Melbourne house prices have been flat as a pancake all year: Catherine Cashmore
The internet’s done some wonderful things for us. Google is now the brain of the universe – any question can be plugged in and answered (albeit with a hefty disclaimer along the lines of ‘react at your own risk’). However, it’s also fragmented the time we take to digest information that, in a pre-internet age, caused many to devour a newspaper cover to cover on a Sunday afternoon and come out feeling at least partially educated.
Now some of our most important markets are analysed by a myriad voices all desperate to be the first to break the news via a Twitter link or a hastily written column under a flashy headline, which –when coupled with the pressure to publish at breakneck speed and grab the top Google ranking – can be both misleading and conflicting in the information provided.
In addition, the frequency at which data and statistics are produced from a range of different providers evokes microscopic media analysis, which can prevent any sensible overview until there’s enough distance to look back and take stock – a situation that doesn’t usually evolve until the end of either the financial or calendar year.
As a case in point, RP Data’s daily house price index is ideal fodder for trigger-happy attention grabbers, and often has me humming that old classic Those Magnificent Men in their Flying Machines with the lyrics “Up, down, flying around, looping the loop and defying the ground” – Because if ever there were a roller coaster of irresistible headline capturing sensationalism, the fuel for it could be found in the “daily house price index” – for which media releases hit my inbox both weekly and monthly.
In any one week, property prices can be up, down, or flat depending on which way you look – north, south-east or west, and in some cases, which day of the week you choose to concentrate on.
As a case in point, early in the year, Melbourne readers had been informed that the market was in a state of permanent demise, with “values in Melbourne declining fairly quickly”and no hope of recovery on the horizon for the remainder of 2012.
By March, however, the daily house price index had been ‘formally’ released and relief was only moments away.
In any one week, property prices can be up, down, or flat depending on which way you look – north, south-east or west, and in some cases, which day of the week you choose to concentrate on.
As a case in point, early in the year, Melbourne readers had been informed that the market was in a state of permanent demise, with “values in Melbourne declining fairly quickly”and no hope of recovery on the horizon for the remainder of 2012.
By March, however, the daily house price index had been ‘formally’ released and relief was only moments away.
June’s data showed Melbourne’s housing market was up a whole 1%! And after a period during which we nourished ourselves on housing collapse headlines, arrayed with pictures of downward pointing arrows and “more bleak times ahead” news reports, RP Data’s figures provided a welcome ray of sunlight compounded with media reports of housing market recovery!
According to RP Data “After reaching a trough on the 11 June” (note: not the 10th OR the 12th for that matter), “Melbourne dwelling values have now recovered by an impressive 1.7%.” All was not lost, and the media reflected as such.
July’s daily house price index informed that rises were “not as broad-based” as the June results. However, in Melbourne, excitement prevailed when vendors were informed values had risen a booming 1.4% over the four weeks to July 31. “Melbourne was the strongest-performing capital city housing market over July.” It really seemed too good to be true.
And then came August. August flagged concerns because values had flat lined with only a 0.2% rise for the month. Could rises be sustained, asked R P Data’s Tim Lawless – we all waited in anticipation as the “daily” results continued to filter through.
But along came September with a reassuring stomp! A 1.4% increase in September had Melbourne once again rising from the ashes like a glorious phoenix of hope, especially when Lawless informed that values in our most “livable capital” had recorded a 4% surge since the month of May, “which is the largest recovery so far across all the capital cities.” Hooray!
Any hope of celebrating through to Christmas was put to bed in October, during which the index recorded a relatively huge whack in the form of a 1.1% drop, which was followed in November by a second 1% drop, and Melburnians were informed that their city was the “only capital market” to suffer a slide on the national barometer.
The headlines once again went to town with their downward-pointing arrows, however the data confirmed what most of us in the housing industry knew already (even if we weren’t going to admit it in front of a Saturday afternoon auction crowd) that house prices – in Melbourne at least –really haven’t moved from woe to go.
Despite minuscule changes in the median data, in reality, they’ve been flat as a pancake for the entire year. Hopefully it won’t come as a shock to any imagining house prices have been changing, that when analysing data to provide a market appraisal of any said listing, my eyes will filter as far back as June if necessary for a comparable sale – despite the somewhat bumpy daily index road of media sensationalism.
Along with the seemingly relative inadequacy of the daily house price index in assessing forthcoming trends, RP Data also released a long list of suburbs earlier in the year for which it was supposedly cheaper to buy than rent. The inaccuracy of the report was easy to see through – as I pointed out here – however it didn’t stop the media going to town with little time to assess the reality behind the analysis.
Even without any on-the-ground assessment, if it were really cheaper to buy than rent, we wouldn’t have rising numbers sitting on public housing lists or seeking rental assistance (as all welfare agencies will readily attest,) first-home buyer numbers falling, household sizes increasing, and young people “choosing” to stay in the family home well into their 30s.
It’s as hard – if not harder – to find affordable accommodation in locations most need to live (close to work hubs and transport) particularly for single income units - and figures from the latest census data stack up as such, with the largest jump in the number of individuals sharing accommodation.
Furthermore, although housing affordability has show some improvement, rising rental prices and erosion to the interest rates for long-term deposit accounts all but cancel out the benefit.
And while Wayne Swan is once again reaching to pat himself on the back for keeping rates “lower than the last government” –Joe Hockey is doing the media rounds to tell us how awful Australia’s economy is performing, obviously hoping the news will help Julia Gillard fall on her sword when the long-promised stimulus fails to eventuate (at least without serious fiddling of the books.) All I can say is it’s a good job Kate Middleton is pregnant – or from where would our good news come?!
It’s commonly stated that the RBA takes careful note of RP Data’s daily house price index, and from the following media releases, I’d asses the RBA is just as confused as the rest of us as to whether housing prices are improving or not.
Following this year’s first interest rate cut in May, the media release from the RBA read:
“Housing prices have shown some signs of stabilising recently,” which was a verbatim repeat of April’s statement.
In June it was noted:
“Housing prices had shown some signs of stabilising around the turn of the year, but have recently declined again.”
In July it was noted:
“The housing market remains subdued.”
But by August:
“Dwelling prices have firmed a little...”
The same ‘firming’ statement was repeated in September’s media however by October dwelling prices were once again
“Subdued.”
November seemed more positive, as the RPA reported:
“the housing market has strengthened”
And most recently following December’s cut of 0.25 percentage points governor Glenn Stevens noted that:
“there are indications of a prospective improvement in dwelling investment.”
However, throwing forward-thinking terms such as “prospective improvement” and other wishy-washy statements such as those noted above are no reassurance from the experts – with the best and most reliable data at hand – that the market is either “subdued” or “firming.”
In fact the RBA seem no better informed than the rest of us on such matters – jumping on each tiny notion of movement, which may (or may not) hint of a forthcoming ‘trend.’
The pick-up in housing as we approach the end of the year is – in part – a seasonal expectation. As December nears its end, there is always a last-minute rush of buyers as they try to tie up deals before the real estate world takes its annual Christmas breather.
Post-Christmas most are recovering from too much champagne, turkey and weighty credit card debt to pay the property market much attention, with one exception – investors.
As the latest ABS data attests, the erosion of interest rates on long-term credit accounts is clearly luring this demographic back into what they probably assess to be their best long-term bet among a range of low-performing sectors.
Speculation that growth in the economy will fall to 2.5% during the year ahead – well below the usual trend of 3-3.25% – is why many are assuming a further 25- to 50-basis-point drop in the cash rate is needed if we’re to stimulate the ‘non-mining sectors’ of our economy.
Should this occur, and the banks pay it forward, it will take lending rates low enough to provide a greater incentive for potential property shoppers to make their move.
However, consumer sentiment plays a far stronger hand in dictating future movements in our economy – and this is one area of influence even the best crystal ball readers fail to either predict or dictate.
Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.