How did the forecasters fare in 2017?
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Feb 8, 2018
How did the forecasters fare in 2017?
Looking back at how the pundits' predictions for last year fared.
Now that we’re easing ourselves into the New Year and the markets are starting to wake up with new stock about to hit the books and campaigns about to begin, it’s a good time to look at how the pundits fared with their predictions for 2017 about rates of growth (or otherwise) across the country.
Our national obsession with property prices has spawned an industry in the dark art of predicting the rise or fall of housing values across each city, and I thought it would be worthwhile holding a light to some of the better-known crystal ball gazers to see how their predictions for 2017 held up to the reality of the year in retrospect.
NAB property survey
NAB’s survey of 250 property experts proved a good, if somewhat over pessimistic forecaster of price growth in 2017.
It was pretty close, forecasting that capital city house prices would rise 3 – 4% and was correct with the expectation that Melbourne would outstrip Sydney as the better performing market. But their forecast of a rise between 5 and 6% in Melbourne was about half of the actual increase seen.
They got it right with Sydney (up 4.5%) and Brisbane (up 1.7 per cent), and Perth (down 2.7 per cent) but were out on Hobart’s very strong gains.
Their prediction for this year is an increase of 3.4 per cent in house prices 2018 and just 2.5 per cent in 2019, with unit prices forecast to rise 0.5 per cent in 2018 with a modest fall expected in 2019.
Domain (Australian Property Monitors)
Domain forecast a much weaker year of house price growth, which proved accurate in most states and capitals but missed in Melbourne, tipping only a 5% rise, and a 2% rise for Hobart was way off the mark. “I think the days of double figure house price growth are now behind us,” said Andrew Wilson, former Domain chief economist – he was right in most cases, although Melbourne recorded an annualised growth figure of 8.9%, and Hobart grew around 12%.
They did forecast below previous years’ average growth for Sydney houses of just four per cent, which was pretty well on the money as were its forecasts for Brisbane, Perth, Adelaide and Darwin.
BIS Oxford Economics
Leading economic researchers BIS Oxford Economics forecasts for Melbourne and Sydney (for the 2017 financial year) were way off the mark.
Their forecast for Melbourne house prices was a rise of 2% for the year to June 2017 when they were up 13.7 per cent according to CoreLogic’s data for that period.
They also forecast Sydney’s median house price would rise 1.7 per in the year to June 2017 compared to CoreLogic’s gain of 12.2 per cent at the time, but its Brisbane forecast of a rise of 2.7 per cent to $540,000 was accurate with CoreLogic showing a gain of two per cent at the time.
Herron Todd White
The national property valuation firm got it wrong when it said it expected “on average double digit growth in Sydney throughout 2017” in its January report, but correctly forecast “substantial growth in property prices” in Melbourne in 2017.
Saul Eslake
One of Australia’s most respected economists, Saul Eslake was correct with his expectations of a moderation in growth in Sydney house prices in 2017 compared with the last couple of years, and that Perth and Darwin would see further price falls, but missed on the Melbourne housing prices predicting that growth would be at “more moderate rates” without putting an actual number on it.
And the winner is…
SQM Research boss Louis Christopher. While he’s the first to admit he got it wrong with his forecast Sydney house prices to rise between 11 and 16 per cent last year, he got most of his other forecasts almost spot on.
SQM Research tipped capital city house price growth of six to 10 per cent (the CoreLogic daily index showed a 4.4 per cent rise across its amalgamated capital city index) and forecast Melbourne prices to rise 10 to 15 per cent (CoreLogic showed a gain of 9%).
He was also accurate when predicting a 3 to 7% gain in Brisbane (up 2.8%), Adelaide up 2 – 4% (up 3%), Canberra up 3 – 7% (up 5.8%), Hobart up 7 -12% (up 11.5%), Darwin down 5 – 9% (down 5.5%) and Perth down 4 - 8% (down 2.3%) - all these results are current as at November.
His expectations are for 2018 house prices to rise between 4 – 8% nationally, with Melbourne up by between 7 – 12%, Hobart 8 – 13% and Canberra 5 - 9%. He predicts Sydney house prices will rise 4 – 8% and small gains in Perth, Adelaide and Brisbane.
To conclude
The growth rates quoted are an average across each capital city, and property type. The market is not a “one size fits all” proposition, different areas will experience different levels of capital growth. The only way to accurately judge the market is to do your own research, talk to those on the ground every day, and apply your own judgement to what you're being told as some commentary may be self-serving, or get a professional to do it for you.
Listening to the commentators is all well and good as a dinner party conversation, and may give some broad guidance as to which way the values are going to trend but it's by no means an accurate way of judging the market future as the market runs on sentiment as much as anything, and this is subject to change as the overall economy fluctuates and public confidence in property as an investment medium shifts with it.
There's no question that growth rates in Melbourne and Sydney slowed down in the last quarter of the year, and a reasonable portion of this winding back can be attributed to the measures taken to deter foreign investment, with the main housing demand now coming from the first home and upgrader segments.
I see opportunities to capitalise on this slower pattern in most sectors, and there are still suburbs in the middle ring which are very affordable, you just need to be attuned to them and know what the drivers for growth are and will continue to be.
Read more about real estate data and forecasts:
Hobart likely to lead price gains in 2018: SQM Boom and Bust Report
