Australian Property Chart of Shame - Epic Failure of The Australian Property Bears

Discussion in 'Property Market Economics' started by Shadow, 23rd Jun, 2015.

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  1. Propertunity

    Propertunity Well-Known Member

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    It is just you :) You have to wait a little until the graph stops heading down and starts doing this:
    upload_2019-6-13_16-1-24.png
     
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  2. DAZ79

    DAZ79 Well-Known Member

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    The time to buy in Perth will be when the rental vacancy rate is low enough to produce across the board rental inflation.


    Simple.
     
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  3. Perthguy

    Perthguy Well-Known Member

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    Good question?
     
  4. Perthguy

    Perthguy Well-Known Member

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    Sure has. I invested in Perth during that time and made money. Like swimming upstream... it's hard work
     
  5. Momentum

    Momentum Well-Known Member

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    The problem with investing in Perth is that 18-20% of your gross rent goes to the PM. The fees are ridiculous over there so you need to make sure you take this into account when doing your DD
     
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  6. Angel

    Angel Well-Known Member

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    I'm getting the urge to go on a road trip to Perth sometime soon.
     
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  7. Blueskies

    Blueskies Well-Known Member

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    Perhaps, but it makes it better value than 5 years ago...
     
  8. Simon Hampel

    Simon Hampel Founder Staff Member

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    ... and 5 years ago it was still massively overpriced.

    @petewargent posted this chart on twitter a while back - Pete Wargent on Twitter

    [​IMG]

    5 years ago the Perth property market peaked - but the run up it had had since 2003 far exceeded anything else that has happened in the country (excluding Darwin - which isn't exactly comparable) - mostly driven by insane growth from 2003 - 2006.

    According to this chart, if you had invested $500K in Perth in 2003 and $500K in Sydney in 2003, your Perth property portfolio would be worth more than your Sydney portfolio, despite the prolonged downturn in the Perth market and the recent boom in the Sydney market!

    Given that Perth should be more comparable to Adelaide and Brisbane - it could be that Perth has quite a while to go before it reverts back to the mean (ie similar long term growth to Adelaide and Brisbane).

    Of course, these are just considering city-wide median values and we all know this isn't representative of what actually happens with specific properties - gentrification / new infrastructure / rezoning / etc all have a localised impact.

    I'm not saying that Perth isn't due for some growth or that it is a bad investment (I'm not knowledgeable enough on that market to comment) - all I'm saying is that just because prices has dropped - doesn't make them cheap, nor does it make them good value or preclude them from dropping even further (or at best, seeing prolonged stagnation until it reverts to mean).

    You have to look at the bigger picture to understand the context of the movements in the market - don't only consider the last 5 years of data!!!!!
     
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  9. Redwing

    Redwing Well-Known Member

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  10. Blueskies

    Blueskies Well-Known Member

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    Sure, but by the same argument what is the significance of staring this chart 15 years ago?

    If it is rebased to 2007 or even 2005 suddenly Perth and Darwin are the cheapest markets in the country.

    I don’t have any particular insight into an imminent turn around for Perth, but I know I can now pick up a freestanding house on 700m2 10ks from the CBD for prices sub $300k which to me feels pretty good in absolute terms and compared to the eastern capitals.
     
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  11. petewargent

    petewargent Buyer's Agent

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    i regularly get abused on Twitter for the arbitrary start date on this chart (post-Sydney Olympics boom).

    for the conspiracy theorists out there, the reason for the start date is simple - it's when the ABS data series commenced.

    no other reason, can rebase it to any date you like.
     
  12. DAZ79

    DAZ79 Well-Known Member

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    Yeah, wage growth in the interim is a key factor.

    Up heaps from 2003 to 2011 in WA and, like the rest of the country, stagnation or backwards since.
     
  13. MTR

    MTR Well-Known Member

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    Thats peak to trough

    However Perth boom cycle 2001-2007, and 2013-14

    I am also very wary of charts they can never tell an accurate picture, as too broad

    Back to Perth ....we are currently in oversupply for majority of markets, therefore even what is considered blue chip is still price sensitive
     
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  14. Simon Hampel

    Simon Hampel Founder Staff Member

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    It's not about what is "cheap" - this chart does not show value - these are relative figures, showing relative growth.

    My whole point was that you need to go back far enough to get a representative set of data to compare with. If you ignore the insane growth that Perth had in 2003 - 2006 by starting your chart in 2007, then you get a very different picture of the markets which goes a long way to explain why Perth hasn't seen any real growth in recent years.

    It is absolutely because of the mining boom growth that Perth is now sliding backwards - it is reverting to mean. If you choose a shorter timeframe, you'll miss that and jump to the wrong conclusion that Perth is now "cheap" because it has dropped in value over the last 5 years - when the longer term data shows that it is still actually relatively expensive and might have some way to go to revert to mean yet.

    By which I specifically mean that if you buy in Perth (for investment purposes) now, then you may well see further falls in value - or at best - stagnant growth for quite some time until the mean is regained.

    It would be even better to go back and look at even older data - because that should hopefully show you the mean growth and demonstrate it more clearly.

    Edit - okay, I just went and did exactly that.

    I found data from the REIWA dating back to 1960 here: file:///C:/Users/Simon/Downloads/Perth_s%20Long%20Term%20Price%20Growth%201960%20-%202013.pdf

    ... but that data only went to 2013, so I added in data from here: Perth Median House Prices, Sales Volume and Rental Market Data - REIWA (note that I just picked the Dec quarterly figures to make it simpler).

    This is plotted using a logarithmic scale on the vertical axis.

    The median line (light blue) is auto-generated by Google Sheets.

    upload_2019-6-14_14-52-20.png

    Interestingly, the longer term data shows that Perth market was actually fairly flat for around 5 years from 1995 - 2000 (average 4.3% growth per year) after a sharp boom in 1988 (post 87 stock market crash??) followed by a correction from 1989 - 1992.

    Which means that the mining boom lead growth from 2000 - 2007 was possibly coming from a relatively low base (compared to the long term median) and so didn't necessarily overshoot as much as it seems - the first part of the boom was actually catching up to the mean.

    As such, it could well be that Perth's prices now are actually now below the long term average and they may indeed represent good value for money?

    Or my chart may be just misleading??

    My point still remains though - 5 years of data is not enough to determine "value" - not when cycles can take much longer!!

    As mentioned by other people, I think you'd want to see rental vacancies dropping and yields increasing before you're going to see any substantial and sustained growth in the Perth market.
     
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  15. Simon Hampel

    Simon Hampel Founder Staff Member

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    Yup, these are city wide median values, which we all know never tells you the story of what is actually happening on the ground.
     
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  16. highlighter

    highlighter Well-Known Member

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    Definitely this.
     
  17. devank

    devank Well-Known Member

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    Yes, the median house we bought ten years ago isn't the median house now. We don't consider the money injected as new buildings when we compare medians.
     
  18. MTR

    MTR Well-Known Member

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    Yes, I think areas out in the sticks will be feeling much more pain

    The thing is for anyone who purchased in Perth at peak there is no choice but to hold as values will be far less today

    I guess no different to Std and Melb if purchased at peak. Sadly Perth has seen a fown cycle for longer period
     
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  19. ALT

    ALT Well-Known Member

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    Looking at Simons Perth chart you would think it should be tracking upwards this time next year :)
     
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  20. Beelzebub

    Beelzebub Well-Known Member

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    This looks like a very informative chart. Can someone please break it down for me? Being fairly severely colourblind I can't match the colours to work out the order of cities.