Median prices misleading.
One of the greatest myths in real estate is that home prices always rise.
The faltering real estate boom, now being felt around the nation, is beginning to show that property prices can – and do – fall.
The Real Estate Institute of NSW sought to disguise the bad news in its media release on the latest market movements. The press statement headed “Solid property performance during September Quarter” focussed on the 1% rise in the median price for Sydney houses.
Buried in the data was evidence of a slowing market and the impact of over-building. The median price for units across the Sydney market fell 1.3% – while inner-city unit prices dropped 5.3% in the quarter. Apartment values fell in 14 of Sydney’s municipalities.
This pre-dated the interest rate rise.
Similar frailty is found in statistics from the Real Estate Institute of Queensland. Median house prices fell in 29 Brisbane suburbs in the September Quarter. Another eight suburbs showed no increase in prices.
On the Gold Coast, median house prices fell or stagnated in 15 suburbs, including prestige markets such as Surfers Paradise, Mermaid Waters and Burleigh Heads.
Caution is needed when dealing with median prices, particularly over short time frames – such as comparing the September and June quarters.
However, the figures show that prices do not always rise remorselessly. They also demonstrate that there is no single property market – but a series of sub-markets. Some areas continue to show rising prices while others having declining values.
Homebuyers and investors need to remember also that during the stagnant 1990s, following the last price boom, all capital cities had periods when prices fell, for both houses and units.
With real estate now coming off the boil, this will happen again.
Housing affordability for first-home buyers is now at an all-time low. The difficulty for prospective new home owners has prompted the Federal Government to initiate the Productivity Commission Inquiry into First Home Ownership.
Affordability generally is much lower than a year ago and the trend towards rising interest rates is making things harder. It all points to the likelihood of home prices falling.
*Neil Jenman is a real estate authority and author.
