It's A Property Boom... Still!

The latest CoreLogic data on property values has been released for August, and all the media are abuzz with how property prices didn't grow as quickly or were even flat.

The spin is that the property price boom is slowing substantially and that somehow those reducing supply APRA and bank lending initiatives are miraculously working to make housing more affordable. Nothing could be further from the truth.

What is really happening, is that people are beginning to baulk at the high prices of Sydney and Melbourne at the moment, and they are also engaging in the wishful thinking of the media that it is all going to come back quite a lot. Just so they can buy at a cheaper price?

It is certainly not the case that people are keen to sell, or that sellers exceed buyers. Quite to the contrary, auction clearance rates remain through the roof and in the fine print we find that the property price surge is virtually unabated.

The thing is, one month does not a property value make. Remember all economic numbers are surveys, and while CoreLogic works harder than anyone else to amass significant data, their end numbers are generalisations and include the worst properties and worst suburbs. It is an average. But, no property is the average. So we are left with interesting conversations only. Converting these averages to what your own property or portfolio of properties may be worth, is, well, pardon the pun, not logical.

With that point made, you may be wondering if I am trying to push back against a set of disappointing numbers? Not at all. You see, when I said one month does not a property value make, I was making the point that trend data and longer samples are far more relevant.

Given Australia’s climate and other factors, any one month can be impacted by issues as bizarre as merely a rainy day. So it is when we look at the three-month data, better still the 6 or 12-month data that you can begin to get at least a vague idea about the general property shift. By no means would I expect you to have average properties for the city of purchase, and so your value changes will be very different to the average.

Given all of the above. Guess what? We are still in a property boom!

Look past a single month, which showed solid growth overall in any case, and we see in the 12 months data that very little has changed. The property price boom continues. Even on top of the tremendous price gains already seen. The reason for these skyrocketing prices is, of course, the attempts to restrict supply by APRA and the banks.

It is not the case that those badly mistaken initiatives are somehow slowing property prices.

Sydney may have been flat for August, and up only 0.3% for the previous quarter, but it is still up a whopping 13% over the year. Melbourne was 0.5% for the month, 1.9% for the quarter, and 12.7% for the year.

Do property price gains of 13% really sound like a stagnating property market? Now it's not the same in all cities. Never has been, never will be.

There are early signs however of what I have been speaking of for the past year or more, that increasingly people will begin to shift from Sydney and Melbourne to other centres. Triggered by the extreme property values now in place there, but with the added benefit in most cases of a better quality of life as well. Why not choose the better quality of life option, especially when it comes at a lower price.

Go south east Queensland in particular, and other capital cities and regional centres too.

Clifford Bennett