Headline obsessed writers need a reality check
I think we all need to have a cold shower, a few aspirin and a wee lie down.
Then, having calmed down a bit, conduct a rational assessment of our property markets, without the emotion, the self-serving hyperbole and the publicity-seeking rhetoric.
We seem to have arrived at a point where any price rise anywhere in Australia is deemed a crisis. We're also at a point where the argument (it doesn't deserve to be called a debate) about real estate is driven by the people who make the most noise, rather than those with the most knowledge.
And, saddest of all, Australia in 2014 is a place where few people who work in or use the media give a damn about fairness, accuracy or balance. The only thing that matters is the headline or the political points scored or the amount of publicity achieved.
There was a time when journalists performed a worthwhile role. They were the filters through which information and comment had to pass. Claims were challenged, information was checked and alternative views were sought.
No one got to write about a subject unless they had credentials.
Today employees of media organisations are often mere conduits for propaganda. The public is asked to accept that if it's in a press release, it's valid. If someone describing themself as an economist makes a statement, it's likely to be fact. If an offshore "analyst" makes an observation, it's news.
The outcome is a melting pot of extreme views. The missing ingredients are objectivity, scrutiny and balance.
Many journalists no longer feel the need to support their statements with evidence.
A writer from a major media company (not a property specialist but apparently a "personal finance writer") this week stated as fact that Australia has "inflated house prices" and "surging property prices across the country". And that was just the first sentence.
No evidence was presented to back those big statements; we were expected to accept them as truth, despite the writer's lack of expertise and the reality that all the research data contradicts the notion we have "surging property prices across the country". According to the numbers I see every day, it's simply a lie.
On the same day, a writer from a different media company, with even flimsier credentials, sought to justify a pre-conceived attitude that investors exploiting the tax system drive up property prices. He presented graphs which he claimed showed that "whenever investor activity increases, house prices go up".
He saw what he wanted to see but, in reality, the graphs showed nothing of the sort. They showed, in fact, that investors do not lead price rises – they follow them. In every step along the graph line, a change in investor activity came after a change in prices.
My three decades researching real estate has taught me that investors never instigate property booms - they follow them. The biggest force in real estate, always, is the sector comprising home buyers other than first-home buyers, who dominate most markets numerically and have the financial capacity and motivation to pay high prices.
Meanwhile, another columnist with a bee in his bonnet about Asian investors tried to argue that "an influx of murky money from China" had been distorting and inflating our property markets "for years".
There was little in the way of research evidence, just a convoluted set of statements that led to no apparent conclusion.
So there we had, on the same day, three writers, all of them working for major media organisations but none of them with any real estate expertise, all claiming "Australian property prices" were unreasonably high, but each blaming a different bogeyman – one claiming it was foreign investors, another pointing the finger at local investors boosted by negative gearing, and the third blaming slack lending standards.
The one thing they had in common is that they all got it wrong. And probably don't give a damn because the headline is the thing.
So, setting aside all the ego-driven noise, here's a reality check.
Sydney remains the only city to have produced boom growth to date. The figure so many misguided commentators keep quoting – and describing as "the surge in Australian property prices" – is nothing more than the average increase across the capital cities, greatly inflated by Sydney's growth.
The key thing is this: Sydney's upturn follows 10 years of under-performance. Even with the rises of the past year or so, Sydney's average growth over the past decade is still below par. As a number of the more rational observers have commented, Sydney has been playing catch-up. But, despite the recent increases, it still hasn't caught up.
Here are some examples of what I mean. The median house price for Vaucluse has increased 17% in the past 12 months, according to Australian Property Monitors, but the average annual rise in the past five years is just 1.4%. The 10-year growth average is 3% per year.
The median unit price for Point Piper is up 17% in 12 months, but the 10-year average is 1.5% per year. In real terms, they've lost value over the past decade.
In Darling Point, the median unit price today is lower than it was 10 years ago, despite the recent growth. They've lost money, even without allowing for inflation.
Heading out west to a more mainstream and affordable market, the suburb of Blacktown (Sydney's most popular suburb in terms of sales volumes) has recorded 18% median price growth in the past year, but it's 10-year average is just 3% per year.
You'll find similar numbers right across the Sydney metropolitan area. Even when you examine above-average performers, the numbers are still modest. Balgowlah's five-year growth average is 5% per year; its 10-year performance is 4.1% per year.
All the froth and bubble in the media is being caused almost exclusively by Sydney's growth, but in reality Sydney's long-term performance remains decidedly poor.
Take the recent Sydney growth out of the equation and the average growth in the past year across the other seven capital cities is 4-5%. And that follows several years of price decline.
But, amid the prevailing atmosphere that any price rise is a national disgrace, even that number would be described by some as a bubble.
Terry Ryder is the founder of hotspotting.com.au. You can reach Terry via email or twitter.
