In my opinion, 2011 was annus horribilis. For those of you who aren’t up to speed with your Latin, ‘annus horribilis’ is a Latin phrase meaning ‘horrible year’. I don’t know how your year went but so far as property investment is concerned, I have never known the property market to behave as it has this year.
BY PETER KOULIZOS
It hasn’t been catastrophic, but to have dwelling prices in all the major Australian capital cities fall over the past 12 months is almost unheard of.
The table below gives us an idea of the performance of each of the capital city property markets. It shows the annual change in dwelling values for the year ending September 2011.
If we can understand why this has happened, it can provide an insight into what we can expect in the future.
Property markets are affected by many factors. These include interest rates, unemployment, inflation, etc. The majority of these issues lead to one thing: consumer confidence. In my opinion, this is the most influential factor on the property market – and the economy. If we feel happy and confident, we’re more likely to spend money. If we’re feeling unsure and remain cautious, we’re more likely to save money. It’s the increased demand for property, which is a result of spending money, which helps prices to rise.
So, what has caused us to be so cautious and pessimistic and display such a low level of consumer confidence?
Firstly, it’s the overseas money crisis. Even though Australia and its economy is in excellent shape compared to the rest of the world, it’s the constant bad news that we hear/see/read about faltering overseas economies that’s been the biggest factor influencing the national property market. Up until early this year, all eyes were on the US and their debt problem. Midway through the year, attention turned to Greece and its political and economic woes. Now it’s Italy.
Secondly, there’s the uncertainty that’s brought about by the current balance of power in Canberra. It’s very difficult for one major party to be decisive when there are so many other parties, lobby groups and independents that need to be pleased. Unfortunately some of the major decisions that have been made have created even more uncertainty – for example, the carbon tax.
Finally there are individual state issues that impact on their local markets.
Queensland has been very unlucky with not one, but two major natural disasters in the space of a few months. Western Australia is still suffering the lagging after effects of the huge property boom it experienced last decade. Darwin and Melbourne are in the early stages of a price downturn as their property boom came to an end early this year.
The frustrating part of the current situation in the property market is, as I mentioned before, Australia and its economy is in excellent shape compared to the rest of the world. Our markets (and economy) should be much better than it is but at the moment the bad news is outweighing the good news.
Enough of the bad news, I can hear you saying. You want to know when things will turn around. The answer is simple; it will be when consumer confidence returns. The hard part is trying to pick the time when consumer confidence will pick up. Stay tuned for my next blog which should give you an insight to what we can expect in the future. It will be titled: ‘2012 – Annus Betterus’ (it’s not a Latin phrase!).
Peter Koulizos is a property lecturer and the author of The Property Professor’s Top Australian Suburbs. For more information visit www.thepropertyprofessor.com.au
Are your percentages indicating reductions in all price ranges, are they indicating fewer sales or are they just showing a lowering of the median price which could indicate a greater number of sales below the median? This type of article is meaningless! You have pointed out some valid reasons whereby certain markets could be affected but this is not a blanket acceptance throughout the industry.
This article was written without the author providing any research insight at all.
I work in the property investment area and we have seen some very mixed results, particularly with people wanting property for SMSF.
Comment by Chris Gunn — December 16, 2011 @ 6:57 am
I appreciate you taking the time to respond to the blog. The median prices quoted are for all price ranges in all the capital cities. They do not give an indication of the number of sales but if you take the time to do the research, as I have, you will also find that there have been far less sales this year than last year, through all price ranges.
I beg to differ that my article is meaningless. I agree that it is general in nature and some segments of the market have performed better than others but overall, the property market has performed poorly. Prices are falling, vacancy rates are increasing and confidence in property is way down. Most real estate professionals that I speak with, concur with my point of view. My property investment students who have been trying to sell property, also agree. If you need more verification, check the official figures from the Australian Bureau of Statistics, which also show that every capital city has experienced a fall in prices over the last 12 months.
If you have had good results this year, you should congratulate yourself as most businesses that deal in property have had a horrible year, “annus horribilis”.
Comment by Peter Koulizos — December 16, 2011 @ 6:04 pm
Yes Peter, there are some negative overseas influences, however all domestic indicators bar consumer confidence are positive. The single dominant factor effecting consumer confidence is unquestionably the federal government. Every polIcy, good and bad, has been poorly managed. From the “No carbon Tax,” the MRRT, border protection, live cattle exports, Craig Thompson, Peter Slipper, class warfare, BER wastage, pink bats fiasco, no surplus budgets achieved, etc. even good policy like Enterprise Migration Agreements they stuff up through firstly foolishly declaring class warfare against the only sector creating jobs, giving them the lowest unemployment rate in generations (despite all their destructive efforts with inflexible FWA IR laws, militarised unions demanding pay increases without associated productivity increases, vis GMH Elizabeth SA, billionaire miner bashing and significant anti-productive taxes in the carbon and minerals tax, and then lying to the unions about their knowledge of it.
Negative consumer confidence is a direct correlation with tha disatisfaction with this Pfederal government. I therefor contend that consumer confidence will not return until there is a change of federal government
Comment by Michael O'Brien — June 10, 2012 @ 3:23 pm
Hi Michael,
Firstly, thanks for taking to the time to blog.I ALMOST agree with you. I don’t think consumer confidence will return in full until the next Federal election. I am not so concerned about which political party will be in power; my concern is in the current balance of power in Federal Parliament. At the next election, I assume (hope) that one political party will be a clear winner and will be able to govern in its own right. If there is more certainty in our Federal politics, I am sure there will be a flow on effect and there will be more confidence in the economy.
I suppose we will just have to wait and see!
Comment by Peter Koulizos — June 12, 2012 @ 3:31 pm