1 00:00:03,990 --> 00:00:07,590 Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer. The property 2 00:00:07,590 --> 00:00:10,440 Sean Aylmer: market has had a surprisingly good start to the year, 3 00:00:10,440 --> 00:00:14,129 Sean Aylmer: very high auction clearance rates and prices holding up pretty 4 00:00:14,130 --> 00:00:16,889 Sean Aylmer: well. How long will it last? Tim Lawless is the 5 00:00:16,889 --> 00:00:19,920 Sean Aylmer: head of research for CoreLogic. In addition to monitoring the 6 00:00:19,920 --> 00:00:22,800 Sean Aylmer: market with all of the auction data and more, CoreLogic 7 00:00:22,800 --> 00:00:25,320 Sean Aylmer: has put out a report today showing just how big 8 00:00:25,320 --> 00:00:28,890 Sean Aylmer: the gap is between house and unit values in Australia. 9 00:00:29,070 --> 00:00:30,570 Sean Aylmer: Tim, welcome back to Fear and Greed. 10 00:00:30,900 --> 00:00:32,459 Tim Lawless: Many thanks, Sean. Good to be here, mate. 11 00:00:33,269 --> 00:00:35,609 Sean Aylmer: We'll get to your report that's out today in a 12 00:00:35,609 --> 00:00:39,300 Sean Aylmer: moment. But firstly, have you been surprised by the strength 13 00:00:39,510 --> 00:00:42,839 Sean Aylmer: in the auction market thus far this year? And if 14 00:00:42,840 --> 00:00:43,650 Sean Aylmer: so, why? 15 00:00:44,159 --> 00:00:48,030 Tim Lawless: It is surprising. Absolutely. So for some context, at the 16 00:00:48,030 --> 00:00:50,519 Tim Lawless: end of last year, we were seeing auction markets quite 17 00:00:50,519 --> 00:00:55,560 Tim Lawless: weak. Clearance rates were well below average, generally finalizing across 18 00:00:55,560 --> 00:00:59,190 Tim Lawless: the major auction markets around the mid- 50% range. The long- 19 00:00:59,190 --> 00:01:02,340 Tim Lawless: term average, by the way, is sort of 66 to 20 00:01:02,340 --> 00:01:05,670 Tim Lawless: 67% would be a typical clearance rate on a 10- 21 00:01:05,670 --> 00:01:09,389 Tim Lawless: year average. Whereas the first three weeks of the auction 22 00:01:09,389 --> 00:01:13,440 Tim Lawless: market this year, the auction market picks up around late 23 00:01:13,440 --> 00:01:16,200 Tim Lawless: January, early February. So we've had three weeks of results 24 00:01:16,200 --> 00:01:19,919 Tim Lawless: coming through, and we've seen clearance rates on the early 25 00:01:19,920 --> 00:01:23,039 Tim Lawless: numbers getting back up to the early 80% mark for 26 00:01:23,039 --> 00:01:27,209 Tim Lawless: Sydney, the high 70% mark for Melbourne, revising down to 27 00:01:27,569 --> 00:01:31,200 Tim Lawless: the mid- 70% range. So the clearance rate is looking 28 00:01:31,200 --> 00:01:34,709 Tim Lawless: very strong. Auction volumes, so the number of auctions being 29 00:01:34,709 --> 00:01:37,709 Tim Lawless: taken to market also picked up quite a bit, which 30 00:01:37,709 --> 00:01:39,480 Tim Lawless: is normal for this time of the year, but we're 31 00:01:39,480 --> 00:01:41,670 Tim Lawless: definitely seeing a lot more auctions now than at the 32 00:01:41,670 --> 00:01:45,569 Tim Lawless: same time a year ago. So yeah, it's been a 33 00:01:45,569 --> 00:01:48,329 Tim Lawless: strong start to the year, and I'd probably put that 34 00:01:48,330 --> 00:01:51,150 Tim Lawless: down at least partially to this... what looks to be 35 00:01:51,150 --> 00:01:54,090 Tim Lawless: a renewed level of confidence emerging on the back of 36 00:01:54,330 --> 00:01:57,389 Tim Lawless: lower than expected inflation. We're now seeing a lot more 37 00:01:57,389 --> 00:02:00,300 Tim Lawless: forecasts that interest rates might come down a bit earlier 38 00:02:00,300 --> 00:02:03,299 Tim Lawless: than first thought, and that does seem to be flowing 39 00:02:03,299 --> 00:02:06,990 Tim Lawless: through to this renewed level of exuberance in housing sentiment. 40 00:02:08,490 --> 00:02:10,530 Sean Aylmer: It's interesting, and you've said this a few times over 41 00:02:10,530 --> 00:02:14,610 Sean Aylmer: recent weeks. Actually, demand and supply are matching. So we 42 00:02:14,610 --> 00:02:16,559 Sean Aylmer: talk about this often about our interest rates might be 43 00:02:16,559 --> 00:02:19,110 Sean Aylmer: coming off, people are getting more excited, et cetera. But 44 00:02:19,110 --> 00:02:20,669 Sean Aylmer: at the end of the day, you need a seller, 45 00:02:21,030 --> 00:02:23,339 Sean Aylmer: and you need a buyer, and they need to agree 46 00:02:23,400 --> 00:02:27,960 Sean Aylmer: on a price. Just explain that concept where you're actually 47 00:02:27,960 --> 00:02:31,050 Sean Aylmer: having the two sides meeting in the middle more. 48 00:02:31,710 --> 00:02:33,929 Tim Lawless: Yeah, that's exactly what an auction is, and it's one 49 00:02:33,929 --> 00:02:36,000 Tim Lawless: of the reasons why it's one of the most followed 50 00:02:36,000 --> 00:02:39,120 Tim Lawless: metrics, especially in markets like Sydney and Melbourne that have 51 00:02:39,120 --> 00:02:42,839 Tim Lawless: a real auction culture. In markets like Perth, as a 52 00:02:42,900 --> 00:02:46,290 Tim Lawless: completely different example, you see maybe 2 to 5% of 53 00:02:46,290 --> 00:02:49,109 Tim Lawless: properties are taken to auction. Most homes sell by private 54 00:02:49,110 --> 00:02:52,230 Tim Lawless: treaty. But in Sydney and Melbourne, Canberra is also a 55 00:02:52,230 --> 00:02:54,719 Tim Lawless: good example, you generally see more than a third of 56 00:02:54,719 --> 00:02:57,630 Tim Lawless: properties are taken to auction. And it's a really good 57 00:02:57,630 --> 00:03:02,100 Tim Lawless: measure of the fit between buyer and seller pricing expectations. 58 00:03:02,460 --> 00:03:06,358 Tim Lawless: When clearance rates are low, it generally means that vendors 59 00:03:06,360 --> 00:03:08,700 Tim Lawless: are expecting to get more for their properties than what 60 00:03:08,700 --> 00:03:10,649 Tim Lawless: buyers are willing to pay. And when clearance rates are 61 00:03:10,650 --> 00:03:13,559 Tim Lawless: high, it's the opposite. And we also see a really 62 00:03:13,559 --> 00:03:19,350 Tim Lawless: close correlation between auction clearance rates and housing value growth 63 00:03:19,440 --> 00:03:23,549 Tim Lawless: trends as well. So chances are, as we see clearance 64 00:03:23,550 --> 00:03:27,269 Tim Lawless: rates bouncing back like they have, it's probably going to 65 00:03:27,270 --> 00:03:31,770 Tim Lawless: be accompanied by a bounce back to some extent in 66 00:03:31,799 --> 00:03:34,738 Tim Lawless: the rate of growth in housing values, which was clearly 67 00:03:34,740 --> 00:03:36,480 Tim Lawless: easing towards the end of last year. 68 00:03:36,930 --> 00:03:39,690 Sean Aylmer: You just said something then, which I hadn't thought much 69 00:03:39,690 --> 00:03:43,200 Sean Aylmer: about. If supply and demand are more likely to be 70 00:03:43,200 --> 00:03:47,309 Sean Aylmer: matching as seen through higher auction clearance rates, house prices 71 00:03:47,460 --> 00:03:49,889 Sean Aylmer: probably tend to do better. What's that mean for the 72 00:03:49,889 --> 00:03:50,609 Sean Aylmer: rest of this year? 73 00:03:51,299 --> 00:03:55,530 Tim Lawless: Well, most forecasts were already for house prices to rise 74 00:03:55,530 --> 00:03:58,500 Tim Lawless: through 2024, just probably not at the same sort of 75 00:03:58,500 --> 00:04:01,650 Tim Lawless: pace as what they did last year. So last year 76 00:04:01,650 --> 00:04:04,650 Tim Lawless: at a fairly macro view, we saw capital city housing 77 00:04:04,650 --> 00:04:09,240 Tim Lawless: values rise by about 9%. And most forecasters have capital 78 00:04:09,240 --> 00:04:13,110 Tim Lawless: city values up somewhere between about 5 and 6% this 79 00:04:13,110 --> 00:04:15,510 Tim Lawless: year. So we might start to see some of those 80 00:04:15,510 --> 00:04:18,900 Tim Lawless: forecasts revising a little bit higher. Now that we're finally 81 00:04:18,900 --> 00:04:21,599 Tim Lawless: starting to see what looks to be the early signs 82 00:04:21,599 --> 00:04:25,380 Tim Lawless: of a rise in consumer sentiment, still fairly pessimistic, but 83 00:04:25,620 --> 00:04:28,198 Tim Lawless: at least a lift- off that the deeply pessimistic levels 84 00:04:28,199 --> 00:04:31,440 Tim Lawless: we've seen over the past two years. That could translate 85 00:04:31,440 --> 00:04:34,080 Tim Lawless: into more housing activity, which could place some renewed upwards 86 00:04:34,080 --> 00:04:37,170 Tim Lawless: pressure on housing prices. So it's definitely one to keep 87 00:04:37,170 --> 00:04:39,630 Tim Lawless: an eye on. The other trend, I guess, in values 88 00:04:39,630 --> 00:04:42,178 Tim Lawless: is, of course, a massive amount of diversity. You've got 89 00:04:42,178 --> 00:04:46,500 Tim Lawless: markets like Perth, Brisbane, Adelaide, all continuing to track more 90 00:04:46,500 --> 00:04:50,310 Tim Lawless: than 1% higher month on month. The real slowdown from 91 00:04:50,490 --> 00:04:52,589 Tim Lawless: the middle of last year was in Sydney and Melbourne, 92 00:04:52,650 --> 00:04:56,519 Tim Lawless: Hobart, Canberra, where each of those markets have stabilized. So 93 00:04:56,520 --> 00:04:58,469 Tim Lawless: that's where we could start to see a bit of 94 00:04:58,469 --> 00:04:59,940 Tim Lawless: a bounce back in the rate of growth. 95 00:05:00,360 --> 00:05:01,888 Sean Aylmer: Stay with me, Tim. We'll be back in a minute. 96 00:05:08,310 --> 00:05:11,340 Sean Aylmer: My guest this morning is Tim Lawless, head of research 97 00:05:11,370 --> 00:05:16,320 Sean Aylmer: for CoreLogic. You've got a report out today, and the 98 00:05:16,320 --> 00:05:19,740 Sean Aylmer: bottom line in that is that the disparity between average 99 00:05:19,740 --> 00:05:23,370 Sean Aylmer: house prices and average unit prices in the big cities 100 00:05:23,730 --> 00:05:25,529 Sean Aylmer: has widened incredibly. 101 00:05:26,520 --> 00:05:30,479 Tim Lawless: It's widened massively. Absolutely. And the simple reason being that 102 00:05:30,480 --> 00:05:34,109 Tim Lawless: house values have continued to rise much more than unit 103 00:05:34,110 --> 00:05:36,570 Tim Lawless: values. So to give you an idea of what that 104 00:05:36,570 --> 00:05:39,389 Tim Lawless: looks like, again, I'll use some pretty macro numbers here 105 00:05:39,389 --> 00:05:42,029 Tim Lawless: and then maybe use Sydney as an example. So across 106 00:05:42,029 --> 00:05:45,000 Tim Lawless: the combined capitals since the start of the pandemic back 107 00:05:45,000 --> 00:05:48,600 Tim Lawless: in March of 2020, we've seen house values on our 108 00:05:48,600 --> 00:05:51,300 Tim Lawless: combined capitals index have risen by a little bit more 109 00:05:51,300 --> 00:05:54,389 Tim Lawless: than a third. They're up 33. 9% or, in dollar 110 00:05:54,389 --> 00:05:58,949 Tim Lawless: terms, that's roughly an increase of about $ 240,000 to the 111 00:05:58,949 --> 00:06:02,310 Tim Lawless: median value of a house. Unit values, on the other 112 00:06:02,310 --> 00:06:05,010 Tim Lawless: hand, have only increased by about 11%. They're up about $65, 113 00:06:05,040 --> 00:06:09,960 Tim Lawless: 000. So it's no surprise, houses are always more expensive 114 00:06:09,960 --> 00:06:12,328 Tim Lawless: than units, unless you're looking at a really high- end 115 00:06:12,330 --> 00:06:16,410 Tim Lawless: boutique unit development. But that gap has widened. If you 116 00:06:16,410 --> 00:06:18,630 Tim Lawless: look at where it was... Again, I'll just use the 117 00:06:18,630 --> 00:06:22,560 Tim Lawless: beginning of the pandemic as a benchmark. The gap back 118 00:06:22,560 --> 00:06:26,219 Tim Lawless: then of crossing and buying capitals was about 17%, just 119 00:06:26,220 --> 00:06:30,000 Tim Lawless: a little bit less than 17%. Now it's 45%. But you 120 00:06:30,000 --> 00:06:32,309 Tim Lawless: can go to a market like Sydney, the gap back in 121 00:06:32,309 --> 00:06:37,861 Tim Lawless: early March was about 33%. Now it's nearly 70%, 68.4%. 122 00:06:37,861 --> 00:06:39,001 Sean Aylmer: Wow. 123 00:06:39,510 --> 00:06:43,440 Tim Lawless: It's a gap of about $570, 000 in Sydney between a 124 00:06:43,440 --> 00:06:47,520 Tim Lawless: house and a unit. So yeah, it's extraordinary. Australians seem 125 00:06:47,520 --> 00:06:50,549 Tim Lawless: to be very prepared to pay an ongoing and upwards 126 00:06:50,549 --> 00:06:54,960 Tim Lawless: premium to live in a detached home. Maybe that's just 127 00:06:55,170 --> 00:06:58,260 Tim Lawless: talking to the scarcity value of houses or the fact 128 00:06:58,260 --> 00:07:00,540 Tim Lawless: that we still want to live in an area that 129 00:07:00,540 --> 00:07:01,500 Tim Lawless: has more space. 130 00:07:02,220 --> 00:07:06,600 Sean Aylmer: It surprises me because intuitively, when we had an influx 131 00:07:06,660 --> 00:07:10,200 Sean Aylmer: of migrants, particularly students, I don't know many students who 132 00:07:10,559 --> 00:07:13,530 Sean Aylmer: have the white picket fence. Mostly, they're living in apartments 133 00:07:13,530 --> 00:07:16,680 Sean Aylmer: and units and that type of thing. Also, as we 134 00:07:16,680 --> 00:07:19,320 Sean Aylmer: have more migrants into the country, you would think that 135 00:07:19,320 --> 00:07:21,479 Sean Aylmer: they would be going for cheaper housing simply because they 136 00:07:21,480 --> 00:07:25,500 Sean Aylmer: can't afford more expensive housing. It doesn't make sense intuitively. 137 00:07:25,950 --> 00:07:28,799 Tim Lawless: Yeah. It's a real juxtaposition here in the sense that 138 00:07:28,799 --> 00:07:33,690 Tim Lawless: we're in this affordability crisis, yet we've seen a growing gap 139 00:07:33,750 --> 00:07:37,080 Tim Lawless: between house and unit values, and as premium for houses 140 00:07:37,080 --> 00:07:41,310 Tim Lawless: just keeps on getting larger. Back to your analogy there 141 00:07:41,370 --> 00:07:43,889 Tim Lawless: of more students and so forth coming in, like overseas 142 00:07:43,889 --> 00:07:47,279 Tim Lawless: migration, absolutely does drive housing demand, but it tends to 143 00:07:47,279 --> 00:07:50,910 Tim Lawless: drive rental demand at least initially and then gradually flows 144 00:07:50,910 --> 00:07:54,210 Tim Lawless: through the purchasing demand. So I think that helps to 145 00:07:54,210 --> 00:07:56,520 Tim Lawless: explain the fact that we haven't seen as much growth 146 00:07:56,520 --> 00:07:59,429 Tim Lawless: in unit values in the sense that a large part 147 00:07:59,429 --> 00:08:02,909 Tim Lawless: of this housing upswing has been driven by domestic demand, 148 00:08:02,910 --> 00:08:05,849 Tim Lawless: where Australians still seem to have this love affair with 149 00:08:06,000 --> 00:08:10,050 Tim Lawless: space, with the great Australian dream, as we still call 150 00:08:10,050 --> 00:08:13,500 Tim Lawless: it, I suppose. But you'd have to think with affordability 151 00:08:13,500 --> 00:08:16,290 Tim Lawless: being what it is and getting worse, there is going 152 00:08:16,290 --> 00:08:18,989 Tim Lawless: to be some deflection of demand towards that medium to high- 153 00:08:18,990 --> 00:08:22,709 Tim Lawless: density sector. Maybe not out of preference, but simply out 154 00:08:22,709 --> 00:08:25,620 Tim Lawless: of where prospective buyers' budgets will take them. 155 00:08:26,220 --> 00:08:31,170 Sean Aylmer: So on that basis, do you think units potentially... In 156 00:08:31,170 --> 00:08:34,380 Sean Aylmer: a valuation sense, they're cheaper than they were relative to 157 00:08:34,410 --> 00:08:39,750 Sean Aylmer: houses, obviously. Potentially, there's an opportunity in units. I get 158 00:08:40,139 --> 00:08:42,809 Sean Aylmer: location, location, location. So we are certainly not an investing 159 00:08:42,809 --> 00:08:44,910 Sean Aylmer: podcast. We're not suggesting run out and buy a unit 160 00:08:44,910 --> 00:08:48,030 Sean Aylmer: here, but just on a valuation basis, there must be 161 00:08:48,030 --> 00:08:48,870 Sean Aylmer: some opportunities. 162 00:08:49,830 --> 00:08:52,708 Tim Lawless: It is looking like this sector of the marketplace is 163 00:08:52,710 --> 00:08:56,728 Tim Lawless: undervalued, absolutely, at least compared to house values. But also, 164 00:08:56,730 --> 00:08:59,399 Tim Lawless: you can look at another benchmark of value, which is 165 00:08:59,400 --> 00:09:04,439 Tim Lawless: the yield. Rental yields for apartments remain substantially higher than 166 00:09:04,440 --> 00:09:07,710 Tim Lawless: what they are for houses. So maybe that's another benchmark 167 00:09:07,710 --> 00:09:12,119 Tim Lawless: there. But I think going forward, historically, we know that 168 00:09:12,120 --> 00:09:15,360 Tim Lawless: houses have generally shown a much stronger growth rate than 169 00:09:15,360 --> 00:09:18,780 Tim Lawless: units. That's probably the underlying land component that's driving the 170 00:09:18,780 --> 00:09:23,220 Tim Lawless: value higher, but I wouldn't be surprised amid worsening affordability 171 00:09:23,220 --> 00:09:26,280 Tim Lawless: pressures. We do start to see the unit sector, at 172 00:09:26,280 --> 00:09:29,910 Tim Lawless: the very least, performing in parallel or maybe outperforming houses 173 00:09:29,910 --> 00:09:33,720 Tim Lawless: to some extent as we see that demand deflection taking place. 174 00:09:34,799 --> 00:09:37,950 Sean Aylmer: Tim Lawless from CoreLogic, you are becoming the godfather of 175 00:09:37,950 --> 00:09:40,950 Sean Aylmer: the Australian property industry, whether you like it or not. 176 00:09:41,429 --> 00:09:43,920 Sean Aylmer: Do you just love property? I'm just interested. You are 177 00:09:43,920 --> 00:09:47,070 Sean Aylmer: so heavily involved in the data and the research around 178 00:09:47,070 --> 00:09:48,929 Sean Aylmer: it. You must like the asset class. 179 00:09:49,830 --> 00:09:53,129 Tim Lawless: I haven't heard that term before, the godfather. Thanks, mate. 180 00:09:53,129 --> 00:09:57,120 Tim Lawless: Thanks, Sean. I think that's a compliment. But yeah, absolutely. 181 00:09:57,120 --> 00:10:00,840 Tim Lawless: I do love property, and I never intended on being 182 00:10:00,900 --> 00:10:05,488 Tim Lawless: a property analyst, to be honest. It just happened, but 183 00:10:05,490 --> 00:10:07,889 Tim Lawless: every day is different. And you've got to admit, being 184 00:10:07,889 --> 00:10:11,010 Tim Lawless: in Australia, where we have this ongoing love affair with 185 00:10:11,010 --> 00:10:13,858 Tim Lawless: property, there's a lot of interest in this sector, which 186 00:10:14,400 --> 00:10:17,098 Tim Lawless: certainly keeps me at a job, which is a good thing. 187 00:10:17,219 --> 00:10:19,319 Sean Aylmer: Yeah. Tim, thank you for talking to Fear and Greed. 188 00:10:19,920 --> 00:10:21,149 Tim Lawless: Thanks, Sean. Absolute pleasure. 189 00:10:21,450 --> 00:10:23,849 Sean Aylmer: That is Tim Lawless, head of research for CoreLogic. This is 190 00:10:24,809 --> 00:10:27,179 Sean Aylmer: the Fear & Greed daily interview. Join us every morning for 191 00:10:27,179 --> 00:10:29,550 Sean Aylmer: the full episode of Fear and Greed, Australia's most popular 192 00:10:29,639 --> 00:10:32,670 Sean Aylmer: business podcast. I'm Sean Aylmer. Enjoy your day.