Are prices increasing across Sydney at 2.8%? The answer is no. First home buyers have certainly paid far too much for their sub-$500,000 properties with the assistance of the First Home Owner’s Grant. As my regular readers would know, I am of the firm opinion that the over inflated prices paid at this level will cause the Australian economy and financial sector enormous pain.
I have watched with interest since RP Data released figures on Friday May 29, indicating that Australian property prices are on the move. We are supposed to think that property prices have increased by 2.8% in the first 4 months of 2009. This increase has reportedly occurred in the face of a worldwide recession, rising unemployment, or at best a decreased workplace participation rate.
The press release was splashed across major newspapers and news websites by journalists who should have given the figures careful consideration before reporting them at all. Stories are one sided and are rarely put into context, whether it be the reporter’s inability to dissect the information or the Editor’s need for a catchy headline.
The schizophrenic reporting I constantly see about prices going up and down is simply crazy. On one weekend prices are on the way up and on the same weekend in a different newspaper they are on the way down. How is the general public expected to make any sense of this nonsense? Should you buy or should you sell? Do you expect a record price for your home or do you listen to the real estate agent or broker who is telling you what is actually happening?
There is no one size fits all answer to what prices are doing in Australia. There are enormous variations in prices from city to city and even within individual suburbs. Lower priced properties have done better than their more expensive neighbours, that haven’t had price increases fuelled by the First Home Owners Grant sham – which has acted to artificially increase demand and thus prices.
So in the same week that we heard reports that Luxury properties in Waterfront suburbs had plunged in price we were told that the property market was finally improving. All of this based on 4 months of data provided by one source (RP Data) and despite the economic climate the entire world finds itself in. Companies are falling by the day, thus people are losing their jobs and our country is staring at the largest public debt in history.
Many employers are pushing for wage freezes for the next 2 years and some are asking employees to work less or job share. Foreign Banks are retreating back to their home bases and reducing the size of their workforce. Credit availability is still scarce with Governments all around the world requiring massive amounts of finance to sustain enormous deficits. Does this sound like people will have more to spend on housing and where will the credit be coming from to fuel such price increases?
It’s clear to blind Freddy that prices are not uniformly increasing and in areas where prices have increased the Champagne is best kept in the fridge. The true extent and pain of the recession is still not known and what goes up can always come down just as fast. In Australia unemployment continued to increase for 24 months after the “official” end of the last recession. Again does this sound like the environment where prices will continue rising? The obvious answer is no.
Michael Marquette on +61 433 170 170
Marquette Turner Luxury Homes on MarquetteTurner.com