The latest predictions that Australian property markets will collapse are destined for the growing scrapheap of misguided real estate forecasts.
The 60 Minutes program used an obscure US spruiker and the unique market circumstances of mining boom-bust town Moranbah to somehow justify claims that Australia is headed for a US-style market crash.
One of Australia’s leading property analysts, Terry Ryder says “we see such claims as merely the latest in a long line of doomsday forecasts, all of which have been proven wrong.”
Australian property markets won’t crash because the conditions needed for such an event don’t exist here.
Some pessimists point to the US market decline past-GFC and infer that Australia will go the same way “because that’s what happened in the States”. They fail to understand that property markets in the US declined for clear reasons – and those same circumstances are not present in Australia.
The American economy was in recession, unemployment was high, a massive oversupply of dwellings existed and lending practices at the time were reckless. When those four elements aligned, the US was primed to crash. But it didn’t fall the 40%, 50% or 60% some have predicted for Australia – it fell an average of 25%.
Australia doesn’t have any of the four main elements that caused the US decline. In particular, our lending standards are among the most stringent in the world – and more so since the APRA changes inflicted in 2015.
There’s nothing new about forecasts about market crashes in Australia, especially from US spruikers who seek publicity to promote seminar tours or book launches. Making doomsday predictions are a guaranteed way to generate major headlines and that’s why those over-the-top forecasts are made.
Last year Terry conducted a research exercise to examine what major newspapers and other media had forecast for real estate since the beginning of this century.
This revealed that doomsday predictions about Australian real estate are extremely common. Hardly a week has gone by since 2000 without someone gaining major publicity by predicting the market was about to crash. Many have predicted falls of 40% or 50%, sometimes more, an event that has never happened to my knowledge anywhere in the world.
These forecasts all have one thing in common: they were all spectacularly wrong.
Below is a list Terry published in June 2015. This was his “Top 20 list of the worst predictions about Australian property markets”.
|Jan 2012||Home values to fall 60% in a “bloodbath” starting in 2013. Land values will fall 90%.||Jordan Wirsz, US spruiker||City prices rose an average 9% in 2013 and 8% in 2014.|
|Sep 2011||Prices will fall 40% in 2012, Australians advised to “sell their excess real estate”.||Harry Dent, US spruiker||Prices rose an average 2% in 2012, 9% 2013 and 8% 2014.|
|Feb 2014||Prices will crash “some time in 2014” – by at least 27% in Sydney and Melbourne.||Harry Dent, US spruiker||Capital city prices rose an average 8% in 2014.|
|Aug 2010||The Australian market is 40% over-valued and the bubble will burst soon.||Morgan Stanley’s Gerard Minack||City prices on average have risen steadily since 2010.|
|Sep 2008||Australian property prices will fall 40% in 2009.||Steve Keen, Uni of Western Sydney||Prices rose 13.6% (ABS) or 11.5% (RP Data) in 2009.|
|Oct 2011||Prices will fall 20% by 2013 (later revised his predicted decline to 5-10%).||Steve Keen, Uni of Western Sydney||City prices rose an average 2% in 2012 and 9% in 2013.|
|Mar 2011||“The value of your home could fall 61% the minute interest rates start rising.”||Kris Sayce, Money Morning||6yrs later, we’re still awaiting the collapse in housing values.|
|2010||The “Australian housing bubble” will burst soon.||Jeremy Grantham, US spruiker||Capital city prices rose in 2012, 2013, 2014 and 2015.|
|2010||The cash rate will reach 6.5% and mortgage rates will be above 9% by 2013.||BIS Shrapnel’s Richard Robinson||The cash rate has been well below 5% and is now 2%.|
|Nov 2011||The sovereign debt crisis in Europe will put Australian house prices at risk.||Comm Bank chief Ralph Norris||House prices rose in 2012, 2013, 2014 and 2015.|
|Feb-12||The “slow melt” in house prices will continue.||Anti-property raver Leith van Onselen||Prices rose in 2012 and more again in 2013, 2014 and 2015.|
|Jun 2012||House prices are “chronically weak” and “over-valued”, heading for “a sharp fall”.||Shane Oliver, AMP Capital||Prices rose a little in 2012 and more in 2013, 2014 and 2015.|
|Feb 2010||“Price surge heralds big crash” Headline in The Australian, speaking of Melbourne.||BIS Shrapnel’s Jason Anderson||Melbourne has had moderate to high rises in most years since.|
|Feb 2010||“Prices could fall as higher interest rates bite” Headline in the Herald Sun.||Economist Craig James of CommSec||Prices have risen in most years since 2009.|
|Mar 2010||House prices will soar in Brisbane because of a housing shortage.||Access Economics’ Chris Richardson||Brisbane prices in the next 4yrs were +1%, -7%, -1%, +5%.|
|Aug 2011||Melbourne will experience “a US-style property crash with price falls of 30%”.||Prosper Australia||Melbourne prices rose in 2012, 2013, 2014 and 2015.|
|Sep 2012||Australian housing prices will fall by up to 20% by the end of 2014.||Michael Power of Investec||City prices rose an average 2% 2012, 9% 2013 and 8% 2014.|
|Jan 2013||House prices will grow only 2.1% for the next two years.||NAB residential property index||Prices rose 9% in 2013 and 8% in 2014.|
|Apr 2013||The rapid trend in house price growth is at an end.||Luci Ellis, head of finan. stability RBA||Price trend (mostly Sydney) continued 2013-2014-2015.|
|Jun 2013||House prices will peak in March 2014 and fall thereafter.||Josh Williamson, Citibank economist||Price rises continued, notably in Sydney and Melbourne|