WARNING: House prices will fall 32%
Warnings of a possible housing market collapse have been slammed by industry professionals.
Our media are once again using the most negative property market comments they can find to fuel headlines as they fight for attention.
Worst-case scenarios are obviously considered to be the ideal ‘bait’ to attract viewers, but this sensationalised approach has developed into a theme that often distorts the truth.
This week we are faced with headlines like; Australia’s biggest bank forecasts house prices will fall 32%.
At the same time the media could have used a headline derived from the latest actual data supplied by REA (realestate.com.au) like; House price drops of 20% or more, are way off the mark!
Behind the headlines, there were many actual great news stories. Stories such as the record numbers of online buyer activity strongly suggesting we could see massive buyer demand as Auctions and Open Homes start to resume normal activities over the next few weeks. However, it was the negative news, such as a range of possible scenarios from the CBA that became the news of the week. Of course, the only content deemed worthy by our media was the ‘worst case’ scenarios from the CBA forecasts.
All best-case scenarios failed to be reported, with all focus instead firmly placed on CBA’s ‘worst-case forecast’ where it identified how a few high-risk sectors of our national property market could experience up to a 32% price fall. This scenario was only developed to illustrate the maximum negative effect possible to a small percentage of properties. The scenario was also only possible ‘if’ a range of negative factors were to all eventuate at the same time, and ‘if’ these factors were to be also experienced over the longest possible forecast period.
Regardless of the full range forecasts available or the actual market performance, nothing stopped the headlines reading; CBA forecasts property prices will fall 32%.
Property market holds strong in our toughest month.
April 2020 will no doubt be remembered by the real estate industry for many years to come. Real Estate agents faced the most challenging month perhaps they will ever see with social distancing rules resulting in group open homes and onsite auctions banned. As a result, property listings fell drastically, and negative property market forecasts rattled sellers, investors and agents. Against the odds, our property market has once again defied the negative forecasts and heavily restricted market conditions, displaying it’s resilience under pressure.
These reassuring results to this highly anticipated pressure test of our property market during extreme, unprecedented market conditions was surely worth some major headlines, right?
Wrong! It seems good news stories are far less effective tools for our media, and very little was reported about the strength our markets displayed during perhaps our darkest COVID-19 month. The forecasts that expected property values to ‘fall off a cliff’ during this lockdown period were not only proven wrong, CoreLogic data also highlighted that national dwelling values continued to slightly increase during April.
Why didn’t we see fair headlines like; Australian property shows it’s resilience!
Aren’t we a proud country that loves to recognise our strengths in the face of adversity? How did our media evolve into a fear-based storyteller, that only digs through the data to extract the most negative justification for a headline? Then totally avoid the most positive data available, or fail to reflect on how the negative forecasts have proven to be wrong.
The war on misleading information.
Trusted and respected national property market commentator, Terry Ryder, has always let the data do the talking. He has also earned the respect of the real estate industry by highlighting the media’s poor choice of headlines that often misinforms the public on what is actually happening within the property market.
This week he pointed out a startling inconsistency in Australian news media when it comes to the treatment of real estate prices. This sees Analysts provide misleading information, causing buyers and sellers to tremble at the idea of delving into the property market at this time of uncertainty.
Terry described how when actual data is published, uncovering the truth behind what actually happened with house prices, the media will scrap the figures (if they are positive, as they were in March and April) and dismiss them as irrelevant or misleading. But if someone makes a forecast about prices which is negative, the news media will accept that without question. And, worse, the media will turn this speculation into a fact. It’s not a case of “prices are forecast to fall”- it’s presented as “prices will fall”.
Terry pointed out that data from both CoreLogic and SQM Research shined a light on the fact that prices resisted the significant impacts of the virus shutdown in both March and April. Prices are rising and continuing to rise to an extent in most property markets around Australia. And as a nation, we are three months into the COVID-19 debacle, and there’s still absolutely no evidence which suggests a price collapse that was predicted by the media analysts.
His frustration was well deserved and obvious. He went on to describe how despite our property market being challenged by news media with misleading and extremely negative headlines such as: “Real Estate Markets Collapse”, property markets in Australia, have seen little to no impact on the rise. He believes the media is consistently revolving their news around click-bait headlines, allowing the truth to be optional. Pointing out that if someone used this deception and dishonesty in other walks of life to try and scrape money out of the pockets of individuals, they end up charged with serious offences and in some cases go to jail.
Forecasts from our banks ‘notoriously bad’.
Terry also put a spotlight on how our big banks have chimed in on the negative forecasts allowing media outlets to have a field day with those reports—saying that no one has questioned or challenged them at all. And they should be challenged because the track records of bank economists in forecasting anything, but in particular real estate prices, are notoriously bad.
He drew attention to the fact National Australia Bank publishes regular forecasts about residential property prices, including the quarterly NAB Residential Property Survey reports. And how, after many years of reading the forecasts, one thing he knows to be true is that the forecasts are ‘never’ correct. Stating that pessimism encapsulates their reports, but they are always invariably wrong.
Terry was comfortable pointing out the fact that NAB reports have been notorious for consistently being wrong with their price forecasts year after year. Believing they always lean towards negativity and real estate keeps on proving them wrong. Here are some examples he shared:
NAB forecast a 5.6% decline for Sydney house prices in 2019, The result for Sydney houses was a rise of 6.8% (Domain), 6.1% (CoreLogic) and 4.8% (SQM).
NAB also forecast a 7.0% decline for Melbourne, but the result for Melbourne houses was a rise of 8.7% (Domain), 4.6% (CoreLogic) and 5.7% (SQM).
There are similar contrasts with the other cities. Hobart, for example, rose 15.6% (Domain) and 11.7% (SQM), whereas the NAB report had forecast a 2019 rise of just 1.8%.