Property Observer article

I came across this article in Property Observer by Terry Ryder and really enjoyed reading it. It sums up the scenario that there are many out there that like to have their two cents worth to add to the media, much of which proves to be wrong, and full of hot air. Great stuff Terry.

By Terry Ryder
Tuesday, 20 August 2013

“For the past three years headline-writers at metropolitan newspapers have been in despair. They have been cruelly denied the opportunity to put “bubble” in a headline.

With capital city prices mostly in decline since 2010, even a species willing to use fabrication when sensationalism won’t do has been unable to conjure a bubble out of our property markets.

Now, with capital city prices up a moderate 5% on average, a peephole of opportunity has appeared.

Sub-editors have, as willing accomplices, a gaggle of chattering economists and sharemarketanalysts who see an opportunity for a bit of personal limelight while pontificating on a subject outside their sphere expertise.

That’s all it takes in this country to turn a nothing into a sensational issue.

Auction rates signal boom at hand, shouts the Sydney Morning Herald.

Fears of bust as property runs hot, squeals The Australian.

Hallelujah, the bubble is back.

Three years ago BIS Shrapnel, which makes part of its living from mis-forecasting property markets, declared in 2010 that capital city prices would continue to rise strongly.

By 2013 Perth would be up 22% and both Sydney and Adelaide would have added 20%.

Nothing of the sort happened, of course. Three years on, Perth is up about 7% and Sydney a meagre 4%. Adelaide is still down 3%. These are not statistics that support bubble theories.

For there to be a bubble fit to burst, there needs to be a major decline in affordability.

But Australia has the opposite.

The past eight quarters have produced consecutive improvements in affordability. Prices, on average, have fallen and there have been multiple interest rate decreases.

The forgotten part of the affordability equation, income, has assisted as well.

New figures from the Australian Bureau of Statistics suggest an average 5% rise in wages in the past 12 months. That’s a rise larger than the median price rise over the past year in five of the eight capital cities.

It’s significant that much of the bubble hysteria is coming out of Sydney.

People who think Australia starts at Sydney Heads, ends somewhere east of Parramatta and occupies a narrow corridor in between those two points, believe that the current auction frenzy in their narrow world represents the Australian property market.

To get an idea of how these people think, here is what agent John McGrath, much loved by the Sydney media, said not so long ago: “Sydney remains the BHP of Australian real estate – the big blue-chip market that generally out-performs the others.”

John, welcome back from the parallel universe you’ve been visiting these past 10 years.

The research shows that Sydney has been the chronic under-achiever of the capital city property markets over the past decade. Its capital growth rates have been the worst, by a considerable margin, among the eight state and territory capital cities.

And for those who cling to the myth about the superior performance of the blue-chip suburbs, here’s the capital growth rates (average annual growth in median prices over the past 10 years) of millionaire suburbs in Sydney:

Balgowlah 2.5%, Balmain East 3.7, Bayview 3.5, Birchgrove 2.6, Cammeray 5.1, Castle Cove 2.4, Chatswood 4.2, Clontarf 1.1, Clovelly 4.0, Collaroy 3.7, Cremorne 2.8, Cronulla 2.6, Darling Point 0.5, Double Bay 3.1, Dover Heights 3.1, East Killara 3.7, Gordon 3.0, Greenwich 4.2, Hunters Hill 2.8, Kensington 3.8, Killara 2.3, Lane Cove 3.7, Lilli Pilli 0.3, Lindfield 4.1, Longueville 2.0, Malabar 2.8, Manly 4.3, McMahons Point 2.8, Mosman 2.4, Neutral Bay 3.5, North Bondi 4.8, North Sydney 2.2, Northbridge 4.1, Paddington 4.7, Palm Beach 1.3, Pymble 3.6, Queens Park 3.8, Randwick 4.4, Rose Bay 1.9, Roseville Chase 2.4, Seaforth 4.0, St Ives 2.4, Sylvania Waters 3.8, Turramurra 3.2, Vaucluse 1.3, Warrawee 3.3 Willoughby 4.8, Woollahra 2.4.

Sydney has been an investor’s nightmare since 2004.

Now, at last, it’s showing some signs of life and the rulers of the universe who inhabit the place are in a bit of a tizz.

Turi Condon, property editor of The Australian, who takes the time to write an article about as often as the Wallabies beat the All Blacks, was moved to put together a piece that told us that Sydney’s inner suburbs were “red hot”.

McGrath has also declared Sydney to be “red hot”.

Do you need to know more?

Sydney’s red hot so Australia has a property bubble.


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