Publicity junkies keep howling at the moon, but the property markets keep growing
Tuesday, June 10, 2014/
The nature of Australian media makes it difficult to have a genuine debate on any subject and real estate is no different.
This is particularly so for print media, where desperate attempts to stave off the inevitable (death) leads to more and more extravagant treatment of story lines that contradict most of the available research evidence (e.g. the mythical affordability crisis).
We’ve now had three clear instances in the past eight months of publicity junkies declaring “the property boom is over”, each time based on one month’s median price figures (dodgy at the best of times) from one unreliable source, only to have the notion controverted a month or so later by another more buoyant set of monthly figures.
Newspapers have been only too happy to regurgitate the press releases declaring the market dead, then re-born, then definitely dead, then miraculously resuscitated, then really truly absolutely dead, this time we really mean it.
If we can believe the headlines, the market peaked in October, then surged again, then peaked in February, then surged again, and more recently peaked yet again in May.
In the past week, individuals and organisations have clambered to be the first to declare, one more time: “The property boom is over.”
The first question that arises is: Which boom are they speaking of? Although most of the “I was the first to say it’s over” commentators refer to a thing they call “the national property market”, I’m quite sure they’re thinking of Sydney and extrapolating that situation across the country.
This must be so, because Sydney is the only major centre in Australia with exceptional growth figures. Nowhere else is booming, although there are other places with forward momentum.
The second question is: What does that mean, the property boom is over? Does that mean markets have ground to a halt? Does that mean prices have stopped rising? That people have stopped buying?
If that’s what these “publicity addicts” mean, then they’re clearly wrong.
I think we’re in similar territory to mid-2013, when people declared “the mining boom is over” at a time when projects worth over $250 billion were under construction. Then, as now, the declaration had little to do with intelligent debate – it was nothing more than a desire to generate a headline.
There’s all sorts of evidence that makes nonsense of the idea that real estate markets are grinding to a halt, in Sydney and elsewhere. There is, for example, the evidence that sales volumes in the March quarter were the highest for any March quarter in the past five years.
There are the various arguments that have contributed to the BIS Shrapnel conclusion that Sydney will continue to show growth for the next couple of years. This concurs with my own analysis of sales activity, which shows there is still a lot of momentum in markets across Sydney (keeping in mind that sales volumes are a far better barometer than median prices, which mislead more than they inform).
I’ve just finished analysing, suburb-by-suburb, sales activity in Perth for an update of our Price Predictor Index and there remains considerable momentum in this market as well. The current market cycle is far from over in Perth. There’s no doubt sales volumes generally are not rising at the rate they were in early/mid 2013, but sales levels remain elevated across Perth.
The same exercise has confirmed a steady improvement in Tasmanian markets, with suburbs in both Hobart and Launceston on the improve.
For these markets and elsewhere, it’s way too early to declare the end of anything.
This article first appeared on Property Observer.