The 18-Year Property Cycle

What Is the 18-Year Property Cycle?

Jeremy explains the theory originates from a book by economist Fred E. Foldvary, based on an analysis of US property market data, proposing that major property booms tend to recur roughly every 18 years. Despite being based on US data, the theory has become popular in Australian property investing circles, frequently referenced across podcasts, blog posts, and email newsletters.

Australia's National Growth Rate Over 44 Years

Jeremy presents a chart of Australia's per annum national growth rate from the end of 1981 to mid-2024. Over this period, the fastest national growth surge occurred in the late 1980s, peaking at around 31% per annum, while the worst national growth rate occurred in mid-2012, at around -5.5%. National growth dipped into negative territory five separate times over the 44-year period, with gaps between those troughs ranging from under three years to over a decade. At the time of recording, the current growth rate sits at around 7.7% per annum, following a sharp decline after a historically low-interest-rate-driven boom around the COVID period.

Long-Term Averages Shift Depending on the Period Measured

Jeremy adds two reference lines to the chart: a long-term national average growth rate of just under 8% across the full 44-year period, and notes this figure isn't a reliable forward-looking benchmark, since it shifts meaningfully depending on the exact period measured (dropping to around 6% per annum if only the last 35 years are considered). He also notes recent 10-year growth has sat around 6–6.2% per annum. Jeremy explains he prefers to track a market's recent growth trend (referred to as the "LG" metric) as an input into the DSR score specifically because strong recent growth tends to reduce the probability of continued strong growth going forward, and vice versa, reinforcing the general principle of comparing an individual investment's performance against the national benchmark to judge whether it's genuinely outperforming.

Testing the 18-Year Cycle Theory: Defining a "Boom"

Using a 25% per annum growth threshold to define a "boom," Jeremy identifies three qualifying booms over the 44-year period: the late 1980s, the early 2000s, and the post-COVID early 2020s boom (an earlier surge in the early 1980s falls just short of this threshold). The gaps between these three boom peaks are 13 years (1989 to 2002) and 20 years (2002 to 2022), averaging 16.5 years, but with only two data points to average from, and no real consistency between them, Jeremy considers this far too small and inconsistent a sample to support an 18-year cycle claim.

Changing the Definition Changes the Result

Jeremy demonstrates how sensitive this kind of analysis is to an essentially arbitrary choice, the percentage threshold used to define a "boom." Raising the threshold to 30% leaves only one qualifying boom (making any gap calculation impossible). Lowering it to 20% produces four peaks (adding an early 1982 boom) and three gaps of 7.5, 13, and 20 years, averaging 13 years, still far from 18, and still highly inconsistent. Dropping the threshold further to 15% doesn't change the result at all (same four peaks). Dropping it all the way to 10% produces nine peaks and an average gap of just 5 years, ranging from as little as 2.5 years to as much as a decade, again showing no reliable, repeating pattern.

Why This Matters for Investors

Jeremy's overall conclusion is that no consistent national growth cycle length can be reliably identified in Australian historical data, whichever reasonable definition of a "boom" is used, and that the 18-year figure specifically simply doesn't hold up. He also challenges the practical usefulness of the theory even if it were accurate: since property markets vary enormously by suburb, city, and region (with some suburbs growing while the national figure is negative, and vice versa), an investor can't meaningfully act on a purely national-level cycle anyway, since there's no way to "buy the index" the way one might with shares; a specific property in a specific suburb still has to be chosen.

Jeremy's practical takeaway is to stay invested in the market when circumstances allow, given property tends to reward a long-term, largely "set and forget" approach, while Damien notes some investors may choose a more active strategy with a portion of their portfolio (buying and selling opportunistically) provided the numbers justify it, a topic flagged for a future dedicated episode on trading versus holding.

Closing Thoughts

Jeremy sums up the 18-year cycle theory as not holding true for the Australian market based on available historical data, and cautions that with a small enough sample size, virtually any cycle length can be "found" by adjusting the definition of a boom, and then published as if it were a genuine, reliable pattern. Both hosts note this kind of theory can be attractive to those looking to package themselves as an expert, despite lacking a robust evidential basis. They close by encouraging listeners to like, comment, subscribe, and share the episode with anyone who might be repeating similar claims.