Good article Tony, thanks.
One of the things it doesn't address is the 'cocooning' trend as identified by Faith Popcorn. This trend appears to becoming a tidal wave in the USA with paranoia alive and well.
One of the effects of cocooning (for those that don't know) is the turning of your home into a haven which you don't leave by choice. In Time Mag this week the trend is so strong that the humble PJ sales has grown 28% where as clothing generally is down 4%. Why get changed in the morning if you ain't going to go out?
Any industry, service which facilitates staying at home is booming and has been for ten years or so. eg. Why go to the cinema when you can watch it on a big screen TV or better yet build or add a home theatre room. Add a safe room to your home, shop for anything over the net and have it home delivered, home delivery of any kind, the home office boom, telecommute and so on.
All these things add value to the home (because the home is often modified to suit) and distort growth figures. Go back 20 - 25 years; home offices, home theatres, spas, saunas, ensuite bathrooms, internal access garages or security parking, air conditioning even dishwashers and 'family rooms' were considered a luxury. The point being the average 3 or 4 bedroom home of twenty years ago vs today are chaulk and cheese and often no adjustment is made for this.
And another thing, they (statisticians) rarely adjust for size (which does matter) as the average 4 bedroom ensuite home has grown in 25 years from 180m2 to 220m2 (in OZ) not including garages. But for the most part the evidence presented is as 'the average price of a 4 bedroom home has grown by xx% pa for the last xx years'. Not accurate at all as more often than not the figures don't include size growth or ammenity improvements!
For those that doubt this happens in the established suburbs think about owner occupiers and what they do. They often upgrade by adding the family room / rumpus room / studio or ensuite / sunroom / covered deck / double garage etc and this is also reflected in price growth in the established suburb; but it is not taken into account when stats are viewed.
Does it matter? Probably not because as investors we don't really care where the growth comes from so long as it's happening and doesn't reverse. It's just that the price growth and potential 'bubble' in housing is far more complex than the gross data and numbers show.
Enough ranting but please look behind the figures that are presented by any 'authority' and use some uncommon sense and always ask why is this so.
regards, Michael Croft
