What Is The Mid Cycle Slow Down And How Might It Affect Property Prices?

[arve url="https://www.youtube.com/watch?v=Ncqw2dhqw3U" mode="lazyload" align="center" /] The mid cycle slowdown is a point where asset prices around the world are priced in and we start to get a wobbly market. We can also identify some potential trends and effects it has on the Australian property market Book a Free Strategy Session - https://onproperty.com.au/session/ 0:00 - Mid cycle slowdown introduction 1:14 - What is the 18-20 year cycle 4:17 - The difference between a mid cycle slow down and GFC style event 6:05 - Why it is important to know about the mid cycle slow down 7:23 - After the mid cycle slow down does Brisbane historically do better? 12:01 - This is just one indicator of many you should look at before investing 12:51 - How can we take advantage of the mid cycle slowdown to move towards financial freedom? 16:14 - Then overlay your strategy on top of these cycles 19:07 - Using timing the cycles to reduce your risk significantly 21:11 - Ben's personal investment strategy 22:53 - Look for these 3 things when investing in an area 24:01 - Brisbane is cheaper to buy now than it was 10 years ago! WTF?! 25:29 - Reducing your downside risk so you can achieve financial freedom 26:54 - Stop trying to get lucky in order to achieve financial freedom 28:26 - Looking at what you can control in your investing and life 31:37 - Next steps if you want to start investing Phil Anderson's Book: The Secret Life of Real Estate and Banking - https://onproperty.com.au/thesecretlifeofrealestateandbanking Fred Harrison's Book - https://amzn.to/2SYV5De Transcription: For those of you who haven't heard about this concept of the mid cycle slow down, it's effectively these points that we've been in for about the last six months where asset prices around the world are fully priced in and we start to get a bit of a wobbly market. Maybe it's a stock market, maybe it's the crypto market, maybe it's the property market. So today's video, Brian and I are from on property. You're going to explain exactly what that is and Ryan just going to ask me a couple of questions about it. Yeah, so Ben has always yammered on about the mid cycle, slow down and about Phil Anderson and the 18 year cycle and always recommended me his book. And given that it's only an audiobook format, I still haven't read it even though I should, but I know that we're entering into this time in the market where it is what [inaudible] would call a mid cycle, slow down. I don't know as much about it as Ben does. So I thought it would be a good chance to ask Ben some questions, get some ideas on what exactly is a mid cycle slow down and how does it affect markets? Because I know me and knew Ben have had conversations off camera about how Brisbane tends to do well after the mid cycle slow down, whereas Sydney and Melbourne tend to do well before the mid cycle slows down. So we'll talk about that sort of stuff as well. So do you wanna start by talking about what is the, I don't know, 18 year cycle and how does a mid cycle slowdown and fit into that? What are the other parts of the cycle? Yeah, so the cool thing about the world and the property market's economies, businesses, governments is they all work in these cycles. Sometimes things are good and going up sometimes seem to bad and they're going down in every single asset in the world runs in a cycle. Now some guys like Warren Buffet and Ray Dalio save it is, you know, seven to 10 years. So I called some other people like Phil Anderson and Fred Harrison's. Say that there's a, you know, more 18 to 20 year cycle, which is effectively just two of the Warren Buffet, 10 year cycles in play. Now all it is is effectively we have a recession or a great depression or a GFC all like the 1990 [inaudible] recession. We had to have all the great depression and a lot of the money leaves the marketplace and things get really, really, really cheap and depressed. And then what happens is governance around the world and bank style pumping money into the economy to try and get things stimulated again and over that seven or eight years of pump priming, they call it the market goes up around the world. Land prices go up, stock markets go up, crypto and crap like that goes up. And then we get to this point where all of that cheap money has gone into the economy and things are starting to turn again. Businesses, a good unemployment rates are low and then the banks generally because of pressure from the governments around the world go, Holy Shit, we've overleveraged ourselves a little bit. We need to take the foot off the gas and then they start increasing interest rates a little. They started making it harder to raise to get money like that had did in Australia for the last two years and then all of a sudden, you know because of the money stops things go a little bit flat or in the stock market basically based on, you know, a couple of years of couple of hundred years of history or 70 years of history in the American exchanges. We normally get a dip in stock market prices and then we be out of this period which lasts somewhere between generally 12 and 24 months and we go into the second half of the cycle because everyone believes that things are moving forward. Again, people go absolutely crazy in that second half of the cycle and that's where things really go up. And then we get to a point where everything is just overpriced, people are completely over leveraged and we come into a decline phase again. And in that instance it's a really bad one. So it's kind of like you have a really bad recession followed by a smaller recession and then you have a really bad recession again. So I'm guessing 2008 was the really bad recession and we're talking about mid cycle down is coming into a smaller style recession. Maybe this year, maybe next year, maybe the year after sort of time period. Yup. And then coming out of that we'd go crazy again. Now the difference between the mid cycle, which is where we are now and the GFC style event is in the mid cycle. Slow down. I've still got cash in the bank. You've got cash in the bank. The banks have clean, healthy balance sheets because they've cleared out all the shitty mortgages over the last seven years. There's no default says people paying money. People have equity, you know, cashflows, good incomes, good unemployment's really high. And so there's all of this money, whether it's, you know, the banks, whether it's governments, the Australian government's going into surplus again this year. Apparently it's individuals. We've all accumulated cash and a lot of us were still scared by the last cycle, haven't done anything. Um, and so there's money there. And so when we do go through a bit of a shitty time, the government's got surplus, the banks have got surplus, the pump, the economy again with money and it pushes it out at the mid cycle slowdown or recession point and into a good market again. But when we get to the top, mums and dads don't have savings. The stock markets ridiculously overpriced. The property markets around the world are overpriced and people start going into default at that time because of really unresponsible lending, normally driven by America. And then that has a knock on effect all the way around the world and the, and the top comes off and it goes to a really bad bottom. Generally at that time, stock market's declined by 50 to 60% and property markets around the world declined by between 20 and 60% as well. We're in the mid cycle, slow down point. Sometimes there's no effect on property prices, but the stock market should get a pretty heavy hit in the next couple years if history has to repeat itself. Yeah. Which obviously we don't have a crystal ball, so we're never sure whether or not that's going to happen. So with the mint cycles slow down, why is it important for people to know this if they're investing in property in Australia and how has it, if it has at all affected property prices? Yeah. Sounds some of the mid cycle slowdown points because it feels book the secret life of real estate and banking. He looks at 250 years worth of these cycles in America. Yup. And I'll lean up. I'll link up to both Phil Anderson's book and Fred Harrison's book in the description down below. If you want to check that out, you can go and purchase those books for yourself. Yeah. And in Fred's book he looked at 350 years of the UK property market booms and busts and how that affected business economies and the stock market. So they've got a good understanding of history and the patterns and you know, generally in Australia does one or two things, property prices go relatively flat. Stock markets might take a beating like they will around the rest of the world historically. Um, you know, or sometimes property prices like they are in Sydney and Melbourne right now and maybe in other parts of Australia, like Darwin and Perth might come back by somewhere between 10 and 15 or 20% but they're not going to go, you know, 40 50% which is what they can do at other times of the cycle. Yeah. So I think what I want to talk about, his conversations that we've had in the past where there's been indicators that Sydney and Melbourne tend to do well before the mid cycle slow down. So after a larger recession or depression than Sydney and Melbourne tend to bounce back first, which obviously we've seen that happen from 2012 through to 2016 17. Um, we saw Sydney and Melbourne go gangbusters. And then after the mid cycle, slow down, then it's time for Brisbane and other areas in Australia to shine. Has this historically happened in the past? Yeah, so what I've done is I've, cause I love the data. I've looked at, you know, high only give this incredible report of 46 years worth of Australian property prices in Sydney, Melbourne, Brisbane and Perth. And so I overlaid feels timelines against that data,