Most regional markets walking rather than running

Terry RyderNovember 9, 20160 min read

Earlier this week I was sitting amid 30-degree heat in South-east Queensland, noting that some parts of Australia had 40 degrees and others had 20, while speaking by phone to a Tasmanian friend who had just lit a fire amid wintry conditions.

Imagine our reaction if a TV weather presenter took an average of weather conditions around the nation and announced that “the temperature in Australia today was 25 degrees”.

Clearly that would be ludicrous. But every day in media, economists and other commentators take that kind of position on residential real estate. They reduce this very large and diverse nation to a single market to be described by a single figure: “Australia house prices rose 8 percent in the past 12 months.”

From that one figure which so inaccurately describes Australian residential property, they will extrapolate myriad conclusions: there’s a national property boom, prices are too high, there’s a real estate bubble in Australia, the nation is vulnerable and young people are being left behind.

The big-name ratings agencies like Moody’s and Standard and Poor’s take it a big stride further. They will access narrow data from a single source, often based on a single month’s alleged price movements, and use that to justify a press statement warning about “Australian house prices” getting out of hand.

Moody’s recently dashed off a media release warning that “resurgent housing prices” in Australia were eroding affordability, because “housing prices had risen 2.7 percent across Australia” in September. But prices hadn’t increased across Australia – the average for the capital cities had risen that much, according to one source, whose figures were contradicted by several other sources – not forgetting the notoriously erratic nature of month-to-month changes which are ignored by credible researchers. 

The lack of expertise and sophistication evident in these statements is quite startling, given the lofty reputations of the big brand-name entities making them. It really is very flimsy analysis and shallow behaviour, based not on a desire to inform but on a need to generate publicity. 

I had a call earlier this week from an ACT-based journalist wanting to discuss the market in Canberra which, he said, was going crazy “like everywhere else in Australia”. We’re entitled to expect people paid to write about real estate to have better knowledge than that. Everywhere is not going crazy in real estate and certainly Canberra is not (annual house price growth averages around 4 percent, according to three major research entities).

But that’s a common assessment I hear from all kinds of people daily. Many Australians really do believe what they read and hear: that there’s a national property boom, that prices are through the roof everywhere and no one can afford to buy.

I fear for consumers making big financial decisions based on such skinny knowledge, while wading through a sea of misinformation.

The different scenarios being played out in the thousands of markets around the country include a small number of strongly rising ones, a far greater number of mediocre ones, some with prices going backwards and a few where the local market has crashed.

Economists clearly believe there’s a national boom because interest rates are at record lows and that, in their minds, means real estate should be rising everywhere. And therefore it is.

But it isn’t. And that reality would suggest to an inquiring mind that the level of interest rates perhaps is not the over-riding factor.

In my view, the most significant factors are the underlying local economic conditions and the level of spending on infrastructure.

It is not coincidence that the No.1 ranked economy is NSW and that the city with the biggest infrastructure spend, by a wide margin, is Sydney. That’s been the case for the past three years, a time during which most markets across metropolitan Sydney have had strong price growth.

The No.2 ranked economy is Victoria, helped by strong population growth, and the infrastructure spend is reasonable, though well below Sydney’s. Not coincidentally, Melbourne has been the second strongest city market on price growth, though at levels well below the genuine boom levels of 2001-02-03.

The economies impacting Brisbane, Adelaide, Canberra and Hobart have largely been mediocre and infrastructure spending has been relatively weak in recent years. That’s reflected in the absence of price growth to match Sydney’s.

It is, again, not coincidence that the recent rise of prospects for Hobart real estate has happened alongside an improving state economy and sharply rising spending on infrastructure in Tasmania. 

Adelaide, too, is showing signs of an improving market, supported by solid economic and real estate indicators and significantly rising spending on infrastructure.

Meanwhile, Western Australia now ranks in CommSec’s State of the States report as the worst economy in the land and Perth has the weakest of the city real estate markets. The Northern Territory is also faltering and Darwin’s property market is in a similar condition to Perth’s. Prices in both cities have been going backwards for three years and record low interest rates have not helped them.

Beyond the capital cities, there are multiple different scenarios in the many thousands of different markets.

Some, including regional centres close to Sydney, have had periods of solid price growth. Others, like both the Gold and Sunshine Coasts in Queensland, have had elevated activity without yet delivering major price escalation 

Most regional markets, however, have been walking rather than running – and several, notably those impacted by the resources sector, have experienced significant decline.

We’re a massive nation and the real estate conditions are as diverse as the range of temperatures you’ll see on a weather map on the evening television news.

Terry Ryder is the founder of You can email him or follow him on Twitter.

Terry Ryder

Terry Ryder is the founder of
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Regional Markets
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