The Economist is wrong to argue that Australia's property market is overvalued: Michael Matusik
Australia has moved from fifth to fourth most overvalued global property market but the overall risk of a housing bubble has subsided, according the very debatable The Economist magazine's 2013 global housing index.
On a personal income housing affordability measure, Australia ranks fourth behind France (34%), the Netherlands (33%) and Canada (32%) while on a rents measure, Australia ranks third behind Hong Kong (81%) and Singapore (57%).
The Economist calculates that Australian house prices are overvalued 24% (28%per cent last year) against average personal disposable income and 44% (38%per cent last year) against rents.
What a load of rubbish! Read here what we wrote about this stuff last time around.
I believe The Economist has an issue with the Australian property market because we hadn’t experienced a substantial housing bust (or correction) here like most countries in the developed world.
For mine, due to our different lending practices here (full recourse loans etc) and high level of owner-occupier property, we were extremely unlikely to see the massive housing corrections that they experienced abroad, regardless of what Steve Keen believes!
Also, most economists struggle forecasting things like actual economic growth and interest rates let alone property markets. Generally speaking, economists have a pretty poor understanding of the real dynamics and influences of property markets.
Some economists (among others) have criticised me of late as being “too close to the market” i.e. that is involved in marketing and some very select selling - and therefore not somehow capable of independent thought or the tenacity the share it. The irony is that it is this very coalface contact with the market that is the most important when it comes to better property analysis.
And as for an international economist – using a bunch of bland, internet-based, third party data sources – to speculate on Australia’s property markets, please give me a break! It is real estate after all. You must do a site visit. Walk the turf, kick the tyres, eyeball the vendor and quiz (interrogate) the salesperson.
Australia, also, has a culture built on doing whatever is required to protect the family home – when things get a bit tough overseas they put the keys in an envelope and post them to the bank!
Finally you cannot make comparisons between property and share markets. They are completely different.
But maybe The Economist knows what it is doing. It needs to sell its magazine and online advertising after all. Well, if it ‘bleeds it leads’ and sadly telling us that our housing is going (again) to ‘hell in a hand basket’ must increase the magazine’s circulation.
Michael Matusik is the founder of Matusik Property Insights, which has helped over 550 new residential projects come to fruition. Read Michael's blogor follow him on Twitter or connect via LinkedIn.
