Tail Investment Research's Cycles, Trends, & Forecasts, Catherine Cashmore's Land Cycle Investor, and Catherine Cashmore's Real Estate Wealth Course – publications that teach real estate and stock market investors about the land cycle, its impact on the economy, and how to create wealth from property and stocks using this knowledge.

She is also one of the former editors of the extremely popular The Daily Reckoning Australia (or the ‘DR’ as it's affectionately known to its 60,000 subscribers).  The DR is an independent financial news broadcaster that has been in the business of reporting financial trends that shape the economy since 1999.

Previously authoring the annual ‘Speculative Vacancies’ report, the only study in the world that analyses long-term vacant housing based on water usage data (Australia-focused), Catherine has an in-depth knowledge of the Australian real estate market and economic environment few can rival.

You can contact Catherine directly on 0458 143 089 or at cc@cashmoreco.com.au 

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