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The property boom that never was

Right now I’m having amnesia and déjà vu at the same time, to quote American comedian Stephen Wright. The déjà vu arises from a new round of people declaring “the end of the property boom”. The amnesia is my difficulty in remembering how many times this has happened in the past two years.

Yes, in the past week there has been another chorus of pundits with limelight deficit syndrome shouting that the boom is over.

Here’s the first problem. How do you end something that never started? As I have commented often, there is no property boom in Australia. Growing numbers of commentators are now (belatedly) acknowledging this, including Reserve Bank Governor Glenn Stevens – and even including the occasional economist who takes the time to look beyond the statistic that describes the average annual rise in capital city prices.

Here’s the second problem. The end to the boom that never was has been announced repeatedly since 2013.

As a reference, I need to go back to the column I wrote on Property Observer in October 2014. At that time I wrote: “They’re declaring the ‘property boom’ over, yet again. And, yet again, it’s based on a single figure for a single month from a single source, published in haste.

“This is the fourth time (or is it the fifth?) the so-called boom has been pronounced dead within the past 12 months. This week I’ve observed radio news bulletins, online news services and newspapers making the claim, or otherwise placing great significance of this isolated statistic.

“The alleged growth in Australian house prices in September was small, therefore it’s all over, red rover.” At that time, I referred back to an event in June 2014, when data was published indicating a decline in capital city prices in May. “People rushed to be first to declare the end of the property boom.  They generated lots of headlines for themselves – which evidently was the only objective – but they got it horribly wrong.”

And I noted this: “The organisation which made the biggest play for profile in June was an obscure valuation practice. We won’t publish its name to protect the guilty. Early in June the firm issued a press release which sought to ensure everyone knew that it had been the first to declare that the market had peaked and the boom was over.”

But, prices continued to rise in Sydney and, to a lesser extent, Melbourne.  Click here for our Top 10 Best Buys report.

Okay, so this time there’s a slight difference. This time, those declaring the end of the boom that never was are not relying on a single month’s figures – they’re basing their declaration on a single quarter’s figures.

But the outcome is equally ridiculous.

Here’s what one magazine published under the headline “End near for housing boom” a few days ago: “Property price growth has started to look very modest throughout Australia, with the notable exception of Sydney. New CoreLogic RP Data statistics reveal that the median price in Australia’s eight capital cities grew by an average of 3.1% in the 12 months to 31 March 2015. However, the average growth rate was only 1.5% once Sydney was excluded.”

The absurd thing about this? It’s always been thus. Over the past 2-3 years, property price growth has been “very modest throughout Australia, with the notable exception of Sydney”. There’s nothing new in the new figures. Since the start of the mythical boom, we have had the situation of Sydney pumping up the national figures, creating the impression of an elevated market for those who don’t delve too deeply.

This is what happens when media publishes press releases without journalistic scrutiny from someone expert in residential property. The great seething mass of misinformation grows ever larger.

Written by Terry Ryder