This seems to be the question of the moment; and this week, this subject seems to have attracted a lot of media attention and speculation. The blog post on the correlation between media speculation (no, to be fair and consistent it was not speculation, it was reporting) on the potential for a catastrophic slide in property prices and a slow down in web traffic to an aggregate of real estate websites attracted a fair share of the radio and TV airtime.
The media has been quick to attempt to package this analysis up and make it into a “blame the media for the slowdown in the property market story” – as I have tried to get across in interviews the message is a simple one.
This industry is of far too critical an importance to all NZ’ers directly and indirectly to be left to the small range of media outlets we have in this country to influence consumer sentiment. The consumer deserves and requires a broader opportunity to understand the trends in the market and this is now being supplied through the benefits of the web:
- This blog – Unconditional provides analysis, information, opinion and statistic from NZ and around the world to engage you the reader and to provide the opportunity to be part of the discussion
- Other blogs – The most active and comprehensive is Bernard Hickey’s Rates blog which provides an incredibly comprehensive perspective on the all matters financial providing excellent coverage of property related matters
- Forums – these are the ultimate user communities and allow you the reader to not just be part of the discussion, but also start the discussion – the diversity of content is very revealing and offers broad contribution from NZ and international. I would highlight two here Property Talk and Global House Price Crash
- Further in an attempt to provide the audience of property searchers with a vehicle to better understand the market at a real local level we have provided a platform for real estate agents to have their own blogs so as to build their own community of readers interested in local markets or specialist areas of real estate. It is an emerging environment and as with any new initiative the cream will rise. We highlight new posts from what we call Voices on the home page below the latest Unconditional postings
Now compare just this short selection with what you had even 6 months ago (I recognise that Property Talk has been around a good few years) – you were largely influenced by the media giants of APN, Fairfax, TVNZ and CanWest. We are all aware of media consolidation and equally the now steady rise of citizen journalism, it is the latter that through professional channels can provide a richer and in some ways more objective view of the trends in this market.
As a final note I could not help but highlight a response posted on Property Talk when they discussed the blog post on the media – a contributor “leapy” from Invercargill made this comment in referring to the NZ Herald article penned on Monday reporting my post. And just for clarification I am not a real estate agent or the media unit of the Real Estate Institute, as incorrectly reported in the article.
Open your eyes people and see this for what it is. All the man said is that with the advent of internet technology a direct correlation can be tracked between negative media headlines and property website hits.
This entirely makes sense and really should come as no surprise to anyone. It’s fully accepted that news sentiment affects the the sharemarket on a day by day basis. Why not the property market?
Furthermore, shame on Granny Herald for the opening sentence of the article, which is completely misleading and not supported by comments made in the rest of the story.
Ironically – this plays exactly into the notion that the media is becoming more and more salacious in an attempt to generate revenue.
Alistair perhaps you are using the wrong terminology, specifically the word ‘blame’, which to me is suggestive of a ‘bad’ process having happened. Personally I regard the global house bubble of the past 5-6 years as the biggest and worst mis-allocation of funds since WW2. It has made many fewer people better off than is broadly supposed, and with the incipient bursting of the bubble is about to make a great many more people worse off than the number that ever benefited (including, in all probability, and much to my disgust, many who never even dabbled in the market). If you think my views are part of a small unrepresentative minority think again: this recent BBC study in the UK showed that most thought the fall in house prices there a GOOD thing:
http://newsvote.bbc.co.uk/1/hi/business/7395041.stm
I suggest if you want to make a tilt at press bias you start with one of the most fundamental – the endlessly propagated view that house prices rising faster than the general rate of inflation is a good thing which makes everyone more wealthy.
Agents really are feeling the heat:
http://www.stuff.co.nz/ifr/4525396a23795.html
Andy
I really appreciate the highlighting of these key pieces of background information.
As to the use of the word “blame” I think there is too much focus on the headline and not enough on the substance. The post above speaks to the key issue which I have been trying to bring to the fore – more variety of comment, fact and debate is in the long term, beneficial for all. For too long we have had too little breadth of comment and discussion on a matter of such key importance – the buying and selling of property.
Thanks for those links Andy – Found this interesting Video clip on BBC UK about the housing crash. The title is Are You Crash Proof? Part 1 screened last night and Part 2 in next 24 hours. No wonder the housing crash has become a global event which such easy instant access to this information.
This peaks and troughs report is very interesting reading. Shows the history of booms and slumps related to international events like Oil crisis, Asian crisis, 9/11 etc, etc.
I agree that confidence plays a major part in how markets operate. After all we create our own reality much of the time.
But commentators have been talking about the overvaluation and massive leverage in the property market for at leats 4 years. But property markets are very slow to turn around and often people don’t see the turn until a few years have passed.
I would direct you to Fred Harrison’s book: “Boom Bust: House Prices, Banking and the Depression of 2010“. It was published in 2005 and so written sometime in 2004.
If you want to understand property and banking it’s a fine place to start.
In the last 15 years property has become a major investment and therefore should be treated as one in commentary. There is a major yield gap in property where yields are some 5-7% below the cost of finance. That makes no sense except in a market which rises perpetually and heavy tax breaks are provided to investors.
That fallacy has been exposed constantly since the first mortgages struck some 400 years ago.
I think it’s great that there is balance in discussion over property and values but at the same time nothing shouldd prevent rigorous analysis of the numbers.
G’day Ross – you asked the other day for some specific predictions (which I don’t really do), but here is now a most likely case of what is about to happen on the macro front.
1. As you will have seen recent unemployment/retail figures were much poorer than expected; this has caused many to believe the RBNZ will cut rates, and in response the $ has already fallen 8% vs US$.
2. This despite NZ inflation way above 3% upper band and rising.
3. Bollard will compound his earlier mistakes (not raising rates high enough 2 years ago), by lowering in the next 4 months or so.
4. The kiwi fall will accelerate both before and after said cut
5. Imported inflation will surge, and signs will emerge that more general inflation is now entrenched.
6. Very soon afterwards Bollard will have to admit that despite a stagnating economy he can’t lower rates further (in fact a rout in the $ might force him to raise rates). We are then in classic stagflation territory.
If you doubt the possibility of such a scenario just take a look at the UK in the past 6 months – it’s exactly what has just happened.
I fully agree with you Andy – in fact you would have to be one of the most realistic best informed commentators on the various blog sites you contribute to – keep it up. This “Unconditional” blog that Alistair has set up looks like being a real winner!
Your too kind Ross (the $100 note is on the way).
Yep 3 cheers for Alistair!
More on the global angle:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/14/bcnoecd.xml
Andy here’s an interesting one – Oil could hit $200 in “Super-Spike”