60 Minutes property segment was misleading and melodramatic: John McGrath

60 Minutes property segment was misleading and melodramatic: John McGrath
60 Minutes property segment was misleading and melodramatic: John McGrath


This is an email McGrath sent to his estate agents on Tuesday.

There was a piece on 60 Minutes that was particularly misleading in my opinion and unsurprisingly melodramatic in its depiction of a property market that could shortly spiral out of control. 

It’s simply not the case.

In fact, barring any macro-economic disaster like we saw when the GFC took us all by surprise, I believe the property market has seen most of the value declines it is going to see this cycle (in many markets there has been a 5% to 10% decline in values this year and I think we may see another 5% to 7% in some areas) and at the end of that there will either be a steady state period of market stability or even a small positive rebound back by a few percent. 

I say this having now experienced five property cycles in my 35 years real estate career and each time, often at around this stage of the cycle, hearing the same old headline grabbing commentary by one of two so-called experts saying something like “the Australian property market is in a bubble and when it bursts will fall by 40% etc.!”

Which of course has never happened and unless we see a total financial catastrophe engulf the entire world is never going to happen. 

Two questions that I get asked when I have this discussion.  “Why then do they say this and why do you think they are they wrong?”

So the first one is the easiest one.

Generally speaking the sponsors of such theories are seeking self-promotion. 

They put their views forward in some form of press release aimed to grab media attention (the 60 Minutes story was called 'Bricks and Slaughter!') and inevitably are looking to promote a book or attract eyeballs to their website. 

Steve Keen predicted a 40% drop in 2010, Johnathan Tepper predicted a 30% to 50% drop in 2016. Of course, none have even been close to accurate.  In fact, they have been ridiculously inaccurate on every occasion.

And why are they going to be wrong again this time?  Well firstly you would have to interrogate what would have to happen for their theory would have any validity whatsoever.

Firstly, two out of three Australians own their own home or are living in a home with the owner and one in three are in a rented place. Of the 66% who own their home, half of these homes are fully paid off with no loan whatsoever. Just park that fact for the moment but it should make you feel that property is on a very solid footing.

Next let’s look at the generational change occurring – where many Baby Boomers (aged 60 to 75 approximately) are assisting their children secure a first home and of course as the life cycle turns, many will also be leaving their often-considerable assets to their kids. 

And in the main most Australians are wealthier than ever before through their property, other assets or indeed inheritance. Statistically, the average Australian is worth around $395,000 which is at record highs.

Next, let’s look at the underlying factors that we are experiencing today that may affect property, negatively or positively.

We are enjoying a robust economy, low levels of unemployment, record low interest rates and significant overseas immigration and investment. None of these are likely to change significantly into the future. After all, we are the lucky country.

So, when you combine the strong levels of home ownership with the robust economic and social markers it’s easy to see why the negative pundits have consistently got it wrong. Australian real estate is one of the best investments on the planet and that isn’t changing.

Now I do have concern with housing affordability however. Despite the average Australian being technically wealthier than ever before there is no doubt that the ability for many Australians to buy their own property and in many instances even rent their own property is challenging.

And this situation needs to be addresses urgently by both the Governments (Federal and State) as well as the private sector. What has been and will continue to be most Australians’ best financial freedom strategy, residential property, does have another side which must be addressed.

Every Australian should have a path to securing shelter for themselves and their family and this issue will need strong collaboration by both private and public sectors to ensure we achieve this. 

And at McGrath we are in a great position to assist and influence positive outcomes in this space. And we will.

John McGrath is the founder of McGrath Estate Agents.

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