60 MINUTES: FACT FROM FICTION
Downturn in the property market. That was the headline of Channel 9’s 60 Minutes report. They claimed that the market is set to drop 40% in the next year, and that the current conditions resemble the GFC of 2007-08. “It’s coming”, said one of their motley panel, the “end of Australia’s property boom time.”
The report was not only inconsistent, it was spurious, sensationalist, and downright irresponsible in terms of reporting.
60 Minutes claimed that the great Australian dream was under threat. But even as they interviewed Joe Public, raking his grass clippings in a sullen way, the astute viewer should have been suspicious. They quoted a vendor whose property had been on the market for 18 months without a result, without analysing whether or not their property was over-priced. They alleged that Melbourne’s prices are the ‘most inflated housing prices on the planet’ and that ‘personal mortgage debt is stratospheric’ likened to the GFC.
Indeed, Australia has a high level of personal and household debt. It is true that, due to increased employment opportunities in Sydney and Melbourne’s urban areas, the markets in those areas have experienced incredible growth. But, blinded by an obsession with the “market bubble” concept, those facts were twisted to portray an unstable market that is actually quite robust.
It is true that for decades housing loans have been our financial bedrock. According to the report, $1.7 trillion is held by the banks in mortgages from owner-occupiers and investors, amounting to 65% of total lending. However, when they explain that there are large numbers of people sitting on big loans with no ability to service them, they uncover the key point, which isn’t about the real estate as much as it is about responsible lending.
It is no surprise that the report struggled to recruit a reputable agent to interview. Instead they hopped into the Mercedes Benz of a stereotypical West Sydney agent and asked him the median price of some nondescript suburb.
‘$1 million,’ he answered.
‘And what was this a year ago?’
‘So they’ve lost $200k in a year?’
This type of anecdotal reporting is harmful and flat out contemptible.
In the wake of the Royal Commission, banks have tightened lending criteria to avoid repeating history. This is in response to criticism over irresponsible lending. But for 60 Minutes, the (alleged) fact that half of all home owners trying to refinance are being knocked back is bad news. They do not see it as the ABS avoiding a crash. They imply that banks crowbarring customers into Principal and Interest loans is fatal, when it is a penchant for Interest-only that exposes mortgagees to greater risk.
One of the thinnest examples given in the whole report is the “investor” who was shocked when the bank forced him into P+I loans, watching repayments increase by an alleged 57% per month. He complained about being forced back into work to make up the shortfall. It begged the question, are your properties not rented out? Why not sell one or two to reduce your exposure? Apparently, there are thousands upon thousands in the same boat as this investor… yes, thousands (among millions) who are being “severely penalised” by lenders taking steps to ensure that our economy remains stable.
What to take from all this? It is quite simple. Be aware of how readily you absorb sensationalist media reporting. It will often do more harm than good. If 60 Minutes intended to encourage more potential vendors to hit the market by bullying them into a sense of false instability then, bring it on, but if you are a home owner, or a prospective purchaser, who takes pride in thinking for yourself, then arm yourself with good counsel—good financial advisors, good accountants, good real estate agents—and change the channel.