1 00:00:03,900 --> 00:00:06,810 Sean Aylmer: Welcome to the Fear & Greed Business interview. I'm Sean Aylmer. 2 00:00:06,870 --> 00:00:09,809 Sean Aylmer: The Australian housing market looks to have found its mojo 3 00:00:09,809 --> 00:00:13,320 Sean Aylmer: again. According to Domain, the last quarter saw capital- city 4 00:00:13,320 --> 00:00:17,878 Sean Aylmer: house prices post their steepest gain since 2021. In fact, 5 00:00:17,879 --> 00:00:20,880 Sean Aylmer: they've now recouped roughly half of the value lost in the 6 00:00:20,880 --> 00:00:24,450 Sean Aylmer: most recent downturn last year, and unit prices seem to 7 00:00:24,450 --> 00:00:27,809 Sean Aylmer: be heading up again also, at least in most major 8 00:00:27,809 --> 00:00:30,990 Sean Aylmer: cities. Dr. Nicola Powell is Domain's Chief of Research and 9 00:00:30,990 --> 00:00:33,180 Sean Aylmer: Economics. Nicola, welcome back to Fear & Greed. 10 00:00:33,839 --> 00:00:36,150 Nicola Powell: Thank you for having me back on. It's an absolute pleasure. 11 00:00:36,990 --> 00:00:40,110 Sean Aylmer: So first, the stats. Just how big was the recovery 12 00:00:40,140 --> 00:00:42,750 Sean Aylmer: in the June quarter and even the half year, I 13 00:00:42,750 --> 00:00:44,940 Sean Aylmer: suppose, for housing first and then for units? 14 00:00:45,300 --> 00:00:48,750 Nicola Powell: Yeah. The June quarter was, I think, particularly poignant. We've 15 00:00:48,750 --> 00:00:52,529 Nicola Powell: got now every single capital city rising apart from Canberra. Canberra, 16 00:00:52,529 --> 00:00:55,980 Nicola Powell: we saw house prices flatline, but across the combined capitals, 17 00:00:55,980 --> 00:01:00,600 Nicola Powell: we saw house prices rise by 2.7% over the June quarter. 18 00:01:00,600 --> 00:01:03,809 Nicola Powell: So what that means is house prices were roughly rising 19 00:01:03,809 --> 00:01:06,630 Nicola Powell: about four times faster than the previous quarter, so it 20 00:01:06,630 --> 00:01:11,250 Nicola Powell: really showcases that momentum of price growth really gathered over 21 00:01:11,250 --> 00:01:15,209 Nicola Powell: the June quarter. And look, a similar outcome for unit prices, 22 00:01:15,209 --> 00:01:17,640 Nicola Powell: but just not quite as strong, and a little bit 23 00:01:17,640 --> 00:01:22,139 Nicola Powell: diverse across the different cities. On the combined capital- city level, 24 00:01:22,139 --> 00:01:26,729 Nicola Powell: we saw unit prices increase 2.6%, but that's actually quite 25 00:01:26,730 --> 00:01:30,420 Nicola Powell: the turning point overall for unit prices. It's actually the 26 00:01:30,450 --> 00:01:34,919 Nicola Powell: first quarterly increase since late 2021, and it's the most 27 00:01:34,920 --> 00:01:39,119 Nicola Powell: substantial quarterly gain in two years. So it showcases that 28 00:01:39,120 --> 00:01:42,479 Nicola Powell: momentum and that acceleration that we are generally seeing in 29 00:01:42,480 --> 00:01:44,369 Nicola Powell: Australia's housing market recovery. 30 00:01:44,819 --> 00:01:46,619 Sean Aylmer: Okay. So Sydney's still leading the way? 31 00:01:47,549 --> 00:01:52,140 Nicola Powell: Of course it is. It absolutely is. We saw actually quite a jump 32 00:01:52,170 --> 00:01:56,850 Nicola Powell: in house prices in particular in Sydney. They rose 5.3% 33 00:01:57,330 --> 00:02:00,540 Nicola Powell: in the three months to June, and that is quite 34 00:02:00,540 --> 00:02:04,949 Nicola Powell: the rise for a quarter, and that's four times faster 35 00:02:04,949 --> 00:02:07,860 Nicola Powell: than the previous quarter. And what we've got now is 36 00:02:07,860 --> 00:02:11,940 Nicola Powell: Sydney is the furthest along in its price recovery. So 37 00:02:12,180 --> 00:02:16,020 Nicola Powell: it's roughly recouped about two thirds of what was lost 38 00:02:16,020 --> 00:02:16,499 Nicola Powell: during the term. 39 00:02:16,500 --> 00:02:16,560 Sean Aylmer: Wow. 40 00:02:17,010 --> 00:02:21,929 Nicola Powell: Yeah. We saw $151,000 lost from Sydney's median house price. 41 00:02:22,320 --> 00:02:27,510 Nicola Powell: We have now seen $97,000 of that being recouped in 42 00:02:27,510 --> 00:02:31,440 Nicola Powell: just six months. So this rebound to date has been 43 00:02:31,440 --> 00:02:34,919 Nicola Powell: quite a quick one, and I think particularly so we 44 00:02:34,919 --> 00:02:36,900 Nicola Powell: really saw that acceleration over June. 45 00:02:37,380 --> 00:02:39,389 Sean Aylmer: Okay. I want to get into the reasons for it, 46 00:02:39,389 --> 00:02:42,810 Sean Aylmer: but just quickly, so Melbourne and Brisbane are also interesting 47 00:02:42,930 --> 00:02:45,299 Sean Aylmer: as well. So what's happening there in those two cities? 48 00:02:45,930 --> 00:02:49,260 Nicola Powell: Yeah. So Melbourne and Brisbane are not as far along 49 00:02:49,260 --> 00:02:53,520 Nicola Powell: the property cycle as Sydney. What we saw: Melbourne has 50 00:02:53,520 --> 00:02:56,280 Nicola Powell: found a price drop, so has Brisbane, and they're now into 51 00:02:56,280 --> 00:03:00,328 Nicola Powell: recovery mode. We've got house and unit prices rising again 52 00:03:00,600 --> 00:03:03,510 Nicola Powell: in Melbourne, and it's actually the first quarterly increase in a year 53 00:03:03,510 --> 00:03:06,300 Nicola Powell: and a half for houses. So such a turnaround, which 54 00:03:06,300 --> 00:03:10,260 Nicola Powell: has followed five consecutive quarters of a decline. Look, a 55 00:03:10,260 --> 00:03:13,320 Nicola Powell: very similar story in Brisbane as well. We've seen Brisbane 56 00:03:13,320 --> 00:03:16,829 Nicola Powell: house prices continue to recover over the June quarter. I 57 00:03:16,829 --> 00:03:20,310 Nicola Powell: thought what's quite interesting, though, is Brisbane's downturn lasted six 58 00:03:20,310 --> 00:03:23,490 Nicola Powell: months and we're now six months into a recovery. So 59 00:03:23,490 --> 00:03:28,260 Nicola Powell: we saw $47,000 lost in house price during the downturn. They've 60 00:03:28,260 --> 00:03:32,940 Nicola Powell: recouped about $14,000, so roughly about one third of that value 61 00:03:32,969 --> 00:03:33,989 Nicola Powell: has been recouped. 62 00:03:34,320 --> 00:03:35,849 Sean Aylmer: Why do you think Canberra is a laggard? 63 00:03:35,849 --> 00:03:41,671 Nicola Powell: Canberra's that really interesting city. Canberra saw one of the steepest increases. 64 00:03:41,670 --> 00:03:44,429 Sean Aylmer: Hold on. Hold on, Nicola. I'm jumping in here. "Canberra 65 00:03:44,429 --> 00:03:46,350 Sean Aylmer: is a really interesting city," is what you said. 66 00:03:46,800 --> 00:03:47,190 Nicola Powell: I did. 67 00:03:47,190 --> 00:03:50,459 Sean Aylmer: It's a great city. It's a great city. I'm going 68 00:03:50,460 --> 00:03:52,289 Sean Aylmer: to have lots of people angry at me for saying 69 00:03:52,289 --> 00:03:55,110 Sean Aylmer: that. I take it back. Great city, Canberra. Very interesting. 70 00:03:55,110 --> 00:03:55,560 Sean Aylmer: Go on. 71 00:03:55,920 --> 00:04:01,440 Nicola Powell: It is a wonderful city, and I think a wonderful city to raise children. Canberra is- 72 00:04:01,440 --> 00:04:05,699 Sean Aylmer: Oh, see, Nicola, that's not helping the argument there when you 73 00:04:05,700 --> 00:04:08,190 Sean Aylmer: say it's a wonderful city to raise children, which it 74 00:04:08,190 --> 00:04:10,439 Sean Aylmer: is. Sorry. So what's happening in the housing market in 75 00:04:10,440 --> 00:04:10,950 Sean Aylmer: Canberra though? 76 00:04:11,430 --> 00:04:15,420 Nicola Powell: So Canberra saw one of the steepest increases during the pandemic, 77 00:04:15,420 --> 00:04:18,360 Nicola Powell: and I'm saying that because it's important context to know 78 00:04:18,690 --> 00:04:21,839 Nicola Powell: in respect to the downturn and where it is now in 79 00:04:21,839 --> 00:04:25,770 Nicola Powell: the property price cycle. It's only just found a price trough. 80 00:04:25,770 --> 00:04:28,650 Nicola Powell: So it found that price trough originally in March, over 81 00:04:28,650 --> 00:04:31,109 Nicola Powell: the March quarter, and it's held at that price trough 82 00:04:31,170 --> 00:04:36,839 Nicola Powell: over the June quarter. Some of the highest growth was 83 00:04:36,839 --> 00:04:39,900 Nicola Powell: recorded in Canberra. It was Canberra and Hobart. And what we have 84 00:04:39,900 --> 00:04:43,109 Nicola Powell: saw during the downturn is Canberra saw the deepest decline 85 00:04:43,110 --> 00:04:47,010 Nicola Powell: out of all of the capital cities, fell 11.9% from 86 00:04:47,010 --> 00:04:50,640 Nicola Powell: its peak, and it's only just found a price trough. 87 00:04:50,640 --> 00:04:55,080 Nicola Powell: I think the change in affordability... It became a million-dollar 88 00:04:55,680 --> 00:04:59,459 Nicola Powell: housing market during the pandemic. It reached that million- dollar mark. 89 00:04:59,730 --> 00:05:02,099 Nicola Powell: But also, one of the observations that I always take 90 00:05:02,099 --> 00:05:04,678 Nicola Powell: from Canberra's housing market is when you have a look 91 00:05:04,680 --> 00:05:07,109 Nicola Powell: at demographic trends and what Canberra has or the ACT 92 00:05:07,589 --> 00:05:11,010 Nicola Powell: has at the moment is a negative outflow. So it's losing 93 00:05:11,010 --> 00:05:14,580 Nicola Powell: residents to other states and territories. My observation is every 94 00:05:14,580 --> 00:05:16,740 Nicola Powell: time we tend to see that, we do see a 95 00:05:16,740 --> 00:05:20,309 Nicola Powell: blip in house prices. This is a fairly significant blip, 96 00:05:20,339 --> 00:05:23,638 Nicola Powell: and it's the deepest decline that Canberra has ever experienced 97 00:05:23,639 --> 00:05:27,839 Nicola Powell: in terms of downturn. So it is slightly later in 98 00:05:27,839 --> 00:05:30,150 Nicola Powell: its property cycle, but I think what we're likely to 99 00:05:30,150 --> 00:05:33,839 Nicola Powell: see now is it's going to move into a steady recovery. 100 00:05:34,440 --> 00:05:36,299 Sean Aylmer: Stay with me, Nicola. We'll be back in a minute. 101 00:05:42,449 --> 00:05:45,390 Sean Aylmer: I'm speaking to Dr. Nicola Powell, Chief of Research and 102 00:05:45,390 --> 00:05:49,260 Sean Aylmer: Economics at Domain. The reason for all this, leaving Canberra 103 00:05:49,260 --> 00:05:52,920 Sean Aylmer: aside now, so for the national capital cities, the reason 104 00:05:53,010 --> 00:05:57,390 Sean Aylmer: it remains strong demand, low supply, is that still the case? 105 00:05:58,109 --> 00:06:03,210 Nicola Powell: Fundamentally, yes. It sounds almost a very simplistic way of 106 00:06:03,210 --> 00:06:06,930 Nicola Powell: putting it, but we have seen this mismatch between supply 107 00:06:06,930 --> 00:06:11,759 Nicola Powell: and demand and really, it's a usual trend during a downturn, 108 00:06:11,759 --> 00:06:14,998 Nicola Powell: where you see sellers just sit back and wait to 109 00:06:15,000 --> 00:06:18,058 Nicola Powell: see what happens. And I think that that reaction from 110 00:06:18,059 --> 00:06:22,200 Nicola Powell: sellers was even more poignant during this particular downturn, because 111 00:06:22,200 --> 00:06:24,870 Nicola Powell: of obviously rising interest rates and everything else that was 112 00:06:24,870 --> 00:06:28,440 Nicola Powell: occurring economically. So we saw a weak flow of new 113 00:06:28,440 --> 00:06:31,140 Nicola Powell: listings coming onto the market since spring of last year. 114 00:06:31,529 --> 00:06:35,879 Nicola Powell: That continued over 2023. But what we're starting to see 115 00:06:35,879 --> 00:06:38,430 Nicola Powell: is demand started to rise. We still had that weak 116 00:06:38,430 --> 00:06:42,720 Nicola Powell: supply flow, but it started to change in more recent weeks, 117 00:06:42,720 --> 00:06:45,809 Nicola Powell: and what we started to see is an improvement in 118 00:06:45,809 --> 00:06:48,178 Nicola Powell: the flow of new listings. And when you look across 119 00:06:48,178 --> 00:06:52,078 Nicola Powell: the different capital cities, Sydney, Melbourne, Canberra, and Darwin, what 120 00:06:52,080 --> 00:06:54,839 Nicola Powell: we've got now are new listings in these four capital cities 121 00:06:54,869 --> 00:06:58,979 Nicola Powell: are higher than the five-year average. This is a massive shift, 122 00:06:58,980 --> 00:07:02,279 Nicola Powell: particularly so in a city like Sydney, which really had 123 00:07:02,279 --> 00:07:04,979 Nicola Powell: a weak flow of new listings, and I think what we are 124 00:07:05,219 --> 00:07:08,339 Nicola Powell: likely to see is the June quarter was probably a 125 00:07:08,339 --> 00:07:11,609 Nicola Powell: strong performer in terms of the pace of growth, particularly 126 00:07:11,609 --> 00:07:14,910 Nicola Powell: in Sydney. 5.3% is quite a whopper in terms of 127 00:07:14,910 --> 00:07:18,300 Nicola Powell: the rate of price growth. And I think if we continue 128 00:07:18,300 --> 00:07:21,330 Nicola Powell: to see these new listings increase, what that's likely to 129 00:07:21,330 --> 00:07:24,809 Nicola Powell: do is slow down the rate of price gain, which 130 00:07:24,809 --> 00:07:27,419 Nicola Powell: I think is a good news for both buyers and sellers. 131 00:07:27,960 --> 00:07:30,570 Nicola Powell: Selling conditions are still pretty strong, and we've got good 132 00:07:30,570 --> 00:07:35,309 Nicola Powell: conditions in auction markets, where we've got clearance rates above 70% 133 00:07:35,310 --> 00:07:38,940 Nicola Powell: on the combined capital-city level for the first time since 134 00:07:38,940 --> 00:07:42,870 Nicola Powell: October of 2021. So we have seen a vast improvement. 135 00:07:43,469 --> 00:07:45,719 Sean Aylmer: Okay. But what you're saying there in those cities is 136 00:07:45,719 --> 00:07:48,179 Sean Aylmer: that it's not that prices will go backwards. They will 137 00:07:48,210 --> 00:07:51,120 Sean Aylmer: continue to climb, just not as fast as they have been. 138 00:07:51,600 --> 00:07:54,780 Nicola Powell: Absolutely. Look, we still stand by our forecast, which we 139 00:07:54,780 --> 00:07:57,869 Nicola Powell: put out about five weeks ago now, and we are 140 00:07:58,170 --> 00:08:01,290 Nicola Powell: predicting that this financial year, we will see a slow 141 00:08:01,290 --> 00:08:05,219 Nicola Powell: and steady pricing recovery across our capital cities. We still 142 00:08:05,219 --> 00:08:07,980 Nicola Powell: stand by that. I do think that that jump over 143 00:08:07,980 --> 00:08:11,310 Nicola Powell: the June quarter was an unusually strong one spurred by 144 00:08:11,310 --> 00:08:15,150 Nicola Powell: this constant lack of new listings, but that tide, as 145 00:08:15,150 --> 00:08:17,670 Nicola Powell: I said, is starting to change, and it's going to 146 00:08:17,670 --> 00:08:19,920 Nicola Powell: be a trend to watch if we continue to see 147 00:08:19,920 --> 00:08:22,439 Nicola Powell: that being strong in terms of that flow of new 148 00:08:22,440 --> 00:08:24,270 Nicola Powell: listings. And we all know that when it comes to 149 00:08:24,300 --> 00:08:27,270 Nicola Powell: spring, you see that listings boost, but the question is 150 00:08:27,270 --> 00:08:30,270 Nicola Powell: how strong is that listings boost going to be? And 151 00:08:30,270 --> 00:08:32,368 Nicola Powell: I think once we see that unravel, it's going to 152 00:08:32,370 --> 00:08:35,999 Nicola Powell: be able to help us understand where and the depth 153 00:08:36,059 --> 00:08:38,670 Nicola Powell: of price growth in terms of what we'll see in 154 00:08:38,670 --> 00:08:39,569 Nicola Powell: the coming quarters. 155 00:08:40,020 --> 00:08:42,000 Sean Aylmer: Okay. There's been a bit around in the media in 156 00:08:42,000 --> 00:08:45,809 Sean Aylmer: the past week or so about investors selling up. What 157 00:08:45,809 --> 00:08:47,069 Sean Aylmer: does that mean for the market? 158 00:08:47,820 --> 00:08:51,389 Nicola Powell: Yeah, there has been, and look, I think when you 159 00:08:51,389 --> 00:08:55,770 Nicola Powell: think about an increase in investment activity or investors selling up, 160 00:08:56,340 --> 00:08:59,580 Nicola Powell: they're going to be in those prime investment suburbs, which 161 00:08:59,580 --> 00:09:03,900 Nicola Powell: aren't necessarily those areas that are owner-occupier dominated. So it 162 00:09:03,900 --> 00:09:07,260 Nicola Powell: might not necessarily be the right stock that's coming onto the market, 163 00:09:07,740 --> 00:09:10,139 Nicola Powell: and I do think that there is still going to be 164 00:09:10,139 --> 00:09:14,159 Nicola Powell: this high competition for quality family homes in the right suburbs. 165 00:09:14,520 --> 00:09:16,799 Nicola Powell: But I also think, on the flip side of that, 166 00:09:16,799 --> 00:09:19,650 Nicola Powell: it's great news for first-home buyers, because what you tend 167 00:09:19,650 --> 00:09:22,380 Nicola Powell: to find is investors and first- home buyers compete for 168 00:09:22,380 --> 00:09:26,010 Nicola Powell: similar priced properties, and if we've got investors selling up, 169 00:09:26,250 --> 00:09:28,980 Nicola Powell: that's good news for first-home buyers. It's not necessarily good 170 00:09:28,980 --> 00:09:32,009 Nicola Powell: news for the rental market because if we see rental 171 00:09:32,009 --> 00:09:36,029 Nicola Powell: supply dwindle any further, it's going to create a very 172 00:09:36,029 --> 00:09:38,040 Nicola Powell: dire situation in the rental market. 173 00:09:38,610 --> 00:09:42,238 Sean Aylmer: Okay. Now, whatever happened to the mortgage cliff, Nicola? I've 174 00:09:42,240 --> 00:09:44,189 Sean Aylmer: forgotten about the mortgage cliff. Aren't we all supposed to 175 00:09:44,190 --> 00:09:46,590 Sean Aylmer: be falling off the cliff and people rolling off those 176 00:09:46,590 --> 00:09:49,920 Sean Aylmer: lower fixed-rate mortgages under higher variable rates, and a disaster 177 00:09:49,920 --> 00:09:51,179 Sean Aylmer: was coming? What's happened? 178 00:09:51,929 --> 00:09:55,410 Nicola Powell: Look, very interesting question. Look, this has been one that 179 00:09:55,410 --> 00:09:59,550 Nicola Powell: we've been tracking pretty intensively. We look at this on 180 00:09:59,550 --> 00:10:01,858 Nicola Powell: listings on Domain, and we look at those that are 181 00:10:01,860 --> 00:10:06,330 Nicola Powell: deemed as distressed listings, and that's by associated words, whether 182 00:10:06,330 --> 00:10:12,208 Nicola Powell: they're must-sell, mortgage-repossessed, and the trend that we are seeing is overall, 183 00:10:12,208 --> 00:10:15,179 Nicola Powell: distressed listings remain contained, and in some capital cities, they're 184 00:10:15,179 --> 00:10:19,350 Nicola Powell: actually falling. In Sydney, we've seen them consistently fall as 185 00:10:19,350 --> 00:10:22,620 Nicola Powell: a percentage of total listings over this year to date. 186 00:10:22,980 --> 00:10:25,619 Nicola Powell: What I would say to that, though: there are certain 187 00:10:25,620 --> 00:10:29,100 Nicola Powell: pockets of weakness, and this is what I would expect to see. 188 00:10:29,400 --> 00:10:32,880 Nicola Powell: We are going to see areas, particularly in the mortgage belt, 189 00:10:32,880 --> 00:10:35,429 Nicola Powell: particularly in Sydney, where you've got to be highly leveraged 190 00:10:35,429 --> 00:10:38,490 Nicola Powell: to gain access to that market. So I'm talking areas 191 00:10:38,490 --> 00:10:42,719 Nicola Powell: like the west of Sydney, out of Southwest, Blacktown, those 192 00:10:42,719 --> 00:10:46,800 Nicola Powell: much more affordable areas where perhaps people stretch themselves financially. 193 00:10:47,219 --> 00:10:50,010 Nicola Powell: We're starting to see an increase in distressed listings there. 194 00:10:50,370 --> 00:10:52,800 Nicola Powell: But also, going back to what we were saying about 195 00:10:52,800 --> 00:10:56,160 Nicola Powell: an increase in listings, part of my thinking is here, 196 00:10:57,090 --> 00:11:00,179 Nicola Powell: why are we seeing an unseasonable lift in new listings? 197 00:11:00,179 --> 00:11:03,990 Nicola Powell: I think for two reasons. Firstly, we can't disregard the pent- 198 00:11:03,990 --> 00:11:06,810 Nicola Powell: up supply that's been building since spring of last year. 199 00:11:07,110 --> 00:11:10,530 Nicola Powell: I think the persistent recovery in our housing market has 200 00:11:10,530 --> 00:11:13,650 Nicola Powell: been enough to be a draw card for sellers to go, " Right, 201 00:11:13,679 --> 00:11:17,550 Nicola Powell: now is the time." But the second reason is I 202 00:11:17,550 --> 00:11:20,459 Nicola Powell: think what we're probably seeing is some homeowners are actually 203 00:11:20,460 --> 00:11:23,909 Nicola Powell: probably selling before they get into financial difficulties. So that 204 00:11:23,910 --> 00:11:27,478 Nicola Powell: doesn't mean that they're currently in financial distress and they're 205 00:11:27,480 --> 00:11:31,110 Nicola Powell: a distress listing, but it might mean that they're thinking, " 206 00:11:31,170 --> 00:11:33,000 Nicola Powell: I'm not going to be able to meet these higher 207 00:11:33,000 --> 00:11:37,110 Nicola Powell: mortgage repayments. Let's sell while conditions are good for selling, 208 00:11:37,320 --> 00:11:40,589 Nicola Powell: but also before I've got in that financially desperate state." 209 00:11:41,729 --> 00:11:43,559 Sean Aylmer: Nicola, thank you for talking to Fear & Greed. 210 00:11:44,099 --> 00:11:44,819 Nicola Powell: Thank you. 211 00:11:45,240 --> 00:11:48,660 Sean Aylmer: That was Dr. Nicola Powell, Domain's Chief of Research and Economics. 212 00:11:48,870 --> 00:11:51,150 Sean Aylmer: This is the Fear & Greed Business Interview. Join us every 213 00:11:51,150 --> 00:11:53,549 Sean Aylmer: morning for the full episode of Fear & Greed, Australia's best 214 00:11:53,550 --> 00:11:56,218 Sean Aylmer: business podcast. I'm Sean Aylmer. Enjoy your day.