A blip, not dead and buried: Irresponsible media fails to see property market recovery still underway: Terry Ryder

By Terry Ryder
Thursday, 08 November 2012

Well, that was quick, wasn't it? Almost before it got started, the real estate recovery is over. Dead. Finito. No more recovery.

It echoes the mining boom. That's finished, too. The $300 million in resources developments under way are a figment of someone's imagination.

Just as the rise in lending for home purchases, with first-home buyer loans up 18% on last year, must be a mirage. The significant rises in residential rents in multiple locations I read about must have been a misprint. The improvement in clearance rates was clearly a dream and the gradual improvement in city prices from other sources a fabrication.

None of that counts because one month's figures from one careless research source found a small decline. On that flimsy basis, media organisations around the nation declared the market recovery over. Not a hiccup or a blip, but dead and buried.

AAP declared that the market had dropped because the impact of interest rate cuts had ended. This was roughly four weeks after the October reduction by the Reserve Bank and two to three weeks after the response of most lenders. I'm sure RBA board members would fascinated to learn that the impact of its rates decisions lasts only a matter of days.

There were many similar stories. The journalists who wrote those articles and keyed in those headlines should be ashamed, but I'm sure they're not. It would require a concern for accuracy, fairness and balance – a basic sense of professional decency – to have any remorse over a presentation of news that made a mockery of analysis and added to the great overwhelming pile of misinformation that's afflicting real estate consumers.

Why happens if the next month's figures come out and show a small rise in property prices? What stunningly inappropriate headlines will accompany that news? "Market in miracle rebound"? "Skyrocketing prices defy downturn."? "Economists warn of price bubble"? "US analyst predicts price crash"? "Sub-editor's brain explodes trying to dream up new superlative"?

Anyone who's been around real estate longer than five minutes knows sales data is never smooth or consistent. It's common to access data from four different sources about one location and get four conflicting answers.

One month's data from one source is meaningless.

To place such a categorical conclusion on a single month's figures from just one source - particularly a source that's so desperate to get into print that it's become careless – is irresponsible.

It's the reason newspapers are dying a long, slow, agonising death. Low standards, inexpert writers, cheap sensationalism.

Sadly, some of the new forms of media present as little better.

What's really happening in capital city markets? Nothing much has changed – there is a gradual, almost grudging, recovery underway in most cities, an event supported by most of the data coming in from multiple sources.

The markets in Perth and Darwin are rising strongly and investors thinking of buying need to get busy. Sydney and Brisbane are also trending in the right direction. Adelaide, Canberra and Melbourne are still patchy, with conflicting data from various research sources.

Outside the big cities many regional centres have had strong markets for some time, headed by Gladstone, Mackay and Emerald in Queensland.

The general trend is a return to growth, though moderate in most cases, notwithstanding one dodgy set of figures.

Terry Ryder

Property valuations a waste of time and money: Terry Ryder
By Terry Ryder
Tuesday, 06 November 201 2quote
Until recently all the reports on the hotspotting.com.au website advised investors to get a valuation before buying real estate.
I have now removed that from our reports. I think valuations today are a waste of time and money.x
I’m sure there are plenty of competent valuers out there who care about accuracy and professionalism. It’s just been a long time since I encountered one who fits that description.
All my recent experiences with valuers have been frustrating,and the feedback I’m getting from consumers around Australia suggests many others are having the same disappointments.
The problem is that valuers are killing real estate deals. Whether it’s conservatism or incompetence, many valuers are under-valuing properties to a degree that’s plain ridiculous.
Real estate research has been my business for 30 years. Whenever I’m involved in any kind of transaction I do a lot of research and I consult people with good track records.
But every time this year the bank’s valuer has come in with a figure well below market value. In the latest instance, the valuer’s figure was 25% under the true value.
The valuer spent no more than five minutes at the property, took a few measurements and left. The valuation was delivered a few hours later. How can that possibly be a professional and competent job? The result showed a disregard for sales evidence of comparable properties.
Earlier this year I had a similar experience. I protested to the valuation firm and presented my research. They instantly lifted their valuation 10%. Something they considered to be worth $500,000 yesterday was suddenly worth $550,000 today.
One of the issues is that an under-valuation can mean you have to pay mortgage insurance to achieve your goal ,and this is expensive. Sometimes I think this is the lender’s objective.
Many investors are having the experience of engaging different valuers and getting wildly different estimates for the same property.
Property analyst Matusik provides this example: “One developer arranged for one of its newl completed apartments to be valued by several valuers independent of the banks. The first valuation came in at $720,000, the second at $730,000 and the third at $595,000! Why was the third valuation so low? Because the valuer had erroneously based the valuation on a distressed sale in a nearby project.”
I put my concerns about valuations out and about via Facebook last week and got a big response from people having similar frustrations.
Perth agent Bernie Kroczek said: “We recently had a sale fall over in Beldon in Perth, where the valuer put $400,000 on the property which had sold for $440,000. We resold it within days for $435,000.”
Here is some of the other feedback I received:-
“We recently had variations of 50,000 on our valuation from different lenders. Nearly killed the deal. And definitely ended up costing a lot more in LMI.”
“I had a purchase of a new house destroyed by the valuer.”
“We've just had a number of properties revalued and one in the inner north of Brisbane was under-valued by $50,000 easily. We know this as we are actively looking for another property in the area and have a stack of research and experience from attending auctions, etc. Getting a little frustrated.”
Inexperienced practitioners are putting too much emphasis on computer outputs instead of old-fashioned site visits and talking to people and looking at the evidence on the ground.
Whatever the reasons, I believe many valuers are not doing their jobs competently – and it’s costing people money and it’s destroying valid transactions.
T. Ryder
unquote

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