Terry Ryder is the founder of hotspotting.com.au.

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Terry Ryder

22 October 2012

We are returning to moderate housing price growth, but no bubble: Terry Ryder

We are returning to moderate housing price growth, but no bubble: Terry Ryder

Talk is cheap because supply exceeds demand.

The cheapest talk comes from economists speaking about real estate, because supply (endless) is hugely in excess of demand (zero). There’s also a low price on the articles of most journalists about property because the demand is for a David Jones product but most of the supply is coming from Gone Bonkers. 

So, after two years of price decline or stagnation in our major cities, at the first sign of price recovery they’re out there talking up a bubble. 

Yes siree, if you crave a bit of media limelight the shortest route is to contact a lazy journalist and give them a sound byte with the word “bubble” in it. 

Data from the various research sources indicates we’ve had three or four months in which the average result across the state and territory capital cities has been a rise in median prices. 

I’m not sure how reliable the data is, because organisations like RP Data are so desperate to be first with the news that they’ve been calling the monthly price movement on the last day of the month, something that’s difficult to do credibly. Indeed, this week RP Data declared the October price movement 10 days before the end of the month. Is the need for publicity really that desperate? 

Nevertheless, the trend evident in the figures from various research sources is one of big-city prices now starting to trend north, slowly. 

Further to that, a number of forecasters are predicting rising prices in the near future. BIS Shrapnel is tipping growth in all eight state and territory capitals in the next three years, with the strongest to be in Perth, Brisbane, Sydney and Darwin, where the rises are expected to be solid but not spectacular. 

National Australia Bank published its survey of Australian property professionals, most of whom are expecting moderate growth in the next 12 months. 

So we appear to have a return to price growth, though small, with the prospect of more moderate rises. 

But there’s no middle ground with media. It’s either boom or bust. Now it seems even the smallest rise in house prices instantly has the label “bubble” slapped on it. Alternatively, a cut in interest rates gives rise to fears of a bubble.

David Uren, who writes about economics for The Australian, recently tried to link fears of a house price boom in Australia into an incoherent rave about inflation and global financial instability. Some fairly innocuous remarks by business leaders have been portrayed by journalists as fears about a bubble, when the people quoted never used that terminology. 

Bubble talk has been around for the past five years. It started when a metropolitan newspaper journalist misquoted RBA governor Glenn Stevens and the mistake was repeated as fact by media outlets around the country. Economists and journalists have been promoting bubble talk ever since, although Stevens never said the words reported. It wasn’t merely a beat-up – it was a lie. 

I’m still waiting for someone who subscribes to the bubble theory to actually define it. So far, nobody has. The term implies that something has been over-inflated and will burst. 

Despite all those dire predictions about a collapse in our home prices since 2007, mostly from publicity-seekers based overseas, the forecast implosion hasn’t happened. 

So why are we talking about a bubble now, when capital city prices have barely budged after two years of mediocrity? Because we’re beset with writers and commentators who are shallow, lazy and like the sound of their own voices.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

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