kochie on property

nice piece from kichie today---apparently he was a credible commentator on property during the last 2 yrs if i recall
http://au.pfinance.yahoo.com/our-experts/david-koch/article/-/14209687/the-real-state-of-australian-property-market

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The real state of Australia's property market

July 12, 2012, 12:39 pm David Koch Yahoo!7

We separate fact from fiction and offer a real insight into the state of the country’s property market.


Entrepreneurs, there has been a lot of conflicting news on the state of the Australian residential property market lately.

We've been told prices are up, but so are property listings. That the bubble is about to burst, but then buyers are returning to market.

It's hard to make head nor tail of all the contradictory news headlines and expert opinions, so let's just take a step back and weigh up where the Australian property market is really at.

Remember property is no different to any other market – it’s driven by the balance between supply and demand.

Lots of buyers and not many listings means prices go up, while only a few buyers coupled with a flood of supply means prices are forced down. It’s Economics 101.

Against these basic fundamentals, the news headlines of late are quite confusing. Take the most recent June statistics for example.

The recent report by widely cited property research group RP Data-Rismark says that Melbourne property prices actually increased by 1% last month. This is despite the supply of residential property in Melbourne hitting record highs in June, as reported by respected property research house SQM Research.

So what do you believe?

First of all you need to remember there are a lot of vested interests in property research firms so independent studies should always be your first source of information.

On this front, Australian Bureau of Statistics data can be relied on for independence, as can SQM Research statistics. In my experience the latter is one of the few truly independent research houses to be found on the Australian property scene.

So, taking these sources as solid, let’s take a look at the current state of the Australian real estate market.

Data released by SQM Research this week shows the number of residential properties on the market increased by 1.7% in June. That means there are now a whopping 386,857 properties for sale across the country, up 6.4% from a year earlier.

All else equal, this points to softening prices.

Digging a bit further into the data reveals that Melbourne and Hobart in particular are facing tough times with 28% and 29% annual increases in stock levels respectively. Going back to Economics 101, the reports of increasing property prices in these supply flooded areas is a bit hard to fathom.

SQM’s Managing Director Louis Christopher agrees.

“The Melbourne result is a real concern as the supply of listings has reached a new high in that city.” Christopher observes, “I fail to see how other data providers can record rising dwelling prices in Melbourne when there is this much stock on the market.”

Outside those two cities, supply levels seem to be stabilising, although at a higher level. This should ensure prices remain subdued for a little while longer until interest rate relief entices a few more first home buyers into the market and some more properties are cleared from the auctioneers’ books.

So in the medium term, the tough times for Australian property appear set to continue. A sharp global economic downturn would ensure they stayed this way for a while yet.

But once the green shoots of economic growth return, and with them increasing investor confidence, things should turn around. Further interest rate cuts, continued low unemployment, population growth and improving housing affordability will all help to support the house price growth when it happens.

It’s just not happening yet.

So don’t believe everything you read - there’s no bubble to burst, but prices are unlikely to have increased of late either.
Sure, times are tough for the Australian property market, but by understanding your sources you can at least know what’s really going on.""