"The Worst Is Behind Us". The Property Market Is Shifting — Property Experts

[00:00:00] Speaker 1: You're listening to the Folio Property Podcast. I'm Reece Bettle and I'm here each week with my co-host Lachlan De La Hunty. Lachlan, new episode, new format moving forward. We're going to do weekly data dives on what we've seen in each market over the last week. So looking, diving into capital cities, so Sydney, Melbourne, Brisbane, Adelaide, Perth. Looking at price growth, listing data, auction clearance rates, any trends, feedback we're hearing on the ground with our relationships in the market. And also looking at, from a debt perspective as well, what's lending our landscape and what does that look like for investors or even first-time buyers? [00:00:34] Speaker 2: Yeah, we cover both quantitative and qualitative data, Reece, which being a data nerd is really interesting. So we've got the factual information as well as agents, what we're hearing on the ground from Saturday and Sunday. So every Monday you'll get live insights to every capital city in Australia. So this is a place to tune in if you are interested in what's happening in the market from the last seven days. [00:00:56] Speaker 1: And make sure you hit subscribe so you don't miss an episode. Let's kick it off. Round the grounds, particularly markets in Sydney and Melbourne, which have been getting a lot of heat in the media and rightfully so, I guess, with some of the results that we've seen. You know, we're hearing stories from local agents there where there's not a single bidder on properties. Auctioneers going to auctions and not even getting a single one across the line throughout the day. But let's go through the high-level numbers for Sydney and Melbourne to kick off with. So this week in Sydney, negative 0.28%. Now, the four-week change is 1.34%. So roughly in the last month, let's call it, 1.34% negative growth. Melbourne, 0.23% for the week, 1.02% for the last four weeks. So not as severe as Sydney. But the two ones that I think are pretty fascinating for both these, Marcus, which I'd love to get your commentary on. Now, we track the four-week moving average. So looking at the last four weeks, obviously, there's going to be a big – the four-week change is going to be significant. But actually, looking at the average over the last four weeks, Sydney's 0.34%. So what it did this week was 0.28%. So it's below the average. So it shows it is actually starting to improve. [00:02:08] Speaker 2: The fall is lessening, so to speak. Correct. Yeah. [00:02:11] Speaker 1: Now, Melbourne is there or thereabouts. It's about the same. So it's not as severe as Sydney has only dropped to a percent, essentially, rather than 1.34%. But Sydney, the one that's probably been the most yo-yo market in the country at the moment, starting to show early signs of stabilisation. [00:02:26] Speaker 2: Yeah, and the auction clearance ratio, which we'll talk about in a moment, suggests that as well. So to summarise that for the listeners, you essentially look in the last month, Sydney's dropped by about 1.5%. Melbourne about 1%. So pretty serious figures that we're talking about. But you're right, the momentum of fall is easing slightly. And that's what we want to look to. It's about the volatility. And looking at the other markets, which we'll discuss at the moment, that sort of gives us an early forecast, potentially what's going to happen next week. We would be surprised, based on the auction clearance rates that we've seen over the last week, what we're hearing on the ground in terms of buyer activity and the data you just discussed, to see the severity of that fall or that decline intensifying. [00:03:08] Speaker 1: Well, it's interesting. You mentioned there auction clearance rates. So Sydney, 49% for the preliminary auction clearance rates. That was 46% last week. So an improvement. An improvement. Melbourne though, like, you know, looking at this data, I was looking at the reported auctions versus the clearance, just to see if there's some sort of trend. Maybe there was less auctions. That's why the clearance jumped up. But it's there or thereabouts on previous weeks in terms of the amount of auctions scheduled and reported. But it's jumped from 55% to 63%. Massive, massive increase. [00:03:40] Speaker 2: And now we're starting, you know, it's still, now you look at where the average clearance rate needs to see for positive market conditions. We're not there yet. But again, the severity of the decline will lessen on the back of these figures. [00:03:54] Speaker 1: Well, I mean, the Melbourne one's fascinating as well because you're starting to see here when you're comparing it as 12 months ago, it's not too far off in terms of an auction clearance rate. It hasn't moved as negatively at the same velocity as a Sydney market. But it is starting to show, especially the last couple of weeks with Melbourne. And when we've been looking at the medium auction price as well, that lower quartile is starting to heat up in Melbourne as well. [00:04:18] Speaker 2: Yeah, and that's it. We're talking about the two-speed economy. We speak about it a lot. But if you, I'm sure you've got the data there, the lower quartile, the entry price point, you could say sub a million for Perth and sub 1.5 for Sydney. So it's sub a million for Melbourne and sub 1.5 for Sydney. Really competitive price points. They're getting multiple offers. Auction clearance rates are much higher in that segment. And you're seeing things sell much quicker in terms of days on market. So there's just a massive disparity between the top quartile and the bottom. [00:04:51] Speaker 1: And as you said there, we're seeing that across the board. And, you know, look, Sydney and Melbourne is a market that does sort of dominate, I guess, the economic outlook as well from a property perspective. And we're definitely seeing that there is a severe two-speed economy. And we're looking at the upper quartile saying the last three months on average and some of those locations are down three and a half percent. Whereas the lower tier is actually neutral or actually on a positive as well. And, you know, we speak to a lot of agents on the ground, particularly in Melbourne. Sydney, we have a few that we speak to. But Melbourne, we've got a very large imprint. And we're starting to see a lot of properties now go well above the asking price as well. [00:05:31] Speaker 2: Yeah, what we're competing on, Reece. I was speaking to you off here before. Last four auctions I've been to personally, I've missed out at auction by anywhere from 5% to 10% above what the disclosed or advertised price is. So, you know, you could argue there is a little bit of underquoting. There's talks of a Melbourne government looking to try to change auction conditions where you have to disclose, you know, vendor pricing, which is an interesting concept. But regardless, you're starting to see the market really start to shift. And I really do believe that the worst of the Australian housing market is now behind us. You know, we're mid-August. The May budget is now in the rearview mirror. And albeit I don't think we're going to see positive meeting house prices in Sydney and Melbourne, probably this year, I think the worst in terms of that, that falling, almost falling like a rock, almost, you know, a couple of percent a month is potentially behind us, Reece. I think this is the green shoots that we need to see. And it's not going to change overnight. Don't expect, you know, for us to report next week that Melbourne's up 0.2% across the board, Sydney's up 0.3%. You know, it's slower moving transactions take time. So, you know, the data that happens next weekend probably doesn't get reported until four to six weeks later. Obviously, we're across it. This is live data that we're tracking from the weekend. But it is, it seems like the tide is turning. [00:07:01] Speaker 1: Let's talk through the other capital cities and particularly the two-speed economy that we've been speaking so much about for the last sort of six or eight months. Brisbane, 0.05% negative growth for the week, same as Adelaide, and Perth, 0.03%. [00:07:17] Speaker 2: So, complete stagnation across those markets at the moment, which is impressive considering the macro economy when you look at the impact that's happening on Sydney and Melbourne. For those markets to be holding, some of the listing data is also positive. If you've seen the Perth listing data come through, listings have gone down for the first time in probably, you know, 10 to 12 weeks. So, for those that are listing that are local to Perth, you've seen listings go from essentially 3,300. And it was going up quite aggressively, you know, 10 to 20% a week in terms of listings coming to the market. Now, up around that sort of 7,000. But it's held and actually listings come back by about 60 or 70 this week. So, the signs that that market has now stabilised and improving as well. And you look at Brisbane, Adelaide, it's a similar story. [00:08:06] Speaker 1: And you're looking at the rolling four-week average for both Brisbane, Adelaide and Perth. It's much of a muchness. You know, Perth, I guess, the lowest from a declining price growth at 0.06, which is basically stagnant, with Brisbane at 0.1% as well. So, Brisbane did have a couple of those choppy weeks, maybe four or five weeks ago, which had a lot of negative growth. But now it feels like all those three are now going back to the two-speed economy that we've been talking about for so long. [00:08:33] Speaker 2: Yeah, and that means, you know, when I do talk about where the markets are going, I think you could potentially see a rebound in pricing from both Brisbane and Perth. Again, I'm still a little bit sceptical of Adelaide just because of the affordability ceiling that it's now surpassed. But Perth and Brisbane, I think, coming into spring, which is typically, they call it selling season for a reason, I think you'll see a rebound in pricing and start to... It will come a lot down to the inflation data, which will then create a narrative for interest rates. But the more supportive interest rate stagnation or even potentially an interest rate decline could see a pretty serious rebound in a market like Brisbane and Perth. When I say rebound, it's gone from significant growth to a stagnation period. And I think you could see it start to ramp up as we get into the back end of this year or 2027. [00:09:32] Speaker 1: Look, I want to talk around first-home buyers or, look, even owner-occupiers in this market. So, we've spoken about on podcasts the last few regarding first-home buyers applications down 20% since budget. Some lenders are reporting down 25% post-budget as well. So, really having a complete opposite effect to what the government policy was there to create in terms of allowing more first-home buyers into the market. Do you think some of this stabilisation and especially on the lower quartiles we're seeing, is this investors entering the market again and feeling confident in the market? Or are we seeing home movers, I guess? If they've got a 25% down on first-home buyers, are they taking up it? What's your opinion on why we're starting to see some stabilisation? Particularly, I'm going to draw out to maybe Sydney and Melbourne because the other markets have been pretty stable. But on those lower quartiles, is it investors or are we looking at different type of buyer? [00:10:27] Speaker 2: Well, the data suggests that, right? Because first-home buyer activity is down, owner-occupier data is down. So, it's investor activity, particularly in Melbourne, there's essentially a consistent and positive news story about the long-term, medium-term fundamentals of Victoria and specifically Melbourne. So, that lower price point, which goes against the government's intentions, is being pushed by investors, investor activity. [00:10:54] Speaker 1: What about upgraders? So, we've definitely, you know, we've touched on this at the moment. That is probably in these markets, in a lot of instances, depending on your circumstances, it's a great time for an upgrader at the moment. Looking at the listings data from SQM in July, listings were up 12% nationally, which is very abnormal for this time in mid-winter. So, less FOMO and competition than there was probably a year ago. Is this also a great opportunity now for the upgrader? [00:11:19] Speaker 2: Without a doubt, if that's in your sort of sphere, market-dependent, but if you're in Melbourne or Sydney, albeit I think Sydney's got more pain ahead of it than Melbourne, and in the next three to five years, you are thinking about upgrading, I would be having a conversation with my property advisor, should I be bringing that decision forward? Because we know the upgrader, you're spending more, right, than you're carrying home. So, yes, you know, my sister's in a great example of this at the moment, and she's like, "Well, it's not a great time to sell." But I said, "Well, there's a disproportionate price for what you're going to pay for your upgraded property than what you're going to sell your property for. So, you know, if you upgrade for 1.5 and in two years' time it's worth two versus the one that you might sell now for one and it's worth 1.2 in five years' time, you're going to be well ahead." So, for those looking to downsize, probably not the time in those markets, but those looking to upgrade, it's a really good time to do it. [00:12:11] Speaker 1: Interesting, and I think there'd be a lot of listeners in that sort of situation right now as well, where they can see the prices falling, but almost they know what their property was worth, but they're seeing a lot of that equity diminish and probably thinking, "Oh, it's better to hold on rather than do that upgrade." But from what you're saying there, actually, it's the best time to possibly do it. [00:12:30] Speaker 2: Yeah, and those, and that's speaking to Melbourne and Sydney, those inside a market like Brisbane or Perth, like different points of the cycle when you compare Brisbane and Perth. Compared to where Melbourne is, right? Yeah, Brisbane, I think peak cycle. I think you've got Perth at, say, 10:30 on a property clock and you've got Melbourne, you know, hovering around that six o'clock. So, what do I do if I'm in Perth or Brisbane and I'm looking to upgrade? You're probably in place of residence. If you're going to make that decision in the next 12 months that non-negotiable, we want to upgrade the home. And there was a bit of flight to this because people are now investing more in their prime place of residence because of the tax haven, I guess, that you don't have to pay tax on your PPOR compared to other investment opportunities. So, now's probably the best time that there has been, certainly in the last three years to do that because there's less competition. And I think we'll look back on this period of time in three to six months' time and go, you know, middle of the year, post-budget to probably September was a really good time to, you know, I wish I had have upgraded then. And I've got some friends doing it at the moment and they're like, geez, I'm competing on properties where I'm picking him up for a steal compared to what they were three months ago. And I think this is a moment in time for Brisbane and Perth where there is enough uncertainty. You're not going to pick up an absolute steal because it's a very competitive market that's undersupplied. But you can probably maybe pay 10% to 15% less than what you might have to in two or three months. And that's a reality. [00:14:03] Speaker 1: What about first, what about those first-time buyers and look, do you want to get political today? We're trying not to get political, but look, there's 34,000 first-time investors out there that have probably got roughly, we saw an article come out last week about 2.2 billion of equities been wiped out from getting into the market in a high LVR. So, high loan to the valuation of the property. What would be your generic advice to those that have got into the market and are probably sitting in negative equity territory? [00:14:33] Speaker 2: They've only got one thing they can do, Rhys, they have to hang on. And that's the reality, the storm will pass. And what we're experiencing and what we have experienced for the last three months is a storm of complete and utter uncertainty brought on largely by the government through the budget. So, the best thing these types of buyers can do, you don't want to put your head in the sand, but it's probably exactly that. Put down the newspapers for a little while, don't over read the headlines and sit tight, because I think in 12 months' time you will be in a better position. Do I think you'll be in positive territory? Hopefully, but not guaranteed, and you really don't have any other levers you can pull at this point. The government put you in a position and gave you essentially free leverage, 95% LVR, which you took advantage of and it hasn't worked in this scenario. But we know with property, given enough time and patience, that it will return to equilibrium, and then your job then is not having a knee-jerk reaction and sell it, because that's what we find a lot of people do, that typically, if you look at the pattern of those that go through negative cycles, they see a dip. Perth was a great example. A lot of people who bought in 2013-14 had a lot of pain through '15, '16, '17, '18. When the house prices returned to what they paid for it in 2019-20, they sold it. And then the following five years, they've left 100% growth off the table because they got rid of it prematurely. So it's having the ability to hold these assets longer term and don't think in weeks, months, or even in one or two years, it's, "Okay, where's this asset going to be for me in five years' time?" [00:16:20] Speaker 1: Let's go back from more on an investor lens here. So looking at rents, I was looking at the July data and the advertised rents are up 0.4%. Third straight month, annual growth pushing 6% now from a rents perspective. And this was the big talk, right? In the lead up to the budget, you had a lot of people who, especially those who are investors, were very much of the opinion of, you know, these changes are going to force private rentals to go up or the whole market to go up in terms of rents. We're clearly seeing in the data that that is going up. Do you see us hitting to a rental affordability cap that's going to slow this down? Or do you see this just keep on going for the rest of the 2026? [00:16:57] Speaker 2: Yeah, rents will continue to rise, in my opinion, Reece. We've still got a national shortage of property. That's consistent. That hasn't changed. And the government have done very little to help the supply side of the equation, which we've spoken about a lot. So we aren't going to see an abundance of supply come to the market to solve that. I think it was forecasted that the government in their budget predicted $2 a week rent increases. And when REIA did their forecast, a real estate institute of Australia, they've done their modeling and forecasting on $8 increases a week. So there's a massive difference between what the government and what our national body predicts. And looking at the data rates which we track, it's certainly on track to be closer to REA's forecast of $8 a week, not two. So I think investors can make decisions on the fact that there's going to be rent increases across the board nationally. Markets that have seen a surge in more recent years like Perth and Brisbane, there may be some caps because it's getting quite unaffordable for renters in those markets. But certainly those coming from a really low base, like Victoria and Melbourne, I think we're going to see pretty serious growth. [00:18:10] Speaker 1: It feels like investors are starting to come back into the market. Look, we've noticed as a business that we've seen a huge uptick in the last six weeks. I've seen other businesses or other influencers in our space say similar things, but hearing what they say is very much aligned with what we're seeing. So you're actually now saying people start to be a bit more proactive now that dust has probably settled post budget. Now we've had banks come out. I mentioned some stats earlier from what some banks and some mortgage aggregators were saying from a first time buyer perspective, but actually from a general mortgage lodgement in general. NAB is saying they're down 15%. AFG, which is one of the biggest mortgage aggregators down 20%. A lot of them think it's probably somewhere around 25% to 30%. Now, generally what happens in the banking world is once you start losing your market share, the big four are some of the most profitable companies in the world, they're going to start wanting to get that market share back in some way. And we saw a move a couple of weeks ago while you were in Sweden where AMPs come out with a new 40-year loan, 10-year interest only for investors. I had someone private message me after that comment on the podcast from a non-bank lender saying they're coming out with something even more aggressive soon as well. So we're actually starting to see now, I think as we see the market share drop, especially the big four and definitely the non-bank space, getting a little bit more creative, especially from an investor standpoint. Where do you see that going? We've had a lot of pullback over the last six months from, you know, APRA, restrictions from government, from investors, but now we're sort of starting to see the first positive signs from a banking perspective that they want this business. [00:19:44] Speaker 2: Yeah, I think it's laying the foundation for a really strong rebound in 2027. When you've got banks desperately trying to find profit and find more margin and try to win back some of the work that they've lost, they are going to get more creative. And you find during these cycles, Reece, obviously, you know, the banks increase their restrictions, I guess, over the last two months to try to slow the market down, essentially, the level of debt, slow it down. But now the opposite's going to happen where the shackers are going to be off and 40-year loan term is pretty crazy to think. As little as, what, 10 years ago, the idea of a 25 or a 30-year loan term was aggressive. Now we're talking 40. So it just means your borrowing capacity increases. And in the back of that happening, potentially the landscape, don't want to call it a rate cut in the next four to six months, it can just, it starts to paint the picture of a very bullish 2027. We know lending is what underpins the property market and the access to credit. And now the banks are trying to be more creative to win back market share. Aparam may ease some of their policy and then potentially the cost of money becoming cheaper. It creates a pretty empowering blueprint for what might take place over the next 12 months. [00:21:02] Speaker 1: Friday's a big day in this space and we're actually going to do a podcast on Friday as well. So you mentioned at the start of the podcast, but please join in. We're doing three this week. It does take a lot of energy for us to do that. So if you are enjoying the insights, please give us a like, a subscribe. It does help us know whether it is hitting the right audience and we'll continue to sort of grow the channel. But the big data that's coming out on Friday is the latest ABS data from a lending perspective. So investor lending versus owner-occupier lending. So if we see a sharp increase like we think we're going to see in that data, then we might start to see some more banks be a bit proactive moving forward. [00:21:40] Speaker 2: Yeah, it's going to be really interesting. [00:21:42] Speaker 1: Tune in. You've been listening to the Folio Property Podcast.