One by one, the big banks flooded the market with their property forecasts in March and April. But fortunately for property owners, most of the “Armageddon forecasts” were a miss, and many by a long shot.
Predictions from the banks and industry varied widely at the onset of COVID, with the Commonwealth Bank’s worst-case scenario pointing to a significant drop in house prices by almost a third by the end of 2022.
NAB’s worst-case scenario similarly predicted a 30 per cent drop by 2021, while Westpac’s base case scenario anticipates a 15 per cent fall in house prices in 2020 and a further 5 per cent fall in 2021.
Speaking to Smart Property Investment, Propertyology’s head of research and REIA hall of famer, Simon Pressley, explained that the banks’ doom-and-gloom forecasts weren’t surprising given their “generalist, not expert” approach to property markets.
“None of them have ever studied the ins and outs of the real estate history of every location in Australia,” said Mr Pressley.
“They’re completely oblivious to facts such as Bendigo outperforming Brisbane over the last 20 years. They wouldn’t know that Launceston’s total population growth from the last 20 years is equivalent to what Sydney gains in a few months, yet Launceston’s 20-year average annual capital growth rate is higher.”
Putting his money where his mouth is, Mr Pressley said of the banks: “Property markets are complicated, yet their understanding is appalling.”
Acknowledging that they “mean well”, Mr Pressley explained that the banks just aren’t qualified to provide public opinions that Aussie can rely on for good guidance.
For example, he said, “they are still waffling on about a freeze on overseas migration being detrimental to real estate prices”.
“I could list 20 factors which influence the behaviour of 100 percent of our existing population and have a bigger influence on property markets than an international border closure preventing population growth of 1 percent. They’ll never get it. It’s not their core business.”
“When they all realised how foolish they looked with their Armageddon forecasts, they quickly published a revision, but even they are still far too conservative.”
Contradicting the banks and using its data and property knowledge to get ahead of the forecasting game, Propertyology is predicting growth to exceed 20 percent in many parts of Australia next year.