Amateur reporting causing confusion and fear

Posted on 29/10/2008  

At a time when Australians are trying to make sense of global economics and federal rescue packages, low-standard reporting on real estate issues is causing fear and confusion.

A serious ongoing issue for property is that most of the journalists reporting on the market lack knowledge and experience. While newspapers, radio and television have qualified specialists covering business and finance, real estate stories are delegated to anyone handy.

The real estate sections of major newspapers are often managed by journalists with no expertise in real estate – it’s not considered necessary. I know this from personal experience:  I was made property editor of a metropolitan newspaper at a time when I had zero experience and scant knowledge. Nothing has changed in newspapers since.

Right now, amid mounting community fear about the impact of the so-called "credit crunch", a lot of the reportage on real estate is embarrassingly inept.

The best example is the coverage of the impact of the Federal Government’s $10.4 billion package to bolster the economy, which included the increase in the First Home Owners Grant (FHOG). Most newspapers have sought to measure its impact by quoting auction clearance rates. Anyone with a modicum of property nous knows the two things are not connected.

It’s a bit like visiting Toorak in Melbourne or Point Piper in Sydney to gauge whether the Christmas bonus to pensioners and lower-income families is having any effect. You’re not going to find too many battlers in Toorak or Point Piper.

The FHOG is impacting on the cheaper areas of our major cities. First-time buyers faced with affordability issues are seeking homes in the lower price brackets, often in the middle or outer ring suburbs. Here the great majority of homes are sold by private treaty, not by auction.

Auctions are used primarily to sell property at the top end of the market. In August, for example, the average price of homes sold at auction were $510,000 in Brisbane, $690,000 in Sydney, $555,000 in Canberra and $700,000 on the Gold Coast. Does this sound like first-home buyer territory to anyone?

The upper end of the market where auctions are used is the sub-market that is struggling the most. The sharemarket boom which fuelled this market last year is now in freefall. The interest rate cuts and the expanded FHOG are irrelevant to this sub-market. The poor clearance rates at auction are a reflection of the decline in the sharemarket and in business confidence, not an indication of low impact from the government package.

To gauge the impact of lower interest rates and government handouts, journalists should be monitoring activity in the mortgage belt suburbs. Here, according to the anecdotal evidence, business at display villages and new housing estates has doubled. But most media is missing this and continuing to spread fear by quoting clearance rates at the quintessential barometer of the mainstream market, which it is not.

Take, for example, this nonsense in The Australian: “Clearance rates crashed to record lows over the weekend, with the lure of the increased FHOG failing to offset buyers’ concerns about the global financial crisis.” Or this from The Age: “Melbourne’s property market yesterday suffered its worst day in at least four years, despite yesterday being the first auction day when prospective buyers had access to the increased FHOG.” This misinterpretation was jointly written by two reporters, Chris Vedelago and Peter Weekes. Even two journalists working together couldn’t manage a basic understanding of real estate markets.

Another example of poor journalism is the undue emphasis given to the views of the nutty professor Steve Keen, who would have us believe our property values are going to halve – despite the economic fundamentals (such as record population growth at a time of serious under-supply of new dwellings and record low vacancy rates).

There’s not a single other analyst in Australia who agrees with Keen’s opinions, but the views of senior analysts from BIS Shrapnel, Access Economics, ANZ Bank, RP Data, Australian Property Monitors and many others are being ignored in favour of the extremist views from an obscure academic (who is not a real estate expert) from an obscure institution (the University of Western Sydney).

Why? Because media is obsessed with the “crisis” story-line and Keen’s rantings fit the mindset. Qualified commentators putting forward reasoned arguments based on research and analysis don’t suit the theme, so they are ignored or relegated to the back pages. Instead we are presented with irrational comments like this from Keen: “If you’re an investor, get out of it before the crunch bites. If you’re a home owner, you should also think about liquidating.”

This kind of advice to a scared public is outrageous and irresponsible – and hypocritical.

Consider this: an apartment in inner-city Sydney sold in 2005 for $410,000. The following year it sold again for $480,000. Recently it sold again for $526,000. According to Keen, this should not be happening because our homes are 40% over- valued. But who was the person who bought this apartment for $480,000 ($70,000 more than its previous sale) and sold it recently for $526,000 (a further hike of $46,000)? Professor Keen.

In times like these, Australia needs informed, rational and balanced reporting. We’re not getting it and it’s creating an unnecessary level of fear in the community.


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