It's All Opportunity

Australian property prices went up in the past week, but not in all cities. Something to worry about?

Then there’s the latest fad of instilling fear by talking of a “demographic tsunami” about to hit the Australian property market?

This is, in fact, all desperation from all those people who just keep getting it wrong. Again. Again. And again. What is really interesting is how these people portray themselves as some form of saviour of the consumer and the investor. What they really do is enrich themselves while destroying peoples lives by keeping them out of the market or worst still, getting them to actually sell their properties.

There is no doubt the banks and APRA are making it difficult for investors at the moment. The only outcome I see from this sustained assault is an increase in the number of homeless in Australia. This tragedy is at historic levels of despair, including families seeking shelter. While those clever enough, who already have properties are laughing all the way to… the beach!

Sydney's home values rose slightly more than Melbourne's in the week to June 25. Up 1% compared to 0.8 per cent. Brisbane’s prices slipped 0.3%. Adelaide’s down 1%. Perth barely down at -0.2%.

At the same time the national auction clearance rate for all capital cities “remains below 70 per cent” it was said.

That sounds a little mixed perhaps, but certainly not a major concern, and then there is the all-important perspective here. That is, this is weekly data? Data is never perfect for a start, and of course, weekly fluctuations can be entirely incorrect in discerning what the property market is actually doing. Then, the point is made that clearance rates were below 70%, as if this is a great concern? Yet they were a full 69.1%. There’s not much difference really. Not out there in the real world.

People get way to carried away about there being magical numbers that have to be respected in just about everything we do these days. If you are investing in a property you are not looking for a one week return. And in the mix of this data, there would have been greater advances than the numbers expressed. So again you can be sure that if you are buying and investing in property with true local knowledge awareness, you are more likely to be ahead of the average price shifts.

Then again 1% price growth would be great if it was every week wouldn’t it!

The point is even monthly data can be unreliable. The weekly data is just to sell newspapers.

The story I saw about “demographic tsunami” Armageddon is just another classic headline grab. It is an attempt to mix the usual Harry Dent fear mongering, and we all know how well he has done, buying property while telling everyone else to sell because of “proven” demographics, combining that in a heady mix with the local suburban nature of Australia.

It is nothing new, but it is repackaged to engender fear. That's all it is. Yet this is what our media is absolutely full of week after week. All the time?

In the end, however, as a savvy property investor this all adds up to your just smiling broadly. As all the actions of APRA, the banks, and the fear mongers do nothing but ensure strong price and rental growth for quality properties in well-chosen locations for many years to come. Ain fact all this most likely accelerates prices rather strongly. Less supply is hardly going to drive prices lower.

Just a quick note. There was a lot of volatility in Australian stocks this week, but these were typical over-reactions to the downside down-under. While the US market is fluctuating moderately again at all-time record levels.

The general investment outlook remains strong. Even commodity prices are again strengthening. Another good fundamental for local property to be sure.

Clifford Bennett // Chief Economist