PROPERTY REPORT – OCTOBER 2016

Property Report – October 2016
By Terry Ryder, creator of hotspotting.com.au

Introduction: Desperately Seeking Clarity On Markets Around Australia

If you’re not confused then you haven’t been paying attention. Any Australian who tries to keep up with real estate events by following media will have a head full of misinformation, conflicting figures and downright dodgy data.

Journalists these days are under-resourced and poorly-skilled in the reporting of real estate issues. Most of the real estate content of newspapers and other forms of media is press release material submitted by organisations seeking to promote their businesses.

When this propaganda is re-cycled as news, without proper scrutiny, it’s a recipe for misinformation and confusion.

Anything presented as “research” will get a run in media, especially data on real estate prices. The problem is that statistics from different research sources seldom concur. It’s not uncommon for media to report a market is booming one day and that it’s declining the next, based on divergent data from two different research sources.

In this edition of the Quarterly Market Report, I compare figures from four major sources, point out the discrepancies and attempt to make sense of the figures.

Brisbane and Queensland

Consumers Need To Look Beyond The Generalised Data To Understand Brisbane

There’s general agreement about the state of the Brisbane house market but little consensus about the apartment market. It’s one of those instances when the generalised figures about price growth are quite misleading and deeper analysis is needed.

All of the four major sources I examined attribute moderate growth to Brisbane house prices in the past year. CoreLogic says Brisbane house prices are up 4.1%, Domain says 4.3%, Residex says 5.9% and SQM claims 6.2%.

There’s a broad consensus there but deeper delving reveals many markets have done better than the generalised figures which describe the entire Brisbane metropolitan area. Some precincts have recorded double-digit annual growth at times over the past 2-3 years, but the rise has not been uniform across the Greater Brisbane Area.

In this regard Brisbane has been quite different to Sydney. Brisbane has lacked the strong impetus Sydney has received from a strong state economy, major infrastructure spending and big population growth.  So Brisbane has had elevated sales activity but not the level of price growth across the board that Sydney and, to a lesser extent, Melbourne has received.

The Brisbane up-cycle started 2-3 years ago in the inner-city suburbs and then spread to the middle ring suburbs on the Northside. Later the middle ring areas on the Southside joined in and more recently the more affordable precincts in the outer reaches of metropolitan Brisbane got on board.

Some suburbs have had periods of double-digit price growth, but it has not been as widespread or as sustained as in Sydney or Melbourne.

Right now the best markets are affordable Logan City in the far south, bordering the Gold Coast, and its mirror image in the far north, the Moreton Bay Region.

The most problematic part of the Brisbane market is the apartment sector. Domain and SQM both record small decreases in Brisbane apartment prices overall, while Residex and CoreLogic each report small increases.

Obviously they can’t all be right and, at the end of the day, it’s irrelevant whose figures are most accurate. What matters is what other data tells us: that the Brisbane inner-city unit market is already oversupplied and it’s going to get worse because of the high level of new construction under way.

Looking across the CBD and inner-city suburbs such as South Brisbane, Fortitude Valley and Kangaroo Point, vacancy rates are currently 5% or higher in most precincts. Vacancies will rise further when new projects are completed and investor buyers seek to find tenants.

Research shows that most of the buyers of Brisbane inner-city apartments are investors and few of them are local – always a danger signal for any market.

We’re now seeing the apartment building boom spreading beyond the inner-city to middle ring suburbs like Chermside on the Northside. Buyers should check local vacancy rates (try the SQM Research website for good information about vacancies in individual postcodes) but also go a step further and check out building approvals. Current vacancy rates may look okay but a big upturn in building approvals may provide a clue to future oversupply.

In conclusion

A Single Price Growth Figure For A City Of 5 Million Is Ludicrous

You know you’re listening to a charlatan when a commentator or writer is discussing “the Australian property market” as a single entity.

Economists in particular speak about this mythical creature, the Australian housing market. They will predict that “Australian house prices” will rise 5% next year or observe that “Australian apartment prices” increased 7% last year.

What actually does that mean? In reality, it means nothing of value to anyone. It’s utterly useless information.

To distill all the sales across a nation as large as Australian down to a single growth figure is a ludicrous proposition. There are so many different and conflicting situations across the nation.

According to CoreLogic, apartment prices in capital city Australia rose 6% in the past 12 months. That was the change in the median price for apartments across the eight capital cities.

But, according to the same source, Perth unit prices fell 6% and Darwin dropped almost 15%. Canberra recorded a marginal decline. But Sydney was up 9.5%, Melbourne 3.2% and Brisbane a tad under 2%. Hobart, rather surprisingly, recorded a 13% rise in apartment prices.

That single national growth figure disguises myriad different situations in the various cities.

The single figure for Sydney – a rise of 9.5%, which has been disputed and discredited by the Reserve Bank – is also a nonsense. Sydney is a city of over 700 suburbs and 5 million people. Beneath that single rubbery disputed figure describing the whole metropolitan area lies multiple different situations – some where prices are rising strongly, others where prices are rising moderately, many where prices are stagnating and some where prices are falling, in some cases by a lot.

Most serious researchers know this to be true. But their objective is not to inform consumers or to be helpful. Their goal is to generate publicity to advance their businesses.

Some of them simply don’t care about accuracy or balance. So they continue to publish statistics which are meaningless, inaccurate and sometimes downright dangerous.