The Property Charts That Economists Use to Scare You (And the Charts That Show the Real Picture)

The Property Charts That Economists Use to Scare You (And the Charts That Show the Real Picture) The media’s scare tactics have led to many potential property investors holding back. In this article, we dig deeper to show what the property market actually looks like.   No matter where you look in 2019, the media […]

Written By freedompropertyinvestors

On February 6, 2020
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The Property Charts That Economists Use to Scare You (And the Charts That Show the Real Picture)

The media’s scare tactics have led to many potential property investors holding back. In this article, we dig deeper to show what the property market actually looks like.

 

No matter where you look in 2019, the media has told you the same thing: the Australian property market, after years of sustained growth, has gone bust. 

And on the surface, this may seem true. The market has seen extensive property price drops during the first half of 2019. For a while, those declines showed little sign of abating and the naysayers took this as a signal that the market was on the brink of collapse.

But the cooler heads saw what was really happening.

The market isn’t collapsing. The dips we’ve seen during the past year are only a short-term issue.

And to prove it, we’re going to show you what the media tells you and what’s really happening with the market.

Scary Chart #1 – The “7th Worst Decline on Record” Chart

 

In April 2019, National Australia Bank unveiled the following chart:

That chart shows us every single year during which the Australian property market has declined. And highlighted at position number seven is 2019.

The suggestion here is pretty clear.

The declines we’ve seen in 2019 are some of the worst in recorded history, on a percentage basis. And the economists would have you believe that those declines will continue through 2019 and beyond.

Who knows? Perhaps they’ll reach the same levels as the Great Depression era. 

After all, they’re already the worst declines we’ve seen since 1933.

That’s certainly true. However, what isn’t true is that the market’s approaching the same levels of declines as we saw during the depression. In fact, the market has already rebounded, as you can see below:

This is what the market looked like in November 2019. We’re sure you’ve already noticed something very interesting.

Every major city in Australia, bar one, recorded price increases, with some calling them the biggest increases since 2003.

The market’s already on the way back up after one year of struggling. And some, including Louis Christopher of data firm SQM Research, predict even bigger rises to come. He believes that prices in Sydney and Melbourne will continue to rise into 2020. And by the end of September of that year, prices will surpass the record levels of 2017.

He explains:

“Strong population growth rates, easier access to housing credit and continuing stability from their local economies will provide the fuel for this new upturn.”

To reinforce his point, he even provides a chart that accounts for a range of possible future scenarios:

According to Mr. Christopher, it would take almost a full economic crash for property prices to have a chance of dropping in 2020.

The Message

 

Economists love to paint a doom and gloom pictures when it comes to property. Their ability to point to recent declines as some of the largest on record demonstrates that.

But what these scaremongers often fail to do is to consider the short-term nature of these declines. We’ve already seen the market start its rebound from the lows of 2019. And if you track back through the history of the country’s property prices, you’ll see that there’s a pattern.

Every so often, prices fall. However, soon after the trough comes the growth, which leads to the peak. And in almost every instance, the growth lasts far longer than the decline, resulting in higher peaks than the previous troughs.

Property investing is all about the long game. You will have to absorb some short-term losses during your ownership of a property. However, the capital gains over time far outweigh any losses that you may experience.

Scary Chart #2 – The “Residential Loans Decline” Chart

 

In November 2018, the media whipped itself into a frenzy as property prices started to decline. Some, including the Sydney Morning Herald, switched their focus to residential home loans. They pointed to the lack of these loans as being one of the chief causes of the decline.

After all, if people can’t get a loan, they can’t buy a property.

The outlet demonstrated its point with the following chart:

Again, it’s scary stuff. The sharp decline at the end of that graph shows that the value of loans given to owner-occupiers fell towards the end of 2018.

That’s something that nobody can deny.

However, there are two things that the scaremongers won’t point out.

First, that sharp decline comes on the back of a near-constant increase in total loan values between 2012 and 2018. Again, there are some peaks and troughs. However, you can see the rise for yourself in this chart.

Second, and much like with the first chart we examined, this only takes a short-term view of the situation. In this case, we see the sharpest decline in over six years.

And for many, that’s enough to conclude that we will see nothing but declines in the coming years.

However, that’s not the case.

Data from the Australian Bureau of Statistics show that residential loan values are already on the rise again:

Yes, they’re not yet at the levels that they were during mid-2017. However, the point is that this was another temporary decline that the media whipped up into a major issue.

The Message

 

With the recent easing of criteria for both owner-occupier and investor loans, we’re likely to see this upward trend continue.

Thus, the message here is much the same as it was for the first chart. The property market experiences peaks and troughs over time. The residential loans market will generally mirror those peaks and troughs. 

However, the troughs don’t last. Often, it’s a case of waiting for a short-term issue to pass before you move forward with your plans.

Don’t Let the Media Scare You

 

Rarely does what you read online reflect the true state of the Australian property market.

Here, we’ve highlighted two charts that economists have used to influence your thinking about property. We’ve also highlighted the more recent data that serves as a counterpoint to all of the doom and gloom.

The simple fact is that the market’s on the rise again. As a prospective investor, now is the time to buy property to ensure that you can take advantage of the upcoming growth.

At Freedom Property Investors, we want to help you to do just that. If you’re ready to get started, just do the following:

  • Schedule a one-on-one strategy session with us.
  • Attend one of our live events.
  • Watch our web class.

 

Scott Kuru

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