1 00:00:05,820 --> 00:00:08,520 Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer. 2 00:00:08,639 --> 00:00:12,210 Sean Aylmer: Australia's housing sector has become a two- speed market. House 3 00:00:12,210 --> 00:00:15,719 Sean Aylmer: prices recorded their strongest monthly growth in May since late 4 00:00:15,719 --> 00:00:19,079 Sean Aylmer: last year, up 0. 8%, but there are big disparities 5 00:00:19,079 --> 00:00:22,650 Sean Aylmer: between capital cities, with the mid- size capitals leading the 6 00:00:22,650 --> 00:00:26,340 Sean Aylmer: way. Perhaps the standout story in CoreLogic's Home Value Index 7 00:00:26,340 --> 00:00:28,710 Sean Aylmer: is Brisbane's stellar growth. It is now the second most 8 00:00:28,710 --> 00:00:32,309 Sean Aylmer: expensive capital city in the country, a title it hasn't 9 00:00:32,309 --> 00:00:35,069 Sean Aylmer: held in almost three decades. Tim Lawless is the Head 10 00:00:35,070 --> 00:00:38,070 Sean Aylmer: of Research for CoreLogic. Tim, welcome back to Fear & Greed. 11 00:00:38,490 --> 00:00:40,019 Tim Lawless: Thanks, Sean. Good to be here. 12 00:00:40,650 --> 00:00:44,550 Sean Aylmer: Let's look at those top performers first. Perth, its prices 13 00:00:44,550 --> 00:00:48,299 Sean Aylmer: were up about 2% last month. Adelaide's at 1.8%. Throw Brisbane in there 14 00:00:48,300 --> 00:00:50,970 Sean Aylmer: at 1. 4%. Why are they going so well? 15 00:00:51,360 --> 00:00:54,750 Tim Lawless: Yeah, these are some big numbers. In dollar terms, we're 16 00:00:54,750 --> 00:00:59,340 Tim Lawless: seeing Perth rising in value by about $14, 400 a month 17 00:00:59,610 --> 00:01:04,530 Tim Lawless: at the moment. Brisbane, about $ 12, 000 a month. Adelaide, about $13, 000. 18 00:01:04,530 --> 00:01:08,369 Tim Lawless: So I don't think anyone's incomes are going up that 19 00:01:08,370 --> 00:01:11,219 Tim Lawless: much on a monthly basis, so affordability is the real 20 00:01:11,219 --> 00:01:14,550 Tim Lawless: challenge here. But what's driving these markets is a bunch 21 00:01:14,550 --> 00:01:17,880 Tim Lawless: of things. On the supply side, each of these markets are 22 00:01:18,000 --> 00:01:22,408 Tim Lawless: seeing listing numbers more than 35% below their previous five- 23 00:01:22,410 --> 00:01:25,469 Tim Lawless: year average. So there's not much stock around, which means 24 00:01:25,469 --> 00:01:28,589 Tim Lawless: selling conditions are very good. A market like Perth is 25 00:01:28,590 --> 00:01:32,520 Tim Lawless: seeing homes selling in about 10 days on average. Brisbane's 26 00:01:32,520 --> 00:01:36,480 Tim Lawless: about 19 days. So homes are selling very quickly. Buyers 27 00:01:36,480 --> 00:01:39,360 Tim Lawless: are probably feeling a sense of urgency in these markets 28 00:01:40,020 --> 00:01:43,440 Tim Lawless: and probably not too willing to negotiate all that much. 29 00:01:43,860 --> 00:01:48,240 Tim Lawless: So, yeah, it's very much a case of strong demand and 30 00:01:48,360 --> 00:01:50,370 Tim Lawless: extraordinarily low levels of supply. 31 00:01:51,000 --> 00:01:52,680 Sean Aylmer: The flip side to that too is Hobart, I noticed 32 00:01:52,680 --> 00:01:56,220 Sean Aylmer: in the numbers, it's got a big supply. And it's 33 00:01:56,250 --> 00:01:58,200 Sean Aylmer: probably the worst performing market at the moment. 34 00:01:58,650 --> 00:02:02,700 Tim Lawless: Yeah, the supply numbers, at least advertised supply, really helps 35 00:02:02,700 --> 00:02:05,789 Tim Lawless: to explain these trends. And Hobart's been holding at fairly 36 00:02:05,789 --> 00:02:08,549 Tim Lawless: high supply levels for a couple of years now, and 37 00:02:08,910 --> 00:02:10,919 Tim Lawless: values have been flat to falling for a couple of 38 00:02:10,919 --> 00:02:15,419 Tim Lawless: years. We've seen that market drop in value by about 11. 39 00:02:15,480 --> 00:02:17,490 Tim Lawless: 5% since it moved through a peak back in March 40 00:02:17,490 --> 00:02:23,250 Tim Lawless: of 2022. So, yeah, listings in Hobart are about 40% 41 00:02:23,279 --> 00:02:25,320 Tim Lawless: above where they normally would be, at least based on 42 00:02:25,320 --> 00:02:27,389 Tim Lawless: the five- year average for this time of the year. 43 00:02:27,870 --> 00:02:30,839 Tim Lawless: And, of course, it has a fairly weak demographic trend 44 00:02:30,840 --> 00:02:34,169 Tim Lawless: as well. We've seen interstate migration has moved heavily into 45 00:02:34,169 --> 00:02:38,580 Tim Lawless: negative territory. There's still a positive level of overseas migration. 46 00:02:39,120 --> 00:02:42,510 Tim Lawless: The natural increase is virtually nothing as well. So it 47 00:02:42,510 --> 00:02:45,630 Tim Lawless: doesn't have the same demographic drivers as other markets that 48 00:02:45,630 --> 00:02:49,410 Tim Lawless: are really pushing prices higher, isn't the case in Hobart. 49 00:02:49,950 --> 00:02:53,250 Sean Aylmer: Okay. So in Brisbane, we have a lack of stock 50 00:02:53,429 --> 00:02:56,129 Sean Aylmer: relative to the five- year average, but is there more 51 00:02:56,309 --> 00:02:59,549 Sean Aylmer: to it? Because house and unit values have now overtaken 52 00:02:59,549 --> 00:03:04,980 Sean Aylmer: Melbourne prices. It's just been such an outperformer, particularly against 53 00:03:04,980 --> 00:03:07,710 Sean Aylmer: places like Melbourne and the ACT, where it's overtaken in 54 00:03:07,710 --> 00:03:08,730 Sean Aylmer: terms of median value. 55 00:03:09,120 --> 00:03:11,400 Tim Lawless: Yeah, I think there's two other factors in the mix 56 00:03:11,400 --> 00:03:13,679 Tim Lawless: here and they both come back to the demand side. 57 00:03:13,679 --> 00:03:17,340 Tim Lawless: So on one hand, you've got very high levels of 58 00:03:17,340 --> 00:03:21,060 Tim Lawless: migration coming into Queensland from other states. It's not quite 59 00:03:21,060 --> 00:03:22,860 Tim Lawless: at peak levels. It seems to have settled down a 60 00:03:22,860 --> 00:03:25,980 Tim Lawless: little bit, but it's settling at well above average. So 61 00:03:25,980 --> 00:03:28,800 Tim Lawless: there's a very strong rate of interstate migration, which tends 62 00:03:28,800 --> 00:03:31,859 Tim Lawless: to have a much stronger correlation with purchasing demand than 63 00:03:31,860 --> 00:03:35,219 Tim Lawless: what we see with overseas migration that tends to fuel 64 00:03:35,219 --> 00:03:39,060 Tim Lawless: rental demand more than purchasing. The other thing, of course, 65 00:03:39,390 --> 00:03:42,210 Tim Lawless: simply comes back to things like there's a lot of 66 00:03:42,570 --> 00:03:45,210 Tim Lawless: jobs, pretty good economy. There seems to be this structural 67 00:03:45,210 --> 00:03:48,599 Tim Lawless: change across some of the housing demand trends, where more 68 00:03:48,599 --> 00:03:53,009 Tim Lawless: people are looking to, say, lifestyle markets. And Southeast Queensland, 69 00:03:53,010 --> 00:03:56,190 Tim Lawless: maybe not broadly a lifestyle market, but it probably has 70 00:03:56,190 --> 00:03:58,350 Tim Lawless: a little bit of an upgrade on other regions around 71 00:03:58,350 --> 00:04:01,230 Tim Lawless: the country from a climate perspective. So I think there's 72 00:04:01,230 --> 00:04:03,929 Tim Lawless: those things. I think, maybe a year ago, we could 73 00:04:03,929 --> 00:04:07,409 Tim Lawless: have argued there was also the affordability advantage in Brisbane 74 00:04:07,500 --> 00:04:10,260 Tim Lawless: that was helping to bring more people into the market, 75 00:04:10,260 --> 00:04:13,200 Tim Lawless: but that's pretty hard to argue now that it's only 76 00:04:13,200 --> 00:04:16,170 Tim Lawless: Sydney that has a higher median value. Brisbane just pipped 77 00:04:16,170 --> 00:04:18,419 Tim Lawless: Canberra and, at the end of last year, Melbourne. 78 00:04:19,200 --> 00:04:23,040 Sean Aylmer: Okay. So let's talk about Melbourne. Many friends with homes 79 00:04:23,040 --> 00:04:26,280 Sean Aylmer: in Melbourne. What's happened? It's really flatlined, hasn't it? 80 00:04:26,700 --> 00:04:30,238 Tim Lawless: It sure has. And this isn't just a recent trend. 81 00:04:30,240 --> 00:04:33,839 Tim Lawless: Even throughout the pandemic, we were seeing quite flat conditions. 82 00:04:33,870 --> 00:04:36,659 Tim Lawless: The last four and a bit years since COVID became 83 00:04:36,660 --> 00:04:39,868 Tim Lawless: a thing back in March 2020 has only seen an 84 00:04:39,870 --> 00:04:43,200 Tim Lawless: 11% rise in Melbourne housing values. To put that into 85 00:04:43,200 --> 00:04:47,490 Tim Lawless: some context, we've seen Brisbane prices up about 60%, so 86 00:04:47,490 --> 00:04:49,979 Tim Lawless: a very big difference. So I think there's a few 87 00:04:49,980 --> 00:04:53,280 Tim Lawless: things going on here. Through the pandemic, obviously, there was 88 00:04:53,310 --> 00:04:58,979 Tim Lawless: the lockdowns and that really disrupted economic and demographic trends. 89 00:04:58,980 --> 00:05:02,370 Tim Lawless: But, more recently, there's other things going on. There's probably 90 00:05:02,370 --> 00:05:06,299 Tim Lawless: a legacy of the pandemic in government debt. That's huge. 91 00:05:06,360 --> 00:05:09,450 Tim Lawless: There's a lot of new property related taxes as well, which really 92 00:05:09,450 --> 00:05:14,490 Tim Lawless: seem to be disincentivizing capital flows coming into Victoria. Sentiment 93 00:05:14,490 --> 00:05:17,159 Tim Lawless: seems to be very low as well. There's clearly not 94 00:05:17,160 --> 00:05:20,130 Tim Lawless: as much investment happening in Victoria either. If you look 95 00:05:20,130 --> 00:05:23,430 Tim Lawless: at the home lending data, most of the investment upswings 96 00:05:23,430 --> 00:05:26,730 Tim Lawless: been happening in WA and in Queensland. There has been a 97 00:05:26,730 --> 00:05:29,339 Tim Lawless: little bit more investment activity in Vic, but nowhere near 98 00:05:29,339 --> 00:05:32,459 Tim Lawless: what we're seeing in other markets. So longer term, you'd 99 00:05:32,460 --> 00:05:34,800 Tim Lawless: have to think this is a bit of a competitive 100 00:05:34,800 --> 00:05:38,609 Tim Lawless: advantage that's building up as prices become more affordable. That's 101 00:05:38,610 --> 00:05:41,279 Tim Lawless: probably a good thing. But for the time being, we're 102 00:05:41,279 --> 00:05:44,130 Tim Lawless: expecting this market probably will continue to underperform. 103 00:05:44,730 --> 00:05:46,349 Sean Aylmer: Stay with me, Tim, we'll be back in a minute. 104 00:05:53,219 --> 00:05:55,859 Sean Aylmer: My guest this morning is Tim Lawless, Head of Research 105 00:05:55,860 --> 00:06:01,890 Sean Aylmer: for CoreLogic. How important is state government policy? So in 106 00:06:01,890 --> 00:06:05,820 Sean Aylmer: Victoria, you mentioned some of the taxes on investment properties. There was 107 00:06:06,210 --> 00:06:08,580 Sean Aylmer: a lot of criticism about that when they were introduced. 108 00:06:09,000 --> 00:06:11,279 Sean Aylmer: Is it mostly supply and demand? I'm an economist by 109 00:06:11,279 --> 00:06:13,409 Sean Aylmer: trade, Tim. I always think supply and demand. I don't 110 00:06:13,410 --> 00:06:15,870 Sean Aylmer: think fiscal policy much. But maybe I should be thinking 111 00:06:15,928 --> 00:06:17,938 Sean Aylmer: stuff like state government taxes a bit more. 112 00:06:18,570 --> 00:06:22,260 Tim Lawless: Well, yeah, I think, indirectly, the taxation environment is having 113 00:06:22,260 --> 00:06:26,130 Tim Lawless: an impact on demand. You can see that in Victoria's 114 00:06:26,130 --> 00:06:29,460 Tim Lawless: got a very low level of interstate migration. It's subtly 115 00:06:29,460 --> 00:06:31,558 Tim Lawless: negative, not as bad as it used to be, but 116 00:06:31,559 --> 00:06:34,109 Tim Lawless: it's still negative. And as you mentioned, some of the 117 00:06:34,109 --> 00:06:37,020 Tim Lawless: property taxes have been a real disincentive. So you've got 118 00:06:37,020 --> 00:06:40,890 Tim Lawless: a much lower threshold for land tax. You've got vacant 119 00:06:40,890 --> 00:06:45,420 Tim Lawless: property taxes. You've got windfall capital gains taxes. There's a 120 00:06:45,420 --> 00:06:48,479 Tim Lawless: tourism tax on Airbnb properties. So the list goes on. 121 00:06:48,480 --> 00:06:51,240 Tim Lawless: And even when you just look at the taxation that's 122 00:06:51,480 --> 00:06:54,359 Tim Lawless: in every state, stamp duty, the stamp duty rates in 123 00:06:54,360 --> 00:06:57,390 Tim Lawless: Victoria are the highest in the nation as well. So 124 00:06:57,779 --> 00:07:00,300 Tim Lawless: taxes, I think, are a big part of this weakness. And 125 00:07:00,300 --> 00:07:03,329 Tim Lawless: it seems the state government in Victoria are very much 126 00:07:03,330 --> 00:07:06,629 Tim Lawless: trying to tax property in order to dig themselves out 127 00:07:06,630 --> 00:07:08,160 Tim Lawless: of this debt hole they've created. 128 00:07:08,880 --> 00:07:12,210 Sean Aylmer: Righto. Sydney, the biggest market, reached a new milestone. It's 129 00:07:12,270 --> 00:07:16,980 Sean Aylmer: now prices are beyond, or at, at least, the January 130 00:07:17,010 --> 00:07:21,300 Sean Aylmer: 2022 peak. How important is Sydney as a market, in 131 00:07:21,300 --> 00:07:23,940 Sean Aylmer: terms of leading the country? Or is it just its 132 00:07:23,940 --> 00:07:26,909 Sean Aylmer: own market and so it doesn't really matter outside of 133 00:07:26,910 --> 00:07:27,750 Sean Aylmer: Sydney what happens? 134 00:07:28,590 --> 00:07:31,590 Tim Lawless: Well, we generally do see Sydney leading the cycles, maybe 135 00:07:31,590 --> 00:07:35,040 Tim Lawless: not as much over this current cycle. Although, Sydney was 136 00:07:35,040 --> 00:07:38,400 Tim Lawless: the first market to bottom out and then show pretty 137 00:07:38,400 --> 00:07:42,539 Tim Lawless: strong growth trajectory through the first half of 2023. But 138 00:07:42,840 --> 00:07:45,209 Tim Lawless: that really started to slow down from the middle of 139 00:07:45,210 --> 00:07:49,110 Tim Lawless: last year. And even though we'd been consistently seeing prices 140 00:07:49,110 --> 00:07:52,710 Tim Lawless: rising since January last year, they're up about 14%. So 141 00:07:52,710 --> 00:07:56,130 Tim Lawless: over that 16 month period, it's pretty clear the rate 142 00:07:56,130 --> 00:07:59,219 Tim Lawless: of growth has become much milder, compared to what it 143 00:07:59,219 --> 00:08:03,689 Tim Lawless: was around this time last year. Sydney, clearly, has an 144 00:08:03,690 --> 00:08:07,320 Tim Lawless: affordability problem, but that doesn't seem to be enough that 145 00:08:07,380 --> 00:08:11,520 Tim Lawless: it's pushing prices backwards. It also has an undersupply problem 146 00:08:11,550 --> 00:08:15,570 Tim Lawless: as well. So I think at the moment that undersupply 147 00:08:15,570 --> 00:08:19,770 Tim Lawless: is enough to trump the downside factors of affordability and 148 00:08:20,040 --> 00:08:22,350 Tim Lawless: high cost of debt, low sentiment, high inflation. 149 00:08:23,100 --> 00:08:25,350 Sean Aylmer: What about regional prices? It's a bit of a ridiculous 150 00:08:25,350 --> 00:08:29,160 Sean Aylmer: question because how many regions are there in Australia? Many, 151 00:08:29,160 --> 00:08:32,070 Sean Aylmer: many, many. But is there a broad trend around regional 152 00:08:32,070 --> 00:08:33,780 Sean Aylmer: prices versus the capital cities? 153 00:08:34,260 --> 00:08:36,840 Tim Lawless: Yeah, we do have a regionals index, so this is 154 00:08:36,840 --> 00:08:40,319 Tim Lawless: just anything outside the capital cities combined. So it's a 155 00:08:41,458 --> 00:08:45,030 Tim Lawless: pretty mixed bag. But regional prices are up 2% over the 156 00:08:45,030 --> 00:08:47,400 Tim Lawless: three months ending May. So that's just a little bit 157 00:08:47,400 --> 00:08:50,400 Tim Lawless: higher than the capital cities, which are up 1. 9%. 158 00:08:51,480 --> 00:08:54,659 Tim Lawless: The last 12 months, the regional index has underperformed a 159 00:08:54,660 --> 00:08:58,439 Tim Lawless: little bit. But, again, there's a real diversity here that 160 00:08:58,529 --> 00:09:02,130 Tim Lawless: some of the weakness in regional markets is, again, emanating 161 00:09:02,130 --> 00:09:06,360 Tim Lawless: out of Victoria, where values have been falling. They're actually 162 00:09:06,360 --> 00:09:08,609 Tim Lawless: down over the past 12 months by about 0. 6%, so 163 00:09:09,990 --> 00:09:13,860 Tim Lawless: a little bit worse than flat. Everywhere else is seeing 164 00:09:13,860 --> 00:09:17,520 Tim Lawless: values rising. But, again, those same markets where the capital 165 00:09:17,520 --> 00:09:20,488 Tim Lawless: cities are the strongest, it's the regional markets of WA, 166 00:09:21,059 --> 00:09:24,270 Tim Lawless: Queensland, and South Australia that are really standing out with double- 167 00:09:24,270 --> 00:09:25,500 Tim Lawless: digit annual price growth. 168 00:09:26,309 --> 00:09:30,420 Sean Aylmer: Wow. Okay, Tim, the $ 64 question, of course, is what's 169 00:09:30,420 --> 00:09:32,999 Sean Aylmer: going to happen now? And I'll remind all our listeners 170 00:09:33,000 --> 00:09:36,059 Sean Aylmer: that we are not an investment podcast, so always go 171 00:09:36,059 --> 00:09:38,940 Sean Aylmer: and seek your own financial advice on any of these 172 00:09:38,940 --> 00:09:41,220 Sean Aylmer: issues. But what do you think will happen to house 173 00:09:41,220 --> 00:09:42,270 Sean Aylmer: prices going forward? 174 00:09:43,020 --> 00:09:45,179 Tim Lawless: It doesn't look like they're going to go backwards anytime 175 00:09:45,179 --> 00:09:48,718 Tim Lawless: soon, Sean. We're not seeing any real evidence of a 176 00:09:48,719 --> 00:09:52,259 Tim Lawless: supply response coming into the market. We're one month away 177 00:09:52,260 --> 00:09:56,460 Tim Lawless: from this five year target of 1. 2 million homes 178 00:09:56,460 --> 00:09:58,950 Tim Lawless: to be delivered. So that kicks off from July 1st. 179 00:09:59,610 --> 00:10:01,620 Tim Lawless: And it's going to be happening from less than a 180 00:10:01,620 --> 00:10:05,459 Tim Lawless: standing start. We're still seeing dwelling approvals well below average. 181 00:10:05,700 --> 00:10:09,839 Tim Lawless: It's stabilized, but well below average, maybe 13,000 approvals month 182 00:10:09,839 --> 00:10:12,660 Tim Lawless: on month. To achieve that 1. 2 million target, we 183 00:10:12,660 --> 00:10:15,510 Tim Lawless: need to see 20,000 approvals a month, or at least 20, 184 00:10:15,510 --> 00:10:19,650 Tim Lawless: 000 completions. So it looks like supply is going to 185 00:10:19,650 --> 00:10:22,830 Tim Lawless: be a real pain for every layer of government at 186 00:10:22,830 --> 00:10:25,020 Tim Lawless: the moment. And we can probably expect there's going to 187 00:10:25,020 --> 00:10:28,529 Tim Lawless: be a doubling down of stimulus and incentives aimed at 188 00:10:28,529 --> 00:10:31,710 Tim Lawless: getting more supply into the market. But I think that's 189 00:10:31,710 --> 00:10:34,620 Tim Lawless: a real slow burn. At the moment, we still have 190 00:10:34,620 --> 00:10:38,850 Tim Lawless: just compressed margin pressures for builders. Lending costs are high. 191 00:10:39,179 --> 00:10:42,389 Tim Lawless: Lenders are quite cautious in this sector as well. And 192 00:10:42,750 --> 00:10:45,630 Tim Lawless: trade scarcity is also a really big problem. So I 193 00:10:45,630 --> 00:10:47,189 Tim Lawless: think it's going to be a couple of years before 194 00:10:47,190 --> 00:10:49,020 Tim Lawless: we see supply coming back into the market. 195 00:10:49,620 --> 00:10:52,319 Sean Aylmer: So the bottom line in that is that prices aren't 196 00:10:52,320 --> 00:10:54,900 Sean Aylmer: going to fall, and there could be, in some markets, 197 00:10:54,900 --> 00:10:57,000 Sean Aylmer: obviously, a ways to go yet. 198 00:10:57,750 --> 00:11:01,289 Tim Lawless: It sounds like it to me. And, ultimately, this pendulum 199 00:11:01,290 --> 00:11:04,409 Tim Lawless: will swing. We will see the demand side pressures coming 200 00:11:04,410 --> 00:11:07,860 Tim Lawless: down. We've already seen that overseas migration's been easing since March 201 00:11:07,860 --> 00:11:11,458 Tim Lawless: of last year. There will be a supply response. It's 202 00:11:11,460 --> 00:11:14,099 Tim Lawless: just the timing that we're uncertain about. So I think 203 00:11:14,099 --> 00:11:16,800 Tim Lawless: when that happens, that's when we should expect there probably 204 00:11:16,800 --> 00:11:20,608 Tim Lawless: will be some downwards pressure on housing prices, given how 205 00:11:20,610 --> 00:11:24,419 Tim Lawless: stretched affordability is and how low rental yields are as well. 206 00:11:24,780 --> 00:11:26,370 Sean Aylmer: Tim, thank you for talking to Fear & Greed. 207 00:11:26,910 --> 00:11:28,020 Tim Lawless: Absolute pleasure. Thanks. 208 00:11:28,470 --> 00:11:31,108 Sean Aylmer: That was Tim Lawless, Head of Research for CoreLogic. This is 209 00:11:31,110 --> 00:11:33,389 Sean Aylmer: the Fear & Greed Daily Interview. Join us every morning for 210 00:11:33,389 --> 00:11:36,270 Sean Aylmer: the full episode of Fear & Greed, business news for people 211 00:11:36,270 --> 00:11:39,119 Sean Aylmer: who make their own decisions. I'm Sean Aylmer. Enjoy your day.