Dusting off the crystal ball: can we forecast Brisbane’s real estate market in 2016?
It’s an engaging headline and we understand why the media chase property market “experts” for constant comment. We all want to know what’s happening – much of the currency of the news media is built on fear and nothing scares people more than the prospect of dropping home prices. What’s the latest expert market commentary today? Or even this morning? Last week I read that real estate prices were about to implode, but today another tea-leaf-reading property guru proclaimed investors would sell their shares to return to bricks and mortar.
So here’s the cold hard truth about forecasting Brisbane home prices in 2016: no-one knows with any real accuracy.
Yes there are obvious supply and demand indicators – new housing completions, population growth and employment for example. There is some science in interpreting this data and they do move up and down. There are some relatively reliable broad trends in the property market with many of the experts suggesting we’re on a steady incline upwards with prices. One well-known commentator says Brisbane will see 5% to 8% capital gain in 2016. I saw another (admittedly less known and respected) who actually wrote up a forecast on price growth by suburb. Yes – a percentage increase they’d “calculated” for 2016 home prices in each Brisbane suburb! How they can claim to know what’s happening in Greenslopes and Ashgrove and Toowong and Hamilton and every Brisbane suburb is beyond me.
Inevitably we become swamped with information, much of it meaningless garbage, but remain more confused than ever.
But here’s what doesn’t sell newspapers: Real estate trends are long term and the market cycles roll on through the years. Hatches, matches and dispatches – home buyers couple up and buy their first homes (if not earlier as singles), they get a bigger place when kids come along, then they downsize or depart… And investors buy to fund their retirements. Year in and year out, the cycles roll on. There is always demand for housing.
So here’s what I like to focus on: turnover. If you wanted to sell your Brisbane property in 2014-2015 it was easier than the year before with 4% more property sold in this city. As long as there’s a liquid market (buyers active) when you sell and buy again then the price of real estate isn’t really that important is it? You get more, you pay more? Investors cashing in are an exception (less than 30% of our housing) but for most people this media fascination with home price movements is fairly inconsequential.
Except for the “wealth effect” – the well-researched link between rising home prices and consumption. You and I feel better off when our home’s value rises so we spend more. And borrow more. It’s good for business apparently so there’s lot of economists and other important people watching this with great interest, hoping for a home price rise. While those wanting to enter the market are invariably hoping for a drop.
So as we look to a fresh year here’s two last stats to help us all keep things in perspective. Australia’s standard of living is now the highest in the world for any nation of more than 10 million people. Sixth highest overall. We live in one of this planet’s most desirable countries. Life is good. We should start 2016 with every reason for optimism – regardless of home prices!