CoreLogic is one of Australia’s leading sources of data on residential real estate matters, although increasingly overshadowed by other, smarter data organisations like PropTrack.
CoreLogic has lots of statistics about housing markets but when it comes to analysis and commentary, CoreLogic is very often a source of illogic.
Their problem, like so many companies that comment on Australian housing markets, is that they employ economists to analyse real estate and the outcome very often is kindergarten analysis.
Here’s a recent example:
According to CoreLogic’s Regional Market Update, property markets outside the capital cities are experiencing a slowdown in value growth because, they say, fewer people are moving from the cities to the regions and because of the elevated interest rate environment.
Regional markets saw dwelling values increase by 1.3% over the three months to July.
CoreLogic economist, Kaytlin Ezzy, said this means the pace of growth has eased from recent peaks.
She noted, however, that growth trends across Australia’s 50 largest regional markets have become increasingly diverse, including 11 regions which saw values rise by more than 3% in the quarter.
So here’s what wrong with that analysis, for want of a better word.
Firstly, they have made the common error of placing great significance on short-term data. The rate of price growth, overall on average across regional Australia, is less than it was a few months earlier, apparently, therefore they say that the market is declining.
But price graphs are seldom smooth and future months may see a return to higher price rises. It’s always unwise to declare a new trend based on one recent set of short-term figures.
Secondly, they claim internal migration to the regions is no longer happening as strongly as before. The latest Regional Movers Index, jointly published by the Commonwealth Bank and the Regional Australia Institute, strongly disagrees with that statement. It shows that Australians continue to relocate from Sydney and Melbourne to regional areas in large numbers.
Thirdly, the claim that elevated interest rates are causing a decline is farcically stupid. The RBA started lifting the official interest rate in May 2022 and it rose steadily (by a total of four percentage points) until November 2023. So interest rates have been elevated for over two years – and there has been no further rise in the past nine months – but now, according to Core Illogic, elevated interest rates are causing a decline in regional property markets.
And how does that theory sit alongside the reality that, according to Core Illogic, 11 regions recorded a rise of more than 3% in the latest quarter?
They say that “if you torture statistics enough, they’ll tell you anything you want to hear”.
That’s particularly true for economists who subscribe to the theory that everything that happens in residential real estate is caused by interest rate trends, notwithstanding lots of compelling evidence to the contrary.
The truth is that we still have a situation where many of Australia’s strongest property markets for price growth are in the regional areas, headed by boom regional centres like Bunbury, Mandurah and Geraldton in Western Australia, and Rockhampton, Toowoomba and Townsville in Queensland.
Regional Australia continues to provide the best options for investors seeking affordable prices, higher rental yields and good prospects for capital growth, provided you choose your location with care.
