Today we had a guest presentation from PropTrack’s Senior Economist, Paul Ryan.
Being a bit of a stats nerd, I love these presentations.
Unlike the forecasts and predictions from banking analysts, which are generally not worth the pixels they are written on, the data and statistics from PropTrackare reliable.
These are hard data – sold prices, sales volume, listing activity, new loan approvals, days on market, etc.
Data can still be misinterpreted and sensationalized by the media – for example, looking at median house prices for one suburb for one quarter, where the sample size is tiny and easily skewed by one or two outliers.
But today’s presentation was solid.
Accordion to PropTrack, these are the changes in home prices by region since February 2020:
Melbourne’s inner east is up by 14.9%
Geelong is up by 29.6%
Mornington Peninsula is up by 32.3%
Bendigo is up by 41.2%
Warrnambool is up by 52%
Regional areas have clearly outperformed Melbourne, while our market of the inner east has outperformed other parts of Melbourne.
For example, the inner south is up by 11.7%, but still 8.1% down on the peak of 2021. (The inner east is only down 2.2% since the peak, according to PropTrack).
One thing that wasn’t mentioned in the presentation, and which doesn’t get much air time in relation to house prices, is inflation.
From March 2020 to March 2023 inflation was up a cumulative 13.7% in Australia (RBA). It would be closer to 15 or 16% now in July.
In essence, all of these gains in the inner east since the pandemic have been eroded by inflation.
A house that cost $1,000,000 in March 2020 would need to have sold for $1,137,000 in March 2023 just to keep up with inflation. (Excluding stamp duty and selling costs).
So in inflation adjusted / real terms, house prices in our market are flat over the last three years.
The good news is that if you have debt, this is also being eroded by inflation, and you likely have been paying negative real interest rates for many years.
Given enough time and enough inflation, a $1,000,000 mortgage may seem like peanuts in the future, especially if we see decent wage growth.
At this rate, in a few years’ time $1,000,000 will probably only buy you a kitchen and bathroom renovation, a couple of years of private school fees and a trip to Europe!
Inflation aside, at least house prices have still gone up in our market since the pandemic. This is much better for home owners than the alternative.
And those with regional properties have seen exceptional growth.
Though Paul Ryan was cautious to make any future predictions, and admitted that he incorrectly forecast prices to fall 10% this year when they have clearly been on the rise since February, he was optimistic about the market moving forward…
“Forward indicators suggest price growth will continue to improve… and prices are not likely to retrace pandemic gains.”
Ultimately, house prices are important but they are not the be all and end all. Prices go up and go down. You can get lucky or unlucky with the timing of a purchase or a sale.
But you still need a roof over your head and a place to call home. And we are fortunate to live in one of the best cities in the world.
Feature Property: 21 Stuart Street, Armadale
David Sciola 