Crypto Millions Raining on Aussie Property — Real Estate Market
The real estate market is going insane.
I’m not exaggerating here.
A couple of weeks ago a property in Marsfield, Sydney, sold for $2.74 million.
That’s $240,000 over the reserve and $1 million more than the buyer paid for it five months ago.
Take a look — it’s nothing flash that’s for sure.
The house is a knockdown essentially.
The Value is in the Land
The only change to the property since it was purchased five months ago is that it has been council approved to build a duplex. (Essentially two townhouses with a common wall.)
No doubt plans for a duplex add value to the land.
And I’ve said numerous times to subscribers of Cashmore’s Real Estate Wealth — the best real estate investment you can make (if seeking ‘capital growth’ — or more accurately termed land price inflation) is to target these sites.
That is, well-located older houses on blocks of subdividable land in popular suburban locations.
But to sell it five months on, for a million more than paid?
That’s a bull run unlike anything we’ve seen for decades. Something we forecast back in 2019 in Cycles, Trends & Forecasts — and it’s playing out in stunning fashion.
We need to use history as our guide to what happens next.
To see anything like the fervour in the market of this magnitude, we need to scoot back to the 1890s.
In the late 1800s, Melbourne was heralded as ‘Marvellous Melbourne’.
Like today, it was experiencing the biggest land boom Australia had ever seen.
Immigrants discovered large nuggets of gold in areas such as Castlemaine and Bendigo.
They poured their wealth into the real estate market.
By 1889, the value of land in parts of central Melbourne was so high — it rivalled that of London.
The most successful investors developed an intricate web of land banks, mortgage companies, and building societies.
All set up on a web of complex cross-ownership and financial arrangements.
While confidence held, the boom in land values kept growing — fuelled by speculation in land and shares in the companies that backed it.
You can still see the results of that era lining St Kilda Rd in Melbourne today.
Grand mansions that, at the time, rivalled anything seen prior. They housed some of Melbourne’s most influential families.
Source: Historic mansion Armadale at 461 St Kilda Road, Melbourne. Image: Fairfax
The crash that followed, was the most severe financial crisis Australia has ever experienced.
Real GDP fell 17% over 1892 and 1893.
Land values didn’t recover until the 1920s run into the Great Depression.
(The full extent of that period best captured in Michael Cannon’s The Land Boomers.)
Today’s bull run is not being driven by gold prospecting, however.
And although buyer grants and low interest rates are adding fuel to the fire. There’s another game at play — and land is inevitably taking the gains just as it did in the late 1800s.
I’m talking about the mining of cryptocurrencies and the blockchain technology that supports it.
A mate of mine was speaking to an agent the other day.
He was saying how strong the first home buyer market is right now and mentioned a first home buyer he’d sold to had used his profits from crypto to buy into the property market.
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Crypto A New Form of Gold
Whichever way you look at it, crypto is now seen as a digitally scarce store of value — a new form of gold.
And you don’t have to convert your bitcoins to fiat for a property purchase I may add.
Bitcoin fever started to hit the real estate market a few years ago.
In the UK, property developer Go Homes began selling new properties in bitcoin in 2017.
The first was sold to a bitcoin miner for £350,000 in Colchester.
The world’s first crypto house auction in Australia took place in front of 200 people on the east coast in April 2019.
Since then, platforms that enable the buying and selling of properties using fiat money and cryptocurrency, have closed on sales in crypto across both Sydney and Melbourne.
The influence of blockchain goes further than this, however.
Take Power Ledger as just one example.
It is an Australian blockchain pioneer changing the way energy is made and used.
Their technology allows households to disconnect from power companies.
Using solar powered energy generation, property owners can trade electricity with others via an online marketplace.
It’s done with the help of battery storage.
Houses with similar solar systems installed form a ‘virtual power plant’ allows low power users to trade surplus power with high power users.
Owners can trade their excess electricity through Power Ledger’s blockchain-based energy platform. And if needed, they can also buy it back.
And as power becomes cheaper?
You’ve guessed it — land prices take the gains. Simply — buyers have more money in their budget to bid up the price of real estate.
The boom in crypto will be a significant and increasing force on this real estate cycle. Unlike anything we’ve ever seen.
You don’t have to like how this feudal system works. But whether buying real estate — or the stocks that back it, you do need to understand it, if you want to benefit.
Investors are only just starting to enter the market in force.
An increasing number of cash buyers among them.
Reports on-the-ground of cash saved for overseas trips now being ploughed into real estate and older Australians emptying term deposit accounts in search of higher yields.
One thing you don’t want to do, is sit on the sidelines.
My colleagues Ryan Dinse and Greg Canavan have just launched a new service called New Money Investor.
This service is designed to take you into the heart of the cryptocurrency market and discover all the implications of where this massive trend is taking us.
The giant influence it’s about to exert on the property market is a vital one. But there is so much more.
Some of my trader mates are wondering if one reason returns on the stock market have been muted lately is because other traders are migrating to crypto.
Crypto is also now developing ways to generate passive income.
See what I say when its influencing so many different markets?
Make sure you see what Greg and Ryan are forecasting by going here now!
But if you are a property buyer just remember, the value is in the land and its development potential — not the depreciating property that sits on top of it!
For The Daily Reckoning Australia
PS: Australian real estate expert, Catherine Cashmore, reveals why she thinks we could see the biggest property boom of our lifetimes — over the next five years. Click here to learn more.