1 00:00:04,110 --> 00:00:06,539 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,600 --> 00:00:09,690 Sean Aylmer: Aylmer. With the official cash rate rising to a 10- 3 00:00:09,690 --> 00:00:13,109 Sean Aylmer: year high of 3.1% this week, there are plenty of 4 00:00:13,110 --> 00:00:16,529 Sean Aylmer: questions of what this means for the property market. How 5 00:00:16,529 --> 00:00:19,680 Sean Aylmer: did the spring selling season this year compared to previous 6 00:00:19,680 --> 00:00:22,829 Sean Aylmer: years, and did the run of successive rate rises take 7 00:00:22,829 --> 00:00:25,410 Sean Aylmer: the heat out of the market? Eliza Owen is Head 8 00:00:25,410 --> 00:00:28,650 Sean Aylmer: of Research at CoreLogic. Eliza, welcome back to Fear and Greed. 9 00:00:29,250 --> 00:00:30,179 Eliza Owen: Thanks for having me. 10 00:00:30,960 --> 00:00:33,629 Sean Aylmer: I love the spring selling season, Eliza. It's a time 11 00:00:33,630 --> 00:00:37,470 Sean Aylmer: to get very excited. Was it the busiest time this 12 00:00:37,470 --> 00:00:38,820 Sean Aylmer: time around? How did it go? 13 00:00:39,540 --> 00:00:44,639 Eliza Owen: 2022 was really different to what we've seen previously. Usually 14 00:00:44,639 --> 00:00:48,269 Eliza Owen: you get these longer daylight hours and really good weather 15 00:00:48,269 --> 00:00:52,739 Eliza Owen: and gardens looking their best, drawing out more buyers and 16 00:00:52,739 --> 00:00:58,800 Eliza Owen: sellers of real estate. But for 2022, we didn't just 17 00:00:58,800 --> 00:01:03,419 Eliza Owen: see a lackluster spring selling season, we actually saw less 18 00:01:03,540 --> 00:01:07,289 Eliza Owen: new advertised properties coming to the market than we saw 19 00:01:07,289 --> 00:01:08,731 Eliza Owen: during the winter of 2022. 20 00:01:08,731 --> 00:01:09,780 Sean Aylmer: Wow. 21 00:01:09,959 --> 00:01:12,179 Eliza Owen: And that's the first time that that's happened in at 22 00:01:12,180 --> 00:01:13,800 Eliza Owen: least 12 years. 23 00:01:14,730 --> 00:01:18,510 Sean Aylmer: Why? Let's actually, before we go why, I'm just interested. 24 00:01:19,560 --> 00:01:22,380 Sean Aylmer: Anytime I've visited an open house the place always looks 25 00:01:22,530 --> 00:01:26,400 Sean Aylmer: great. I'm just interested, do you get more money for 26 00:01:26,400 --> 00:01:27,839 Sean Aylmer: your house if your gardens look good? 27 00:01:29,430 --> 00:01:34,560 Eliza Owen: Look, there's not actually too much seasonality in price movements, 28 00:01:34,560 --> 00:01:39,719 Eliza Owen: and that's because both supply and demand fluctuate and have 29 00:01:39,719 --> 00:01:44,099 Eliza Owen: that seasonality. Even though you've got more buyers out there, 30 00:01:44,099 --> 00:01:47,459 Eliza Owen: you've also usually got more choice and more property in 31 00:01:47,459 --> 00:01:49,740 Eliza Owen: the market, which tends to iron out some of that 32 00:01:49,740 --> 00:01:51,120 Eliza Owen: seasonality in price. 33 00:01:51,420 --> 00:01:53,550 Sean Aylmer: Okay. So let's go back to the why. Why were 34 00:01:53,550 --> 00:01:57,030 Sean Aylmer: there more houses on the market in winter than spring? 35 00:01:57,990 --> 00:02:00,330 Eliza Owen: I think there's a couple of reasons for this. For 36 00:02:00,330 --> 00:02:06,119 Eliza Owen: springtime in 2022 we probably really saw that rising interest 37 00:02:06,119 --> 00:02:10,800 Eliza Owen: rate environment starting to take hold on prospective new buyers. 38 00:02:12,090 --> 00:02:15,899 Eliza Owen: I'd say people were probably dissuaded from buying amid a 39 00:02:15,900 --> 00:02:18,508 Eliza Owen: higher cost of debt. And even those who were still 40 00:02:18,508 --> 00:02:22,709 Eliza Owen: confident about buying this spring would've potentially been able to 41 00:02:22,709 --> 00:02:25,919 Eliza Owen: borrow less. So sellers, knowing that they're not going to 42 00:02:25,919 --> 00:02:28,139 Eliza Owen: get as good a price for their property as they 43 00:02:28,139 --> 00:02:32,280 Eliza Owen: could six or 12 months ago, have probably held back 44 00:02:32,550 --> 00:02:35,309 Eliza Owen: and are waiting for a better time to sell. I 45 00:02:35,309 --> 00:02:39,269 Eliza Owen: think another potential reason is just that transaction activity was 46 00:02:39,270 --> 00:02:44,579 Eliza Owen: so strong in 2021, that this low interest rate environment 47 00:02:44,580 --> 00:02:47,669 Eliza Owen: we saw in spring last year maybe brought forward some 48 00:02:47,669 --> 00:02:49,889 Eliza Owen: buying and selling decisions as well. 49 00:02:50,429 --> 00:02:54,480 Sean Aylmer: Okay. We saw irrationality in 2021, but what you've just 50 00:02:54,480 --> 00:02:56,578 Sean Aylmer: described, it sounds a lot more rational. 51 00:02:57,480 --> 00:03:01,380 Eliza Owen: Yeah, I think that it's just a response to interest 52 00:03:01,380 --> 00:03:05,190 Eliza Owen: rates. I don't even know that the 2021 buying and 53 00:03:05,190 --> 00:03:11,219 Eliza Owen: selling frenzy was necessarily irrational, because with that record low 54 00:03:11,219 --> 00:03:15,929 Eliza Owen: interest rate of 0. 01%, actual interest costs would've been 55 00:03:15,929 --> 00:03:18,238 Eliza Owen: so low. And you would've had a lot of household 56 00:03:18,240 --> 00:03:21,000 Eliza Owen: savings built up through the pandemic as well because people 57 00:03:21,000 --> 00:03:26,340 Eliza Owen: weren't spending on services, going out, traveling, or contributed to 58 00:03:26,340 --> 00:03:28,138 Eliza Owen: that strong buying activity. 59 00:03:28,710 --> 00:03:31,620 Sean Aylmer: Eliza Owen, from CoreLogic, I'm never going to say 2021 60 00:03:31,620 --> 00:03:35,340 Sean Aylmer: was irrational again, because you've just shown why it wasn't. 61 00:03:35,969 --> 00:03:39,330 Sean Aylmer: There are the 2, 700 home scheduled for auction this week. 62 00:03:39,450 --> 00:03:41,250 Sean Aylmer: Now that's the fifth week in a row where there's 63 00:03:41,250 --> 00:03:44,880 Sean Aylmer: been an increase in the number for auction, busiest auction 64 00:03:44,880 --> 00:03:48,300 Sean Aylmer: week since May. Why do you think? Are things getting 65 00:03:48,300 --> 00:03:50,039 Sean Aylmer: back to normal or is it just to get in 66 00:03:50,040 --> 00:03:50,850 Sean Aylmer: before Christmas? 67 00:03:51,660 --> 00:03:53,850 Eliza Owen: Yeah, so I'm glad you brought this up because it 68 00:03:53,850 --> 00:03:56,670 Eliza Owen: really feeds into that piece where we're talking about with 69 00:03:56,670 --> 00:04:01,260 Eliza Owen: spring selling season as well. Auction volumes, while we typically 70 00:04:01,260 --> 00:04:04,770 Eliza Owen: think of spring ending in November, the auction market does 71 00:04:04,770 --> 00:04:07,140 Eliza Owen: tend to peak a little bit later. So that's what 72 00:04:07,140 --> 00:04:09,089 Eliza Owen: we are seeing here. This is a little bit of 73 00:04:09,089 --> 00:04:12,630 Eliza Owen: a seasonal uplift that we usually see a peak early 74 00:04:12,630 --> 00:04:17,610 Eliza Owen: to mid- December. Noting that last year there were nearly 5, 75 00:04:17,670 --> 00:04:21,299 Eliza Owen: 000 properties scheduled for auction. So when you think of 76 00:04:21,300 --> 00:04:26,250 Eliza Owen: it that way, the 2, 700 odd properties that are scheduled is a 77 00:04:26,250 --> 00:04:27,839 Eliza Owen: bit dull in comparison. 78 00:04:28,350 --> 00:04:30,150 Sean Aylmer: Stay with me, Eliza, and we'll be back in a 79 00:04:30,210 --> 00:04:39,599 Sean Aylmer: minute. My guest today is Eliza Owen, Head of Research 80 00:04:39,630 --> 00:04:43,889 Sean Aylmer: at CoreLogic. Okay, now on your numbers, obviously house prices 81 00:04:43,889 --> 00:04:47,579 Sean Aylmer: have come off. Sydney I think is 11% or more 82 00:04:47,580 --> 00:04:51,600 Sean Aylmer: from peak to trough, and still going probably. I think 83 00:04:51,600 --> 00:04:54,690 Sean Aylmer: nationally, capital cities was closer to 7%. Correct me if 84 00:04:54,690 --> 00:04:58,380 Sean Aylmer: I'm wrong there. What do you think the story is? 85 00:04:58,380 --> 00:05:00,809 Sean Aylmer: I mean, at least last month the pace of decrease 86 00:05:00,809 --> 00:05:02,638 Sean Aylmer: slowed, if you know what I mean, so we weren't 87 00:05:02,639 --> 00:05:04,829 Sean Aylmer: falling as fast type thing. Do you think that will 88 00:05:04,830 --> 00:05:07,050 Sean Aylmer: continue? I mean, what's your feel for where we're going? 89 00:05:08,250 --> 00:05:11,820 Eliza Owen: I agree that there's been a pretty consistent slowdown in 90 00:05:11,820 --> 00:05:16,830 Eliza Owen: the rate of decline. Monthly declines for Australian housing values 91 00:05:16,830 --> 00:05:20,789 Eliza Owen: bottomed out at 1. 6% through August, and since then it's 92 00:05:20,790 --> 00:05:24,750 Eliza Owen: gotten smaller and smaller to 1% decline in November. But here's 93 00:05:24,750 --> 00:05:27,570 Eliza Owen: the thing, I think there is a little bit of 94 00:05:27,570 --> 00:05:33,928 Eliza Owen: a risk of that monthly decline reaccelerating in 2023. And 95 00:05:33,928 --> 00:05:37,830 Eliza Owen: some of those risks include some pretty clear signaling that 96 00:05:37,830 --> 00:05:40,859 Eliza Owen: there are going to be further rate rises early next 97 00:05:40,859 --> 00:05:45,839 Eliza Owen: year. The RBA ending their December monetary policy statement with, " 98 00:05:46,080 --> 00:05:49,529 Eliza Owen: We expect further rate rises in the period ahead." And 99 00:05:49,529 --> 00:05:51,928 Eliza Owen: on top of that, you've also got this fixed- term 100 00:05:51,928 --> 00:05:56,549 Eliza Owen: cliff that's coming off. So the market might be tested 101 00:05:56,549 --> 00:06:00,180 Eliza Owen: by people rolling off home loan rates as low as 1. 102 00:06:00,210 --> 00:06:05,670 Eliza Owen: 95% into a variable rate environment where rates are five 103 00:06:05,670 --> 00:06:09,870 Eliza Owen: to 6%. So that might see slightly more motivated selling, 104 00:06:10,080 --> 00:06:14,490 Eliza Owen: higher listings volumes, and further downward pressure on property values. 105 00:06:15,000 --> 00:06:18,059 Sean Aylmer: Okay. When we look across the capital cities, so Sydney 106 00:06:18,059 --> 00:06:21,779 Sean Aylmer: has fared worst but it did very well in the run- 107 00:06:21,779 --> 00:06:24,720 Sean Aylmer: up. There are other cities, again, you're going to have 108 00:06:24,720 --> 00:06:25,830 Sean Aylmer: to correct me because I'm sure I'm going to get them 109 00:06:25,830 --> 00:06:28,979 Sean Aylmer: wrong, but Adelaide, Perth, I think Brisbane is in this 110 00:06:29,040 --> 00:06:33,479 Sean Aylmer: crowd. They just haven't fallen by as much. Will they 111 00:06:33,900 --> 00:06:38,820 Sean Aylmer: keep falling basically while Sydney and Melbourne stabilize? Or is 112 00:06:38,820 --> 00:06:41,190 Sean Aylmer: it just a Sydney thing, a Melbourne thing? How should 113 00:06:41,190 --> 00:06:42,120 Sean Aylmer: we think about it? 114 00:06:42,990 --> 00:06:45,809 Eliza Owen: Your stats recall is pretty excellent, I have to say. 115 00:06:46,380 --> 00:06:49,950 Eliza Owen: It is a peak- to- trough in Sydney of 11.5%, 116 00:06:50,339 --> 00:06:55,200 Eliza Owen: and this ranges to declines of less than 1% for 117 00:06:55,200 --> 00:06:58,650 Eliza Owen: a city like Perth, for example. I would say the 118 00:06:58,650 --> 00:07:03,330 Eliza Owen: main characteristic of markets that are having steeper price declines 119 00:07:03,330 --> 00:07:07,529 Eliza Owen: are that they're more expensive. Sydney and Melbourne have had 120 00:07:07,529 --> 00:07:11,429 Eliza Owen: more volatility throughout the past few cycles, including the one 121 00:07:11,430 --> 00:07:15,840 Eliza Owen: we're in now, so you would expect steeper declines. Perth 122 00:07:15,840 --> 00:07:20,460 Eliza Owen: and Adelaide and Darwin, which are our highly affordable markets, 123 00:07:20,910 --> 00:07:25,650 Eliza Owen: have seen around peak- to- troughs of 1% or less so 124 00:07:25,650 --> 00:07:29,520 Eliza Owen: far. Brisbane a little bit different. It's not quite as 125 00:07:29,520 --> 00:07:34,320 Eliza Owen: expensive as Sydney and Melbourne for example, but it has 126 00:07:34,320 --> 00:07:38,099 Eliza Owen: risen a lot in value. And I think affordability constraints 127 00:07:38,099 --> 00:07:41,580 Eliza Owen: are really setting in for buyers. Maybe people have needed 128 00:07:41,580 --> 00:07:44,009 Eliza Owen: to extend themselves a bit more to buy into the 129 00:07:44,009 --> 00:07:48,239 Eliza Owen: Brisbane market, and it has actually seen a relatively sharp 130 00:07:48,360 --> 00:07:53,130 Eliza Owen: downswing. Noting that values across Brisbane are still almost 30% 131 00:07:53,160 --> 00:07:57,390 Eliza Owen: above their pre- pandemic levels, but they're down about 8% 132 00:07:57,990 --> 00:07:59,429 Eliza Owen: from a recent peak. 133 00:07:59,940 --> 00:08:04,740 Sean Aylmer: Okay. What about the regions? And I'm sure location, location, 134 00:08:04,740 --> 00:08:07,080 Sean Aylmer: location, it depends where in the regions we're talking about, 135 00:08:07,080 --> 00:08:11,280 Sean Aylmer: but some of those more popular regions. South of Melbourne, 136 00:08:11,640 --> 00:08:15,002 Sean Aylmer: Gold Coast, Northern New South Wales, so it's (inaudible) 137 00:08:15,030 --> 00:08:17,249 Sean Aylmer: popular areas. How are they going? 138 00:08:18,509 --> 00:08:22,920 Eliza Owen: Yeah, you're quite right. Regional Australia in aggregate has had 139 00:08:22,920 --> 00:08:26,340 Eliza Owen: less of a downturn than the combined capital cities. As 140 00:08:26,340 --> 00:08:29,580 Eliza Owen: a whole, regional Australia is down about 6% from a 141 00:08:29,580 --> 00:08:33,900 Eliza Owen: peak in June, compared to the 7. 5% decline across 142 00:08:33,900 --> 00:08:39,089 Eliza Owen: the capitals. But your higher end, more expensive regional centers 143 00:08:39,089 --> 00:08:43,200 Eliza Owen: that are almost more like their own cities, have seen 144 00:08:43,830 --> 00:08:46,380 Eliza Owen: big, big run- ups in prices, but a lot more 145 00:08:46,380 --> 00:08:51,150 Eliza Owen: volatility introduced through the downswing too. The Illawarra region is 146 00:08:51,150 --> 00:08:54,389 Eliza Owen: probably a good example where we've seen a massive run- 147 00:08:54,389 --> 00:08:57,569 Eliza Owen: up in prices, upwards of 40% from trough- to- peak. 148 00:08:58,020 --> 00:09:03,390 Eliza Owen: But now prices are down 11.5% from their peak, which 149 00:09:03,390 --> 00:09:06,090 Eliza Owen: is the same peak- to- trough we've seen in Sydney 150 00:09:06,090 --> 00:09:10,199 Eliza Owen: so far. So I think that's very telling about how 151 00:09:10,410 --> 00:09:13,830 Eliza Owen: some of the structural changes that we saw through COVID, 152 00:09:14,250 --> 00:09:18,629 Eliza Owen: maybe higher incomes being introduced to these popular regional centers, 153 00:09:19,020 --> 00:09:22,590 Eliza Owen: has also introduced more volatility in their cycles. 154 00:09:23,130 --> 00:09:28,828 Sean Aylmer: Okay. Crystal ball time here, Eliza. What's going to happen? 155 00:09:28,830 --> 00:09:32,130 Sean Aylmer: What's going to happen in 2023? Will investors come back 156 00:09:32,130 --> 00:09:35,309 Sean Aylmer: into the market with a bang? Do you think we'll 157 00:09:35,309 --> 00:09:38,460 Sean Aylmer: see a shift from auctions to private treaties, but mostly 158 00:09:38,460 --> 00:09:40,140 Sean Aylmer: what do you think is going to happen to prices? 159 00:09:40,320 --> 00:09:42,929 Sean Aylmer: So there's about three questions there. I've given them all 160 00:09:42,929 --> 00:09:45,510 Sean Aylmer: at once. Let's start at the beginning. Investors, are they 161 00:09:45,510 --> 00:09:47,400 Sean Aylmer: in the market, will they come back into the market? 162 00:09:47,400 --> 00:09:48,000 Sean Aylmer: What do you think? 163 00:09:48,870 --> 00:09:51,750 Eliza Owen: It wouldn't surprise me to see some investor activity come 164 00:09:51,750 --> 00:09:55,350 Eliza Owen: back, but investors tend to shy away when things are 165 00:09:55,350 --> 00:09:59,309 Eliza Owen: uncertain. We'd need to wait for some kind of stability 166 00:09:59,309 --> 00:10:03,060 Eliza Owen: in the cash rate environment for investors to be confident, 167 00:10:03,270 --> 00:10:07,799 Eliza Owen: I believe. But everyone knows the rental story at the 168 00:10:07,799 --> 00:10:12,029 Eliza Owen: moment, where even as prices full, rental incomes are rising. 169 00:10:12,059 --> 00:10:16,858 Eliza Owen: Rent values are up 10% in the year to November, one 170 00:10:16,860 --> 00:10:19,078 Eliza Owen: of our near record high growth rates that we've seen 171 00:10:19,080 --> 00:10:22,139 Eliza Owen: through the cycle. And the other thing too is that 172 00:10:22,139 --> 00:10:25,980 Eliza Owen: this is a potential strategy as people roll off of fixed- 173 00:10:25,980 --> 00:10:29,039 Eliza Owen: term rates as well. You might see people renting out 174 00:10:29,039 --> 00:10:32,820 Eliza Owen: a room or converting an owner- occupied property to an 175 00:10:32,820 --> 00:10:35,460 Eliza Owen: investment property, if they can find somewhere cheap enough to 176 00:10:35,460 --> 00:10:39,240 Eliza Owen: live. I think that adoption of a rental strategy is 177 00:10:39,240 --> 00:10:42,809 Eliza Owen: something that might actually help people with higher serviceability costs 178 00:10:42,809 --> 00:10:45,420 Eliza Owen: in the year ahead. And hopefully that adds a bit 179 00:10:45,420 --> 00:10:47,309 Eliza Owen: more supply and eases some rental pressures. 180 00:10:47,309 --> 00:10:51,838 Sean Aylmer: Okay. What about the auctions verse private treaties? Do you 181 00:10:51,840 --> 00:10:53,670 Sean Aylmer: think there'll be much change in that? 182 00:10:54,330 --> 00:10:58,500 Eliza Owen: My understanding is that historically auctions are used in a 183 00:10:58,710 --> 00:11:02,639 Eliza Owen: hot market to drum up excitement about a property. In 184 00:11:02,639 --> 00:11:06,270 Eliza Owen: a cooling market auctions can give the game away a 185 00:11:06,300 --> 00:11:08,760 Eliza Owen: bit too much, that there is a bit of a 186 00:11:09,270 --> 00:11:14,310 Eliza Owen: softer demand environment. So I would expect more private treaty, 187 00:11:14,370 --> 00:11:16,980 Eliza Owen: similar to what we've seen this year, not as many 188 00:11:16,980 --> 00:11:18,208 Eliza Owen: auctions going ahead. 189 00:11:20,520 --> 00:11:23,429 Sean Aylmer: Okay. The $64,000 question, the one we all want to know, what's 190 00:11:23,429 --> 00:11:24,929 Sean Aylmer: going to happen to house prices? 191 00:11:26,100 --> 00:11:29,880 Eliza Owen: I think in the first half of 2023 I would 192 00:11:29,880 --> 00:11:32,309 Eliza Owen: expect them to keep going down. And again, this is 193 00:11:32,309 --> 00:11:34,889 Eliza Owen: just in line with some of the expectations for the 194 00:11:34,889 --> 00:11:38,639 Eliza Owen: cash rate, which is the biggest short- term determinant in 195 00:11:38,639 --> 00:11:42,328 Eliza Owen: house price movements. But there are some tailwinds to look 196 00:11:42,330 --> 00:11:46,320 Eliza Owen: forward to, the return of overseas migration, which has really 197 00:11:46,320 --> 00:11:50,639 Eliza Owen: started with a bang in 2022 and will continue filtering 198 00:11:50,639 --> 00:11:54,689 Eliza Owen: through to more housing demand in 2023. We've got a 199 00:11:54,690 --> 00:11:58,260 Eliza Owen: pretty strong labor market, even as the RBA is trying 200 00:11:58,260 --> 00:12:01,020 Eliza Owen: to unwind it a little bit. That's helping to underpin 201 00:12:01,020 --> 00:12:05,370 Eliza Owen: serviceability and will keep a floor under housing market declines 202 00:12:05,370 --> 00:12:09,870 Eliza Owen: as well. But as I mentioned, the major headwind to 203 00:12:09,870 --> 00:12:13,710 Eliza Owen: that will be the fixed- term cliff and what that 204 00:12:13,710 --> 00:12:16,650 Eliza Owen: does to the market. There are also going to be 205 00:12:16,650 --> 00:12:20,370 Eliza Owen: some supply shocks to watch out for that could change 206 00:12:20,370 --> 00:12:24,720 Eliza Owen: the inflation and interest rate trajectory. For Australia, that could 207 00:12:24,720 --> 00:12:29,280 Eliza Owen: mean bushfire season and extreme weather events. Internationally it's going 208 00:12:29,280 --> 00:12:33,539 Eliza Owen: to be things like energy prices, global conflict, overseas growth 209 00:12:33,780 --> 00:12:38,520 Eliza Owen: and demand. You never know exactly what is going to 210 00:12:38,520 --> 00:12:42,510 Eliza Owen: happen, but I'd say Australia's housing market will be guided 211 00:12:42,929 --> 00:12:45,059 Eliza Owen: by cash rate movements in the short term. 212 00:12:45,599 --> 00:12:47,670 Sean Aylmer: Eliza, thank you for talking to Fear and Greed. 213 00:12:48,150 --> 00:12:49,800 Eliza Owen: Thanks again for having me. Take care. 214 00:12:50,370 --> 00:12:53,699 Sean Aylmer: That was Eliza Owen, Head of Research at CoreLogic. This 215 00:12:53,699 --> 00:12:56,130 Sean Aylmer: is the Fear and Greed Daily Interview. Join us every morning 216 00:12:56,130 --> 00:12:58,410 Sean Aylmer: for the full episode of Fear and Greed, Australia's most 217 00:12:58,410 --> 00:13:01,740 Sean Aylmer: popular business podcast. I'm Sean Aylmer, enjoy your day.