Summary notes created by Deciphr AI
https://podcasts.apple.com/au/podcast/episode-76-property-market-pulse-predictions-policies/id1685105426?i=1000663399921Rich Harvey, CEO of Propertybuyer.com.au, hosts Louis Christopher, managing director of SQM Research, on the Property Buyer podcast to discuss the current and future state of Australia's property market. They explore the impact of recent interest rate hikes, predicting a buyer's market with modest price declines in Sydney and Melbourne, while Brisbane and Perth are expected to outperform due to relative affordability and economic factors. They emphasize the critical need for increased housing supply and policy changes, such as replacing stamp duty with a land tax and incentivizing investors in new housing. Migration rates and the rental market's tight conditions are also discussed as significant influencers on the market's trajectory.
"I think overall it's been a dampener on the housing market in 2024. I think we need to wind ourselves back to the beginning of the year where you may recall there was great expectation out there that we were about to have an interest rate cut. Well, it never came."
"The interest rate levels are at a point where it's been taking out discretionary expenditure out of the economy. We're seeing that in, for example, in softening retail sales."
"There is still a risk out there as we speak right now that the RBA will lift rates again."
"The next CPI numbers, which I think referring to, comes out next week."
"If that's a bad number, yeah, there'll be a lot of pressure on the RBA to lift rates in August."
"Overall it generally does take about between three to twelve months to go through the system."
"One of the reasons why it's taken a little bit longer for interest rates to have their effect in this cycle is because we've had very, very strong population growth."
"The ABS has been reporting the same thing as well, that building costs are starting to ease a little, but it's still, it still has been growing."
"Overall housing costs, when you take into account rents, has been having a negative impact upon the CPI prints and will continue to do so for some time to come."
"It runs through the economy and it keeps running through like a recycled air conditioner."
"Wages growth has picked up, but it hasn't overly accelerated."
"The risk being that if the Middle east really did blow up, you could see things like what we had in the 1970s where there are restrictions on oil supply shock."
"Yes, we have this regional war in the Middle east, but so far, there's been some periods where I've been very concerned. Well, it looks like it's about to really blow up. But so far there's been some containment."
"Increased chatter about a potential housing crash in Australia."
"When we look at history and we look at, for example, the japanese housing bubble and crash, the us housing crash, the irish housing crash, all three of those crashes had one major thing in common, which we do not have in this country, and that was that there was a lot of speculative housing supply and construction that occurred just before the crash."
"We have got a major undersupply, which has, of course, been the primary reason why we've got a rental crisis on our hands."
"What are the current figures for building approvals? Like, has this been improving or declining?"
"So we're on track for this current financial year. So FY 25 to complete, about 138,000 dwellings. The long-term average since the beginning of the 21st century has been more along the lines of about 160,000 to 170,000 dwellings being built."
"Those numbers from building approvals have been trending down. So what this is telling us is that, okay, not only are we going to miss the federal government's target for the first year, where they wanted to build 1.2 million dwellings over five years, we're going to miss it for year one, we're going to also miss it for year two."
"So what you're telling me is there's basically a structural deficit coming up in the housing supply, and that is no way going to lead to a crash. In fact, it's the absolute opposite. It's going to create more problems."
"That's not to say we can't have housing price for. And we'll get on to that in a moment, I'm sure. But to say we're going to have an outright crash in the housing market in Australia very, very unlikely at this point in time."
"The policy which would make the biggest change to stabilize the rental market now would be to cut migration rates for a temporary period. I'm not suggesting for a permanent period. Cut it back to about 100,000 per annum would do the job in terms of stabilizing the rental market within twelve months."
"We need migration. We need skilled migrants coming into this country. Right?"
"I think migration can be used as a good economic lever, provided it's used wisely. And there are times when you put on the accelerator and then there's times where you should be putting on the brakes."
"So by doing that, you're actually providing more liquidity to the marketplace. Downsizers can downsize. Upsizers can upsize. And the transaction costs are a lot less."
"We've had firm evidence that essentially the stamp duty system we've got from the states has been suffering from, essentially, bracket Creek."
"The other policy I would bring in is provide more incentives for investors to invest in new homes. And I truly mean investors beyond first-time buyers."
"Let's encourage investors to go into new housing. Yep, I think that would make a change."
"I suspect more needs to be done on that front as well. And some hard decisions do need to be made about building high density in inner ring Sydney, inner ring Melbourne, inner ring Brazil."
"Not in my backyard. Let's have supply, but not in my backyard."
"Rental vacancy rates in regional Australia plummeted as many people moved out of the cities to get away from the lockdowns from COVID and they plummeted."
"Developers need to reduce their risks in building in regional Australia. And it's very hard for them to do that because the banks have black spots where they say, no, we're not going to lend to you in this area."
"Approval for manor housing townhouses and low rise apartments in R2 zonings, I think will free up a lot of the housing stock."
"By providing that medium density, the housing stock of low rise townhouses, I think would definitely free up a lot of the housing stock."
"But you've got this space above the railway lines, and if you visit other countries, this is actually what happens. The space is actually utilized."
"If you flood an economy with more underlying demand all in one go, that economy will hit up against its capacity constraints. We see it in housing, of course, through the rental market, but it's also happened in health. It's happened with education."
"It's one of the reasons why I think migration needs to be managed. If you don't manage it, then it can potentially be quite inflationary for the economy."
"It's been a political football for a long time, and the history of both major parties is. It's something they don't really want to talk about."
"I think labor will actually have some success in the lead up to the election in getting the migration rates down. We know it's their policy."
"We're not expecting a crash, but I think single digit housing price falls somewhere between minus one to about -5% over an annual period are likely to be reported in our two largest capital cities."
"Beyond the two capital cities. So Brisbane, Adelaide and Perth, they're not showing any signs yet of a significant slowdown."
"If we were to see an interest rate rise, then for the first six months of 2025, the housing price falls we speak of in Sydney and Melbourne will continue on."
"You need to be holding properties for seven to ten years, right? And if you were to come into Melbourne literally in the next six months, probably at the lowest point, potentially, of a cycle you are set for the next rise."
"It's not going to be a crash because of the genuine shortages we've got, but it will be a buyer's market for a twelve month period, essentially starting now."
"Potentially the first half of 2025. Potentially. But we got to see some better inflationary prints."
"I'm predicting February, but here it is on the record. But again, it's going to be. That's my prediction, but I agree with you. I think it's going to stay on hold probably the rest of the year."
"We had a bad year in 2018. I was way off. We said the housing market would slow down, but it fell."
"We gave ourselves an eight out of ten for our 23 forecast. So our base case forecast came in for most cities last year, which we're happy about."
"Timing is very difficult to get right in the market, and it is time in the market."
"To restate the forecast we had for Sydney and Melbourne, which we put out in November, was that we were expecting a flat to falling housing market in those two cities. Markets started off a little bit stronger than what we anticipated, but it's coming back to our forecast now as we speak."
"They've been picking up and so we've seen more new listings over the course of 2024 than what we've seen over the course of 23. That's been particularly the case in the market of Sydney, to a lesser extent, Melbourne as well. Days on market, though, has blown out a bit more."
"We've got a distressed listings index and report that we put out there for our audience and those numbers have actually been surprisingly benign. So across the country, we're reporting about 6000 listings which seem to be selling under distressed conditions. That is out of a total number of know, some 270,000 listings."
"There was a great fear of the great mortgage recess... The mortgage cliff coming off fixed rates... Didn't happen."
"The principal place of residence to home, the last thing that sells when you're trying to cut back expenditure, you will stop going to restaurants first. You will stop the holidays first. You will sell a car. She may sell the investment property first, but the home is the very last thing."
"I think we'll see a rise and. Well, we normally get a rise in spring listings and I think we'll see the same thing again for our largest capital cities. Clearance rates will continue to fall from here, in my opinion."
"We have a national rental vacancy rate of 1.3%. Sydney's running at about 1.7% now. If I recall, Melbourne's running at about 1.5."
Low vacancy rates indicate a continued rental crisis, but some seasonal fluctuations are expected.
The severe rent increases of 10-20% are likely over, as negative news has been priced into the market.
"The days of ten to 20% rises in rents, I think are now behind us and it's starting to show up in our numbers now. Were actually recording some rent declines in Sydney, for example, from their very high levels and it's the case now in Melbourne too."
"In Queensland, they've just introduced new laws that even if a tenant is on a leaves their rental property, it's still on a twelve month period. But you can't put up rents more than once within a twelve month period."
"I'm not a proponent of rental restrictions in the market, caps on rents, anything like that. This is crazy. It's actually counterproductive."
"I'm not so sure whether we're going to get a mother of all property booms nationwide, not unless the Reserve bank of Australia aggressively cuts rates back towards, say, 1%. And I think that's highly unlikely for the time being."
"I think Brisbane is going to be one of those cities where we're going to see long term outperformance performance compared to Sydney and Melbourne. And Perth is another one as well."
"One big change which has occurred with the state of WA is that they have, for the last three to four years now, I think, been receiving a larger percentage of the GST pie, and that has been helping the state tremendously."
"Adelaide can do well, but I always scratch my head in terms of its outperformance because you look at the south australian economy, you know, there's not a lot of fireworks there. You know, quite frankly, there just isn't. But one thing that South Australia does have, and the city of Adelaide definitely has in spades, is affordability."
"People need to also be cautious, though, that it could be more difficult to find a job in Adelaide when we have a major economic slowdown."