1 00:00:03,730 --> 00:00:07,020 Sean Aylmer: House price growth across our capital cities was 10 times 2 00:00:07,020 --> 00:00:10,900 Sean Aylmer: slower in the March quarter than the December quarter, but 3 00:00:10,930 --> 00:00:14,240 Sean Aylmer: there are still some extraordinary prices and records being set. 4 00:00:14,680 --> 00:00:17,579 Sean Aylmer: Dr. Nicola Powell is the chief of research and economics 5 00:00:17,579 --> 00:00:19,480 Sean Aylmer: at Domain. Nicola, welcome to Fear and Greed. 6 00:00:19,840 --> 00:00:21,820 Dr. Nicola Powell: Thanks so much for having me on. It's a absolute 7 00:00:21,820 --> 00:00:22,680 Dr. Nicola Powell: pleasure to be here. 8 00:00:23,020 --> 00:00:27,220 Sean Aylmer: So, house price growth across the combined capitals is 10 9 00:00:27,220 --> 00:00:32,269 Sean Aylmer: times slower than the last quarter. That is quite remarkable. 10 00:00:32,920 --> 00:00:35,790 Dr. Nicola Powell: Isn't it quite a remarkable statement? It's actually about 10 11 00:00:35,790 --> 00:00:40,229 Dr. Nicola Powell: times slower than the first three months of 2021 as 12 00:00:40,229 --> 00:00:44,470 Dr. Nicola Powell: well. So, it really does highlight that we are seeing 13 00:00:44,520 --> 00:00:47,519 Dr. Nicola Powell: an overall slowdown of our housing market. And as we 14 00:00:47,520 --> 00:00:51,520 Dr. Nicola Powell: know, that housing price boom was really focused on house 15 00:00:51,520 --> 00:00:55,160 Dr. Nicola Powell: prices. So, we're really seeing that momentum come out of 16 00:00:55,160 --> 00:00:58,330 Dr. Nicola Powell: house prices more so. It's much more evident. I mean, 17 00:00:58,520 --> 00:01:01,070 Dr. Nicola Powell: we did see unit prices fall over the quarter, but 18 00:01:01,070 --> 00:01:04,550 Dr. Nicola Powell: I think it's that stark comparison to the rate of growth 19 00:01:04,550 --> 00:01:06,789 Dr. Nicola Powell: that we were seeing this time last year and even 20 00:01:06,880 --> 00:01:10,830 Dr. Nicola Powell: over the final quarter of 2021, versus what 2022 has 21 00:01:10,830 --> 00:01:11,580 Dr. Nicola Powell: been so far. 22 00:01:12,370 --> 00:01:14,240 Sean Aylmer: Okay. So, let's get it in... Well, in a moment we'll get 23 00:01:14,240 --> 00:01:16,480 Sean Aylmer: into the breakdown of houses and units and things like 24 00:01:16,480 --> 00:01:22,440 Sean Aylmer: that. We're talking about combined capital. So clearly underneath that, 25 00:01:22,800 --> 00:01:25,819 Sean Aylmer: there's all sorts of different things happening in different cities. 26 00:01:26,180 --> 00:01:30,770 Sean Aylmer: So, Melbourne and Canberra recorded house price drops last quarter. 27 00:01:31,270 --> 00:01:33,750 Sean Aylmer: What are some of the cities that are doing okay though? 28 00:01:34,450 --> 00:01:40,430 Dr. Nicola Powell: It's really interesting. 2022, we have seen our capital cities 29 00:01:40,490 --> 00:01:44,709 Dr. Nicola Powell: markets operate on multiple speeds. So, what we're seeing now 30 00:01:44,709 --> 00:01:47,180 Dr. Nicola Powell: is different pace of price growth coming out of our 31 00:01:47,180 --> 00:01:51,070 Dr. Nicola Powell: different capital cities. And we've got Brisbane and Adelaide recording 32 00:01:51,070 --> 00:01:53,870 Dr. Nicola Powell: some of the strongest rates of growth comparatively to the 33 00:01:53,870 --> 00:01:57,940 Dr. Nicola Powell: other cities, and we're certainly seeing greater weakness coming out of Sydney, 34 00:01:58,100 --> 00:02:01,830 Dr. Nicola Powell: Melbourne, and Canberra. I find this trend a really interesting 35 00:02:01,830 --> 00:02:04,860 Dr. Nicola Powell: one, because when you have a look at this upswing that 36 00:02:04,870 --> 00:02:07,850 Dr. Nicola Powell: commenced more or less at the start of the pandemic, 37 00:02:08,160 --> 00:02:12,540 Dr. Nicola Powell: we saw a synchronized property market across all of our capital cities. And what 38 00:02:12,770 --> 00:02:16,240 Dr. Nicola Powell: that means is, we saw house price growth across every 39 00:02:16,240 --> 00:02:18,610 Dr. Nicola Powell: single capital city, and that was the first time that 40 00:02:18,610 --> 00:02:22,010 Dr. Nicola Powell: we'd seen that since post- GFC. So that was even in Darwin, 41 00:02:22,470 --> 00:02:25,609 Dr. Nicola Powell: even in Perth, where we'd seen those cities have multiyear 42 00:02:25,610 --> 00:02:28,400 Dr. Nicola Powell: downturns. And what we've seen now is that dynamic has 43 00:02:28,400 --> 00:02:33,179 Dr. Nicola Powell: changed again in 2022, and we're seeing that multiple speed market occur 44 00:02:33,180 --> 00:02:37,610 Dr. Nicola Powell: again. We're seeing greater weakness in our more expensive and our larger capital 45 00:02:37,610 --> 00:02:40,799 Dr. Nicola Powell: cities; Sydney and Melbourne, but also Canberra, because Canberra achieved $ 46 00:02:40,919 --> 00:02:44,310 Dr. Nicola Powell: 1 million median over this upswing. So, it's been quite the 47 00:02:44,310 --> 00:02:46,370 Dr. Nicola Powell: milestone for the Canberra housing market. 48 00:02:46,690 --> 00:02:49,260 Sean Aylmer: Okay. So, why are we seeing those differences from city 49 00:02:49,260 --> 00:02:52,130 Sean Aylmer: to city in that first three months of the year? 50 00:02:52,350 --> 00:02:55,930 Sean Aylmer: We had a coordinated rise, but if we have Adelaide and 51 00:02:55,930 --> 00:02:59,010 Sean Aylmer: Brisbane still going, were they not going as hard last 52 00:02:59,010 --> 00:03:02,429 Sean Aylmer: year as Sydney, Melbourne, and Canberra? Why the difference now? 53 00:03:02,760 --> 00:03:06,080 Dr. Nicola Powell: Sure. Look, we definitely did see, in Sydney and Canberra in 54 00:03:06,080 --> 00:03:10,010 Dr. Nicola Powell: particular, very strong rates of growth, particularly for houses. Melbourne 55 00:03:10,010 --> 00:03:12,440 Dr. Nicola Powell: also, but certainly not to the extent of Sydney. I 56 00:03:12,440 --> 00:03:16,130 Dr. Nicola Powell: mean, we saw above 30% increase on a stratified median 57 00:03:16,130 --> 00:03:19,530 Dr. Nicola Powell: house price, which is an extraordinary rate of growth over 58 00:03:19,530 --> 00:03:23,730 Dr. Nicola Powell: the calendar year of 2021. I think there's different dynamics 59 00:03:23,730 --> 00:03:27,150 Dr. Nicola Powell: coming out of Brisbane and Adelaide, and particularly Brisbane. When you 60 00:03:27,150 --> 00:03:30,500 Dr. Nicola Powell: have a look at the state of Queensland, Queensland has 61 00:03:30,500 --> 00:03:34,389 Dr. Nicola Powell: the strongest annual rate of population growth. We've seen lots 62 00:03:34,389 --> 00:03:38,880 Dr. Nicola Powell: of interest coming from interstate into Southeast Queensland, and I 63 00:03:38,880 --> 00:03:41,580 Dr. Nicola Powell: think that in itself has been a big driver of 64 00:03:41,580 --> 00:03:46,070 Dr. Nicola Powell: housing demand. And I think as well, Brisbane really had 65 00:03:46,070 --> 00:03:50,030 Dr. Nicola Powell: missed out on previous housing upswings that the east coast 66 00:03:50,030 --> 00:03:52,750 Dr. Nicola Powell: had seen, and so really have had quite a long 67 00:03:52,750 --> 00:03:56,120 Dr. Nicola Powell: period of time of very modest price growth. So look, 68 00:03:56,120 --> 00:03:58,540 Dr. Nicola Powell: this has almost been the boom that Brisbane has been 69 00:03:58,540 --> 00:04:01,860 Dr. Nicola Powell: waiting for, and look, here it is. It's seen such a strong 70 00:04:01,860 --> 00:04:05,030 Dr. Nicola Powell: increase over the past year, and I think there's still 71 00:04:05,330 --> 00:04:10,090 Dr. Nicola Powell: momentum in the Brisbane housing market. House prices were up 32% over 72 00:04:10,090 --> 00:04:11,950 Dr. Nicola Powell: the last 12 months in Brisbane alone. 73 00:04:12,300 --> 00:04:14,300 Sean Aylmer: Stay with me, Nicola. We'll be back in a minute. 74 00:04:20,089 --> 00:04:22,750 Sean Aylmer: My guest this morning is Dr. Nicola Powell, chief of 75 00:04:22,750 --> 00:04:29,720 Sean Aylmer: research and economics at Domain. Okay. So, let's look at the comparison between houses and units. Across the combined 76 00:04:29,720 --> 00:04:34,500 Sean Aylmer: capitals, house prices set another record high, not withstanding some 77 00:04:34,500 --> 00:04:39,420 Sean Aylmer: cities are coming off, whereas units actually declined. Why are 78 00:04:39,420 --> 00:04:41,539 Sean Aylmer: units still in the doldrums? 79 00:04:42,320 --> 00:04:45,820 Dr. Nicola Powell: Yeah. Look, this is an interesting trend, because the theory 80 00:04:46,279 --> 00:04:49,500 Dr. Nicola Powell: is that, and there is evidence that really would support 81 00:04:49,500 --> 00:04:52,779 Dr. Nicola Powell: greater unit price grows, particularly in our more expensive capital 82 00:04:52,779 --> 00:04:57,210 Dr. Nicola Powell: cities. Units have generally underperformed during this upswing, and we've 83 00:04:57,210 --> 00:05:01,390 Dr. Nicola Powell: got many cities with a record price gap between houses 84 00:05:01,460 --> 00:05:05,110 Dr. Nicola Powell: and units. So, across that combined capitals, we've still got 85 00:05:05,110 --> 00:05:08,440 Dr. Nicola Powell: a record price gap between houses and units, and we've 86 00:05:08,440 --> 00:05:12,540 Dr. Nicola Powell: got many cities still seeing that record price gap, apart 87 00:05:12,540 --> 00:05:16,830 Dr. Nicola Powell: from Canberra, Hobart, and Darwin. I think units are that interesting 88 00:05:16,830 --> 00:05:19,760 Dr. Nicola Powell: one. We certainly haven't seen the upswing that we saw 89 00:05:19,830 --> 00:05:22,739 Dr. Nicola Powell: for houses. We've seen in some of our cities houses 90 00:05:22,740 --> 00:05:26,690 Dr. Nicola Powell: grow three, four times faster than units over the past 91 00:05:26,690 --> 00:05:29,730 Dr. Nicola Powell: year. It goes back to that race for space. People 92 00:05:29,730 --> 00:05:33,420 Dr. Nicola Powell: wanted greater space, we saw the rise of the upgrader 93 00:05:33,420 --> 00:05:37,490 Dr. Nicola Powell: during the pandemic, supported by low interest rates, really fueling 94 00:05:37,490 --> 00:05:41,710 Dr. Nicola Powell: demand for larger detached family homes. And I think the 95 00:05:41,710 --> 00:05:45,610 Dr. Nicola Powell: unit market hasn't seen such an increase in price, because 96 00:05:45,770 --> 00:05:50,370 Dr. Nicola Powell: investors did shy away, we saw a disrupted rental market, 97 00:05:50,570 --> 00:05:53,420 Dr. Nicola Powell: but those conditions are changing. And I think when you 98 00:05:53,420 --> 00:05:57,140 Dr. Nicola Powell: have a look at investment activity, it has a hit 99 00:05:57,140 --> 00:05:59,409 Dr. Nicola Powell: a high in some of our states and territories over 100 00:05:59,410 --> 00:06:02,980 Dr. Nicola Powell: 2022, in terms of the value of home loans that 101 00:06:02,980 --> 00:06:07,020 Dr. Nicola Powell: are being financed to investors. So, investors are a rising 102 00:06:07,020 --> 00:06:09,630 Dr. Nicola Powell: buyer segment where we're seeing first home buyers or owner 103 00:06:09,630 --> 00:06:13,539 Dr. Nicola Powell: occupiers decline. And I think there's still this perceived value 104 00:06:13,540 --> 00:06:16,279 Dr. Nicola Powell: in units because they have underperformed. And we have to 105 00:06:16,279 --> 00:06:19,810 Dr. Nicola Powell: think as well, there's real affordability issues in some of 106 00:06:19,810 --> 00:06:22,900 Dr. Nicola Powell: our cities, particularly in Sydney where you've got a median 107 00:06:22,900 --> 00:06:26,650 Dr. Nicola Powell: house price of almost at 1. 6 million, and you've got 108 00:06:26,650 --> 00:06:30,920 Dr. Nicola Powell: Melbourne and Canberra with a median house price above $1 million. So, affordability is certainly 109 00:06:31,529 --> 00:06:35,270 Dr. Nicola Powell: a key issue in many of our cities. I think 110 00:06:35,270 --> 00:06:39,119 Dr. Nicola Powell: what we're likely to see, we've certainly seen momentum slow 111 00:06:39,120 --> 00:06:43,150 Dr. Nicola Powell: down more so for houses. We're still seeing weakness for 112 00:06:43,150 --> 00:06:45,820 Dr. Nicola Powell: units, but that momentum has been lost more so for 113 00:06:45,820 --> 00:06:49,250 Dr. Nicola Powell: houses. I mean, Sydney is a really good example. So, 114 00:06:49,390 --> 00:06:51,219 Dr. Nicola Powell: when you have a look at house price growth over 115 00:06:51,220 --> 00:06:53,830 Dr. Nicola Powell: the first three months of this year, they're up 0. 116 00:06:54,140 --> 00:06:56,970 Dr. Nicola Powell: 2%. If we compare that to the first three months 117 00:06:56,970 --> 00:07:01,940 Dr. Nicola Powell: of last year, house prices were rising about 46 times 118 00:07:02,000 --> 00:07:04,000 Dr. Nicola Powell: faster than what they are now. 119 00:07:04,260 --> 00:07:04,279 Sean Aylmer: Wow. 120 00:07:04,310 --> 00:07:07,740 Dr. Nicola Powell: So, it really shows. I mean, it's a phenomenal statistic. 121 00:07:07,740 --> 00:07:09,210 Dr. Nicola Powell: Really shows that slowdown. 122 00:07:09,490 --> 00:07:09,730 Sean Aylmer: Okay. So, how are the regions performing? 123 00:07:11,590 --> 00:07:15,760 Dr. Nicola Powell: So, regional Australia is outperforming the cities for house price 124 00:07:15,760 --> 00:07:19,310 Dr. Nicola Powell: growth. We've got the median house price in regional Australia 125 00:07:19,310 --> 00:07:22,890 Dr. Nicola Powell: up 3.1% over the quarter, and they're up almost 21% 126 00:07:22,950 --> 00:07:27,070 Dr. Nicola Powell: annually. I think it does depend upon the location within 127 00:07:27,330 --> 00:07:31,150 Dr. Nicola Powell: regional Australia, but generally we're still seeing pretty strong conditions, 128 00:07:31,150 --> 00:07:33,130 Dr. Nicola Powell: pretty strong rates of price growth. 3% over a quarter 129 00:07:33,130 --> 00:07:38,619 Dr. Nicola Powell: is a robust output for price growth. But I think particularly 130 00:07:38,650 --> 00:07:42,560 Dr. Nicola Powell: in those regional markets that are closely connected to a 131 00:07:42,560 --> 00:07:47,790 Dr. Nicola Powell: major working hub, employment hub, a major city, lifestyle areas, 132 00:07:47,790 --> 00:07:52,700 Dr. Nicola Powell: hinterland locations, coastal locations; are still really performing pretty well. 133 00:07:52,700 --> 00:07:54,980 Dr. Nicola Powell: But I think what we're starting to see is that 134 00:07:55,050 --> 00:07:58,340 Dr. Nicola Powell: annual rate of price growth isn't as high as what 135 00:07:58,340 --> 00:08:01,080 Dr. Nicola Powell: it was during the peak of the boom, particularly in 136 00:08:01,080 --> 00:08:03,720 Dr. Nicola Powell: some of these areas like Byron Bay, which had seen 137 00:08:03,810 --> 00:08:08,470 Dr. Nicola Powell: extreme rates of price growth. Even in Mornington Peninsula, that's technically 138 00:08:08,470 --> 00:08:11,290 Dr. Nicola Powell: part of greater Melbourne, but even in Mornington Peninsula, we've 139 00:08:11,740 --> 00:08:14,660 Dr. Nicola Powell: still got many suburbs that are recording really strong rates 140 00:08:14,660 --> 00:08:19,420 Dr. Nicola Powell: of price grows, but certainly not at the 40% annual 141 00:08:19,420 --> 00:08:22,050 Dr. Nicola Powell: increase that we were seeing during the height of the boom. 142 00:08:22,970 --> 00:08:25,960 Sean Aylmer: Okay, Nicola. That's what's happened, but what we're all interested 143 00:08:25,960 --> 00:08:29,330 Sean Aylmer: is what's going to happen. And of course, keeping in 144 00:08:29,330 --> 00:08:31,550 Sean Aylmer: mind that the Reserve Bank today meets, or the board 145 00:08:31,550 --> 00:08:34,380 Sean Aylmer: of the Reserve Bank today meets, and may well lift 146 00:08:34,380 --> 00:08:36,990 Sean Aylmer: interest rates after last week's inflation data. And if not 147 00:08:36,990 --> 00:08:40,760 Sean Aylmer: today, probably in a month's time. What will happen to 148 00:08:40,760 --> 00:08:43,910 Sean Aylmer: house prices, and how important are interest rate rises? 149 00:08:44,420 --> 00:08:47,809 Dr. Nicola Powell: So, I think we've got prices falling in some of 150 00:08:47,809 --> 00:08:51,520 Dr. Nicola Powell: our capital cities with interest rates not even rising, or 151 00:08:51,520 --> 00:08:55,040 Dr. Nicola Powell: the official cash interest rate hasn't risen so far. And 152 00:08:55,040 --> 00:08:59,410 Dr. Nicola Powell: I think we do see that interest rates, there is 153 00:08:59,410 --> 00:09:02,900 Dr. Nicola Powell: an inverse relationship between the cash rate and housing prices. 154 00:09:03,220 --> 00:09:05,980 Dr. Nicola Powell: So, anything that basically restricts the value or the number 155 00:09:05,980 --> 00:09:09,140 Dr. Nicola Powell: of home loans will slow demand and slows price growth. 156 00:09:09,540 --> 00:09:12,110 Dr. Nicola Powell: But I think it's important to remember, they're still historically 157 00:09:12,110 --> 00:09:14,969 Dr. Nicola Powell: low. And I think the bigger question becomes, we know 158 00:09:14,970 --> 00:09:17,360 Dr. Nicola Powell: interest rates are going to move higher, but it's how 159 00:09:17,360 --> 00:09:20,450 Dr. Nicola Powell: aggressive are the RBA going to be with normalizing those 160 00:09:20,450 --> 00:09:23,110 Dr. Nicola Powell: interest rates? How hard are they going to be with 161 00:09:23,110 --> 00:09:26,679 Dr. Nicola Powell: the increase, and how frequent those increases are going to 162 00:09:26,679 --> 00:09:30,880 Dr. Nicola Powell: be? It is a headwind for our housing market, but 163 00:09:30,880 --> 00:09:33,670 Dr. Nicola Powell: I think it's important to remember that there are many 164 00:09:33,670 --> 00:09:37,309 Dr. Nicola Powell: drivers of our housing markets and we've got a slowdown, and 165 00:09:37,309 --> 00:09:41,590 Dr. Nicola Powell: a loss of market momentum with interest rates or the 166 00:09:41,590 --> 00:09:44,050 Dr. Nicola Powell: official cash interest rates not even moving higher. 167 00:09:44,780 --> 00:09:48,860 Sean Aylmer: Okay. But potentially if they are aggressive in moving rates 168 00:09:48,860 --> 00:09:53,300 Sean Aylmer: higher, the slowdown in the market could be accentuated. 169 00:09:53,710 --> 00:09:56,540 Dr. Nicola Powell: Look, it could be, and I think it really does depend on 170 00:09:56,540 --> 00:10:01,700 Dr. Nicola Powell: how aggressive and the timing of those increased interest rates. 171 00:10:02,160 --> 00:10:06,900 Dr. Nicola Powell: It will weigh on demand and the amount that a 172 00:10:06,900 --> 00:10:10,300 Dr. Nicola Powell: borrower can have of their home loan, and that will impact 173 00:10:10,300 --> 00:10:12,410 Dr. Nicola Powell: the market. What we tend to find, I think Sydney 174 00:10:12,410 --> 00:10:15,360 Dr. Nicola Powell: and Melbourne are much more sensitive to changes overall in 175 00:10:15,360 --> 00:10:19,270 Dr. Nicola Powell: economic conditions and interest rates, more so than other cities. 176 00:10:19,270 --> 00:10:23,190 Dr. Nicola Powell: We see bigger swings in property prices in Sydney and 177 00:10:23,190 --> 00:10:27,110 Dr. Nicola Powell: Melbourne based on historical data. But yes, I think if 178 00:10:27,110 --> 00:10:30,760 Dr. Nicola Powell: we see aggressive interest rate rises, it could have a 179 00:10:30,860 --> 00:10:34,420 Dr. Nicola Powell: larger impact on the downturn, or the start of the 180 00:10:34,420 --> 00:10:35,600 Dr. Nicola Powell: downturn, in terms of what we're seeing in prices. 181 00:10:37,470 --> 00:10:39,530 Sean Aylmer: What about things like the Home Guarantee scheme? We saw 182 00:10:39,530 --> 00:10:42,540 Sean Aylmer: the federal government extend that a few weeks back. It 183 00:10:42,540 --> 00:10:45,430 Sean Aylmer: supports first home buyers trying to get into the market. 184 00:10:45,480 --> 00:10:48,240 Sean Aylmer: It allows them to have a deposit as low as 5% 185 00:10:48,600 --> 00:10:52,590 Sean Aylmer: without having to take out fairly expensive mortgage insurance products. 186 00:10:52,940 --> 00:10:55,329 Sean Aylmer: What do those sorts of schemes do to the market? 187 00:10:55,990 --> 00:10:58,700 Dr. Nicola Powell: So, you tend to find that when you have a 188 00:10:58,700 --> 00:11:02,120 Dr. Nicola Powell: scheme, and particularly if a scheme has a deadline, it 189 00:11:02,120 --> 00:11:05,740 Dr. Nicola Powell: does bring forward demand in the market. And so, it 190 00:11:05,740 --> 00:11:08,820 Dr. Nicola Powell: will support obviously more first home buyers to get onto 191 00:11:08,820 --> 00:11:12,750 Dr. Nicola Powell: the property ladder sooner. I think the good thing is 192 00:11:12,809 --> 00:11:15,920 Dr. Nicola Powell: that they also came out and they increased the property 193 00:11:15,920 --> 00:11:20,210 Dr. Nicola Powell: price caps that were associated with this particular incentive, which 194 00:11:20,210 --> 00:11:23,420 Dr. Nicola Powell: I think was a good thing, because initially they hadn't 195 00:11:23,420 --> 00:11:25,860 Dr. Nicola Powell: increased that property price cap. And if you're in a 196 00:11:25,860 --> 00:11:29,559 Dr. Nicola Powell: very expensive capital city, it's extremely challenging to find a 197 00:11:29,559 --> 00:11:33,929 Dr. Nicola Powell: property below that threshold. So, they've moved it and it's 198 00:11:33,960 --> 00:11:38,010 Dr. Nicola Powell: opens up much more options for first home buyers. But 199 00:11:38,010 --> 00:11:40,809 Dr. Nicola Powell: ultimately when you do see incentives, it does increase demand, and 200 00:11:40,929 --> 00:11:45,950 Dr. Nicola Powell: that increases the property price of properties within that price 201 00:11:45,950 --> 00:11:49,990 Dr. Nicola Powell: banding. First home buyers are looking for entry price properties. 202 00:11:49,990 --> 00:11:53,840 Dr. Nicola Powell: They're looking and competing against one another for the lower 203 00:11:53,840 --> 00:11:56,660 Dr. Nicola Powell: end of the market in terms of price point. So, 204 00:11:56,990 --> 00:12:00,260 Dr. Nicola Powell: it could support prices at the lower end. And we 205 00:12:00,270 --> 00:12:03,670 Dr. Nicola Powell: tend to find anyway, historically; when you see swings in 206 00:12:03,670 --> 00:12:05,620 Dr. Nicola Powell: the property market, they're led by the upper end of the 207 00:12:05,620 --> 00:12:09,929 Dr. Nicola Powell: market. So, you tend to find that 75th price percentile 208 00:12:10,140 --> 00:12:14,640 Dr. Nicola Powell: has bigger upswings, but they also have deeper downturns. And 209 00:12:14,640 --> 00:12:17,910 Dr. Nicola Powell: you find with the 25th percentile, that lower entry price 210 00:12:17,910 --> 00:12:22,870 Dr. Nicola Powell: point, those swings are less significant compared to the upper 211 00:12:22,870 --> 00:12:23,079 Dr. Nicola Powell: end of the market. 212 00:12:24,000 --> 00:12:26,209 Sean Aylmer: Okay. Just quickly, Nicola, because we're running out of time. 213 00:12:26,210 --> 00:12:29,600 Sean Aylmer: You've also recently released your quarterly rent report. Now, house 214 00:12:29,600 --> 00:12:32,880 Sean Aylmer: rates hit a new record high across the capital cities. 215 00:12:33,250 --> 00:12:36,900 Sean Aylmer: Given what you think will happen to house prices, do 216 00:12:36,900 --> 00:12:39,480 Sean Aylmer: you think rents will keep rising? Or is there actually 217 00:12:39,480 --> 00:12:43,190 Sean Aylmer: a substitution effect where if house prices come off and 218 00:12:43,450 --> 00:12:46,469 Sean Aylmer: renters, they're at the margin, they're able to buy into 219 00:12:46,470 --> 00:12:49,569 Sean Aylmer: the market, therefore not as much pressure on rents? How's 220 00:12:49,570 --> 00:12:50,270 Sean Aylmer: all that work? 221 00:12:50,600 --> 00:12:55,830 Dr. Nicola Powell: Yeah, look, very good point. If we do see a pullback in property price, it does create 222 00:12:55,950 --> 00:12:59,700 Dr. Nicola Powell: better purchasing conditions for first home buyers. I think one of the 223 00:12:59,700 --> 00:13:04,199 Dr. Nicola Powell: more important things for buyers at the moment is the ability to 224 00:13:04,200 --> 00:13:07,580 Dr. Nicola Powell: contemplate decisions. And I think particularly for a first home buyer, 225 00:13:07,690 --> 00:13:10,720 Dr. Nicola Powell: that's much better conditions to purchase a home in, because 226 00:13:11,090 --> 00:13:15,040 Dr. Nicola Powell: we've seen that frantic nature of our housing market that 227 00:13:15,540 --> 00:13:20,579 Dr. Nicola Powell: 2021 was peppered by has left in 2022. I think 228 00:13:20,580 --> 00:13:24,580 Dr. Nicola Powell: for our rental markets, I think there's some more pain 229 00:13:24,580 --> 00:13:27,329 Dr. Nicola Powell: ahead for tenants. We're likely to see rents continue to 230 00:13:27,330 --> 00:13:31,340 Dr. Nicola Powell: rise. I think we saw international borders being reopened this 231 00:13:31,340 --> 00:13:34,819 Dr. Nicola Powell: year at a time our rental market was already pretty strained. 232 00:13:35,280 --> 00:13:38,030 Dr. Nicola Powell: When you have a look at vacancy rates across our 233 00:13:38,030 --> 00:13:42,270 Dr. Nicola Powell: capital cities, every single city now is operating in landlords 234 00:13:42,270 --> 00:13:46,340 Dr. Nicola Powell: market. So, that means that vacancy rate is below 2%. Even 235 00:13:46,340 --> 00:13:49,010 Dr. Nicola Powell: when you look at Melbourne. Melbourne saw the most disrupted 236 00:13:49,010 --> 00:13:52,110 Dr. Nicola Powell: rental market as a result of international borders being closed 237 00:13:52,110 --> 00:13:55,300 Dr. Nicola Powell: and that demand shock we saw. Vacancy rate in Melbourne 238 00:13:55,300 --> 00:13:58,890 Dr. Nicola Powell: has seen nothing short of a remarkable recovery. It's now 239 00:13:58,890 --> 00:14:03,050 Dr. Nicola Powell: sitting at 1. 8% overall for Melbourne. And when you look 240 00:14:03,179 --> 00:14:06,699 Dr. Nicola Powell: at Melbourne City, at its peak, the vacancy rate hit 241 00:14:06,730 --> 00:14:08,429 Dr. Nicola Powell: above 14%, and now- 242 00:14:08,429 --> 00:14:08,430 Sean Aylmer: Wow. 243 00:14:08,430 --> 00:14:12,830 Dr. Nicola Powell: ... It's sitting about 1. 5%. So, it's been a really 244 00:14:13,150 --> 00:14:16,210 Dr. Nicola Powell: rapid and remarkable recovery in the rental market. And I 245 00:14:16,210 --> 00:14:18,839 Dr. Nicola Powell: think one of the flip sides to that is, investors 246 00:14:18,840 --> 00:14:22,140 Dr. Nicola Powell: are a rising buyer segment. We have seen the value 247 00:14:22,140 --> 00:14:25,080 Dr. Nicola Powell: of home loans to investors eek this year. So, that 248 00:14:25,310 --> 00:14:29,740 Dr. Nicola Powell: will obviously translate to more rental stock, more choice for 249 00:14:29,740 --> 00:14:32,930 Dr. Nicola Powell: tenants, but is also one of those things that could 250 00:14:32,930 --> 00:14:36,780 Dr. Nicola Powell: continue to support prices for units, because units are the preferred 251 00:14:36,780 --> 00:14:37,591 Dr. Nicola Powell: property type for investors. 252 00:14:37,591 --> 00:14:42,421 Sean Aylmer: Yep. Yep. Nicola, thank you for talking to Feer and Greed. 253 00:14:42,421 --> 00:14:42,441 Dr. Nicola Powell: Thanks for having me on. 254 00:14:43,940 --> 00:14:46,700 Sean Aylmer: That was Dr. Nicola Powell, chief of research and economics 255 00:14:46,700 --> 00:14:49,220 Sean Aylmer: at Domain. This is the Fear and Greed Daily Interview. 256 00:14:49,220 --> 00:14:52,250 Sean Aylmer: Join us every morning for the full episode of Fear and Greed, Australia's most popular business podcast. I'm Sean Aylmer, 257 00:14:55,800 --> 00:14:56,220 Sean Aylmer: enjoy your day.