Boom declared dead 4 times in 12mths

Posted on 3/10/2014  
Boom declared dead 4 times in 12mths

Good grief, do they ever learn? Or do they just not care? They’re declaring the “property boom” over, yet again.

And, yet again, it’s based on a single figure for a single month from a single source, published in haste.

This is the fourth time (or is it the fifth?) the so-called boom has been pronounced dead within the past 12 months. This week I’ve observed radio news bulletins, online news services and newspapers making the claim, or otherwise placing great significance on this isolated statistic.

The alleged growth in Australian house prices in September was small, therefore it’s all over, red rover.

To illustrate how silly this is, let me take you back four months.

Early in June data was published indicating a decline in capital city prices in May. People rushed to be first to declare the end of the property boom.

They generated lots of headlines for themselves – which evidently was the only objective – but they got it horribly wrong.

They simply added to the great seething mass of misinformation which confuses and misleads real estate consumers – for no better reason than to develop their profiles or advance their businesses.

The organisation which made the biggest play for profile in June was an obscure valuation practice, called Propell. Early in June the firm issued a press release which sought to ensure everyone knew that it had been the first to declare that the market had peaked and the boom was over.

"This has been well and truly demonstrated now that the May figures are out,” it shouted in its 3 June press release. “At the beginning of May, other forecasters were still looking for a rebound in activity in May following a weaker Easter period, but now it is clear that we were correct in calling a change in the market.”

Well, actually, NO. They were wrong. Prices have continued to rise in Sydney and, to a lesser extent, Melbourne – and now other cities have begun to move (moderately), including Brisbane, Adelaide and Hobart.

Its mistake, apart from a shameless push for I-told-you-so publicity, was its reliance on a single data figure, describing a single month’s price movement, from a single company. You would have to think they’ve been around real estate long enough to know that price graphs are never smooth and that a single month’s data can be an aberration. That’s particularly so for May, which often is a month in which the market dips slightly, but temporarily.

Even worse was basing an assessment on one figure, which describes the average change across a very large nation. That was naпve in the extreme.

But they weren’t alone.

Economists and financial analysts just can’t resist preaching about real estate, notwithstanding their lack of expertise. So in June, a multi-national financial services corporation, Morgan Stanley, jumped on board and declared that “the housing boom is finally over”. We’ll overlook the reality that there was no housing boom, just a Sydney boom.

“If you’re an investor, you’ve missed the boat,” said one of their analysts, who put out a note to investors tell them that, without further interest rate cuts, the currently housing cycle was a dead duck.

So, four months later, here we are again. The commentators and analysts have forgotten June, or just don’t care, and so have the media workers who publish their nonsense.

While the attention-seekers were clamouring this week to grab a bit of profile from the September price data, valuation firm Herron Todd White published the October edition of The Month in Review and made this pertinent observation: “There continues to be talk of the Sydney property boom, but not all markets can lay claim to this sort of activity. Our real estate is as varied as our landscape in Australia, and market performance is just as diverse.”

It also said this: “It’s funny. These almost daily calls of ‘property bubble vs no property bubble’ feel a bit like a couple of grade one school boys attempting classic sledges such as At least I’m not ugly and I know you are, but what am I?. It looks like Sydney and, to a lesser part, Melbourne are driving the property market agenda again. Let’s just say that there are other markets outside of these that would really, really like to see some capital gains, but may be doomed to legislative tightening designed to cool New South Wales and Victoria. It’s further evidence that, in our big nation, there is no such thing as an average property or a typical market.”


So true. But try telling that to your (very) average economist, who knows little about real estate but a lot about generating cheap publicity.

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