My award for the worst piece of misinformation of the year goes to...
Most real estate articles published these days are nothing more than press releases with headlines. There is no journalistic content, other than (sometimes) a quick re-write for which the journalist claims a byline as if it’s an original piece of creative work.
The result, usually, is misinformation. It’s the inevitable outcome because a press release is a piece of propaganda written by someone with a vested interested in the claims being made. Often the content consists of lies disguised as research or sensational claims designed to generate cheap publicity for the authors or their companies.
If a media organisation publishes the propaganda without proper scrutiny and journalistic input (asking questions of the source, seeking alternative viewpoints, conducting other research, etc) then the media organisation is misinforming its customers.
Misinformation is a serious issue because real estate consumers base major decisions on what they absorb from media. A decision based on bad information is a bad decision, likely to lead to a poor investment outcome.
Often the content of a press release is designed for no purpose other than to generate media profile for the organisation writing it. The more sensational the material, the more likely it is to be published.
So it was this week, with what I see as worst example of this problem in 2014.
Misinformation is a serious issue because a decision based on bad information is a bad decision, likely to lead to a poor investment outcome.
A mortgage broking firm came up with what some of the nation’s largest newspapers called “analysis” to estimate house prices will be in our capital cities 10 years from now.
They made the attention-grabbing conclusion that all the capital cities except Hobart will have median house prices above $1 million within a decade. One Sydney newspaper printed it with this unbelievable headline: “House prices to soar as skyrocketing rises continue.”
And what was the “analysis” that arrived at this startling result? The mortgage brokers simply concocted a fictitious growth figure and applied it equally to all eight capital cities. This is the first clue that this is nonsense.
Somehow, we’re expected to believe that all eight cities will grow at exactly the same rate between now and 2024 – and that the magical figure is 8.12% per year.
Where this figure came from was not explained.
It should be already apparent that this has no credibility - but in case it’s not, let me illustrate by examining the past 10 years based on actual data.
Last month, data recorded the growth rates for median house prices in the eight capital cities since 2004 finding that the weighted average across the eight cities was recorded at 5.44% per year. You can see here which capital cities managed to perform.
So my first question is: given that the past decade has included a couple of major growth periods, and the average growth rate was 5.44%, what drivers will push growth rates above and beyond that to 8.12%? Why will the next decade be so much more prolific than the last (particularly as most commentators, myself included, expect the opposite to be true)?
Looking again at the past 10 years, there were big differences in the growth rates from one city to the next. Hobart and Sydney grew around 3% per year on average. Canberra managed a tick under 4% a year. Brisbane’s growth rate was 4.4% a year and Melbourne’s was 4.8%.
The best performers, and this correlates with other research from other sources, were Perth (averaging almost 9%) and Darwin (averaging slightly less than 10%).
So here’s my next question: given that the growth rates in the individual cities ranged from 3% in Hobart to 5% in Melbourne to 10% in Darwin, why will all cities grow at exactly the same rate between now and 2024?
The answer is that they won’t. They never have and I dare say they never will.
And, as an offshoot to that question, how will the five cities which grew less than 5% a year over the past decade manage better than 8% a year over the one to come?
The mortgage broking firm which published this rubbish conducted no “analysis” – they threw together some rubbery figures and sat back smiling while major newspapers published it as credible information.
This wins my annual awards for the worst piece of misinformation for the year, the most shameless grab for publicity and the worst example of non-journalism.
It would be comical, were it not so serious.