WEBVTT - Sunny outlook for Queensland property 0:00:09.720 --> 0:00:13.160 Hello, and welcome to The Australian's Money Puzzled podcast. I'm 0:00:13.240 --> 0:00:16.000 James Kirby, the web editor at The Australian, and welcome 0:00:16.000 --> 0:00:21.720 aboard everybody. I imagine that every now and again as 0:00:21.720 --> 0:00:24.440 an investor, it makes a lot of sense for everybody 0:00:24.440 --> 0:00:27.560 to stand back a little bit and jump above the 0:00:27.600 --> 0:00:30.120 noise and take a look at some of the bigger 0:00:30.360 --> 0:00:34.400 questions and the bigger issues that are emerging and shaping 0:00:34.520 --> 0:00:39.440 the property market we're investing in. I have my guest today. 0:00:39.520 --> 0:00:41.080 I was looking for someone that could give us a 0:00:41.120 --> 0:00:44.400 helicopter view, if you like, of the property market. He's 0:00:44.440 --> 0:00:47.160 been on before. He is the ideal person. He fits 0:00:47.159 --> 0:00:50.879 the bill. It's Louis Christopher of SQM Research. 0:00:50.880 --> 0:00:53.599 How are you, Louis, goody, Jane's nice to be with 0:00:53.640 --> 0:00:55.160 you and your audience once more. 0:00:55.960 --> 0:00:58.440 It's great to have you on board. Some of the 0:00:58.480 --> 0:01:00.760 bigger themes I think through the mar market this year, 0:01:01.080 --> 0:01:03.520 I want to just put on the table today because 0:01:03.560 --> 0:01:05.319 we often talk about them and I want to actually 0:01:05.319 --> 0:01:08.200 sort of put them in properly and do them properly today. 0:01:08.360 --> 0:01:10.759 And one of the sort of running issues all year 0:01:11.319 --> 0:01:15.200 is about whether this market that we all think we 0:01:15.280 --> 0:01:18.960 know the Australian property market, whether it's really changing, and 0:01:19.000 --> 0:01:22.160 whether the regional markets are to some extent sort of 0:01:22.240 --> 0:01:24.640 breaking off and going their own way. There was always 0:01:24.640 --> 0:01:27.120 a we thought it was a natural order of things 0:01:27.160 --> 0:01:30.520 and property Sydney was the dearest, Melbourne was the second dearest, 0:01:30.560 --> 0:01:35.000 then Brisbane, then pert and Adelaide naturally enough linked with 0:01:35.120 --> 0:01:39.199 the size of those cities. That's not happening this year, 0:01:39.760 --> 0:01:43.160 very different story. Melbourne is about fourth on the ladder, 0:01:43.840 --> 0:01:46.600 Adelaide and part are very hot markets at the moment. 0:01:46.800 --> 0:01:49.680 Do you think that the market is changing into regional 0:01:50.000 --> 0:01:51.520 distinct regional markets. 0:01:52.040 --> 0:01:55.880 I think for twenty twenty four we've seen nationally a 0:01:55.960 --> 0:02:00.320 very mixed housing market. You're right to point out, and 0:02:00.480 --> 0:02:03.200 Perth of being the outperformers. I would like to add 0:02:03.240 --> 0:02:07.040 into that Brisbane as well. They are three cities which 0:02:07.080 --> 0:02:09.919 on our numbers, and I'm aware of our peers as well, 0:02:10.400 --> 0:02:15.799 are recording still strong capital growth. So, for instance, Perth 0:02:15.960 --> 0:02:19.040 over the past twelve months we've got dwelling prices up 0:02:19.120 --> 0:02:25.040 near twenty four percent, extraordinarily strong. I contrast that with 0:02:25.360 --> 0:02:29.000 say Melbourne and at this point in time, over the 0:02:29.080 --> 0:02:32.440 last thirty days, we're actually recording some falls and dwelling 0:02:32.480 --> 0:02:35.400 prices in Melbourne and the twelve month change coming in 0:02:35.480 --> 0:02:38.320 at just under five percent. So there is quite the 0:02:38.360 --> 0:02:41.000 contrast across the capital cities. 0:02:41.400 --> 0:02:44.639 Yeah, so you've got like Perth growing four times as 0:02:44.680 --> 0:02:47.800 fast as Melbourne is a smaller city. And I know 0:02:47.919 --> 0:02:51.800 there are always, to some extent regional variations, but I 0:02:51.919 --> 0:02:54.639 wonder when you look at the market, are you detecting 0:02:54.680 --> 0:02:57.760 something deeper. I mean, for instance, the Queensland market is 0:02:57.880 --> 0:03:00.680 very strong for years in the year years now, it's 0:03:00.680 --> 0:03:05.840 probably had, it's probably had certainly since COVID, particularly strong run, 0:03:06.240 --> 0:03:10.480 and there is internal migration there and they are getting 0:03:10.600 --> 0:03:14.440 very good numbers consistently across the state, not just Brisbone 0:03:14.440 --> 0:03:19.320 but through particularly to southeast Queensland. And the Melbourne market 0:03:19.360 --> 0:03:25.160 is soft and remains soft, and they are facing broadly 0:03:25.200 --> 0:03:27.680 the same fundamentals. Do you think there's any sort of 0:03:27.680 --> 0:03:31.079 disturbance to that natural order that I laid out at 0:03:31.080 --> 0:03:34.200 the start, that Sydney's always the deuce, that Melbourne's always 0:03:34.240 --> 0:03:35.440 the second eiest, et cetera. 0:03:36.080 --> 0:03:39.280 Well, I think in terms of absolute dollars we still 0:03:39.320 --> 0:03:42.680 had that Sydney is still the most expensive housing market. 0:03:42.720 --> 0:03:47.280 So for example, for freestanding houses, we have a medium 0:03:47.320 --> 0:03:49.720 price in Siting now running at about one point nine 0:03:49.800 --> 0:03:54.960 million dollars. I compare that to say, Perth, which has 0:03:55.240 --> 0:03:58.160 just crossed over a million dollars, which, of course for 0:03:58.280 --> 0:04:01.240 local residents and Perth that will sound very expensive indeed, 0:04:01.640 --> 0:04:04.360 but it's nearly half the price of city. So we 0:04:04.440 --> 0:04:07.040 still have this contrast and he is still by far 0:04:07.200 --> 0:04:10.640 the most expensive. But when we speak about performance, of 0:04:10.640 --> 0:04:15.040 course we're looking at relative capital growth and certainly over 0:04:15.080 --> 0:04:17.960 the past twelve months Perth has been the number one 0:04:18.000 --> 0:04:22.880 out performer, followed by closely by Adelaide and then Brisbane 0:04:23.040 --> 0:04:25.640 and then our two largest capital cities. Well, no, they've 0:04:25.720 --> 0:04:28.520 not been performing well. Now getting to your question, well, 0:04:28.600 --> 0:04:31.719 what's driving I think one of the key factors here 0:04:32.600 --> 0:04:39.640 is net interstate migration. Okay, so Queensland and Western Australia 0:04:40.000 --> 0:04:44.080 have been having in very recent times very positive net 0:04:44.160 --> 0:04:48.320 interstate migration flows which have been coming from Victoria and 0:04:48.480 --> 0:04:52.520 New South Wales. That's definitely one of the key factors. 0:04:52.520 --> 0:04:56.120 People have been moving, I think in part for affordability, 0:04:56.680 --> 0:05:01.960 in part for job opportunities as well into Queensland into 0:05:02.120 --> 0:05:05.599 way to pick up those better paying jobs and to 0:05:05.640 --> 0:05:07.120 get a better priced house. 0:05:07.600 --> 0:05:10.719 Yes, right now, Traditionally people did move. There was always 0:05:10.800 --> 0:05:14.159 patterns and there was always some you know, New South 0:05:14.160 --> 0:05:17.200 Wales and Victoria particularly, people would move up to Queensland 0:05:17.240 --> 0:05:20.480 to retire. But I noticed you said their job opportunities, 0:05:21.120 --> 0:05:23.080 So is it a different sort of pattern there are 0:05:23.120 --> 0:05:24.279 the different people moving. 0:05:25.160 --> 0:05:28.120 I think there are different people moving. We unfortunately, when 0:05:28.160 --> 0:05:31.520 it comes to the strict demographic data from the Australian 0:05:31.520 --> 0:05:35.520 Bureau of Statistics, it's not entirely clear who are these 0:05:35.560 --> 0:05:38.599 people that are moving, so we can only guess. But 0:05:38.680 --> 0:05:41.520 I would agree with you based on what we can 0:05:41.560 --> 0:05:46.000 see for purchases of dwellings that it's looking like they 0:05:46.080 --> 0:05:50.440 are first home buyers. There is some property investment activity 0:05:50.920 --> 0:05:55.479 there as well, but it's first home buyers, second home 0:05:55.520 --> 0:06:00.719 buyers buying freestanding dwellings predominantly in these city isn't selling 0:06:00.800 --> 0:06:02.440 up in Sydney and Melbourne? 0:06:02.560 --> 0:06:04.920 Right? So they can buy a house, this is it. 0:06:04.960 --> 0:06:08.640 They can buy a house outside the two metropolitan centers. 0:06:09.640 --> 0:06:11.880 I think that's in large part what's been driving this. 0:06:14.640 --> 0:06:17.560 So Louis it's interesting you say that because one of 0:06:17.560 --> 0:06:19.760 the things I'm thinking about is there was a very 0:06:19.800 --> 0:06:22.960 big structural shift in the market after COVID where we 0:06:23.040 --> 0:06:25.760 realize people could work at home, and there is a 0:06:25.880 --> 0:06:28.359 drift back to work, but it's never going to be 0:06:28.400 --> 0:06:30.480 the same again. I think most people will agree with that. 0:06:30.839 --> 0:06:33.160 The fact that you can work outside of Sydney and 0:06:33.200 --> 0:06:38.560 Melbourne has changed everything, and there was this huge shift 0:06:38.600 --> 0:06:42.280 to coastal regions, treat change regions, and some of that 0:06:42.400 --> 0:06:44.800 was almost like panic if you like, in COVID. But 0:06:45.080 --> 0:06:49.880 there's a deeper pattern now of people working for whoever 0:06:49.960 --> 0:06:53.279 they like, wherever they like. So I'm just wondering whether 0:06:53.520 --> 0:06:59.120 in your data that's coming through, has that settled or 0:06:59.200 --> 0:07:00.560 is that process it happening. 0:07:00.600 --> 0:07:03.960 I wonder, James, I think we're still seeing it. I 0:07:03.960 --> 0:07:08.880 think there's actually been a recent shift back towards living 0:07:09.040 --> 0:07:13.920 in regional Australia. I say that because we've been recording 0:07:14.160 --> 0:07:18.520 falls and rental vacancy rates across regional Australia once again 0:07:18.920 --> 0:07:23.160 in twenty twenty four. So by way of background, our 0:07:23.320 --> 0:07:26.040 data strongly agrees with your point that in during the 0:07:26.080 --> 0:07:30.240 lockdown period twenty twenty one twenty twenty two, rental vacancy 0:07:30.280 --> 0:07:35.200 rates and regional Australia tightened dramatically. Then we noticed at 0:07:35.240 --> 0:07:37.640 the end of twenty two and into twenty twenty three 0:07:37.760 --> 0:07:41.920 they East rental vacancy rates rose and we started to 0:07:41.960 --> 0:07:45.920 record a slide down in rents. But for this year 0:07:46.240 --> 0:07:49.840 we're seeing the reverse yet again, where rental vacancy rates 0:07:49.880 --> 0:07:53.559 have been tightening in regional Australia. Now, obviously we cannot 0:07:53.600 --> 0:07:57.520 point to a lockdown that hasn't been happening. I found 0:07:57.600 --> 0:08:01.040 the data quite surprising. My expectation while that rental vacancy 0:08:01.160 --> 0:08:05.160 rates would continue to age in twenty four across regional 0:08:05.240 --> 0:08:08.040 Australia as more and more people return back to the office, 0:08:08.760 --> 0:08:11.640 but that's not the case, and I can only conclude 0:08:11.720 --> 0:08:15.680 that there must be more negotiations going on between employer 0:08:15.840 --> 0:08:20.760 employee to allow that employee to continue to work and 0:08:20.880 --> 0:08:21.920 live remotely. 0:08:22.080 --> 0:08:24.920 Yes, yes, because I imagine if people prove their case 0:08:25.560 --> 0:08:28.440 and then they finally take the chip in by train 0:08:28.920 --> 0:08:31.280 to the center of Melbourne or the center of Sydney, 0:08:31.360 --> 0:08:33.320 and who knows their boss might have taken a trip 0:08:33.320 --> 0:08:35.200 in on the train as well. The maybe they weren't 0:08:35.200 --> 0:08:37.360 in there at all And they both meet in the 0:08:37.400 --> 0:08:41.800 center of the city and the employee says, well, you 0:08:41.840 --> 0:08:45.240 know what's wrong with my work? Is there any problem? 0:08:46.080 --> 0:08:48.920 And the employer says no, I would just like to 0:08:48.960 --> 0:08:52.360 have you in the office. It's not a very powerful point. 0:08:52.480 --> 0:08:55.200 I don't think it's going to swing people. I'm just 0:08:55.240 --> 0:08:57.680 thinking about on the that's the demand side. What about 0:08:57.720 --> 0:08:59.839 the supply side, Louie, Is there nobody building out and 0:09:00.200 --> 0:09:03.520 in Australia that those rental vacancy rates have tightened again. 0:09:03.800 --> 0:09:06.960 That's the number one issue I think, James, is that 0:09:07.080 --> 0:09:11.400 on the builder side of supply side, regional Australias regard 0:09:11.440 --> 0:09:15.280 as high risk to build. And the issue is that, 0:09:15.320 --> 0:09:17.320 as I'm sure you're well a where many builders and 0:09:17.360 --> 0:09:22.200 developers require financing and pre sales before they can go 0:09:22.240 --> 0:09:25.720 off and build. The issue is that the financial sector 0:09:25.760 --> 0:09:29.520 or the banks have many black spots in regional Australia 0:09:29.520 --> 0:09:33.160 where they regard the risk profile of these areas. It's 0:09:33.200 --> 0:09:35.760 just too risky for their books. They will not leave. 0:09:35.960 --> 0:09:37.800 I didn't know that, yeah. 0:09:37.840 --> 0:09:41.960 And so that, combined with what has been a shortage 0:09:41.960 --> 0:09:48.760 of builders, has been holding back many development companies from 0:09:48.800 --> 0:09:51.080 building in Regional Australia. They just regard it as too 0:09:51.160 --> 0:09:54.480 high risk. They cannot get the financing properly, they cannot 0:09:54.520 --> 0:09:58.040 get the local labor into build and so yeah, it's 0:09:58.080 --> 0:10:01.120 been a big problem on the supply side for Regional Australia. 0:10:01.280 --> 0:10:07.160 And that risk that the banks determine about house building 0:10:07.160 --> 0:10:12.360 outside the city center and which keeps the vacancy rates 0:10:12.679 --> 0:10:14.960 tight in the regions. I just want to ask you 0:10:15.480 --> 0:10:18.280 what's the risk. Is the risk in the building that 0:10:18.360 --> 0:10:20.920 it's so difficult to build anyway it's harder to build 0:10:21.040 --> 0:10:24.640 outside or are the deeper risks like that for instance? 0:10:24.800 --> 0:10:28.240 Basically the economies of the regions are rarely as dynamic 0:10:28.280 --> 0:10:29.800 as the big cities. Which is it. 0:10:30.559 --> 0:10:34.720 I think it's a combination of factors, James. Historically we've 0:10:34.760 --> 0:10:37.840 seen a lot of volatility in dwelling prices in many 0:10:37.920 --> 0:10:42.600 regional townships. The volatility has just been huge. I'll never 0:10:42.720 --> 0:10:46.880 forget what happened, for example, in Karatha in Western Australia, 0:10:46.920 --> 0:10:50.680 where back in nineteen ninety three the median house prices 0:10:50.760 --> 0:10:54.040 running two hundred thousand dollars, it ran up to over 0:10:54.080 --> 0:10:57.760 a million dollars for a house in Karatha at the 0:10:57.800 --> 0:11:01.000 pink of the mining boom, and then it came all 0:11:01.040 --> 0:11:04.680 the way back in twenty fourteen, back to three hundred 0:11:04.760 --> 0:11:05.480 thousand dollars. 0:11:05.760 --> 0:11:08.480 Oh my, and someone somewhere paid a million bucks for 0:11:08.480 --> 0:11:10.760 our house in Karta at that time. 0:11:10.760 --> 0:11:14.360 And they got smashed. And the problem is that historical 0:11:14.480 --> 0:11:19.720 data features in the in the bank's books. They see this, 0:11:20.640 --> 0:11:24.000 they say, right, this is an area of very high volatility. 0:11:24.640 --> 0:11:27.640 We could see a situation where our loan to value 0:11:27.760 --> 0:11:31.360 ratios in this area really blow out if meetium dwelling 0:11:31.400 --> 0:11:35.200 prices fall like that again. And so we're only willing 0:11:35.240 --> 0:11:39.120 to provide very limited lending to this area or no 0:11:39.360 --> 0:11:42.120 lending at all, and we'll just let another financier take 0:11:42.160 --> 0:11:43.280 care of it. 0:11:43.280 --> 0:11:45.440 It's interesting, isn't it. So there's this notion that you 0:11:45.440 --> 0:11:47.600 can always sell in the city and the banks probably 0:11:47.600 --> 0:11:52.079 have that ingrained. But interestingly, if you are an owner 0:11:52.600 --> 0:11:58.280 in regional Australia, then you've got really good vacancy rates 0:11:58.320 --> 0:12:00.960 from a property owner's point that is there are really 0:12:01.000 --> 0:12:04.400 tight and remain tight. That's really interesting. That is a 0:12:04.400 --> 0:12:07.240 big picture of developments that I hadn't quite been aware of. 0:12:08.000 --> 0:12:11.040 Yeah, it's something I think we need to fundamentally resolve 0:12:11.080 --> 0:12:14.040 because I think Australia's long term future does lie of 0:12:14.120 --> 0:12:17.880 the regions. Of course, once upon a time we used 0:12:17.880 --> 0:12:20.439 to look at the United States as a very successful 0:12:20.840 --> 0:12:24.640 and very strong economy. Obviously it's had its weaknesses of late, 0:12:24.679 --> 0:12:27.160 but one of the key drivers to its long term 0:12:27.200 --> 0:12:32.840 success was the development of inland towns and cities, townships, 0:12:32.880 --> 0:12:36.840 small townships turning into large cities. And I've got a 0:12:36.880 --> 0:12:39.599 great belief that we need to see that here in Australia. 0:12:40.559 --> 0:12:43.840 We cannot just simply rely on our coastal townships forever 0:12:44.120 --> 0:12:46.800 when we have this mass, we have this massive land 0:12:46.840 --> 0:12:50.560 mass in Australia and these regional townships where they are 0:12:50.600 --> 0:12:53.840 local economies. Yes, they can be fickle, but there is 0:12:53.880 --> 0:12:57.320 a there is an economy there, and one way or 0:12:57.320 --> 0:12:59.719 the other they will grow. But we should be doing 0:12:59.760 --> 0:13:01.600 every we can to. But still it take that. 0:13:01.600 --> 0:13:03.960 Grousth Okay, it's probably a long time since we saw 0:13:04.040 --> 0:13:07.319 consistent price growth and rental demand in regional centers like 0:13:07.440 --> 0:13:12.120 consistent of which we've had for one reason or another 0:13:12.320 --> 0:13:15.440 says for four years now basically, And as you say, 0:13:15.480 --> 0:13:18.640 what's really interesting is anybody familiar with the market would 0:13:18.679 --> 0:13:20.920 have said, Okay, with those vacancy rates in the regions, 0:13:20.960 --> 0:13:22.920 you know, they've got to watch them fly up when 0:13:22.960 --> 0:13:26.240 everything settles down post COVID, and as you say, that 0:13:26.320 --> 0:13:29.559 hasn't happened, which is a very interesting point. Okay, we'll 0:13:29.559 --> 0:13:42.400 take a short break. We'll be back in a moment. Hello, 0:13:42.480 --> 0:13:45.719 and welcome back to The Australian's Money Puzzle podcast. I'm 0:13:45.800 --> 0:13:48.959 James kirkby Well, the editor at The Australian, talking today 0:13:49.000 --> 0:13:52.480 to Louis Christopher of SQM Research. Louis is one of 0:13:52.520 --> 0:13:59.040 the leading interpreters and researchers on property in Australia. Widely quoted. 0:13:59.080 --> 0:14:02.000 I'm sure you're familiar with him already. We know each 0:14:02.040 --> 0:14:04.200 other for a long time. I've always talked to him 0:14:04.679 --> 0:14:08.000 when I want to get a view, a studied view, 0:14:08.040 --> 0:14:10.200 if you like, of the market based on data, which 0:14:10.240 --> 0:14:12.040 is his own data that he works on in his 0:14:12.120 --> 0:14:16.520 own group, SQM Research. Louis looking, we're coming towards the 0:14:16.640 --> 0:14:21.880 end of twenty twenty four and certain things are certain 0:14:21.920 --> 0:14:25.400 sort of fundamentals in the market remain sort of broadly 0:14:25.440 --> 0:14:28.520 in place. We have rates that are perhaps higher than 0:14:28.560 --> 0:14:31.800 we're used to in recent times, certainly the last decade, 0:14:32.120 --> 0:14:35.880 we've got vacancy rates consistently low. And then there's some 0:14:35.920 --> 0:14:40.360 interesting things happening in the market that every investor should know. 0:14:40.680 --> 0:14:44.680 One of them, which is, if nothing else entertaining, is 0:14:44.720 --> 0:14:50.080 that units and apartments are doing better than houses. Just now, 0:14:51.200 --> 0:14:53.920 could you explain to people why that's happening and then 0:14:53.960 --> 0:14:56.040 your view as to how long it could keep going? 0:14:56.680 --> 0:14:59.240 Yes, James, I might talk about it in terms of 0:14:59.280 --> 0:15:03.000 certain city and why this is happening is it's not 0:15:03.040 --> 0:15:05.600 happening everywhere, but it has been happening in our two 0:15:05.640 --> 0:15:10.160 largest capital cities in more recent times. Now, what we've 0:15:10.240 --> 0:15:14.640 been finding and what I've concluded now is that during 0:15:15.400 --> 0:15:20.400 softening markets in Australia, what we tend to see is 0:15:20.600 --> 0:15:27.200 units outperforming houses. In a softening period. During a growth period, 0:15:27.880 --> 0:15:30.920 we tend to see the opposite, free standing houses doing 0:15:31.000 --> 0:15:34.920 better than units. And we've got to ask ourselves, well why, 0:15:35.520 --> 0:15:39.520 I think in part units essentially offer a little bit 0:15:39.520 --> 0:15:45.360 more of a defensive characteristic compared to houses. Houses. Now, 0:15:45.400 --> 0:15:48.560 of course, when we think about our house has mentioned 0:15:49.040 --> 0:15:52.760 the median free standing house price and cities running at 0:15:52.800 --> 0:15:56.520 one point nine million dollars, that means not every investor 0:15:56.600 --> 0:15:59.680 can afford to jump into our house in Sydney which 0:15:59.720 --> 0:16:03.960 to make investment. It's very high on entry level, whereas 0:16:04.120 --> 0:16:07.680 units are a far lower entry level. Also, over and 0:16:07.680 --> 0:16:12.280 above that, I believe units have been offering more stable 0:16:12.600 --> 0:16:16.880 income in terms of rents because they generally are target 0:16:16.960 --> 0:16:20.600 the more affordable end of the tenancy market where there's 0:16:20.640 --> 0:16:25.520 a lot more demand. This combined with the fact that 0:16:25.600 --> 0:16:29.520 we've been underbuilding units for a long time now, as 0:16:29.560 --> 0:16:33.840 we're well aware, we've got a significant shortage of residential 0:16:33.920 --> 0:16:37.800 dwellings in this country. And by the fact that we've 0:16:37.800 --> 0:16:42.480 been underbuilding homes, that means really we've been underbuilding units 0:16:43.240 --> 0:16:47.960 because we build more units than freestanding houses nowadays, and 0:16:48.800 --> 0:16:53.880 with that undersupply, I think that's meant that when we 0:16:53.920 --> 0:16:58.280 see downturns, we no longer see units under performing or 0:16:58.320 --> 0:17:03.120 falling further. Now a few caveats here, I wouldn't wish 0:17:03.120 --> 0:17:06.159 to be buying in off the plan development at the 0:17:06.160 --> 0:17:09.119 start of a downturn. I think you would see significant 0:17:09.200 --> 0:17:13.280 underperformance in that scenario, and I generally stay well clear 0:17:13.400 --> 0:17:17.640 of new dwellings on that front. So I think this 0:17:17.720 --> 0:17:19.880 is one of the key reasons why we've been seeing 0:17:19.960 --> 0:17:24.160 so Yes, our data shows during downturns, more recent downturns, 0:17:24.240 --> 0:17:27.680 units have been performing better during upturns. Free standing house. 0:17:27.840 --> 0:17:33.560 There's some contradiction. Maybe the unit prices are performing better right, 0:17:33.880 --> 0:17:37.000 which you say compared to houses, which you say happens 0:17:37.359 --> 0:17:40.119 in a softening period. But it's not softening or is 0:17:40.160 --> 0:17:42.159 it softening just now? We had a good start of 0:17:42.160 --> 0:17:44.560 the year, the first six months were strong. How would 0:17:44.560 --> 0:17:46.359 you see it as a signal that the market's going 0:17:46.400 --> 0:17:46.880 to get softer. 0:17:48.080 --> 0:17:50.679 I believe the Sydney and Melbourne market, so that the 0:17:50.720 --> 0:17:53.960 markets are now two largest capital cities are softening as 0:17:54.000 --> 0:17:58.200 we speak. Okay, right, we're seeing it in weak option 0:17:58.400 --> 0:18:01.080 clearance rates of singeing in Melbourne. We've been naturally seeing 0:18:01.119 --> 0:18:03.719 it since about the month of Duke. We're seeing it 0:18:03.760 --> 0:18:08.359 and falling asking prices so vendors in senior Melbourne have 0:18:08.480 --> 0:18:12.720 become more negotiable. Now. I don't want to overtop this, James. 0:18:12.760 --> 0:18:15.159 We're not saying any type of housing crash on anything 0:18:15.280 --> 0:18:18.320 like that, and we wait have to very very unlikely 0:18:18.359 --> 0:18:23.440 we'll get such a major downturn. But I think we 0:18:23.520 --> 0:18:27.120 are falling and singing in Melbourne on an annualized rate 0:18:27.240 --> 0:18:30.080 now running about four to five percent. 0:18:30.840 --> 0:18:35.840 Right, So you see going into the twenty twenty five 0:18:37.480 --> 0:18:40.679 Melbourne and Sydney you see them as soft. 0:18:42.320 --> 0:18:44.640 I see them as soft now, James. But I think 0:18:44.760 --> 0:18:47.240 there's a lot of water under the bridge still until 0:18:47.280 --> 0:18:49.639 we get to twenty twenty five, and the year twenty 0:18:49.720 --> 0:18:53.160 twenty five itself will be most interesting. One of the 0:18:53.160 --> 0:18:55.920 big variables out there is what happens with interest rates. 0:18:55.960 --> 0:18:57.480 Yes, yes, yeah. 0:18:57.640 --> 0:19:02.440 So some months back I was talk of course of 0:19:02.600 --> 0:19:05.840 I'm potentially an interest rate rise. That sort of changed 0:19:05.880 --> 0:19:10.080 given the recent market volatility and the money markets are 0:19:10.119 --> 0:19:13.480 looking increasingly like they're crossing in multiple interest rate cuts 0:19:13.480 --> 0:19:16.480 in this country starting from towards the end of this year. 0:19:16.800 --> 0:19:20.560 That will change things in the big way I expect. Yeah, okay, 0:19:20.600 --> 0:19:21.959 well we'll put that. We'll put that on one. 0:19:21.960 --> 0:19:22.160 Sorry. 0:19:22.200 --> 0:19:24.520 From the something I want to catch something I wanted 0:19:24.560 --> 0:19:27.159 to ask you, which I often ask guests who have 0:19:27.240 --> 0:19:29.920 actually helicopter view and on the basis of what you've 0:19:29.920 --> 0:19:34.240 been seeing, if Louis Christopher I said to you, I 0:19:34.320 --> 0:19:38.840 have a million dollars to invest in residential property anywhere 0:19:39.000 --> 0:19:45.920 in Australia, in any sort of property, what would you. 0:19:45.359 --> 0:19:48.160 Where would you be pointing me, well, I'm a great 0:19:48.160 --> 0:19:49.440 believer in diversification. 0:19:50.440 --> 0:19:51.800 Are you going to tell me to split it up? 0:19:52.880 --> 0:19:55.560 Bets? Yeah, very hard. It's split a million dollars for 0:19:55.600 --> 0:19:59.200 example in Sydney where I live. Look, I'm also believe 0:19:59.480 --> 0:20:02.600 that in in an area you know well and generally 0:20:02.640 --> 0:20:05.240 be an investment in a NASA class you also know well. 0:20:05.880 --> 0:20:09.200 So for me personally, I probably would use the money 0:20:09.240 --> 0:20:11.800 to take out another property in city in Sydney. 0:20:11.880 --> 0:20:13.960 Yes, but that is your personal because you know. 0:20:14.200 --> 0:20:18.119 That's my personal point of view. Now, if I had 0:20:18.240 --> 0:20:21.639 all my properties in Sydney already, then I would look 0:20:21.840 --> 0:20:25.600 to invest in another city, and that another city probably 0:20:25.600 --> 0:20:26.640 would be Brisbane. 0:20:26.840 --> 0:20:31.840 Okay, So even though you know Melbourne is has been weaker. 0:20:31.800 --> 0:20:35.360 I know Melbourn's been weaker, but that doesn't necessarily mean 0:20:35.400 --> 0:20:38.920 one should disautomatically jump into that market. From a longer 0:20:39.000 --> 0:20:43.280 term perspective, I'm interested in understanding the longer term economic 0:20:43.280 --> 0:20:46.439 opportunities for a city in state, and I believe Queens 0:20:46.480 --> 0:20:49.920 Aint's got the better economic opportunities over the next ten years. 0:20:50.200 --> 0:20:53.280 Yeah, right, Okay, what makes you say that apart from 0:20:53.280 --> 0:20:56.080 the Olympics. Sort of buzz the Olympics. 0:20:55.720 --> 0:20:58.280 It's one definently in fact, the taxation regimes a little 0:20:58.280 --> 0:21:00.600 bit better and Queens aren't compared to Victoria right now, 0:21:01.000 --> 0:21:04.600 is not a fact that we've spoken earlier about the 0:21:04.680 --> 0:21:09.000 state migration flows Now that's been a longer term trenders. 0:21:09.000 --> 0:21:11.679 I'm sure you're well aware, but there's no evidence at 0:21:11.680 --> 0:21:13.600 this point in time to suggest that's about to slow 0:21:13.600 --> 0:21:15.960 in Queensland. If anything has been speeding up. I think 0:21:16.000 --> 0:21:22.360 too that supply side of property has been changing in Queensland. 0:21:22.440 --> 0:21:26.320 So once upon a time, for example, on the Gold Coast, 0:21:26.960 --> 0:21:29.399 you would have a lot of builders and developers build 0:21:29.400 --> 0:21:33.960 their high rise developments there on the coast on speculation. Okay, 0:21:34.720 --> 0:21:38.280 Now I've been noticing in more recent cycles that developers 0:21:38.320 --> 0:21:40.919 no longer do that they cannot build on speck anymore. 0:21:40.960 --> 0:21:45.520 They need the pre sales and so the typical boom 0:21:45.640 --> 0:21:48.520 bus crunch, which you know that the bus is generally 0:21:48.560 --> 0:21:53.040 delivered by oversupplies, no longer apparent in southeast Queensland. And 0:21:53.080 --> 0:21:55.280 I would also argue that's a case of cross Queens 0:21:55.280 --> 0:21:57.920 and probably out of countries out of states as well. 0:21:58.400 --> 0:22:01.960 But that combined with this long to increase an underlying 0:22:02.000 --> 0:22:05.840 demand which I expect to continue on that with the 0:22:05.920 --> 0:22:11.280 lower with a better taxation profile property investors, I believe 0:22:11.320 --> 0:22:15.440 that makes Queensland are pretty solid case or investment. I 0:22:15.480 --> 0:22:16.080 have a long time. 0:22:16.160 --> 0:22:19.480 Okay, very interesting and very interesting and always great to 0:22:19.520 --> 0:22:22.680 have a guest who will actually make a call, So 0:22:22.760 --> 0:22:24.800 thank you for that. All right, we will be back 0:22:24.800 --> 0:22:33.760 in a moment. Folks. Hello, welcome back to The Australian's 0:22:33.800 --> 0:22:37.119 Money Positive podcast. I'm James Kirby with Louis Christopher and 0:22:37.200 --> 0:22:40.920 we are talking big picture on property today, standing back 0:22:40.920 --> 0:22:43.520 and looking at all the data that we know, what 0:22:43.640 --> 0:22:46.200 are the big takeaways in the market And I think 0:22:46.240 --> 0:22:48.240 in the first two segments of the show some really 0:22:48.280 --> 0:22:53.840 interesting observations there about how the market has changed, how 0:22:54.520 --> 0:22:59.120 ex Melbourne and Sydney for instance, those markets are stronger 0:22:59.160 --> 0:23:04.200 and have deeper dynamics we perhaps were used to traditionally, 0:23:05.000 --> 0:23:08.280 and the extended low vacancy rate sort of proves that. 0:23:08.720 --> 0:23:14.359 I like Louis's observations on Queensland as a potential property performer. 0:23:14.560 --> 0:23:17.280 All the talk of courses in the market is about Melbourne, 0:23:17.320 --> 0:23:19.600 that Melbourne is at a discount basically, then it must 0:23:19.640 --> 0:23:23.000 be a bargain. Who's to say that may not be 0:23:23.080 --> 0:23:26.199 the case if you look at those internal migration figures, 0:23:26.200 --> 0:23:29.720 if you look at the property disposition if you like, 0:23:29.880 --> 0:23:32.479 of the regime in Queensland compared to Melbourne, and they 0:23:32.520 --> 0:23:36.760 are certainly well to reverse that in the Victorian government 0:23:36.840 --> 0:23:39.960 or the least property friendly state, that's for sure. These 0:23:39.960 --> 0:23:43.320 things are very important for long term investors. Okay, Louis well, 0:23:43.320 --> 0:23:45.359 a couple of other things I wanted to talk to 0:23:45.400 --> 0:23:47.960 you about. They are different than the first parts of 0:23:48.000 --> 0:23:51.360 the show, but interesting for all our listeners. First of all, 0:23:52.720 --> 0:23:54.520 with one thing that home buyers are doing at the 0:23:54.560 --> 0:23:57.200 moment our homeowners are doing at the moment in property 0:23:57.200 --> 0:23:59.800