Expert Bust #17 – Govt housing is no big deal

A lot of “experts” suggest investors steer clear of public housing. But historical data suggests it’s no big deal…

The scatter plot shows a red dot for each suburb in 2012 that had a known percentage of government housing. Some had very little (left) while others had a lot (right).

In the 5 years that followed 2012, some suburbs had high growth (top). Others had low growth (bottom).

If there is a relationship, we’d expect to see the scattering of red dots start at the top left and go down to the bottom right. It’s hard to tell from the scattered red dots, so I’ve plotted a line of best fit. It does slope gradually down from left to right. This suggests there might actually be a mild relationship. But it’s too flat to be considered statistically significant. The slope might be caused by inherent error in the means by which capital growth is measured.

The vast majority of suburbs have less than 10% government housing. Most suburbs have no govt housing. The difference in capital growth rate from one extreme to the other is insignificant.

Even a change in govt housing doesn’t help…

This chart shows the relationship between change in govt housing from 2006 to 2011 and the capital growth rate for the following 5 years. The trend line is almost dead flat.

There’s nothing in this that investors can use to improve growth prospects. Sometimes it’s easier to blurt out an opinion or have a wild guess than it is to do the research and know.