How to get ready for the biggest property boom we’ve ever seen.
What I’m going to share with you now is probably going to sound crazy.
How can we possible be set for a rerun of the Roaring 20s?
We’ve got the Coronavirus under control (for now!) in Australia, but its still running amok in America and most of Europe. China, our biggest trading partner (for now!) has Corona under control, but they’ve decided they don’t want to be best buddies with us anymore, and are clamping back on cross-border trade.
On top of that, JobKeeper is ending, unemployment is up, mortgage deferrals are lapsing, small businesses are shuttering.
How could we possibly be on the cusp of the kind of super-cycle boom that made the 1920s famous?
But cast your mind back 100 years to 1920. How many people then thought the future was going to be a bright and fantastic place to be?
Think about it. World War I had just ended, laying to waste an entire generation of young men the world over. On top of the tragic personal cost, it was a massive hit to the productive capacities of the world’s economies.
Not only that, you had pandemic that followed hot on the heels of the war. The Spanish Flu killed millions and there was no known cure.
The outlook in 1920 was grim.
And yet people stood on the cusp of one of the most epic and famous economic booms in human history…
… and they had no idea.
The world is a very different place 100 years on, but there are some important parallels.
For instance, just as they were in 1920, governments are squarely back in the driver’s seat. After taking a hands-off approach for the better part of 60 years, governments are taking responsibility for our economic prosperity again.
After running close to surplus for several years, we are now running a budget deficit to the tune of 10% of GDP. That’s massive. That’s a huge injection of cash, straight into the economy.
This firehose of cash is working hand in glove with lower-interest rates. Mortgage rates in particular have tumbled, and it’s increasingly common to see banks offering rates with a ‘1’ in front of them.
Incredible! I never thought I’d see that in my lifetime.
At the same time, there’s a revolution in the way we structure our economies. Just us WWI forced us to reimagine our trade networks and supply chains, Covid has given us Work from Home and Zoom meetings, and a rapidly shifting geo-political playing field.
And in the context of this rapidly dematerialising economy (think about what Netflix and Spotify have done to VHS cassettes and CDs), with the money machines printing cash at full tilt ($100 billion in six months in Australia!), hard assets have become a hot commodity.
This is what we saw during the GFC. All that “liquidity” (aka made-up money), flowed straight into asset prices. Between 2010 and 2018, in the western world, stock markets and property markets boomed.
But – and this is the really important thing – the ‘liquidity’ that flowed out of the GFC is nothing compared to what’s flowing into the global economy right now! It’s like comparing a garden hose with the mighty Murray -Darling.
And that’s why I believe we’re looking at a rerun on the Roaring 20s.
And look, obviously the 1920s is only a rough metaphor, and there’s a lot of nuance we need to get into. But Jon Giaan – the rascal economist – and I will get into some of that nuance in the pages of this magazine for you.
And I think when you look at the data, when you see how our property and asset markets are already responding to the stimulus we’ve seen – and when you remember how much stimulus is still on the way – then it’s easy to understand why the outlook is so exciting.
In fact, this could easily – very easily – become the greatest property boom we’ve ever seen.
So I want you to do two things.
Take some time off. Some proper time off. It’s Christmas after all. And you really need to be coming out the other side of this with your batteries fully-charged.
Second, give some time to visioning and dreaming. It’s a potent time of year. Have a think about where you want to be and how you’re going to get there.
Do both of those things, then when the year opens, you’ll be ready.
It’s time to pull the trigger.
DB.