It’s hip to be bear

By Leith van Onselen

For me, one of the most interesting aspects arising from following the Australian housing market over the past couple of years has been the widespread change in media and public sentiment towards the state of the market.

Since writing my first ever post warning of a housing bubble in May 2010 – just as Australian home prices reached their peak – the mainstream media has seemingly turned from vocal cheerleaders for housing – running countless articles / television segments on a near daily basis promoting property as an sure fire way to get rich and promising further house price gains – to housing pessimists.

Reader comments on newspaper’s property-related articles also appear to have flip-flopped. Whereas once the overwhelming majority of comments were bullish, now pessimism prevails – so much so that most articles promoting housing now have the comments feature turned-off.

One of the more visible outlets promoting property during Australia’s long boom was the tabloid current affairs programs – A Current Affairs (ACA) and Today Tonight. At least a few times each week, these programs would run segments showing ordinary Aussies getting rich through property investment, or renovators flipping homes for huge profits.

The tide seemed to turn when last year’s season of popular renovation program, The Block, ended disasterously with three of the four homes failing to sell at the televised live auction (they sold in the weeks following via private sale). Since that time, mainstream television appeared to turn bearish, with a steady flow of segments warning of house price falls, rising stress and a subdued outlook [obviously these are my own observations and other’s interpretation of events may differ substantially].

A good example of the change in mood comes from Friday’s ACA segment entitled “Home Buy Bargains” (video below), which profiles the growing number of repossessions across Australia and some (albeit extreme) examples of falling prices, whereby “some properties have plunged to levels not seen for almost a decade”. To me, the segment seems a bit extreme and is not a true reflection of the entire market. Nevertheless,  it’s a good gauge of just how far media sentiment has swung.

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  1. “They can be bought for less than market value”. I’d suggest whatever the price paid is, it IS market value!

    • Diogenes the CynicMEMBER

      I agree but perhaps it is written from the perspective of the bank where the “market value” is the bank valuation or amount of debt owed on the property.

  2. reusachtigeMEMBER

    On the comments sections of online newspapers – thanks to all of you who have been avid contributors, you’ve helped rip through all the spruik and have played a big part and turning sentiment around (to the truth, and how it should be). Good on you all, you know who you are!

    • Hang on, not so quick. Let’s just think about who it is that makes comments in on-line newspaper articles. I’d suggest it’s a narrow demographic, not a broad cross-section of the community.

      A hasty generalization, I’d suggest.

      (I’m reminded of magazines like Cleo, which surveys its readers attitudes towards all things sex-related, and publishes the results as if they represent the views of the broad community).

      • You are not suggesting that on-line newspapers are only read by people who are interested in housing, are you?

        • No, I’m guessing that a large percentage of on-line newspaper readers are younger and therefore less likely to already have bought houses. They are therefore more likely to be bears, as they want to buy cheaper in the future. (They are also more likely to resent the older generations who have apparently built wealth through the simple decision of buying a house).

          If anyone has comprehensive data on the demographics of on-line newspaper readership, I’d be interested to see it.

    • Online newspapers are great just from the point of view of being able to read comments. I particularly like online comments that allow readers to ‘agree’ or ‘disagree.’ Online commentary makes up for the lack of discussion when meeting Australians face to face. People I meet seem only to discuss current fashions, cars, sports and the weather.

  3. It isn’t so much that the media set out to misinform, it’s just that many in the media have little understanding, and they get acrried away with poor indicators such as changes to suburb medians based on low volumes.

    They will be spruiking positive articles on housing long after the merket sentiment has turned down. However that is generally balanced by the fact that they will still be running negative stories on the market months after the market has moved upwards.

    Essentially pretty much all of the media run with stories that are historical rather than current or forward looking.

    It’s just what they do.

      • JPK – I would say that account is quite even handed. I have no issue with it.

        I’m pretty bearish on Melbourne, but Melbourne is not Australia.

        • “I’m pretty bearish on Melbourne, but Melbourne is not Australia”

          its the 2nd biggest housing market in the country PF? if its got problems then so does everyone else.

          • GB – why are all Melbournians so Melbourne centric. Freud would have a field day.

            But apart from that, really what will hold Melbourne up if we can’t restart our manufacturing and education industries?

            If prices are tanking in Melbourne, but WA is powering along with high incomes, infrastructure building, exporting, mining royalties, etc etc etc – then why would someone in Perth care what is even happening in Melbourne – what would it matter to them?

            We have been in a two speed economy (maybe three speed) for some time now. Melbourne will affect the national medians, but not all other cities directly.

    • dumb_non_economist

      I don’t think it has anything to do with their understanding. ACA & TT are spruiker/infomercial programs with little interest in the truth or “education.” When was the last time you saw a program that was Goldilocks “just right,” never, it’s either hot or cold and in the direction that the general public is leaning. They never lead, they follow!
      It’s the same with law & order issues, never given with facts just perceptions and distorted/overblown “facts” to get people ecstatic or outraged.

      • darklydrawlMEMBER

        Yes, the MSM has only one goal, and that is to sell as much advertising it can at the highest margin to the most eyeballs.

        Of course they are always going to publish / broadcast / promote views that are highly polarised one way or the other.

        The greater the shock and outrage, generally the better.

        There is no money (from their POV) in rational and considered debate.

        • I don’t believe most Australians are really interested in rational and considered debate.

      • Hi DNE – you might be right – I never watch ACA or TT – IMHO they are entertainment shows that have only a slight relationship to actual events that matter to me.

        But I can promise you they will have catastrophic reports on housing when the producers deem it to be the “right time” – haven’t they done any yet?

        They rely on an emotional story and a convenient scapegoat – and one will come along sooner or later.

        They are shock-jocks with moving pictures. When they do run that story it will be welcomed by posters here, just as their Pollyanna stories were derided here. Not that I’m having a shot at MB – it will be the same on every blogsite.

        Note how Kochie is now loved by some here, but wasn’t a short time ago – they all have a product to sell, and sell it they will, and the public will buy it.

        If a radio play “War of the Worlds” can get people out in the night carrying rifles to defend themselves agains intergalactic aliens, what power will some visual footage have?

        Seeing is believing isn’t it?

        • dumb_non_economist

          Hi Peter,

          That’s right, when the time is right, which is when the viewers are ready to accept the message. You won’t see these sorts of programing go against public opinion or they will lose viewers. EVER seen positive boat people coverage putting the situation into perspective, no bloody way, they would turn off in droves!!

          • Well I think that many of those programs lead people by the nose. they try to get us angry on issues, and it works well.

            As for the boat people comment – I agree 100%. You could substitute global warming, immigration, banks, or almost any controversial subject you choose.

            I hate to say it but it’s remarkably easy to sway opinions.

  4. reusachtigeMEMBER

    I’ve think we’ve got Kochie to thank for this change (thankyou Kochie, you are a legend). As MB noted back when Kochie ran his first bearish story – he may not be the best financial expert on the idiot box (maybe he is though) but he definitely represents where the masses thoughts will be lead, the gauge effect.

        • dumb_non_economist

          Reusachtige, Mav & jelmech,
          What are you guys on? Koch was nothing but a weather vane, the wind was already blowing in that direction and he just hoped on the bandwagon. He may have been the first “celeb” on tv to put that forward, but a leading light, hardly, he didn’t lead in a anyway whatsoever. Steve Kean put his balls well and truly on the line long before nearly anyone.
          Heaven help us if Koch is the best finance commentator on TV, uck!

  5. Spot on, UE.

    Australia has a giant PR industry employed to promote RE ‘confidence’. This worked until it didn’t, about a year ago.

    But the spruikers’ frenzied malfeasance went on – their task became to allow the developers and investors time and space to exit ahead of the collapse, leaving all the high priced rubbish in the hands of little people.

    Somehow, committing an entire generation to a lifetime avoiding debt and obsessively collecting brown paper and bits of string is just ‘market forces at work’.

    TP: edit

    Don’t Buy Now!

  6. The message is definitely starting to get through to even the biggest of property bulls.
    I recently caught up with a friend who is the biggest property bull I know. He has bought, renovated and then sold many properties over the last 10 years and done quite well out of it.
    On several occasions throughout the last year I have suggested to him that there is more downside than upside in the Sydney property market only to be howled down with all of the “it’s different here” arguments.
    He now has all of his three properties on the market (including the family home). When I quizzed him as to why, he mumbled something about his accountant suggesting it was the right thing to do – clearly he is starting to realise that it is “not different here”.
    For the first time in 10 years this guy is going to take a bath on property and he is probably going to have to go out and get a job rather than make money from property speculation – a tough ask for someone that hasnt held down a PAYE job for 5+ years.
    As a friend, I dont like seeing him and his family go through this but he has lorded it up over the past 10 years on the back of property speculation and now he has to pay – it is a modern day case of live by the sword, die by the sword

    • It’s those people who have watched in horror as the price of their dreams passed them by (of home ownership or just a property to rent to get them through retirement), who are now going to be able purchase ‘affordable’ properties, as prices fall, only to see them zoom down further in price, leaving them with a debt that they will struggle to afford on what will then become an overpriced purchase.

      • reusachtigeMEMBER

        Yep, they just see a small fall in prices as a great time to buy and gear up (ready for more destruction).

  7. Jumping jack flash

    It’s all about sentiment, and the media is the driver of this. It drove it up, and it will drive it down.

    Wait until debt fatigue sets in for the ones who bought at the top of the boom, lured in by the FHOB.

    Only a couple more years until the new house smell vanishes, stains and cracks begin to appear, the equity is all drawn out, and the drudgery of repayment is all that is left for the next 20 years.

    I think the banks should start running some ads to counter it: “Your house is awesome, keep paying that huge mortgage, don’t give up.”

    And: “It’s for the best to keep giving most of your income to the bank each week because you’d just waste it. We can manage it properly.”

    And my favourite: “Kids? Who needs them? Expensive, smelly, loud, sticky, demanding. Always getting into trouble. Always getting sick. Did we mention how expensive they were? Best not worry about having them, keep working, and pay your mortgage.”

    • What came first: positive media sentiment or easy credit? I’d suggest the order was:
      1. Easy credit
      2. Rising land prices
      3. Media reports of no. 2.
      4. People getting excited/greedy reading such media reports, and rushing to get more of no. 1.
      5. Repeat of steps 1 to 4.

  8. i would say that based on the true state of the property market the media reporting remains very one sided as they seek to protect their property market advertising revenue streams. every now and then a media report falls through the cracks like the one above that gives a glimpse into whats really going on. compare the media reporting of the stock market crash in 08 and last year to reporting of the propert market crash underway now. even people who didnt own shares knew the share market was crashing. how many people who do own property know it is currently crashing? hardly any. the first time they realise what is really going on is when the try to sell.

    • dumb_non_economist

      That’s something I forgot on my previous rants! SPOT ON, just spruikers with their snouts in the trough as well.

    • Of course there is the advertising revenue. But you’ve also got to consider that a 6% decrease in property values is hardly a “crash”, and much less of a blow than the stock market crash in 2008. When/if property ever gets down to 20% below peak in nominal terms, you’ll hear about it every day.

      • a 6% decrease? you really think that is all? try add the other 5%-25% depending which city. Any seller would be thrilled to get just 6% less than peak values.

      • Don’t forget to take into account the leverage effect on peoples wealth when property falls 6% and they’re geared into that proporty by a factor of 5x or 6x salary.

      • But 6% fall in asset value is a big loss for those that are geared up to the eye balls. For them, it is crash indeed!

      • thomickersMEMBER

        You are forgetting that the housing market is highly levered up when compared to the sharemarket. margin loans only account of 1-3% of stock and everything else is funded with capital.

        You have to account for the leveraged returns on the property market. 55+ yr olds probably own their home outright and 6 % nominal drop = 6 % equity loss. not so bad.

        However, most young families are 80% LVR on their mortgage. a 6% nominal drop = a 30% loss on equity. OUCH!

        it is known that upto 30% of new homeowners who bought in 09/10 are in negative equity. many came into the market using 90-95% LVRs. if there is a 20% drop this is a 200%-400% loss on your home equity.

  9. I think extreme stories, positive or negative help ratings and sell better. Nobody is going to watch a story on Joe Blogs not getting rich, nor losing money in his properties. So commercial media will look for these extreme cases and them make them more extreme.

  10. I watch the local ‘My Property’ magazine here on the Sunshine Coast but I see little listing of ‘mortgagee sales’

    Is there a better way of tracking down these properties? I just like to watch what is going on….not rushing out to buy until the RBA recklessly drops interest rates and inflation gets a go on!!! 🙂

    Note re the ‘My Property’ auction report for last week’s auctions…not a single sale! Apparently the fact that someone has registered as a bidder is now worth reporting even if there are no bids.

    • Flawse – if you contact the major valuers they might give you some info on mortgagee sales, although privacy may prevent them from doing that.

      Do you know any valuers from HTW or Propel?

  11. Diogenes the CynicMEMBER

    5 properties on my street were pulled from the market this month after having the sign out front from before Christmas till late February. None of them sold. That just leaves 5 others still on the market waiting for offers. Out of 80 homes on the street homes that is not very promising. 3 of the 5 homes did lower their prices but obviously are still behind the market which is back to pre-2006 maybe even 2003/4.

  12. IMO its just another form of spruik. Instead of “buy now or prices will rise and you will be locked out foreva!!!111) its now “look at all these bargains, get in there and buy them!”.

    As an aside property around me has caught a second wind; a couple of properties went so high at auction i cant understand how the buyer will get finance (when you have paid 920k, 200k more than a comparable recent sale, will a bank accept that as a reasonable value? I dont know…). Its a bizzarro world.

    • I think it’s really patchy and that doesn’t just refer to the mining hot spots.

      I’m definitely seeing the second wind in my pocket. Smug agents, private listings changing to auction as soon as mulitple interest is detected, new listings fishing for early 2010 prices and busy opens.

      Yet I saw an auction in a top 5 Melbourne suburb on the weekend, where a blue chip offering went for at least 30% below what it would have fetched 2 years ago. All this while 10 km away in the middle of an industrial area, a crazed bunch bid up a knock down to the same level. It’s a fractured market that has clearly lost all sense of balance, fundamentals and delineation. That happens in bubbles.

      • yeah i agree its patchy…very patchy…and symptomatic of a bubble that is in its death throws.

    • its now “look at all these bargains, get in there and buy them!”.

      exactly right poid. look at the young couple in the report “getting a bargain”. thats what they are trying to stimulate with this reporting. they have just changed tact but the message is the same as its always been…buy now or miss out.

  13. ceteris paribus

    Puzzled. I am no conspiracy theorist- so when property data companies say that Melbourne houses have experienced about a 6% nominal loss from the peak,- (about 9% in real terms)-, I believe them.

    Why then, when I look at this inner to middle suburb, and similar surrounding suburbs, do I see a clear 20% fall.

    My eyes clearly deceive me. I remain puzzled. Any explanations?

    • Bigger losses in some suburbs and in the high priced market segments can help make the average, median and mode lower.

    • > My eyes clearly deceive me. I remain puzzled. Any explanations?

      Apparently your eyes do not see hedonic adjustments but neither do mine. It looks like me may both need hedonic spectacles 🙂

    • ceteris, property is not homogenous and prices do not change in sync.

      What changes in value is the land; the structure is worth its replacement price in all markets.

      Further, bubbles rot from the top. South Yarra Vic and similar land-rich are reportedly down 40 per cent. Bayswater (worker dormitory) has barely shifted. That 40 per cent fall will percolate through prestige, upper middle, middle, lower middle etc but it will take a couple of years. Look at the US trajectories.

      There is a wealth of detail at and
      he says, pushing own barrow.

      This property down-turn is going to destroy the finances of many and shatter the free-ride dreams of even more. I see no way to short it except through proxies, so

      Don’t Buy Now!

  14. I have been saying that this would happen. Wait until the MSM becames negative and then see what happens to property prices. The biggest concern for Australia should be China. Their property market is getting negative reviews and that is going to have a massive effect on properties and mining. Put all your eggs in one basket and see what happens. It hasnt gotten bad yet this is just the beginning.

  15. At about 24 seconds:
    “Over 100% reductions”
    100% – 100% = 0% = $0 surely?

  16. Some fun in Surfers Paradise. High-end apartment prices have crashed. Mostly being sold by banks.

    Hilton apts are sold at at least 30-40% discount compared to initial prices:

    Still dreaming:

    Prices will crash when after a boom period of over-building, all of the sudden there is an oversupply. It has nothing to do with affordability. It simply reaches a point where there are no takers. Obviously this area does not represent the whole country, but it shows what can happen after the euphoria phase even in the country where banks are ‘very cautiously’ lending money.

    • See from a sydneysiders point of view those numbers are somewhat depressing. You can get a 3 bedroom house for sub 300K where as in sydney unless you go to the outskirts (>1 hour from the CBD) you would be paying more than 300K for a 1 bedroom place. Then in the city you pay more than 300K for a studio. Seems a bit ridiculous doesn’t it?

    • Those Surfers prices don’t mean as much if the buyer was an off-shore entity that brought their money in at the right time. There’s been a 100% appreciation of the currency in the last 10 years. So a 50% fall in nominal prices still leave a good profit for the owner if the funds get shipped back overseas.

      • Yes, some were off-shore, but many locals too. Most of the apartments (the ones that are most discounted) are actually banks having to resell repossessed apartments (the buyer never settled on the new apartment in the first place, lost the deposit and the bank decided it was not worth it to try recover the contract money).

        • BTW, the big discounts that are available now on the new apartments in Surfers are bringing down the whole high-end market… and even Q1, which is not a new project, are having to bring down prices massively if they want / need to sell now.

          • Those big discounts aren’t going to stop. Here is a little piece from last year on what happened in Manhattan:

            “The banks took virtually every buyer and extracted every available dollar from 1930 to 1935. Private sellers had no chance. They were outmanoeuvred and ridden over by the realization professionals in the banks.

            This unrelenting extractive behaviour by the banks for so many years completely remade economic attitudes toward property ownership.”


  17. Home Buyer Bargains!!! The whole basis of the segment is delusional. Words like “downturn” imply an upturn. Property prices are in a long-term decline. It is driven by demographics and debt levels.

    I can get 6.5% interest on a term deposit that is government guaranteed provided I limit single deposits to $250k. By comparison the distressed property buyer pays $150K for a damaged house that he admits spending $10k to repair. Add to that his buying costs and it will be closer to $200k. Then he is renting for $250/wk at say 90% occupancy so gross income is $11700. Subtract agents fees and repairs of a modest $2000 and he ends up with $9700.

    So his investment return is $4.9% and that does not allow for the eventual write-off of capital as the price declines further. So even at $150k starting price it is still a lousy “investment”.

    Do you think banks would sell them if they were a good investment?