Shallow research leads to misinformed real estate consumers: Terry Ryder
Shallow research leads to misinformed real estate consumers and bad investment decisions. It’s important for investors to look beyond the veneer research published in mainstream media and dig a little deeper.
I’m alarmed at the number of consumers I encounter who think absorbing headlines and sound bytes constitutes research.
Their knowledge is paddling-pool shallow and they don’t know it. Their view of real estate markets is the one economists get from the 45th floor of a Martin Place office building. Australian property values rose 9.8% in the past year. Residential vacancies are 2.3%. First-home buyers can’t afford homes because the Sydney median is a million dollars.
Mainstream media gives you little more than generalised numbers. A single figure describes the entire market is a large capital city. It’s meaningless at best and dangerously misleading at worst.
The generalised number for Brisbane vacancies is around 2.5%. No worries. And a newspaper article recently quoted a “research report” claiming the city will run out of apartments to sell in five months. Other articles have said developers are making lots of off-the-plan sales.
Great, let’s buy an inner-city unit in Brisbane.
Looking a little deeper, all the inner-city suburbs of Brisbane have vacancies in the 4-5% range. And that’s before the new developments now under construction or being marketed off-the-plan are completed and dumped in the rental pool.
If you get a copy of the afore-mentioned “research report”, you find that the people marketing the apartments are the same people who wrote the report – and some very creative accounting has been used to come up with the very self-serving conclusions.
Hunt around a little more and you will find independent research showing that 90% of Brisbane inner-city units are being sold to investors, and most of them are distant investors. The new high-rise apartments are not being built to service local demand.
There’s also independent research indicating that the claims made by developers and marketers about pre-sales are largely false – or, at best, exaggerated.
The bottom line for buyers: it matters not whether every planned apartment in Brisbane gets sold. What matters is whether there’s rental demand for them. A market with empty apartments loses value dramatically. That’s why Surfers Paradise apartments are worth less than 10 years ago.
The veneer research numbers say buy a Brisbane unit. The deeper research says run away as fast as you can.
You can be forgiven for thinking not much is happening in Adelaide’s market. The latest generalised number says house prices have risen only 2.7% in the year to 30 June. Put that together with the vague impression you have about South Australia lacking population growth and economic vitality and you might conclude Adelaide’s not worthy of your attention.
The reality is quite different. There’s considerable momentum in the Adelaide residential market – it’s just that the single figure used to describe this market doesn’t reflect the rising sales activity.
Nor does it describe the many suburbs which have recorded double-digit rises in their median house prices in the past 12 months.
There are suburbs right across the metropolitan area, and across all price spectrums, which have recorded growth ranging from 10% to 18%.
Many of the locations with the strongest growth are middle-market areas, suburbs with median prices in in $500,000s, $600,000s and $700,000s – among them Glenelg East (up 17%), West Lakes (up 14%) and Cumberland Park (up 15%).
Among the best has been Cheltenham, where the median price has increased 21.5% to $540,000. It’s part of the municipality of Charles Sturt in the middle-market western suburbs of Adelaide.
The Charles Sturt LGA is the leading precinct of Adelaide in terms of the number of suburbs with rising sales activity – indeed, it’s currently one of the best in Australia.
But if you simply glanced at the generalised price growth figure for Adelaide overall, and dismissed its prospects, you would never know there’s an outstanding growth market hidden beneath the figures.
Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.
