1 00:00:04,080 --> 00:00:06,600 Sean Aylmer: Welcome to the Fear and Greed daily interview. I'm Sean 2 00:00:06,600 --> 00:00:10,350 Sean Aylmer: Aylmer. House prices are continuing to fall with the market 3 00:00:10,350 --> 00:00:13,710 Sean Aylmer: recording the biggest monthly drop in values in almost 40 4 00:00:13,830 --> 00:00:16,950 Sean Aylmer: years. While the decline is still led by Sydney, it's 5 00:00:16,950 --> 00:00:19,590 Sean Aylmer: become a lot more widespread. I wanted to find out 6 00:00:19,590 --> 00:00:22,620 Sean Aylmer: what's ahead as we enter the spring selling season. The 7 00:00:22,620 --> 00:00:25,619 Sean Aylmer: best person for that is Tim Lawless, research director for 8 00:00:25,620 --> 00:00:28,620 Sean Aylmer: Asia Pacific at Core Logic, which of course, produced the 9 00:00:28,620 --> 00:00:30,390 Sean Aylmer: numbers. Tim, welcome back to Fear and Greed. 10 00:00:30,900 --> 00:00:32,729 Tim Lawless: Sean, thank you. Great to be here again. 11 00:00:33,270 --> 00:00:36,180 Sean Aylmer: You must be very, very busy. Everyone's talking about house prices. 12 00:00:37,140 --> 00:00:40,770 Tim Lawless: Absolutely. I think a transition in the market is always 13 00:00:40,770 --> 00:00:42,779 Tim Lawless: going to be something to talk about, but for an 14 00:00:42,780 --> 00:00:45,780 Tim Lawless: analytics company like Core Logic, it does make things a 15 00:00:45,780 --> 00:00:48,210 Tim Lawless: bit more busy, which is a good place to be. 16 00:00:48,600 --> 00:00:52,680 Sean Aylmer: Okay. Take me through the numbers for August. They look 17 00:00:53,220 --> 00:00:57,450 Sean Aylmer: awful, though there are some signs in Sydney and Melbourne 18 00:00:57,840 --> 00:01:00,060 Sean Aylmer: that we might be at the worst of the falls. 19 00:01:00,060 --> 00:01:00,810 Sean Aylmer: Is that fair to say? 20 00:01:01,590 --> 00:01:05,520 Tim Lawless: Potentially. It really depends. Awful is one way to describe 21 00:01:05,520 --> 00:01:07,530 Tim Lawless: it, but for people looking to buy into the market, 22 00:01:07,530 --> 00:01:10,230 Tim Lawless: they're probably looking at these numbers and saying, " This is great." 23 00:01:10,650 --> 00:01:10,830 Sean Aylmer: Yeah. 24 00:01:11,670 --> 00:01:14,430 Tim Lawless: We have seen housing prices fall now for the fourth 25 00:01:14,430 --> 00:01:18,959 Tim Lawless: consecutive month. They were down 1. 6% nationally, not much 26 00:01:18,959 --> 00:01:22,440 Tim Lawless: difference between the capital cities and the regional markets. They 27 00:01:22,440 --> 00:01:27,240 Tim Lawless: are down 1.6 and 1. 5%. As you say, Sydney is still leading 28 00:01:27,240 --> 00:01:30,030 Tim Lawless: things. The market there peaked a lot earlier. It was 29 00:01:30,030 --> 00:01:32,610 Tim Lawless: actually back in January of this year that the market 30 00:01:32,610 --> 00:01:37,140 Tim Lawless: hit a peak. Since then, the market's down 7.4%. That's 31 00:01:37,140 --> 00:01:41,100 Tim Lawless: why in terms of the actual fallen values, that's why 32 00:01:41,130 --> 00:01:43,830 Tim Lawless: quite a few hundreds of thousands of dollars off the 33 00:01:43,830 --> 00:01:47,250 Tim Lawless: actual typical price of a dwelling in that market. Of 34 00:01:47,250 --> 00:01:50,490 Tim Lawless: course, it is still typical value of a house in Sydney 35 00:01:50,490 --> 00:01:53,580 Tim Lawless: is still up at $ 1. 3 million. It's still quite expensive. 36 00:01:53,850 --> 00:01:56,010 Sean Aylmer: Yeah. I suppose we need to keep this in context, 37 00:01:56,370 --> 00:01:59,250 Sean Aylmer: because was it 22%, the price rises last year? 38 00:02:00,330 --> 00:02:03,750 Tim Lawless: Yeah. Well, across the capital cities, we saw housing prices 39 00:02:03,750 --> 00:02:08,519 Tim Lawless: rise by, well, 26% from the trough through to the peak. 40 00:02:09,030 --> 00:02:13,139 Tim Lawless: Regional prices are up about 42%. Absolutely huge numbers in 41 00:02:13,139 --> 00:02:16,800 Tim Lawless: terms of the upswing. Sydney housing prices were up about 42 00:02:16,800 --> 00:02:20,490 Tim Lawless: 28% from trough to peak. Yeah, the context is really 43 00:02:20,490 --> 00:02:23,520 Tim Lawless: important, and it seems to be most of the areas 44 00:02:23,520 --> 00:02:26,940 Tim Lawless: that are recording fairly substantial declines at the moment are 45 00:02:26,940 --> 00:02:30,989 Tim Lawless: also those same areas that recorded a more substantial upswing. 46 00:02:31,440 --> 00:02:35,070 Sean Aylmer: Okay. Brisbane is a market which I know not much 47 00:02:35,070 --> 00:02:37,920 Sean Aylmer: about, but it's been really interesting to watch, because it 48 00:02:38,310 --> 00:02:40,470 Sean Aylmer: probably started later, but it was going hard while some 49 00:02:40,470 --> 00:02:42,960 Sean Aylmer: of Melbourne and Sydney was going backwards, but it seems 50 00:02:42,960 --> 00:02:44,700 Sean Aylmer: to have well and truly peaked now. 51 00:02:45,180 --> 00:02:49,590 Tim Lawless: Yeah. The Brisbane market has been exceptional. Values have risen 52 00:02:49,590 --> 00:02:54,030 Tim Lawless: by about 43% there. It's like somebody's flipped a switch 53 00:02:54,030 --> 00:02:57,149 Tim Lawless: the last couple of months. We saw the market peak 54 00:02:57,210 --> 00:03:01,500 Tim Lawless: back in June, and a fairly mild decline in prices 55 00:03:01,500 --> 00:03:05,490 Tim Lawless: through July, but August was down 1. 8%, which for 56 00:03:05,490 --> 00:03:09,900 Tim Lawless: a monthly change, that's significant, especially this early in the 57 00:03:09,900 --> 00:03:13,440 Tim Lawless: down cycle. That 1. 8% drop in Brisbane was the 58 00:03:13,440 --> 00:03:17,220 Tim Lawless: second largest drop of any capital city after Sydney. Yeah, 59 00:03:17,220 --> 00:03:22,169 Tim Lawless: it's definitely changed direction quite quickly. Again, after the context 60 00:03:22,169 --> 00:03:23,700 Tim Lawless: of such a spectacular upswing. 61 00:03:24,210 --> 00:03:27,930 Sean Aylmer: Are there any parts still, any capital cities still going 62 00:03:27,930 --> 00:03:28,889 Sean Aylmer: in a positive direction? 63 00:03:29,610 --> 00:03:32,880 Tim Lawless: Well, we got Darwin is the only capital city where 64 00:03:32,880 --> 00:03:36,360 Tim Lawless: housing values are still rising. They were up nearly 1% in a month. 65 00:03:36,450 --> 00:03:36,720 Sean Aylmer: Wow. 66 00:03:37,920 --> 00:03:41,760 Tim Lawless: Quite a significant bucking of the trend there, but Darwin's 67 00:03:41,760 --> 00:03:45,720 Tim Lawless: an interesting market. It quite often is countercyclical, in the 68 00:03:45,720 --> 00:03:48,870 Tim Lawless: sense that it doesn't tend to follow the broader capital 69 00:03:48,870 --> 00:03:54,090 Tim Lawless: city cycles. It's still an extraordinarily affordable market, and prices 70 00:03:54,090 --> 00:03:57,510 Tim Lawless: are actually still about 10% lower now than what they 71 00:03:57,510 --> 00:04:00,180 Tim Lawless: were all the way back in 2014, because it's been 72 00:04:00,180 --> 00:04:04,350 Tim Lawless: through such a long running downturn prior to COVID. Yeah, 73 00:04:04,590 --> 00:04:07,080 Tim Lawless: quite different from the larger capitals. 74 00:04:07,260 --> 00:04:08,730 Sean Aylmer: Okay. I want to get onto the regional areas in 75 00:04:08,730 --> 00:04:11,100 Sean Aylmer: a moment, but I'm just interested in the house, the 76 00:04:11,160 --> 00:04:13,950 Sean Aylmer: apartments. Of course, houses ran up much harder than apartments 77 00:04:13,950 --> 00:04:19,530 Sean Aylmer: did. What's happening in the apartment market vis a vis the housing market? 78 00:04:19,800 --> 00:04:23,490 Tim Lawless: Well, I wouldn't say apartment prices are completely immune from 79 00:04:23,520 --> 00:04:27,000 Tim Lawless: this downturn caused by higher interest rates, but they are 80 00:04:27,060 --> 00:04:30,060 Tim Lawless: certainly not falling as sharply as what house values are. 81 00:04:30,630 --> 00:04:32,790 Tim Lawless: Again, I think the context here is just the really 82 00:04:32,790 --> 00:04:35,820 Tim Lawless: sharp rise and house values through the pandemic is everybody 83 00:04:35,820 --> 00:04:39,750 Tim Lawless: was looking for low density housing options and more space, 84 00:04:39,750 --> 00:04:43,680 Tim Lawless: that really drove house prices higher through the growth cycle. 85 00:04:43,680 --> 00:04:47,250 Tim Lawless: House values are up about 30% across the capital cities, 86 00:04:47,670 --> 00:04:52,799 Tim Lawless: whereas unit values only increased by 13%. At the moment, 87 00:04:52,800 --> 00:04:55,530 Tim Lawless: we are seeing unit values falling they're down about 2. 7% 88 00:04:56,490 --> 00:04:59,820 Tim Lawless: from their peak back in April, but house values across 89 00:04:59,820 --> 00:05:03,810 Tim Lawless: the capital city are down by 4. 6%, same month 90 00:05:03,810 --> 00:05:06,750 Tim Lawless: of peak back in April. Definitely seeing a little bit 91 00:05:06,750 --> 00:05:10,620 Tim Lawless: more of a sharper drop in lower density styles of 92 00:05:10,620 --> 00:05:13,349 Tim Lawless: dwellings. Again, on the back of a stronger upswing. 93 00:05:13,830 --> 00:05:15,630 Sean Aylmer: Stay with me, Tim. We'll be back in a minute. 94 00:05:22,080 --> 00:05:24,480 Sean Aylmer: My guest this morning is Tim Lawless, a research director 95 00:05:24,510 --> 00:05:28,830 Sean Aylmer: for Asia Pacific at Core Logic. Okay. Tim Lawless from 96 00:05:28,830 --> 00:05:31,890 Sean Aylmer: Core Logic, the big question is, how far do we 97 00:05:31,890 --> 00:05:34,589 Sean Aylmer: go? When do we start seeing prices stabilize? 98 00:05:35,400 --> 00:05:37,680 Tim Lawless: Yeah, that's such a hard question to answer. I think 99 00:05:37,680 --> 00:05:39,690 Tim Lawless: even at the best of times, it's hard to provide 100 00:05:39,690 --> 00:05:42,180 Tim Lawless: an accurate forecast when there's a bit more certainty around, 101 00:05:42,180 --> 00:05:45,630 Tim Lawless: but at the moment, uncertainty is just rife. It really 102 00:05:45,630 --> 00:05:48,630 Tim Lawless: depends on what happens with interest rates. Even just look 103 00:05:48,630 --> 00:05:51,870 Tim Lawless: at the mainstream cash rate forecasts coming out of, say, 104 00:05:51,870 --> 00:05:56,820 Tim Lawless: the banking sector or financial markets. They range from at the 105 00:05:56,820 --> 00:05:59,790 Tim Lawless: low end of about 2. 6% is a terminal cash rate, 106 00:06:00,240 --> 00:06:03,810 Tim Lawless: up to looking at the financial markets, they recently just 107 00:06:03,810 --> 00:06:06,900 Tim Lawless: got back into the 4% range, and just dropped down to 3. 108 00:06:07,200 --> 00:06:11,400 Tim Lawless: 8s. There's a huge range in where interest rates may 109 00:06:11,400 --> 00:06:14,670 Tim Lawless: actually land. I think for housing markets, as soon as 110 00:06:14,670 --> 00:06:18,239 Tim Lawless: we do start to see the cash rates stabilizing, that 111 00:06:18,240 --> 00:06:21,870 Tim Lawless: probably will flow through to some stabilization in housing prices. 112 00:06:22,500 --> 00:06:24,989 Tim Lawless: We are seeing a few forecasts now that interest rates 113 00:06:24,990 --> 00:06:27,420 Tim Lawless: may even start to reduce through the second half of 114 00:06:27,420 --> 00:06:30,600 Tim Lawless: next year or late next year. If that's the case, 115 00:06:30,600 --> 00:06:33,839 Tim Lawless: that could be the catalyst for a subtle growth phase 116 00:06:33,839 --> 00:06:34,680 Tim Lawless: to commence. 117 00:06:35,760 --> 00:06:40,140 Sean Aylmer: Interest rates drive the market. Is it all interest rates, 118 00:06:40,200 --> 00:06:42,990 Sean Aylmer: or are there other things, like affordability in that that 119 00:06:42,990 --> 00:06:43,920 Sean Aylmer: play a major role? 120 00:06:44,430 --> 00:06:46,169 Tim Lawless: There's a heap of other things. I think at the 121 00:06:46,170 --> 00:06:51,420 Tim Lawless: moment, absolutely interest rates are the primary influence, but even before 122 00:06:51,420 --> 00:06:55,080 Tim Lawless: interest rates started rising back in May, we're already seeing 123 00:06:55,080 --> 00:06:57,839 Tim Lawless: Sydney housing prices were falling, that they peaked back in 124 00:06:57,839 --> 00:07:01,710 Tim Lawless: January. That was very much due to things like affordability 125 00:07:01,710 --> 00:07:06,390 Tim Lawless: becoming much more challenging, fixed rate mortgages were already rising, 126 00:07:06,390 --> 00:07:10,320 Tim Lawless: sentiment had fallen, inflation was already rising at more than 127 00:07:10,320 --> 00:07:14,490 Tim Lawless: 1% quarter on quarter. Back through previous either upswings or 128 00:07:14,490 --> 00:07:17,220 Tim Lawless: down swings, you can really clearly see that the catalyst catalysts have been 129 00:07:17,460 --> 00:07:20,370 Tim Lawless: very different from interest rates. That the last downturn, for 130 00:07:20,370 --> 00:07:24,000 Tim Lawless: example, that ran between the middle of 2017 and the 131 00:07:24,000 --> 00:07:27,330 Tim Lawless: middle of 2019, was all about credit tightening, through either 132 00:07:27,330 --> 00:07:31,440 Tim Lawless: a macro credential policies or the Royal Commission. Then after 133 00:07:31,440 --> 00:07:34,860 Tim Lawless: the GFC, it was more about the removal of fiscal support following 134 00:07:34,950 --> 00:07:38,640 Tim Lawless: all those incentives and financial support that was introduced as 135 00:07:38,640 --> 00:07:41,910 Tim Lawless: part of the global financial crisis. Yeah, there's always something 136 00:07:41,910 --> 00:07:44,070 Tim Lawless: different that's driving the market, but at the moment, I 137 00:07:44,070 --> 00:07:47,040 Tim Lawless: think it's fair to say that interest rates are the biggest. 138 00:07:47,700 --> 00:07:49,650 Sean Aylmer: We haven't really spoken about the regions, some of the 139 00:07:49,650 --> 00:07:51,900 Sean Aylmer: regions. Well, you mentioned just how hard some of the 140 00:07:51,900 --> 00:07:56,460 Sean Aylmer: regions ran. How are they performing? Generally, that's a very 141 00:07:56,460 --> 00:07:58,230 Sean Aylmer: hard question, because there are so many regions out there. 142 00:07:59,370 --> 00:08:01,320 Tim Lawless: We broadly look at the rest of state markets, and 143 00:08:01,530 --> 00:08:04,200 Tim Lawless: then I'll drill down into some of the more interesting 144 00:08:04,410 --> 00:08:07,170 Tim Lawless: areas. If you look across regional New South Wales, really 145 00:08:07,170 --> 00:08:10,170 Tim Lawless: good example, we saw housing values across that really broad 146 00:08:10,170 --> 00:08:14,040 Tim Lawless: region increased by 48% from the trough through to the 147 00:08:14,040 --> 00:08:16,680 Tim Lawless: peak. The peak was in May, so lining up with 148 00:08:16,710 --> 00:08:21,420 Tim Lawless: higher interest rates. Regional Victoria was up 35%, regional Queensland 149 00:08:21,420 --> 00:08:24,480 Tim Lawless: was up 43%, but we're seeing all of these markets 150 00:08:24,480 --> 00:08:28,980 Tim Lawless: now reducing in value. Not as quickly as, say, Sydney 151 00:08:28,980 --> 00:08:31,140 Tim Lawless: is. There seems to be a bit of a lag here, 152 00:08:31,620 --> 00:08:35,250 Tim Lawless: but if we start to look, scratch back the surface 153 00:08:35,250 --> 00:08:37,320 Tim Lawless: and look at some of the smaller areas around the 154 00:08:37,320 --> 00:08:41,429 Tim Lawless: country, look at somewhere like the Southern Highlands or Byron 155 00:08:41,429 --> 00:08:45,030 Tim Lawless: Bay, two markets where we saw housing values rise by 156 00:08:45,030 --> 00:08:48,240 Tim Lawless: a little bit more than 50% through the upswing. They're 157 00:08:48,240 --> 00:08:51,840 Tim Lawless: now down quite substantially since they peaked back in either 158 00:08:51,840 --> 00:08:54,900 Tim Lawless: April or May in those regions. Those are down sort 159 00:08:54,900 --> 00:08:58,020 Tim Lawless: of seven to 8% in those markets. There is quite 160 00:08:58,020 --> 00:09:00,510 Tim Lawless: a bit of diversity. It gets the more far flung, 161 00:09:00,510 --> 00:09:03,989 Tim Lawless: rural markets, more agricultural markets. We're still seeing some of 162 00:09:03,990 --> 00:09:07,500 Tim Lawless: those areas rising in value, because they're quite disconnected from 163 00:09:07,500 --> 00:09:11,640 Tim Lawless: the broader cycle, and more influenced by the local economic conditions. 164 00:09:11,970 --> 00:09:15,150 Sean Aylmer: Okay. What does all this mean? I know what it 165 00:09:15,150 --> 00:09:17,130 Sean Aylmer: means for me because I own a house and I want 166 00:09:17,460 --> 00:09:20,429 Sean Aylmer: to go up in value, but what about people, particularly 167 00:09:20,429 --> 00:09:23,309 Sean Aylmer: those who have taken loans out over the past couple 168 00:09:23,309 --> 00:09:25,770 Sean Aylmer: of years? Is there a concern that they'll go into negative 169 00:09:25,770 --> 00:09:28,770 Sean Aylmer: equity, where they actually, the house is worth less than 170 00:09:28,770 --> 00:09:31,080 Sean Aylmer: what they owe? Is that a worry? Do you think 171 00:09:31,110 --> 00:09:33,929 Sean Aylmer: we'll see people not putting their houses on the markets 172 00:09:33,929 --> 00:09:37,050 Sean Aylmer: as much, people be trying private treaties or sales rather 173 00:09:37,050 --> 00:09:39,270 Sean Aylmer: than auctions? How does it all manifest itself? 174 00:09:39,809 --> 00:09:43,559 Tim Lawless: Well, I think considering the speed and the magnitude of 175 00:09:43,559 --> 00:09:47,189 Tim Lawless: the upswing, negative equity is probably a pretty low risk 176 00:09:47,250 --> 00:09:50,340 Tim Lawless: at the moment. Even if we saw housing values fall 177 00:09:50,340 --> 00:09:54,870 Tim Lawless: by, say, 15% on a combined capital's index, that's taking 178 00:09:54,900 --> 00:09:57,210 Tim Lawless: the index back to where it was sort of early 179 00:09:57,210 --> 00:10:01,260 Tim Lawless: 2021. It's not wiping all that much off in terms 180 00:10:01,260 --> 00:10:04,739 Tim Lawless: of time. Anybody who's owned a home for more than, 181 00:10:04,740 --> 00:10:07,410 Tim Lawless: say, 12 or 18 months is probably going to be in a 182 00:10:07,410 --> 00:10:10,980 Tim Lawless: fairly firm, positive position, at least based on the value 183 00:10:10,980 --> 00:10:12,630 Tim Lawless: of their home, compared to what they paid for it. 184 00:10:12,960 --> 00:10:15,390 Tim Lawless: Equity is a whole different thing, because generally you'll find 185 00:10:15,390 --> 00:10:17,640 Tim Lawless: most people would've had at least a 10% deposit, and 186 00:10:17,640 --> 00:10:20,970 Tim Lawless: they've probably already paid down some of their principle. Negative 187 00:10:20,970 --> 00:10:24,569 Tim Lawless: equity is even a more distant risk. I think coming 188 00:10:24,570 --> 00:10:26,730 Tim Lawless: into spring, this is going to be the real test 189 00:10:26,730 --> 00:10:29,939 Tim Lawless: for the market. We know that normally through spring, we 190 00:10:29,940 --> 00:10:33,240 Tim Lawless: see about 21% more new listings being added to the 191 00:10:33,240 --> 00:10:37,500 Tim Lawless: market. It's very seasonal. Listing numbers probably won't see as 192 00:10:37,500 --> 00:10:40,380 Tim Lawless: many vendors coming into the market through spring this time 193 00:10:40,380 --> 00:10:43,410 Tim Lawless: around, simply because selling conditions are a lot more challenging, 194 00:10:43,860 --> 00:10:45,750 Tim Lawless: but there is a pretty good chance we will start 195 00:10:45,750 --> 00:10:49,620 Tim Lawless: to see stock levels accumulating, simply because there's less demand 196 00:10:49,620 --> 00:10:52,500 Tim Lawless: and less absorption. This is what I mean by a 197 00:10:52,500 --> 00:10:55,650 Tim Lawless: test for the market through spring is I think buyers 198 00:10:55,650 --> 00:10:57,510 Tim Lawless: will well and truly hold the upper hand. There'll be 199 00:10:57,510 --> 00:11:00,300 Tim Lawless: a lot more stock for sale. They can negotiate. There's 200 00:11:00,300 --> 00:11:03,870 Tim Lawless: no urgency. For people looking to sell, it means they 201 00:11:03,870 --> 00:11:06,870 Tim Lawless: need to be really realistic about the market and be 202 00:11:06,870 --> 00:11:09,660 Tim Lawless: prepared to negotiate, and be quite flexible in their pricing, 203 00:11:09,900 --> 00:11:12,090 Tim Lawless: and make sure they've got a pretty good marketing campaign 204 00:11:12,090 --> 00:11:13,199 Tim Lawless: behind the property. 205 00:11:13,800 --> 00:11:16,140 Sean Aylmer: Tim, thank you very much for talking to Fear and Greed. 206 00:11:16,710 --> 00:11:18,300 Tim Lawless: Absolute pleasure, Sean. Thanks again. 207 00:11:18,720 --> 00:11:22,199 Sean Aylmer: That's Tim Lawless, research director for Asia Pacific Core Logic. 208 00:11:22,530 --> 00:11:24,510 Sean Aylmer: This is a Fear and Greed daily interview. Join us 209 00:11:24,510 --> 00:11:27,059 Sean Aylmer: every morning for a full episode of Fear and Greed, 210 00:11:27,059 --> 00:11:30,660 Sean Aylmer: Australia's most popular business podcast. I'm Sean Aylmer. Enjoy your day.