House prices are falling – somewhere else
Most of the touts working in RE sales would be unemployable without this deep flaw in the system, and they know it.
In the share market, up-to-the-second price and volume data is available to everyone. Meanwhile, the land market – bigger, deeper and more important in every way – is totally ‘gamed’ by spruikers spouting charming but misleading anecdotes and snippets of information, merely to foster ‘confidence’ and keep the mammoth Ponzi scheme going – even in a falling market.
Let me show you how.
A month ago, the Herald Sun wrote about price falls in Melbourne:
“House prices in South Yarra, Hawthorn East and Malvern East have fallen 28 to 38 per cent.
“More affordable areas including Bayswater, Braybrook, Croydon North and Macleod have also been hit hard, with median price falls of 23 to 27 per cent.
The Herald Sun helpfully shows price changes in 10 selected suburbs in prestige, middle, modest and budget price ranges.
Just a moment. 28 of the forty suburbs listed had less than 30 sales in the quarter. The REIV deliberately gave the Herald Sun statistically unreliable statistics.
We are offered the tiny statistical area Heidelberg Heights, rather than statistically significant Heidelberg; Watsonia North rather than Watsonia; Fawkner not Coburg; Donvale not Doncaster; Oak Park not Glenroy; Caulfield South not Caulfield.
Why? Because it is deniable. The big price shifts can be attributed to small statistical samples rather than the real reason: Melbourne-wide price falls. The RE machine is kicking the can down the road hoping against hope prices will bottom and they can move to a new narrative, that of ‘bargains’ bought and gains pocketed.
You may think this assessment harsh. Let me give you another example.
On news.com.au today RP Data’s Cameron Kusher is out with the Ten Worst Hit Areas – the biggest falls in median house prices in 2011, with flood-damaged Ipswich suburb North Booval the most discounted at -46.3 per cent to $154,000.
What a relief! Floods caused the worst price fall. (Letting developers subdivide flood-prone areas makes my blood boil, but that is a subject for another time.)
Also in RP Data’s Ten are Mittagong NSW, Jolimont WA, Carey Bay NSW, St Kilda West Vic, Port Augusta SA, Golden Beach, Rainbow Beach, Acacia Ridge and Eagle Farm all QLD.
Jolimont WA has a population of 1007 and shares the 6014 postcode with Floreat, Floreat Forum and Wembley.
Postcode 2283 has 9369 dwellings and Carey Bay (-42.6%) is one of 15 place names in the postcode.
St Kilda West is a narrow sliver of about 1500 dwellings North West of St Kilda.
Get the picture? Tiny samples make for deniable statistics.
In some ways, the data providers are quite accurate: house prices in these areas have fallen 40 per cent plus. They probably fell a little more than the wider postcode areas. I say the differences are very minor and point to widespread corrections – after all, home buyers would happily shift their interest across one suburb for a 40 per cent saving. The private data collectors aren’t telling. When the accurate ABS data arrives 7 months late, the house price story will have already moved on. Or down.