22 March 2012 – The Australian Conservation Foundation has challenged newspaper reports that claim house prices are lower in town in the Murray-Darling Basin where water reforms propose to return water to the environment.

Detailed analysis of house price data has shown than instead, house values in towns with healthy river systems produce more buoyant house prices, the ACF has claimed.

In 90 local shires across the Murray-Darling Basin, house values are rising, but they are strongest in river valleys that are in good ecological health.

ACF economic adviser Simon O’Connor said the evidence points to the logic of maintaining a healthy environment.

“Some opponents of a strong Murray-Darling Basin Plan have tried to suggest that returning more water to the environment would damage house prices in the Basin, but our study, using a more detailed set of data, tells a different story,” Mr O’Connor said.

“There is in fact a strong correlation between healthy rivers and healthy house prices.

“The best protection for regional communities and farming families is to keep the Basin’s rivers, Australia’s lifeblood, flowing.”

Mr O’Connor said the study used Australian Bureau of Statistics house price data from 90 councils and shires in the Basin and matched this information against the Murray-Darling Basin Authority’s Sustainable Rivers Audit, which rated the ecological health of the Basin’s 23 major river valleys on a scale of extremely poor to good health.

Recent newspaper reports however have suggested a different view:

  • The Age, in a report that said house prices in 14 key towns heavily reliant on irrigation in the Basin suffered a drop in value of 4.2 per cent in 2011.4 (The Age, “House prices slump in basin towns”, David Wroe, 12 Jan 2012 5)
  • The Australian in a report that said house prices in 20 regional towns had an average drop of 10.5 per cent in October and November 2011. 5 (The Australian, “Murray-Darling Water Plan hits house prices”, David Uren, 27 Jan 2011)

Mr O’Connor said the figures used in the reports were from RP Data-Rismark.

“A closer look at that firm’s Home Value Index data suggests there has certainly been a depreciation in house values in regional Australia in 2011. But this is far from restricted to regional Australia or only Basin communities,” Mr O’Connor said.

“Year on year (December quarter 2010 to December quarter 2011), Australian capital city average house prices dropped by 3.6 per cent.6

“The same source shows house prices also dropped in Australian regions over the same period, but by only 2.9 per cent – faring much better than capital cities.

“In fact, even the 4.2 per cent drop in house prices in 14 regional towns in 2011, as reported in The Age, looks like quite a good outcome when compared with Brisbane’s 6.8 per cent drop in house values reported by RP Data-Rismark.

“These results are further supported by the recent ABS House Price Index showing the price index for established houses in Australia’s eight capital cities dropped by 4.8 per cent in the year to December quarter 2011.7

“This indicates that there was little good news for sellers of houses anywhere in Australia in 2011, but the impact of macroeconomic factors on house prices were felt more strongly in capital cities than in the regions.

“To test a relationship between the water reform process and house prices, we analysed a significant sample of the most recent ABS house price data over five years and for over 90 councils and shires across the Basin (as defined by the Murray-Darling Association). 8,9

“This five year period (2006–2010 when latest data is available) was marked by a long drought and then emergency action by Federal and State governments to reform water use and purchase water to stop the decline of the river system.

“Several important national reports and programs initiated during this period all signalled clearly that reform of current water consumption patterns would be dramatically changed in the future, with likely implications for available water for irrigators:

  • The emergency summit called by then Prime Minister John Howard with all Basin State Premiers in November 2006
  • The January 2007 release of Prime Minister Howard’s 10-point plan for reform, which included a $10 billion commitment that was focused on water buy backs and investing in water savings from efficiency measures for the environment

“If there was a link between house prices and water reform, there would be numerous occasions over this five year period where a trend would be noticeable.

“Our analysis indicates there is no such link. Property prices over this period just went up, and up and up.”

Download the full report here