Are property prices going down? It’s all you read about in the papers at the moment, so it must be true, right? Doomsayer headlines sell papers (and get clicks) and it’s always annoyed me when bank PR people get hold of some economic data and suddenly an impending drop in the Australian property market is front page news.
Back in October 2015 the front pages cried out that Australian property prices were about to drop 7.5%. At the time I wrote about it and said what a load of rot. Why could I confidently say that this prediction would not come true? Because there is really no such thing as an Australian property market. Look at any national property data (for instance CoreLogic) and you will see that no two capital cities perform in the same way. And then there are regional markets that all have their own cycles to consider. So how can anybody make a claim that the entire country is over-priced or ready for a fall?
Even within Sydney there are dozens (probably hundreds) of micromarkets. Just consider the dramatically different auction clearance rates across the Sydney’s regions. Are property prices going down in Sydney? Hard to tell, because on any given weekend at the moment they could range from something like 50% in south-west Sydney to well over 80% in the Inner West or Eastern Suburbs. So no such claim of a widespread drop would even apply to one city.
Break it down even further and you can’t even rely on suburb statistics. Median prices are an interesting because they are subject to compositional bias. If a lot of small apartments sell, the median price will go down. Conversely, if a more than usual number of waterfront houses sell, you’ll see that the median price will go up. Recently a buyer told me that Balmain had experienced poor capital growth, however when you have property ranging from tiny workers cottages through to harbourfront homes bundled into the same data you are bound to get pretty confusing statistics. Drummoyne units are another example. ON one side of Victoria Road you have a load of 70-80sqm red brick 3 storey walk-up units and on the other you have a bunch of 150sqm+ luxurious waterfront apartments. Any broad data on Drummoyne unit prices has to be considered pretty useless without interpretation.
Are property prices going down? Well they are in some places and they aren’t in others. Bottom line? If you rely on published market data to make your decisions you are missing out on the real information you need – local market knowledge.
First published:- 16 Oct 2015
Revised: 8 May 2018
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