1 00:00:05,840 --> 00:00:08,639 Speaker 1: Welcome to the Fear and Greed Business Interview. I'm Sean Alman. 2 00:00:08,760 --> 00:00:12,840 Speaker 1: Australia's property market just keeps on going. Fiscal year twenty 3 00:00:12,880 --> 00:00:16,079 Speaker 1: five is coming to an end with prices rising around 4 00:00:16,120 --> 00:00:19,800 Speaker 1: the country, helped along by strong demand and interest rate cuts, 5 00:00:20,520 --> 00:00:22,480 Speaker 1: and in the next twelve months we're set to see 6 00:00:22,680 --> 00:00:26,000 Speaker 1: further price growth, driven largely by Sydney and Melbourne, according 7 00:00:26,040 --> 00:00:30,440 Speaker 1: to domain's Price Forecast report. Doctor Nicola Powell is Domain's 8 00:00:30,480 --> 00:00:33,160 Speaker 1: Chief of Research and Economics. Nicola, welcome back to Fear 9 00:00:33,159 --> 00:00:33,520 Speaker 1: and Greed. 10 00:00:33,720 --> 00:00:34,400 Speaker 2: Thanks Sean. 11 00:00:35,400 --> 00:00:38,240 Speaker 1: Before we talk about the year ahead, the last twelve 12 00:00:38,280 --> 00:00:40,000 Speaker 1: months or so, how would you sum it up? What 13 00:00:40,000 --> 00:00:42,920 Speaker 1: are the big trends look the last. 14 00:00:42,600 --> 00:00:45,320 Speaker 2: Fight, Well, this current financial year has been an interesting one. 15 00:00:45,360 --> 00:00:49,279 Speaker 2: I think that particularly when we were pre empting the 16 00:00:49,320 --> 00:00:52,760 Speaker 2: cash rate reductions, and I think particularly when we started 17 00:00:52,760 --> 00:00:56,080 Speaker 2: in the first half of this financial year, that pre 18 00:00:56,160 --> 00:01:00,279 Speaker 2: empting of that rate reduction was really heightened, and when 19 00:01:00,320 --> 00:01:03,560 Speaker 2: it finally actually came to fruition, you know, in the 20 00:01:03,600 --> 00:01:06,440 Speaker 2: early part of this year. So in the second half 21 00:01:06,520 --> 00:01:09,160 Speaker 2: of the financial year, I think we saw it being 22 00:01:09,160 --> 00:01:13,160 Speaker 2: amplified across our housing markets. And what was interesting towards 23 00:01:13,200 --> 00:01:15,520 Speaker 2: the latter part of last year, we already started to 24 00:01:15,520 --> 00:01:18,200 Speaker 2: see demand start to rise, and I think it was 25 00:01:18,319 --> 00:01:22,039 Speaker 2: mainly coming from investors and those are stude buyers that 26 00:01:22,160 --> 00:01:24,800 Speaker 2: just know what a rate reduction does to a housing market, 27 00:01:25,480 --> 00:01:27,480 Speaker 2: and then when it was delivered. I think that we've 28 00:01:27,480 --> 00:01:30,160 Speaker 2: obviously seen two rate cuts. Now I think what we 29 00:01:30,280 --> 00:01:33,600 Speaker 2: have seen is by a confidence is starting to return 30 00:01:33,800 --> 00:01:36,959 Speaker 2: and our expectation is that is going to continue over 31 00:01:37,000 --> 00:01:38,160 Speaker 2: the next financial year. 32 00:01:38,680 --> 00:01:41,600 Speaker 1: So what's been the standout city or area for you 33 00:01:42,720 --> 00:01:43,039 Speaker 1: for this. 34 00:01:43,080 --> 00:01:46,360 Speaker 2: Current financial year is tier cities. So I think the 35 00:01:46,400 --> 00:01:51,320 Speaker 2: standout performers really in recent times has been Persed. It's 36 00:01:51,320 --> 00:01:54,360 Speaker 2: been Adelaide and it's also been Brisbane. You know, these 37 00:01:54,360 --> 00:01:58,040 Speaker 2: have been standout performers for pretty much, you know, the 38 00:01:58,120 --> 00:02:01,840 Speaker 2: last five years. Look at the diversity of performance and 39 00:02:01,880 --> 00:02:05,080 Speaker 2: when we have a multi speed market across our major 40 00:02:05,120 --> 00:02:08,320 Speaker 2: capital cities. We're expecting that multi speed market, but some 41 00:02:08,360 --> 00:02:11,600 Speaker 2: shifts occur in next financial year, and that means that 42 00:02:11,600 --> 00:02:13,320 Speaker 2: the market is complex. It means that you have to 43 00:02:13,400 --> 00:02:16,840 Speaker 2: understand those local areas and those local nuances. But when 44 00:02:16,840 --> 00:02:18,960 Speaker 2: we have a look at the comparison, you know, over 45 00:02:19,000 --> 00:02:22,639 Speaker 2: the last five years, we've seen Adelaide house prices increase 46 00:02:22,800 --> 00:02:26,480 Speaker 2: eighty four percent. We've seen Perth see a seventy three 47 00:02:26,480 --> 00:02:30,120 Speaker 2: percent increase, Brisbane a seventy two percent increase in five years, 48 00:02:30,320 --> 00:02:32,560 Speaker 2: and then you go down to Melbourne. Melbourne has been 49 00:02:32,560 --> 00:02:35,760 Speaker 2: the weakest performer, has only seen a fourteen percent increase. 50 00:02:36,080 --> 00:02:39,080 Speaker 2: So there's this mass amount of diversity and Sydney sits 51 00:02:39,120 --> 00:02:41,119 Speaker 2: at like middle of the road forty six percent over 52 00:02:41,120 --> 00:02:43,320 Speaker 2: that five year period. So when you look at the 53 00:02:43,400 --> 00:02:47,120 Speaker 2: last financial year, growth was led by Adelaide person Brisbane, 54 00:02:47,240 --> 00:02:51,280 Speaker 2: and we saw slower conditions in Melbourne and Canberra, and 55 00:02:51,360 --> 00:02:53,359 Speaker 2: we started to see a bit more gross coming out 56 00:02:53,360 --> 00:02:57,919 Speaker 2: of the Sydney housing market and momentum is building in Sydney's. 57 00:02:57,560 --> 00:03:00,840 Speaker 1: So just sticking with Perth, Brisbane and before we move 58 00:03:00,880 --> 00:03:04,680 Speaker 1: on to the bigger capitals in Canberra, where's affordability at 59 00:03:04,680 --> 00:03:05,560 Speaker 1: in those markets? 60 00:03:05,600 --> 00:03:08,959 Speaker 2: Now we've seen a drastic change in affordability. I think 61 00:03:08,960 --> 00:03:11,839 Speaker 2: if you are a local to that location, I think 62 00:03:11,919 --> 00:03:14,639 Speaker 2: you would be really feeling the pinch, particularly if you're 63 00:03:14,680 --> 00:03:16,840 Speaker 2: a first time buyer. When you look at the change 64 00:03:16,840 --> 00:03:19,919 Speaker 2: of affordability over a five year period, it's been very 65 00:03:20,000 --> 00:03:24,120 Speaker 2: extreme in Perth, Adelaide and Brisbane, and I think you 66 00:03:24,120 --> 00:03:26,320 Speaker 2: know our loop in with Melbourne as well. You know, 67 00:03:26,360 --> 00:03:29,080 Speaker 2: we've seen an underperformance of Melbourne. And the thing with 68 00:03:29,160 --> 00:03:32,160 Speaker 2: Melbourne is it's undervalued at the moment relative to our 69 00:03:32,200 --> 00:03:36,040 Speaker 2: other capital cities. If you rewind roughly about five years 70 00:03:36,080 --> 00:03:39,040 Speaker 2: ago and you do this comparison of price house prices 71 00:03:39,080 --> 00:03:43,680 Speaker 2: in Melbourne relative to Brisbane, Adelaide and Perse, they were 72 00:03:43,840 --> 00:03:48,000 Speaker 2: about thirty five to forty five percent cheaper than Melbourne. 73 00:03:48,200 --> 00:03:50,600 Speaker 2: Today they're pretty much on part there's only about a 74 00:03:50,680 --> 00:03:53,520 Speaker 2: very one to three percent, which is extraordinary, right, it's 75 00:03:53,600 --> 00:03:55,080 Speaker 2: extraordinary price change. 76 00:03:55,480 --> 00:03:59,200 Speaker 1: I don't understand that was that the state government changes 77 00:03:59,240 --> 00:04:03,320 Speaker 1: that he'd invest in Victoria. I can't quite get my 78 00:04:03,360 --> 00:04:06,960 Speaker 1: head around why Melbourne has underperformed so much. 79 00:04:07,200 --> 00:04:10,600 Speaker 2: Melbourne has significantly underperformed, and it is really unusual because 80 00:04:10,600 --> 00:04:13,680 Speaker 2: Melbourne actually leads price cycles and tends to even lead 81 00:04:13,760 --> 00:04:16,400 Speaker 2: in front of Sydney, and then Sydney kind of follows 82 00:04:16,440 --> 00:04:19,120 Speaker 2: Melbourne's lead. That has not been the case. I think 83 00:04:19,120 --> 00:04:20,920 Speaker 2: it's a variety of things. I think it is the 84 00:04:21,080 --> 00:04:24,560 Speaker 2: taxation changes, so it does mean investors have sold off 85 00:04:24,600 --> 00:04:28,200 Speaker 2: in bulk. First home buyers have definitely taken that market share, 86 00:04:28,240 --> 00:04:30,239 Speaker 2: but you know, first time buyers don't have a deeper 87 00:04:30,320 --> 00:04:34,640 Speaker 2: pockets as investors, and I think new investment activity has 88 00:04:34,640 --> 00:04:37,920 Speaker 2: also been very weak across Victoria. But one of the 89 00:04:37,920 --> 00:04:40,440 Speaker 2: core two of the core things for Melbourne is they've 90 00:04:40,440 --> 00:04:43,760 Speaker 2: had high levels of supply, which I think choice has 91 00:04:43,800 --> 00:04:46,680 Speaker 2: definitely been there for buyers, which means it's really kept 92 00:04:46,680 --> 00:04:50,480 Speaker 2: a lid on price growth and demographic patterns. So we 93 00:04:50,760 --> 00:04:56,680 Speaker 2: have seen a massive shift in population dynamics in Victoria. 94 00:04:56,760 --> 00:04:59,440 Speaker 2: You know, when you capture that pandemic period too, there 95 00:04:59,520 --> 00:05:04,040 Speaker 2: was a massive exodus and that population dynamic is still recovering. 96 00:05:04,360 --> 00:05:06,039 Speaker 2: And this is what feeds into I don't want to 97 00:05:06,040 --> 00:05:08,960 Speaker 2: reveal our forecast yet, but this feeds into what our 98 00:05:09,000 --> 00:05:12,160 Speaker 2: forecasts are for next financial year. By the financial year 99 00:05:12,200 --> 00:05:15,400 Speaker 2: of twenty twenty seven, Victoria is expected to be the 100 00:05:15,520 --> 00:05:20,240 Speaker 2: fastest growing state for population growth. So the recovery is 101 00:05:20,320 --> 00:05:21,480 Speaker 2: building for Melbourne. 102 00:05:21,680 --> 00:05:23,679 Speaker 1: Okay, we'll get to that in a moment. Stay with me, Nikola, 103 00:05:23,760 --> 00:05:32,240 Speaker 1: we'll be back in a minute. My guest this morning 104 00:05:32,320 --> 00:05:35,680 Speaker 1: is Nicola Power from Domain. You left us hanging, Nikola. 105 00:05:36,400 --> 00:05:39,120 Speaker 1: It's all about what's going to happen, not what has happened. 106 00:05:39,640 --> 00:05:42,760 Speaker 1: So let's start with Melbourne, which is where we went. 107 00:05:42,839 --> 00:05:46,680 Speaker 1: We're talking about before the break strong population growth. We've 108 00:05:46,720 --> 00:05:49,920 Speaker 1: actually seen it even in the last few weeks or 109 00:05:49,960 --> 00:05:53,200 Speaker 1: months in terms of clearance, fraith ent prices. It seems 110 00:05:53,240 --> 00:05:55,520 Speaker 1: to be I wouldn't say the boom city, but certainly 111 00:05:55,560 --> 00:05:56,640 Speaker 1: the leading city at the moment. 112 00:05:57,480 --> 00:06:01,039 Speaker 2: We've seen a marx changing conditions across and you mentioned 113 00:06:01,040 --> 00:06:04,120 Speaker 2: the clearance rates. They have been really consistent and they're 114 00:06:04,160 --> 00:06:07,720 Speaker 2: consistently in those high sixties, so that is a massive 115 00:06:07,760 --> 00:06:11,400 Speaker 2: improvement compared to twelve months ago. Momentum is building. I 116 00:06:11,400 --> 00:06:13,960 Speaker 2: think we're particularly seeing it that in the premium end 117 00:06:14,000 --> 00:06:17,080 Speaker 2: of Melbourne's housing market, and what our full carts are 118 00:06:17,160 --> 00:06:20,680 Speaker 2: for next financial year is a six percent increase for 119 00:06:20,720 --> 00:06:23,880 Speaker 2: house prices, which means Melbourne is going to take the 120 00:06:23,960 --> 00:06:26,280 Speaker 2: lead along with Sydney. We are going to see the 121 00:06:26,320 --> 00:06:29,160 Speaker 2: strongest rates of price growth coming out of Sydney and Melbourne. 122 00:06:29,279 --> 00:06:31,880 Speaker 2: This is a massive change for Melbourne. You know, we 123 00:06:32,000 --> 00:06:35,640 Speaker 2: have to remember that pretty much over the current financial 124 00:06:35,720 --> 00:06:37,800 Speaker 2: year nothing happened with price It was pretty much a 125 00:06:37,880 --> 00:06:41,520 Speaker 2: zero change. We're going to see move into a recovery 126 00:06:41,960 --> 00:06:46,320 Speaker 2: and most importantly, what our expectations are. The house prices 127 00:06:46,320 --> 00:06:48,120 Speaker 2: in Melbourne are going to be at a new record 128 00:06:48,200 --> 00:06:50,480 Speaker 2: high by the end of the financial year. So we 129 00:06:50,520 --> 00:06:53,080 Speaker 2: are making a big call here. We are expecting Melbourne 130 00:06:53,080 --> 00:06:56,640 Speaker 2: to move into an established recovery and fully recover in 131 00:06:56,720 --> 00:06:57,360 Speaker 2: terms of price. 132 00:06:58,160 --> 00:07:00,320 Speaker 1: So what's the growth rate in Melbourne go to be 133 00:07:00,440 --> 00:07:01,880 Speaker 1: this over the next twelve months or sir? 134 00:07:02,120 --> 00:07:05,640 Speaker 2: We're expecting a six percent increase in house prices. Now 135 00:07:05,640 --> 00:07:07,840 Speaker 2: that's not boom time, you know, I think that's modest 136 00:07:07,960 --> 00:07:10,920 Speaker 2: rates of price grows. But it means that the medium 137 00:07:11,000 --> 00:07:13,239 Speaker 2: price is going to be at a new record high 138 00:07:13,280 --> 00:07:16,160 Speaker 2: and we're estimating it to be or forecasting it to 139 00:07:16,200 --> 00:07:19,760 Speaker 2: be at one point one one million dollars and that's 140 00:07:19,760 --> 00:07:21,520 Speaker 2: a new record for Melbourne. 141 00:07:21,640 --> 00:07:24,559 Speaker 1: Okay, Sydney, what's going to happen in the Emerald City? 142 00:07:25,040 --> 00:07:27,800 Speaker 2: Sydney, we're expecting to lead lead price growth out of 143 00:07:27,800 --> 00:07:30,360 Speaker 2: all of the capital cities. Seven percent increase for house 144 00:07:30,400 --> 00:07:34,640 Speaker 2: prices and a six percent increase for unit prices. Now, 145 00:07:34,800 --> 00:07:38,240 Speaker 2: our call is that Sydney and Melbourne are going to 146 00:07:38,320 --> 00:07:41,160 Speaker 2: lead price grows and one of the core foundations of 147 00:07:41,200 --> 00:07:43,760 Speaker 2: that is what we're going to see over the next 148 00:07:43,800 --> 00:07:46,720 Speaker 2: financial year is the baton is passing and that batton 149 00:07:46,800 --> 00:07:51,160 Speaker 2: is passing from affordability driven markets such as Adelaide Brisbane 150 00:07:51,440 --> 00:07:55,200 Speaker 2: to interest rate sensitive markets and that is Sydney and Melbourne. 151 00:07:55,320 --> 00:07:58,000 Speaker 2: What you tend to find is that Sydney and Melbourne 152 00:07:58,120 --> 00:08:01,480 Speaker 2: are much more sensitive to changes economic conditions and therefore 153 00:08:01,560 --> 00:08:04,320 Speaker 2: changes in the cash rate. And our expectations is the 154 00:08:04,360 --> 00:08:07,080 Speaker 2: reduction in the cash rate is going to be amplified 155 00:08:07,120 --> 00:08:10,560 Speaker 2: through Sydney and Sydney and Melbourne's housing markets much quicker 156 00:08:10,760 --> 00:08:11,840 Speaker 2: relative to other cities. 157 00:08:12,320 --> 00:08:15,360 Speaker 1: What about Camber, We don't talk a lot about it. 158 00:08:15,360 --> 00:08:17,680 Speaker 1: It hasn't had a great year. What about the next year? 159 00:08:18,240 --> 00:08:20,200 Speaker 2: Camera hasn't had a great year, It hasn't had a 160 00:08:20,200 --> 00:08:23,160 Speaker 2: great few years. It really did lead price growth during 161 00:08:23,200 --> 00:08:26,240 Speaker 2: that peak in the pandemic and has really struggled to 162 00:08:26,320 --> 00:08:28,920 Speaker 2: move into an established recovery. But this is one of 163 00:08:28,920 --> 00:08:31,680 Speaker 2: our other callouts for next financial year. We are expecting 164 00:08:31,720 --> 00:08:34,960 Speaker 2: Canberra to move into a pricing recovery. We're expecting a 165 00:08:35,320 --> 00:08:38,400 Speaker 2: forecasting a four percent increase for house prices in Canberra 166 00:08:38,640 --> 00:08:41,280 Speaker 2: and a three percent increase for unit prices. It's not 167 00:08:41,320 --> 00:08:43,720 Speaker 2: going to quite be fully recovered, but it's going to 168 00:08:43,760 --> 00:08:46,800 Speaker 2: be well on its way to recovery. And house prices 169 00:08:46,800 --> 00:08:49,679 Speaker 2: are going to be sitting about seven percent lower than 170 00:08:49,720 --> 00:08:53,160 Speaker 2: their peak that was hit during the pandemic, but we'll 171 00:08:53,160 --> 00:08:54,320 Speaker 2: be on the road to recovery. 172 00:08:54,480 --> 00:08:57,440 Speaker 1: Okay. So we can't really leave without talking about Perth, Brisbane, Adelaide. 173 00:08:57,600 --> 00:09:00,960 Speaker 1: They have done so well my running between the lines 174 00:09:01,000 --> 00:09:03,720 Speaker 1: suggesting that they won't be doing as well this year. 175 00:09:04,160 --> 00:09:05,840 Speaker 2: They're not going to be doing as well as what 176 00:09:05,880 --> 00:09:08,320 Speaker 2: they've previously seen. I mean, when you look at Adelaide, 177 00:09:08,360 --> 00:09:11,480 Speaker 2: it's been the unstoppable housing market, double digit growth for 178 00:09:11,520 --> 00:09:14,880 Speaker 2: many years. Much more subdued conditions in terms of price 179 00:09:14,960 --> 00:09:17,680 Speaker 2: growth coming out of these capital cities. Look, demand is 180 00:09:17,720 --> 00:09:20,200 Speaker 2: still there's still a bit of momentum, particularly in Brisbane, 181 00:09:20,520 --> 00:09:23,240 Speaker 2: but I think Adelaide and perse really are the capital 182 00:09:23,280 --> 00:09:25,720 Speaker 2: cities where we're going to see a marked slow down 183 00:09:25,920 --> 00:09:29,840 Speaker 2: relative to what we've seen over the current financial year. 184 00:09:30,360 --> 00:09:33,880 Speaker 2: So we're forecasting a five percent increase for house prices 185 00:09:33,920 --> 00:09:36,760 Speaker 2: in Perth and a six percent increase for units. This 186 00:09:36,840 --> 00:09:39,720 Speaker 2: is the only capital city where we're making that call 187 00:09:40,240 --> 00:09:43,880 Speaker 2: that units in Perth are going to outperform house prices, 188 00:09:43,920 --> 00:09:46,520 Speaker 2: and I think that that's the investor story, and it's 189 00:09:46,559 --> 00:09:49,720 Speaker 2: the affordability story. And then when you go to Brisbane 190 00:09:49,800 --> 00:09:54,720 Speaker 2: five percent increase and unit prices and Adelaide, one of 191 00:09:54,720 --> 00:09:57,840 Speaker 2: the slower capital cities, four percent increase for house prices 192 00:09:57,920 --> 00:09:59,920 Speaker 2: and a three percent nudge up for unit p. 193 00:10:01,440 --> 00:10:03,800 Speaker 1: Even though it's slower, we're not going to get economic 194 00:10:03,840 --> 00:10:07,439 Speaker 1: growth at four percent, so it's still a real return 195 00:10:08,040 --> 00:10:08,600 Speaker 1: in a sense. 196 00:10:09,480 --> 00:10:12,520 Speaker 2: And I agree. I think I think when we look 197 00:10:12,520 --> 00:10:17,880 Speaker 2: at these housing markets, they've had such continuous momentum over 198 00:10:17,960 --> 00:10:22,400 Speaker 2: many years, and I think, really it is affordability catching 199 00:10:22,480 --> 00:10:24,760 Speaker 2: up with that momentum is probably the best way that 200 00:10:24,840 --> 00:10:28,040 Speaker 2: I would describe it. There is only so far budgets 201 00:10:28,080 --> 00:10:30,400 Speaker 2: can stretch, and when you've got a wide gap between 202 00:10:30,440 --> 00:10:32,920 Speaker 2: where home price is, it's in the actual capacity of 203 00:10:32,920 --> 00:10:35,120 Speaker 2: a buyer to pack for that home. I think that 204 00:10:35,160 --> 00:10:38,160 Speaker 2: in itself is going to slow price growth, but it's 205 00:10:38,200 --> 00:10:42,480 Speaker 2: even keeping price growth more modest in other capital cities 206 00:10:42,520 --> 00:10:46,440 Speaker 2: like Sydney and Melbourne because we still have got affordability issues. 207 00:10:46,520 --> 00:10:49,599 Speaker 2: I mean, we've seen rates come down and we're expecting 208 00:10:49,600 --> 00:10:53,640 Speaker 2: another tour three rate cuts this calendar. Year, but there's 209 00:10:53,679 --> 00:10:57,320 Speaker 2: still lots of uncertains. There's lots of turmoil happening across 210 00:10:57,360 --> 00:11:00,400 Speaker 2: the world which can impact us domestically here in terms 211 00:11:00,400 --> 00:11:00,920 Speaker 2: of inflation. 212 00:11:01,280 --> 00:11:03,080 Speaker 1: Nickla, thank you for talking to Fear and Greed. 213 00:11:03,440 --> 00:11:03,840 Speaker 2: Thank you. 214 00:11:04,400 --> 00:11:08,040 Speaker 1: That was doctor Nikola Powell, Domain's chief of Research and Economics. 215 00:11:08,200 --> 00:11:10,400 Speaker 1: This is the Fear and Greed Business Interview. Join us 216 00:11:10,400 --> 00:11:12,720 Speaker 1: every morning for the full episode of Fear and Greed 217 00:11:13,040 --> 00:11:17,480 Speaker 1: business news you can use. I'm Sean elmar Enjoy your day.