A Buyer's Market


A Buyer’s Market

Last year a previous client of mind called me for some advice. I’ll call her Claire.

I had assisted Claire to purchase a small single level unit some years ago in Reservoir, Melbourne, and the performance had been good.  

This was at the beginning of the recent boom in 2013. The following 3 years saw the price increase considerably - close to $300K in total.

Claire has since married and is now renting a highrise apartment with her Husband in Melbourne’s Southbank.

They have one child and the location suits them.  It’s a 15 minute walk to work, and a five minute walk to every other amenity you can imagine. Perfect! .. I mean - real estate is all about location, right?

Renting has its issues in Australia.  It’s not considered a long term option.  Most rental agreements last no longer than 12 months. There is a high turnover of tenants, not to mention the increasing number used for AirBnb

In this case, Claire’s landlord wanted to sell the unit. They must rent elsewhere or buy. Hence where I come into the picture.

Claire had identified another apartment in a neighbouring block similar to the one they are now living in. Should they should buy? She asked me.

Her reasoning was simple. It would provide a secure base whilst raising their daughter.  After a few years when they decide to move for schooling - they can rent it. Presently it is marginally positively geared, so would provide some security of income plus good depreciation benefits.

I couldn’t argue with the above. Whenever someone comes to me wanting to purchase a home for a few years, their personal needs have to be balanced against their investment needs. But was this really going to give them the ability to leverage into their next property in say 5 years time?

I did a little research.

The unit they wanted to purchase had been constructed in 2010 and sold for mid $800K. Eight years later and it was now being marketed in the mid $700K (having lingered on the market for 6 months.)

Comparable sales in the same block showed a price closer to $600K was needed to “meet the market”.  This was back in October, and as far as I’m aware, the apartment is still unsold.

Despite being positively geared, this would have been the worst investment decision they could have made.  Claire agreed.

My suggestion? Continue renting and invest elsewhere.

Purchase a home in a gentrifying suburb that would accumulate significant capital growth. In a few years time, the power to leverage from the investment would place them in a far more prosperous position.  With the right purchase, they could even have the option to subdivide in the future, and double the potential profit.

As many know, I’m President of Prosper Australia.  A tax reform organisation with a focus on affordable housing. That week, I told the team at Prosper; “No one wants affordable housing.” In Australia, the concept is flawed. No one wants to buy a property when the price is going backwards. Claire being a good example.

Or to be more relevant to today’s economy, no one wants to buy into a falling market.

Obviously the problem with Claire’s choice was targeting a highrise apartment.  

The oversupply and rapidly increasing supply of high rise apartments that attract a small demographic, are winners for renters, not speculators. And every buyer of real estate in Australia's economy is a speculator. The tax system dictates this.

But what about today’s market?  

After nearly 5 and a half years of rising prices in some states, the market is in a slump.  The severity of this slump has not been seen since the withdrawal of the ‘First Home Buyers Boost’ going into 2011.

Clearance rates in Melbourne, Sydney, and Brisbane, are as low as they have ever been, and clearance rates do correlate with price changes quite closely. So you can expect softening to continue in these states - at least in the short term.  

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Take a look at the Kavanagh-Putland (K-P) index. 


One of Prosper Australia’s executive members Bryan Kavanagh, a former valuer and expert on real estate cycles, developed the index alongside researcher, Dr Gavin Putland.  It was devised to predict economic declines from real estate speculation.

The index shows the total value of Australian real estate sales to GDP. So basically, the amount of debt flowing into real estate, verses investment in the productive sectors of the economy.

The index shows recessions typically occur within 12 months of the year-on-year index declining by more than 25%. It did this mid 2018.  It’s foreshadowing the mid-cycle downturn.

The question is: Should you buy NOW?

Certainty - our brains love it.  Without it, fear dominates - and emotions control everything we do.

It’s the same in music.

The pleasure of certainty, whilst listening to a piece of music based on repeating patterns, is immensely satisfying. Pop(ular) music works on this concept. Repeating patterns.

The economy also works on repeating patterns - the key is identifying them.

This is what we assist you to do at CT&F. You are one step ahead of every other real estate investor because of it.

The current tipping point for our real estate market has been a local influence not felt in other countries.   The Royal Commission into the banking sector.

To be clear, banking fraud has existed since the tables were overturned in the Temple.  Still, everyone is *shocked* at the revelations, and the banks have tightened lending policies considerably. It’s been immensely disabling to the real estate industry and associated trades - especially developers who cannot access finance to complete projects.

Watch this trend, because in 1-2 years time, when today’s projects would have been completed, there will be a shortage of available properties, rents will rise as a consequence, and we’ll kick off into the second half of the cycle - and another building boom. We may even see some growth in apartment prices also.  

Real estate is worth what the bank will lend. Until lending policies losen and the RC become a distant memory (the RC winds up in February), the market will continue to suffer.

Downturns, such as we’re experiencing today, follow a pattern.

Vendors thinking of selling initially hold off, hoping the fall may be short lived.  

As time progresses and stories of doom and gloom are entrenched into the mainstream media’s narrative - with every economist (even the most bullish,) predicting falls of up to 20%, panic sets in.  

A flood of stock comes on the market from those that have to sell. (The past few months are a good example.)

Vendors that have purchased before sale, face going onto bridging finance and slash prices. Buyers scoop a windfall.

Or do they?

The wise ones do.  

Others sit on the fence in fear - paralysed asking: Where’s the bottom?

The tricky thing about real estate, is that unlike the stock market, there is not a sign outside each plot of land flashing the daily price change.

Producing an accurate daily, or even weekly index of prices changes for each individual plot is impossible.  Research companies such as CoreLogic have tried with little accuracy. Their results differ markedly from the more precise quarterly and yearly indexes. Therefore, identifying the bottom is not easy.  You have to take the opportunities when they come.

Let’s put this into perspective.

There has been an annual fall of approximately 5.8% year ending November (Core Logic) in Melbourne’s median house price.  Six percent is $60000 on a $1m purchase. With good negotiation skills you can easily knock a price down by 6K - and in this market, far more!

The median figure doesn’t represent how far an individual property price may have fallen - that differs considerably from property to property - and in some cases, I’ve been able to negotiate more than $100K of houses in the 600-900K price range. The point being, you are experiencing a rare transitional point in the cycle that is offering great opportunities.

The stock market has an identifiable time and price at which it will bottom.. TimeTrader teaches you this.

The real estate market (or markets) has a lot of variables that are not as easy to identify.

'How’, ‘What’, ‘Where’, and ‘When’ to buy, carries more uncertainty..

Infrastructure investment, tax policies, population growth, wage growth, job growth, zoning policies etc. Each location and each type of real estate investment, can differ under local influences.  Even in this market, some regional areas are experiencing rising land prices as a result.

Albeit, within each suburb, there is a limited number of locations (streets and plots of land) that will always market well, and always hold value outside of their monetary component - in all markets.

These locations take their value from what surrounds them. And our tax policies affect how how much growth is transferred to the land.

Let me relay a story that may help you understand.

What are you paying for?

A man walks into a real estate agency.  He’s new to the country and itspolicies. He tells the realtor he wants to buy a plot of land for his factory. He gives the agent an idea of his budget, and land size needed.

“Sure sir” replies the agent. “I have just what you are looking for.”

She takes him in her car to the outskirts of Melbourne.  They drive up a muddy track, through some empty fields, to a block of land. Its dimensions are neatly marked out with wooden stumps.

“Here you are sir, exactly what you’re looking for, 1000sqm and the cost is $10,000.” smiles the realtor.

The man gets out the car and looks around.

“Is this the only road to access this plot?” He asks..

“Yes sir...” she replies pointing - “Your closest neighbour is a few kilometres that way, along with the local primary school and a few village shops.”

“Oh!” The man responds. “This will never do! How will my workers get here on time, and where will my customers come from?!”

Noting the man’s reaction the agent thinks for a moment.  She ushers him back into the car. “I think I understand what you need sir.. “

Driving back into the outskirts of town, they come across another plot of land, exactly the same size and dimension as the first.

Exiting the car she exclaims excitedly “ This is perfect for you sir!”

“See the school over there?  That school is SO good, that people pay $200,000 or more just to live in the ‘zone’!.

Over there is the local hospital.. it has some the best surgeons in Melbourne. It’s very popular and the staff that work there, use this shopping strip all the time.

Down the road is train station where your employees can commute to work, and as you can see, the local bus stop is right outside.

And crime..? Crime is very low. The police patrol this street every 15 minutes….”

“Oh!” Said the man excitedly. “This is exactly what I am looking for!” He reaches for his checkbook.. “How much is it?”

“$100,000” replies the agent.

“$100,000?!” explains the man aghast.. But it’s exactly the same size and proportion as the other block!”

“Sir you’re not thinking!” Replied the agent..”Look at what you’re getting! The location will attract plenty of business to your factory..”

Pondering for a moment, the man agrees - “you’re right - the price is worth it to me. I just have one question, who do I make the cheque payable to?”

The agent looks confused.

He explains further “The high school, the police station, the hospital, the public transport company..?”

“Oh no sir!” Laughs the agent.  “You make it out to the vendor. He’s in Florida, he’s going to retire on the profit from this sale!”

“Then who pays for the facilities that give the land its value” says the man confused.”

“Well Sir, when you set up your factory, and employ your workers, and start producing goods into the economy.. you’ll pay income tax, GST, Payroll tax, Property tax on the building....”

“But that’s not fair!” exclaims the man. “I’m paying twice!.. Once in the land price to a private owner, and once through taxes on my goods and labour for all the services that give the land its value..…! ”

I hope you understand this story. It’s one I use when trying to explain economic rent and the Georgist economic perspective to people who have never considered how the economy works.

When explaining what land price is, it’s a useful one to explain how our economy works. It is also useful in explaining what exactly you are paying for in the land price, and the No1 factor that makes the land price rise in the first place.


With this in mind, let’s have a brief look at some of the major infrastructure projects going on around Australia at the moment that will feed into the surrounding land prices over the coming years.  

The government announce these in advance to enable you to speculate. That coupled with the current downturn, gives you an excellent opportunity to negotiate buy at the lowest point in the cycle (before we rise and fall into the downturn of 2027). In other words, take advantage of this now, and you can buy low, and sell high once the market recovers.

Here are some of the projects happening around the country.


With a 2.4 Billion price tag, The Royal Adelaide Hospital is the most expensive building ever constructed in Australia.

There’s been a lot of controversy over the facility and cost, but it’s attracting staff from around the globe and companies in Adelaide are benefitting as a result.  We haven't seen much growth in Adelaide for some time, but moving into the second half of the cycle, I expect this to change.


I predicted a rise in Tasmania’s real estate market back in 2015 on the Port Phillip Publishing podcast “The Newman Show.”  Population growth, and the extension to Hobart’s airport runway consolidating Tasmania's position as the gateway to the Antarctic pointed towards speculation and population growth. A rise in rents initially evidenced the proceeding trend.  Albit, Tasmania is a small disconnected Island. Only two small islands in the world buck the trend for consistent real estate inflation from speculation - Manhattan and Hong Kong, both connected to the mainland. Tasmania has a few other projects in the pipeline, but if you are really looking to reap a windfall, there are better areas to focus on.


Although there is some time until construction, the second airport will have a roll on effect on the surrounding suburbs and satellite cities such as Greater Penrith and Cambelltown-Marcarthur. However, Sydney is always constrained by affordability. When it starts to rise from a downturn, it attracts a rapid boost of speculation followed by a stagnation as interstate migration flows to other states that offer greater options for middle income workers.  If you’re looking for short term growth, this is not the state to focus on.


$710 Mil metro light rail project is going to have a flow on effect to the local property market.

The University of Canberra Public Hospital is currently under construction at the university campus in Bruce. Additionally, UNSW is considering establishing a second Canberra campus in Reid - potentially attracting 10,000 students to the city.

Canberra is replacing stamp duty for higher rates on land, therefore, growth may be marginally constrained. But prospects continue to look promising.


The $16b railway North East Link will improve the flow of traffic in and around the city aiding access to middle ring suburbs north of the CBD.

Upgrades to rail infrastructure, as well as a new rail link to the airport, are all going to produce massive land inflation in the surrounding suburbs.  The route has not yet been announced, but suburbs such as Keilor East fall along 3 of the 4 proposed lines, and therefore, purchasing there now, could place you in a good position to advantage later in the cycle.


Infrastructure is not the only factor to take into account when speculating, as the story at the top of this article demonstrates.  There are many more factors to consider. Even so - I cannot tell you the number of people I come across that tell me they wish they had purchased in 2008, or 2011/2012.  If you’re in a position to do so, don’t miss this opportunity to take advantage of a downturn, before hindsight catches up.

Best of luck with your investments.



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With decades of experience working in the Australian real estate market Catherine Cashmore and her associates have lectured widely on the real estate cycle and the economics of investment.

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About Catherine

Catherine Cashmore


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Catherine Cashmore has been working in the Australian real estate market for over 14 years. As a buyer advocate, she has assisted hundreds of Australian home buyers, investors, and developers to secure quality real estate for great prices. Originally from the UK, and having lived in the US, Catherine is a seasoned traveller with extensive experience across a range of international real estate markets assisting clients to diversify their property investments.

Catherine is President of Australia's oldest economics organisation, Prosper Australia. She is a regular and highly respected media commentator and often called upon to give guest lectures to university students (including RMIT and Sydney University) on how tax policy affects real estate, the design of cities and the economy.

She is the editor of Port Philip Publishing/Fat Tail Media's 'Cycles, Trends, & Forecasts' – a publication that teaches real estate investors about the land cycle and its effects on the economy.
She is also author of ‘Speculative Vacancies’, the only study in the world that analyses long term vacant housing based on water usage data (Melbourne focused). As such Catherine has an in depth knowledge of the Australian real estate market, few can rival.

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

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