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How Fairfax is destroying the property market to save itself

July 11, 2017
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Domain: A great website if you need a break from all the property market analysis

“Sydney’s housing market finally had an increase of buyer activity,” wrote the Fairfax Media property commentator Dr Andrew Wilson in his latest Monday morning auction wrap. “Although the local market has typically eased into winter, it nonetheless continues to defy predictions of a significant decline in activity.”

To the five million residents of the world’s second most expensive housing market, there was nothing unusual about Wilson’s exuberant take. Since 2014, the “Domain chief economist” has been marvelling at the outperformance of Australian east coast property almost continuously, armed with a handful of superficially impressive statistics.

But there was something off about this week’s serving of Wilson property fervour: it arrived, sunny as ever, at a time when any fool could tell you that the market had turned. Australian residential property coverage has long been disturbingly advertorial, perhaps even complicit in creating the current conditions, but this latest from Wilson was no longer just frothy. It was false.

It’s no secret that the publisher of The Sydney Morning Herald and The Age has pegged its future to property advertising. Once just one of its “rivers of gold”, Domain is now the company’s biggest single profit generator, ahead of all other metro newspaper advertising combined. The company plans to float Domain on the stock market and keep two thirds, the idea being that Domain shares will soar along with the housing sector, providing endless benefit to two-thirds owner Fairfax.

Hey, I also want Fairfax to succeed. And in a bubbly real estate market, its endless stream of cheery suburb snapshots and sports-match-style auction reports do no harm other than to reassure readers about risky decisions they would have made anyway. But in the early stages of what is obviously a correction, the always-upbeat tone is doing something different. It is knowingly inciting people to make bad investments.

In a downturn, more than ever, Fairfax readers need tough-nosed scrutiny of an asset class to which they are likely heavily exposed. What they are getting is sponsored “dream home” clickthroughs, interior design Q&A’s, profiles of millenials who somehow own 37 Gold Coast apartments, thinkpieces by people selling mortgages about how failsafe their product is, and, of course, Wilson’s uncritical, terrible commentary.

It all appears near the top of the Herald and Age homepages, above the politics, world, opinion, business and entertainment sections.

If you want the pros and cons of your next $2.3 million gamble delivered without compromise, if you hope to second guess the tactics of a traditionally shady profession under pressure, if you need impartial information about how the many large-scale capital works taking place in your city will affect your investment, is not the website for you.

Nobody seems to have told Wilson this, so I’ll do it here for free: auction clearance rates are not a barometer of real estate market health. The economy could crash 1931-style, and if people were scared enough they would sell their houses at any price. Say you got your house valued in February at $1.5 million. If your agent whispers enough times in July that “things have cooled, I’d aim closer to 1.2”, you might just take the hit to secure a sale. The official record counts your house as having sold at auction.

Say your agent can’t pay someone to take a contract, let alone convince a buyer to show up on auction day. To avoid reputational damage, the agent cancels the auction and marks it up as “sale withdrawn”, making it look like you, the vendor, cancelled proceedings for reasons unspecified. Since there was no actual auction, it’s not counted in the auction clearance rate.

In any case, as any agent will tell you, official auction clearance rates are precisely as reliable as the methods used to calculate them are transparent – not remotely.

This week, enthused Wilson, the Sydney auction clearance rate rebounded above 70 percent, and “inner suburban, higher-priced areas … continue to generally produce strong winter results for sellers”. Well, I get spammed with agents’ auction wrap-ups in areas professed by Wilson to have clearance rates even higher than that. According to one agent’s email wrap-up I received that same day, of 23 homes the agent had listed for auction, 14 were sold under the hammer, a clearance rate of 60 percent.

According to a rival agent’s email round-up of the same day, of 18 properties they had listed, nine were sold at auction, a clearance rate of 50 percent.

One unrenovated house I wandered through for fun last September fetched $2 million at auction. It would have been a nice place after another $200,000 of renovations. Last week, the same house next door, tastefully renovated, achieved a “sold prior” for $1.9 million. No auction recorded.

This is the reality of the east coast property market at this moment. Not that you’d know by reading the last few hundred Fairfax articles on the subject.

I know what you’re thinking: “But News Corp also runs some pretty vomitous real estate coverage to feed” True enough, but whatever else you might say about News Corp, it is not as singularly reliant on property advertising as Fairfax is. Some days, it’s even possible to click on a News Corp website without seeing Mark Bouris’s face 100 times.

Besides, to Fairfax readers, we’ve come to expect a slanted worldview from the Evil Empire. From News, a bit of exaggeration is not exactly shocking these days.

What is shocking – the very definition of it – is a newspaper publisher lying to readers to perpetuate an investment bubble to inflate a subsidiary’s shares to make up for the fact that that newspaper publisher has no other profit growth.

Independent? Not always.

2 Comments leave one →
  1. Dan permalink
    July 11, 2017 4:53 pm

    Nice work John. Fairfax coverage of raise in foreign ownership levy/tax on existing property was embarrassingly one-sided.

  2. July 11, 2017 7:44 pm

    This should be essential reading for anyone considering buying property in today’s environment…!

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