1 00:00:03,580 --> 00:00:06,069 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,890 --> 00:00:09,900 Sean Aylmer: There's been talk for some time about regulators stepping in to 3 00:00:09,900 --> 00:00:13,410 Sean Aylmer: cool the housing market. And this week, it finally happened. 4 00:00:13,680 --> 00:00:16,210 Sean Aylmer: While prices aren't rising as quickly as they were six 5 00:00:16,210 --> 00:00:18,810 Sean Aylmer: months ago, they're still climbing up one and a half 6 00:00:18,810 --> 00:00:22,299 Sean Aylmer: per cent nationally last month, according to CoreLogic. The peak was 7 00:00:22,300 --> 00:00:26,210 Sean Aylmer: back in March. That was almost 3%. Overall, it means 8 00:00:26,210 --> 00:00:29,130 Sean Aylmer: prices are up more than 20% over the last year with the 9 00:00:29,130 --> 00:00:33,380 Sean Aylmer: annual growth rate tracking at the fastest pace since 1989. 10 00:00:33,890 --> 00:00:37,330 Sean Aylmer: So what will happen now that APRA (Australian Prudential Regulation Authority) has intervened, requiring 11 00:00:37,340 --> 00:00:40,640 Sean Aylmer: banks to increase the interest rate used to assess new loans? 12 00:00:40,979 --> 00:00:45,040 Sean Aylmer: Tim Lawless is the Research Director for Asia-Pacific at CoreLogic. Tim, 13 00:00:45,040 --> 00:00:46,140 Sean Aylmer: welcome back to Fear and Greed. 14 00:00:46,610 --> 00:00:48,840 Tim Lawless: Thank you, Sean. And thanks for inviting me back. 15 00:00:49,220 --> 00:00:51,940 Sean Aylmer: I just said that monthly increases were slowing, but they're 16 00:00:51,940 --> 00:00:52,940 Sean Aylmer: still pretty good. 17 00:00:53,430 --> 00:00:56,560 Tim Lawless: Yeah. So prices nationally are up one and a half 18 00:00:56,560 --> 00:01:01,020 Tim Lawless: per cent through September, which as you mentioned, is virtually half 19 00:01:01,020 --> 00:01:04,300 Tim Lawless: of what we were seeing back in March. But compared to 20 00:01:04,300 --> 00:01:08,289 Tim Lawless: say the 10-year average, we'd normally, at least on average terms, 21 00:01:08,290 --> 00:01:10,920 Tim Lawless: be seeing housing prices rising a little bit less than half 22 00:01:10,920 --> 00:01:13,490 Tim Lawless: a per cent month on month. One and a half per cent, 23 00:01:13,490 --> 00:01:16,440 Tim Lawless: this is still a market that has a lot of momentum, 24 00:01:16,450 --> 00:01:19,559 Tim Lawless: even though that momentum is slowing down. And it's pretty 25 00:01:19,560 --> 00:01:22,560 Tim Lawless: clear that it's generally the larger markets, more Sydney and 26 00:01:22,560 --> 00:01:26,840 Tim Lawless: Melbourne where we have seen the most noticeable slowdown. Remember 27 00:01:26,840 --> 00:01:29,870 Tim Lawless: back in March, Sydney housing prices were rising at nearly 4% 28 00:01:30,310 --> 00:01:30,731 Tim Lawless: month on month. 29 00:01:30,731 --> 00:01:31,211 Sean Aylmer: Incredible. 30 00:01:31,700 --> 00:01:35,640 Tim Lawless: And that's now slowed down to 1.9%. So probably affordability 31 00:01:35,640 --> 00:01:38,300 Tim Lawless: at play here more than lockdowns, I would say. 32 00:01:38,650 --> 00:01:41,440 Sean Aylmer: Okay. So, just recapping. Really, it's low interest rates that 33 00:01:41,510 --> 00:01:45,100 Sean Aylmer: has boosted the market and slowing... And this is before 34 00:01:45,100 --> 00:01:48,220 Sean Aylmer: we start talking about what APRA did this week. Slowing 35 00:01:48,220 --> 00:01:49,820 Sean Aylmer: is around affordability, is it? 36 00:01:50,200 --> 00:01:52,140 Tim Lawless: Well, I think affordability is probably one of the key 37 00:01:52,140 --> 00:01:55,200 Tim Lawless: factors that's been seeing the rate of growth slowing down. 38 00:01:55,200 --> 00:01:57,220 Tim Lawless: I think when you look at income growth, it's tracking 39 00:01:57,220 --> 00:02:01,450 Tim Lawless: around one and a half to 1.6% year on year, and 40 00:02:01,450 --> 00:02:04,320 Tim Lawless: we're seeing housing values rising at more than 20% year 41 00:02:04,320 --> 00:02:07,480 Tim Lawless: on year. So clearly something's got to give there as more 42 00:02:07,480 --> 00:02:10,490 Tim Lawless: and more prospective buyers simply can't afford to raise a 43 00:02:10,490 --> 00:02:14,030 Tim Lawless: deposit or fund their transactional costs. And as you mentioned 44 00:02:14,030 --> 00:02:16,930 Tim Lawless: with credit tightening up a little bit now, that's probably 45 00:02:16,970 --> 00:02:20,220 Tim Lawless: just got to play around the margins, but will obviously 46 00:02:20,220 --> 00:02:22,650 Tim Lawless: have a further dampening effect over time. 47 00:02:22,930 --> 00:02:25,500 Sean Aylmer: So just explain what the Australian Prudential Regulation Authority said 48 00:02:25,500 --> 00:02:27,950 Sean Aylmer: it was going to do on Wednesday. 49 00:02:28,290 --> 00:02:31,359 Tim Lawless: Well, APRA have tightened up their serviceability buffer. So in 50 00:02:31,360 --> 00:02:34,210 Tim Lawless: simple terms, what that means is that when somebody goes 51 00:02:34,210 --> 00:02:38,200 Tim Lawless: to borrow from a bank to purchase a home, they'll 52 00:02:38,200 --> 00:02:41,910 Tim Lawless: be assessed on a higher interest rate. So what lenders 53 00:02:41,910 --> 00:02:45,250 Tim Lawless: would do previously is generally assess a borrower on their 54 00:02:45,250 --> 00:02:49,489 Tim Lawless: ability to repay a mortgage, using an interest rate buffer 55 00:02:49,560 --> 00:02:52,100 Tim Lawless: of two and a half percentage points higher than the 56 00:02:52,100 --> 00:02:55,710 Tim Lawless: going rate. That's been lifted to a three percentage point 57 00:02:55,710 --> 00:02:58,190 Tim Lawless: buffer now. So they lifted the buffer by 50 basis 58 00:02:58,190 --> 00:03:01,230 Tim Lawless: points. That really, I mean, it won't have a marked 59 00:03:01,230 --> 00:03:05,179 Tim Lawless: effect on the market overall, but it will have an impact 60 00:03:05,180 --> 00:03:08,700 Tim Lawless: on say investors who tend to be more leveraged, particularly 61 00:03:08,700 --> 00:03:11,810 Tim Lawless: subsequent investors who may already have an investment property and 62 00:03:11,810 --> 00:03:14,490 Tim Lawless: the debt held against that. Because, of course, this isn't 63 00:03:14,490 --> 00:03:18,529 Tim Lawless: just a serviceability rate on the loan they're applying for. 64 00:03:18,810 --> 00:03:21,700 Tim Lawless: Generally lenders will be looking at the overall level of 65 00:03:21,700 --> 00:03:24,850 Tim Lawless: debt serviceability, not just the current loan they're applying for. 66 00:03:25,290 --> 00:03:28,200 Sean Aylmer: Okay. So investors might be hit, but if I refinanced 67 00:03:28,200 --> 00:03:31,460 Sean Aylmer: recently and I'm fortunate, you know, with age comes some 68 00:03:31,460 --> 00:03:35,210 Sean Aylmer: sort of financial stability. So that probably wouldn't have affected 69 00:03:35,210 --> 00:03:37,560 Sean Aylmer: me this change, but certainly when I first bought a 70 00:03:37,560 --> 00:03:40,890 Sean Aylmer: home, every dollar mattered and I was trying to get the deposit 71 00:03:40,890 --> 00:03:42,280 Sean Aylmer: and then you've got to get the stamp duty and 72 00:03:42,280 --> 00:03:44,780 Sean Aylmer: then you've got to get the conveyancing fees and all 73 00:03:44,780 --> 00:03:47,700 Sean Aylmer: those sorts of things. Is this sort of change more 74 00:03:47,700 --> 00:03:50,780 Sean Aylmer: likely to hit those people, the first home buyers, the 75 00:03:50,780 --> 00:03:53,340 Sean Aylmer: people who are buying lower priced housing? 76 00:03:53,660 --> 00:03:57,170 Tim Lawless: Well, first home buyers are probably more constrained by their 77 00:03:57,170 --> 00:04:03,190 Tim Lawless: deposit requirements. So as you say, first home buyers, generally lower incomes. 78 00:04:03,190 --> 00:04:05,720 Tim Lawless: They don't have the benefit of equity either through previous 79 00:04:05,720 --> 00:04:09,230 Tim Lawless: home ownership or wealth accrual. So generally where they find 80 00:04:09,230 --> 00:04:11,780 Tim Lawless: the hardest part of getting to the marketplace is actually 81 00:04:12,040 --> 00:04:15,530 Tim Lawless: raising a deposit. So I think this serviceability buffer is 82 00:04:15,530 --> 00:04:17,930 Tim Lawless: probably likely to, well, it will have an impact on 83 00:04:17,930 --> 00:04:21,239 Tim Lawless: first home buyers and lower income families. It simply means that 84 00:04:21,240 --> 00:04:24,210 Tim Lawless: their borrowing capacity has probably been reduced by about 5%. 85 00:04:25,310 --> 00:04:27,300 Tim Lawless: But I think it's really going to be a much 86 00:04:27,300 --> 00:04:29,710 Tim Lawless: more impactful on those people who are already a bit 87 00:04:29,730 --> 00:04:32,880 Tim Lawless: more thinly stretched. One thing that APRA could have done 88 00:04:32,880 --> 00:04:36,010 Tim Lawless: is actually implement a firm limit on debt to income ratios. 89 00:04:36,010 --> 00:04:39,060 Tim Lawless: And that's really what the main focus is with this 90 00:04:39,060 --> 00:04:42,089 Tim Lawless: policy tightening is trying to keep a lid on household 91 00:04:42,089 --> 00:04:45,450 Tim Lawless: debt levels. At the moment we are seeing housing debt 92 00:04:45,970 --> 00:04:49,610 Tim Lawless: is at record highs for owner-occupiers and that's where the 93 00:04:49,610 --> 00:04:53,010 Tim Lawless: Council of Financial Regulators really sees the stability risk is, 94 00:04:53,440 --> 00:04:55,619 Tim Lawless: not necessarily in the ability to service the debt at 95 00:04:55,620 --> 00:04:59,670 Tim Lawless: the moment, but when interest rates do eventually rise, obviously 96 00:04:59,670 --> 00:05:02,529 Tim Lawless: a really heavily indebted household sector makes it much harder 97 00:05:02,920 --> 00:05:06,039 Tim Lawless: to ensure consumption, which is a big part of our economy, 98 00:05:06,040 --> 00:05:08,920 Tim Lawless: of course, in Australia. If people are really heavily indebted, 99 00:05:08,920 --> 00:05:11,120 Tim Lawless: they need to dedicate more to servicing their debt than 100 00:05:11,120 --> 00:05:12,790 Tim Lawless: actually spending in the economy. 101 00:05:13,050 --> 00:05:16,620 Sean Aylmer: Okay. And just before we leave first home buyers, this medium price 102 00:05:16,620 --> 00:05:20,869 Sean Aylmer: in Sydney, according to CoreLogic is around $1.3 million. It must 103 00:05:20,870 --> 00:05:23,380 Sean Aylmer: be very hard for the first-home buyer to get into 104 00:05:23,380 --> 00:05:23,990 Sean Aylmer: that market. 105 00:05:24,580 --> 00:05:28,420 Tim Lawless: Absolutely. That's the median house value. So units are obviously 106 00:05:28,420 --> 00:05:33,650 Tim Lawless: much more affordable. The median there is about $825,000. Still, that's 107 00:05:34,050 --> 00:05:36,300 Tim Lawless: certainly also very high. 108 00:05:36,300 --> 00:05:36,320 Sean Aylmer: Yeah. 109 00:05:36,650 --> 00:05:39,049 Tim Lawless: But trying to buy a house now, particularly in really 110 00:05:39,050 --> 00:05:43,480 Tim Lawless: expensive markets like Sydney is becoming almost an insurmountable challenge, particularly 111 00:05:44,029 --> 00:05:47,390 Tim Lawless: for those lower income segments of the marketplace, like first home buyers. 112 00:05:47,779 --> 00:05:50,060 Tim Lawless: So I think gradually you'd have to expect there is 113 00:05:50,060 --> 00:05:53,370 Tim Lawless: going to be some deflection of demand away from detached 114 00:05:53,370 --> 00:05:57,300 Tim Lawless: homes towards more medium to high density options, simply because 115 00:05:57,520 --> 00:06:00,240 Tim Lawless: that's where the price tags are lower and where buyers 116 00:06:00,240 --> 00:06:01,150 Tim Lawless: are able to afford. 117 00:06:01,420 --> 00:06:03,030 Sean Aylmer: Stay with me, Tim, we'll be back in a minute. 118 00:06:08,170 --> 00:06:11,940 Sean Aylmer: I'm talking to Tim Lawless, Research Director for Asia-Pacific at CoreLogic. 119 00:06:13,070 --> 00:06:15,809 Sean Aylmer: So apartments then, they haven't had as strong a run 120 00:06:15,810 --> 00:06:19,859 Sean Aylmer: as housing. And we know the international student story, the 121 00:06:19,860 --> 00:06:23,669 Sean Aylmer: migration story has hurt that sector. Maybe the outlook for 122 00:06:23,670 --> 00:06:27,320 Sean Aylmer: apartments vis-a-vis freestanding homes, isn't quite as bad as it 123 00:06:27,320 --> 00:06:27,730 Sean Aylmer: has been. 124 00:06:28,100 --> 00:06:31,239 Tim Lawless: Yeah, I think the outlook for apartments is probably getting a little bit 125 00:06:31,240 --> 00:06:33,780 Tim Lawless: better, but then again, there's apartments and there's apartments, right? 126 00:06:33,780 --> 00:06:34,751 Sean Aylmer: Yeah. Yeah. 127 00:06:34,751 --> 00:06:37,380 Tim Lawless: So I think the outlook for say more medium density 128 00:06:37,380 --> 00:06:41,060 Tim Lawless: styles and dwellings is looking much more positive, but your 129 00:06:41,060 --> 00:06:46,740 Tim Lawless: inner city high-rise precincts, they're still showing generally some softer conditions, 130 00:06:46,740 --> 00:06:51,080 Tim Lawless: mostly because tenancy has been relatively low up until recently. 131 00:06:51,080 --> 00:06:53,349 Tim Lawless: We're starting to see rental markets around those inner city 132 00:06:53,350 --> 00:06:58,190 Tim Lawless: high-rise precincts are actually starting to improve probably simply because 133 00:06:58,190 --> 00:07:01,160 Tim Lawless: people are looking towards really affordable rentals in some of 134 00:07:01,160 --> 00:07:04,700 Tim Lawless: those precincts. I think more and more people out of 135 00:07:04,700 --> 00:07:09,099 Tim Lawless: necessity simply will need to be looking for say, townhomes, villas, terraces, 136 00:07:09,410 --> 00:07:11,430 Tim Lawless: that type of thing, where at least they still might 137 00:07:11,570 --> 00:07:13,970 Tim Lawless: have a bit of a courtyard or some level of 138 00:07:13,970 --> 00:07:18,020 Tim Lawless: space rather than moving to the high-rise precinct because they are 139 00:07:18,020 --> 00:07:19,100 Tim Lawless: absolutely a lot cheaper. 140 00:07:19,380 --> 00:07:21,840 Sean Aylmer: So we've spoken a fair bit about Sydney here. What 141 00:07:21,840 --> 00:07:25,360 Sean Aylmer: about the other big cities, Brisbane, Melbourne, Perth, Darwin? That 142 00:07:25,360 --> 00:07:27,240 Sean Aylmer: seems to have slowed quite a bit. What are the 143 00:07:27,240 --> 00:07:28,720 Sean Aylmer: other capital cities looking like? 144 00:07:28,930 --> 00:07:31,410 Tim Lawless: Yeah, it is a real mixed bag and we're still 145 00:07:31,410 --> 00:07:34,550 Tim Lawless: seeing Melbourne one of the softest of the capital cities. 146 00:07:34,840 --> 00:07:38,230 Tim Lawless: The annual growth rate in Melbourne is 15% compared to say, 147 00:07:38,230 --> 00:07:42,070 Tim Lawless: Sydney up 22%. Darwin's up a little bit more than 20% 148 00:07:42,070 --> 00:07:45,440 Tim Lawless: as well. Melbourne, of course, has been held back by 149 00:07:45,440 --> 00:07:47,940 Tim Lawless: a number of things. It's much more exposed to things 150 00:07:47,940 --> 00:07:50,690 Tim Lawless: like overseas migration as a source of demand. It's been 151 00:07:50,690 --> 00:07:53,020 Tim Lawless: through a lot of lockdowns, which has been quite disrupting, 152 00:07:53,440 --> 00:07:56,640 Tim Lawless: particularly to volumes and listing numbers in the market. Then 153 00:07:56,640 --> 00:08:01,070 Tim Lawless: you've got Brisbane where Southeast Queensland or Queensland overall hasn't 154 00:08:01,070 --> 00:08:03,770 Tim Lawless: had much impact from COVID. We've been seeing a really 155 00:08:03,770 --> 00:08:06,470 Tim Lawless: consistent level of high number of sales. It's got a 156 00:08:06,480 --> 00:08:11,700 Tim Lawless: very strong demographic tailwind behind it from interstate migration. And we're 157 00:08:11,700 --> 00:08:14,530 Tim Lawless: not really seeing too much evidence that growth rates are 158 00:08:14,530 --> 00:08:18,500 Tim Lawless: slowing down in Brisbane. And Adelaide is remarkably the same 159 00:08:18,560 --> 00:08:22,370 Tim Lawless: as well for similar reasons. Perth, on the other hand, even 160 00:08:22,370 --> 00:08:25,530 Tim Lawless: though the market there looks like it has very good fundamentals, 161 00:08:25,870 --> 00:08:28,500 Tim Lawless: we have seen a slowdown in the rate of growth. 162 00:08:28,530 --> 00:08:31,070 Tim Lawless: In fact, through September, the monthly rate of growth fell 163 00:08:31,070 --> 00:08:34,410 Tim Lawless: down to 0.3%. And I think we can attribute that 164 00:08:34,410 --> 00:08:37,010 Tim Lawless: to a couple of things. We are seeing a much 165 00:08:37,010 --> 00:08:40,190 Tim Lawless: more generous level of listings coming into the market across Perth. 166 00:08:40,190 --> 00:08:42,980 Tim Lawless: So vendors seem to be a lot more active across 167 00:08:42,980 --> 00:08:45,840 Tim Lawless: that marketplace. And we can also look at the finance 168 00:08:45,840 --> 00:08:48,790 Tim Lawless: data from the Australian Bureau of Statistics. And it does 169 00:08:48,790 --> 00:08:52,130 Tim Lawless: look like Perth had a really fast and sharp start 170 00:08:52,130 --> 00:08:56,170 Tim Lawless: to the level of say, mortgage commitments, really sharp start 171 00:08:56,170 --> 00:08:58,690 Tim Lawless: to the level of value growth. And it just seems 172 00:08:58,690 --> 00:09:01,760 Tim Lawless: to be slowing a little bit earlier than most other markets, 173 00:09:01,760 --> 00:09:06,120 Tim Lawless: probably because it started earlier. And we have seen affordability 174 00:09:06,120 --> 00:09:08,929 Tim Lawless: constraints starting to become a little bit more challenging in 175 00:09:08,929 --> 00:09:11,640 Tim Lawless: that market, even though prices are way below what they 176 00:09:11,790 --> 00:09:14,190 Tim Lawless: used to be back in 2014. 177 00:09:14,510 --> 00:09:17,340 Sean Aylmer: And then, of course, what about regional areas? COVID seems to have 178 00:09:17,340 --> 00:09:20,040 Sean Aylmer: given those areas a good fillip, is that likely to 179 00:09:20,040 --> 00:09:20,579 Sean Aylmer: keep going? 180 00:09:20,780 --> 00:09:24,270 Tim Lawless: I think so. And again, kind of like the apartment market, 181 00:09:24,270 --> 00:09:27,099 Tim Lawless: it is really diverse and we can see the strongest 182 00:09:27,100 --> 00:09:30,460 Tim Lawless: performers around the regional areas of Australia tend to be 183 00:09:30,460 --> 00:09:34,210 Tim Lawless: the coastal, the lifestyle markets, particularly those regions that are 184 00:09:34,250 --> 00:09:37,640 Tim Lawless: commutable back into one of the major capital cities or 185 00:09:37,640 --> 00:09:40,590 Tim Lawless: a major regional centre. So areas like the Gold Coast 186 00:09:40,679 --> 00:09:43,610 Tim Lawless: and the Sunshine Coast, for example, I mean, Sunshine Coast 187 00:09:43,610 --> 00:09:45,689 Tim Lawless: values are up a little bit more than 30%- 188 00:09:45,830 --> 00:09:45,831 Sean Aylmer: Wow. 189 00:09:45,831 --> 00:09:48,440 Tim Lawless: ... in the space of the past 12 months. Byron is 190 00:09:48,440 --> 00:09:51,050 Tim Lawless: up more than 30% as well. You've got areas like 191 00:09:51,050 --> 00:09:54,470 Tim Lawless: the Southern Highlands and Shoalhaven down in New South Wales, 192 00:09:54,809 --> 00:09:58,410 Tim Lawless: also up more than 30%. So we're definitely seeing this 193 00:09:58,410 --> 00:10:02,059 Tim Lawless: lifestyle trend. It doesn't seem to be losing momentum, but 194 00:10:02,059 --> 00:10:04,660 Tim Lawless: you'd have to expect that there is going to be a slowdown 195 00:10:04,660 --> 00:10:08,189 Tim Lawless: in those markets over time, simply because they are becoming 196 00:10:08,190 --> 00:10:10,040 Tim Lawless: extremely unaffordable as well. 197 00:10:12,410 --> 00:10:15,720 Sean Aylmer: Okay. Before we go on, talk about rentvesting. This is the idea, particularly first-home buyers who they 198 00:10:15,720 --> 00:10:18,670 Sean Aylmer: keep renting, but then buy an investment property. It's a 199 00:10:18,670 --> 00:10:22,100 Sean Aylmer: more affordable way to get their foot in the door. Does 200 00:10:22,100 --> 00:10:24,410 Sean Aylmer: that still happen? I haven't heard much about it in 201 00:10:24,410 --> 00:10:25,110 Sean Aylmer: recent times. 202 00:10:25,490 --> 00:10:28,530 Tim Lawless: Well, I think it is starting to happen again. And again, looking 203 00:10:28,530 --> 00:10:31,910 Tim Lawless: at the lending data from the ABS (Australian Bureau of Statistics), they do publish 204 00:10:31,910 --> 00:10:35,620 Tim Lawless: numbers on the number of first home buyers buying for an 205 00:10:35,620 --> 00:10:39,079 Tim Lawless: investment rather than buying for owner-occupation. And that has been 206 00:10:39,080 --> 00:10:43,240 Tim Lawless: consistently rising. And it makes sense as affordability becomes more challenging. 207 00:10:43,720 --> 00:10:46,490 Tim Lawless: As we talked about a bit earlier on, first home buyers are one of 208 00:10:46,790 --> 00:10:49,819 Tim Lawless: the more sensitive sectors of the marketplace that tend to 209 00:10:49,820 --> 00:10:53,390 Tim Lawless: get blocked earlier. So it makes sense that if you 210 00:10:53,390 --> 00:10:56,290 Tim Lawless: can't get your foot in the housing market door, then 211 00:10:56,370 --> 00:10:59,660 Tim Lawless: potentially buying somewhere where you can afford, but don't necessarily want 212 00:10:59,770 --> 00:11:02,020 Tim Lawless: to live or can't live because it's too far away, 213 00:11:02,020 --> 00:11:04,929 Tim Lawless: it makes sense. Hopefully they raise a bit of equity 214 00:11:04,929 --> 00:11:08,740 Tim Lawless: that way and build their wealth a little while they're still in the rental market, 215 00:11:09,090 --> 00:11:11,170 Tim Lawless: generally living in a place or renting in a place 216 00:11:11,170 --> 00:11:13,370 Tim Lawless: where it might be closer to where they work or 217 00:11:13,370 --> 00:11:16,510 Tim Lawless: closer to their family, but they couldn't necessarily afford to 218 00:11:16,510 --> 00:11:18,360 Tim Lawless: actually buy in that location. 219 00:11:18,750 --> 00:11:20,700 Sean Aylmer: Tim, the million dollar question, or maybe it's the $5 220 00:11:20,700 --> 00:11:23,880 Sean Aylmer: million question, I live in the Northern Suburbs of Sydney. 221 00:11:23,880 --> 00:11:26,650 Sean Aylmer: And while we've been wandering around doing our walking during 222 00:11:26,660 --> 00:11:29,750 Sean Aylmer: COVID lockdowns, there's lots of houses for sale. They're always 223 00:11:29,750 --> 00:11:33,630 Sean Aylmer: being turned over. They're expensive. Who is actually buying this stuff? 224 00:11:34,740 --> 00:11:36,310 Sean Aylmer: I still don't know where all the money comes from. 225 00:11:36,890 --> 00:11:39,329 Tim Lawless: Yeah, as we mentioned a bit earlier on, the median 226 00:11:39,330 --> 00:11:42,820 Tim Lawless: house value in Sydney is $1.3 million and that's like the middle. 227 00:11:42,820 --> 00:11:46,209 Tim Lawless: So if you get into some of the markets around, well, 228 00:11:46,340 --> 00:11:48,880 Tim Lawless: the Northern Suburbs or the Eastern Suburbs, the Northern Beaches 229 00:11:48,880 --> 00:11:51,939 Tim Lawless: have seen spectacular growth. It is a little bit mind-boggling 230 00:11:51,940 --> 00:11:54,650 Tim Lawless: about how people can afford to buy in these markets. 231 00:11:54,950 --> 00:11:57,670 Tim Lawless: So we know that the largest component of demand is 232 00:11:57,670 --> 00:12:01,220 Tim Lawless: subsequent buyers. So people who they've owned previously, they're looking 233 00:12:01,230 --> 00:12:04,750 Tim Lawless: to upgrade or downsize or move for whatever reason. So 234 00:12:04,750 --> 00:12:06,949 Tim Lawless: I think it's fair to say that that's probably the 235 00:12:06,950 --> 00:12:09,790 Tim Lawless: bulk of demands coming to those markets. We can clearly 236 00:12:09,790 --> 00:12:12,840 Tim Lawless: see first home buyers are winding down, in fact. They now 237 00:12:12,840 --> 00:12:15,469 Tim Lawless: have negative growth. Investors are starting to pick up a 238 00:12:15,470 --> 00:12:18,140 Tim Lawless: little bit, but investors would generally be targeting more sort 239 00:12:18,140 --> 00:12:20,990 Tim Lawless: of the middle to lower end of the marketplace where 240 00:12:20,990 --> 00:12:23,920 Tim Lawless: yield should be a little bit higher. So I think 241 00:12:23,920 --> 00:12:26,290 Tim Lawless: for the most part, it is going to be subsequent buyers, 242 00:12:26,290 --> 00:12:29,420 Tim Lawless: maybe some first home buyers who have a benefactor behind them, 243 00:12:29,420 --> 00:12:32,040 Tim Lawless: like mum and dad helping them to get into the marketplace. 244 00:12:32,410 --> 00:12:35,890 Tim Lawless: But I agree, I wonder the same thing sometimes about 245 00:12:36,610 --> 00:12:39,490 Tim Lawless: prices being so high and who actually is affording them. 246 00:12:39,870 --> 00:12:42,000 Tim Lawless: And it makes sense that when you start looking at 247 00:12:42,000 --> 00:12:45,030 Tim Lawless: things like household debt levels, particularly the housing component of 248 00:12:45,030 --> 00:12:47,290 Tim Lawless: household debt, and you look at the number of loans 249 00:12:47,590 --> 00:12:49,870 Tim Lawless: that are being written with high debt to income ratios, 250 00:12:50,320 --> 00:12:52,710 Tim Lawless: I think a lot more buyers have probably been stretching 251 00:12:52,710 --> 00:12:54,929 Tim Lawless: their budgets as much as they can to get into 252 00:12:54,929 --> 00:12:58,400 Tim Lawless: the marketplace, simply because of how high prices are and 253 00:12:58,400 --> 00:13:01,320 Tim Lawless: this urgency that they feel to get into the marketplace 254 00:13:01,320 --> 00:13:03,140 Tim Lawless: before prices go even higher. 255 00:13:03,460 --> 00:13:05,500 Sean Aylmer: Tim, thank you for talking to Fear and Greed this morning. 256 00:13:05,720 --> 00:13:06,860 Tim Lawless: Always a pleasure. Thanks, Sean. 257 00:13:07,000 --> 00:13:09,990 Sean Aylmer: That was Tim Lawless, Research Director for Asia-Pacific at CoreLogic. This 258 00:13:09,990 --> 00:13:13,559 Sean Aylmer: is the Fear and Greed Daily Interview. Join me every 259 00:13:13,559 --> 00:13:15,850 Sean Aylmer: morning for the full Fear and Greed Podcast with all 260 00:13:15,850 --> 00:13:18,200 Sean Aylmer: the business news you need to know. I'm Sean Aylmer. 261 00:13:18,750 --> 00:13:19,390 Sean Aylmer: Enjoy your day.