1
00:00:05,960 --> 00:00:08,039
Speaker 1: Welcome to Fear and Greed Q and A, where we

2
00:00:08,080 --> 00:00:11,680
Speaker 1: ask and answer questions about business, investing, economics, politics and more.

3
00:00:11,720 --> 00:00:14,800
Speaker 1: I'm Michael Thompson, and today are we entering another house

4
00:00:14,840 --> 00:00:17,840
Speaker 1: price boom? The spring selling season is just about to begin,

5
00:00:18,000 --> 00:00:19,800
Speaker 1: and we are coming into the season with a fresh

6
00:00:19,880 --> 00:00:23,239
Speaker 1: interest rate cut two earlier in the year and more

7
00:00:23,239 --> 00:00:25,119
Speaker 1: expected in coming months. And at the same time, the

8
00:00:25,120 --> 00:00:27,880
Speaker 1: government is bringing forward its program to help first home

9
00:00:27,920 --> 00:00:30,680
Speaker 1: buyers into the market. So the big question is what

10
00:00:30,800 --> 00:00:32,880
Speaker 1: is it all going to mean for house prices. Doctor

11
00:00:32,960 --> 00:00:35,559
Speaker 1: Nicola Powell is the chief of Research and Economics at

12
00:00:35,600 --> 00:00:37,879
Speaker 1: Domain Nicola Welcome back to Fear and Greed Q and A.

13
00:00:38,600 --> 00:00:40,720
Speaker 2: Hi Michael, thanks so much for having me on again.

14
00:00:41,159 --> 00:00:43,840
Speaker 1: I'm going to ask you probably the most obvious question.

15
00:00:43,920 --> 00:00:46,680
Speaker 1: It's almost embarrassing that I'm asking you, but why is

16
00:00:47,120 --> 00:00:51,320
Speaker 1: spring such a pivotal moment for the housing market? Is

17
00:00:51,360 --> 00:00:52,480
Speaker 1: it as simple as the weather.

18
00:00:53,040 --> 00:00:56,120
Speaker 2: Look, the weather is actually part of it, Michael, and look,

19
00:00:56,120 --> 00:00:58,120
Speaker 2: and I love a really simple answer, but I think

20
00:00:58,120 --> 00:01:00,520
Speaker 2: there are two things that go on. You know, in spring,

21
00:01:00,560 --> 00:01:03,800
Speaker 2: it is when our homes present the best. So it

22
00:01:03,840 --> 00:01:05,640
Speaker 2: is when you see a lot of sellers coming to

23
00:01:05,720 --> 00:01:07,960
Speaker 2: market and most sellers are buyers and buyers are sellers.

24
00:01:08,240 --> 00:01:11,320
Speaker 2: But I think the interesting thing for Australia is there

25
00:01:11,360 --> 00:01:14,320
Speaker 2: is another item that really kind of drives that activity

26
00:01:14,400 --> 00:01:16,959
Speaker 2: higher over the spring season. It's not just about when

27
00:01:16,959 --> 00:01:19,720
Speaker 2: our homes look the best. It's also about getting that

28
00:01:19,800 --> 00:01:22,760
Speaker 2: deal done before Christmas. We have to remember that in

29
00:01:22,760 --> 00:01:26,240
Speaker 2: Australia the school year aligns to the calendar year. We

30
00:01:26,360 --> 00:01:29,880
Speaker 2: have big summer holidays December January, and it really is

31
00:01:29,920 --> 00:01:32,480
Speaker 2: about doing that transaction so you can settle into that

32
00:01:32,600 --> 00:01:35,120
Speaker 2: new home before the end of the year and start

33
00:01:35,120 --> 00:01:36,480
Speaker 2: the new year totally afresh.

34
00:01:36,959 --> 00:01:38,960
Speaker 1: Okay, And you see that then in the data, don't you,

35
00:01:39,000 --> 00:01:41,720
Speaker 1: Because listings jump what is it, six percent from winter

36
00:01:41,840 --> 00:01:44,440
Speaker 1: to spring and is that reflected then in the number

37
00:01:44,440 --> 00:01:45,360
Speaker 1: of sales as well?

38
00:01:45,480 --> 00:01:47,480
Speaker 2: It absolutely is, So you see a lift in the

39
00:01:47,560 --> 00:01:51,280
Speaker 2: number of listings and you also see higher transactional activity.

40
00:01:51,440 --> 00:01:55,240
Speaker 2: So in total, when you're looking at winter into spring,

41
00:01:55,720 --> 00:01:58,480
Speaker 2: sours tend to increase by about a percent on that

42
00:01:58,560 --> 00:02:02,840
Speaker 2: national scale. Interesting in the auction side, the volume of

43
00:02:02,960 --> 00:02:06,760
Speaker 2: auction skyrockets. So for spring, when you do that comparison

44
00:02:06,840 --> 00:02:09,760
Speaker 2: directly from winter into spring, it lifts by about thirty

45
00:02:09,800 --> 00:02:13,920
Speaker 2: one percent. So there's lots of auction activity occurring normally

46
00:02:13,960 --> 00:02:17,240
Speaker 2: in a spring season and we're expecting that so to

47
00:02:17,320 --> 00:02:18,359
Speaker 2: be this spring too.

48
00:02:19,080 --> 00:02:22,359
Speaker 1: So that's interesting. So auctions, there are more auctions as

49
00:02:22,360 --> 00:02:27,799
Speaker 1: a percentage of the overall kind of house transactions in spring.

50
00:02:28,080 --> 00:02:29,600
Speaker 2: We do tend to find that. So a lot of

51
00:02:29,639 --> 00:02:32,400
Speaker 2: new listings that come on in spring, they tend to

52
00:02:32,440 --> 00:02:35,000
Speaker 2: come on, particularly in our big market Sydney and Melbourne,

53
00:02:35,280 --> 00:02:37,160
Speaker 2: they come on as as auctions.

54
00:02:37,440 --> 00:02:40,840
Speaker 1: Okay, all right, And clearance rates we're heading into this

55
00:02:40,960 --> 00:02:44,600
Speaker 1: particular spring, clearance rates are very high, I think near

56
00:02:44,680 --> 00:02:49,440
Speaker 1: decade highs. Is the expectation that that can continue even

57
00:02:49,720 --> 00:02:51,320
Speaker 1: with greater supply in the market.

58
00:02:51,680 --> 00:02:53,720
Speaker 2: Look, I think they will. I think the thing with

59
00:02:53,800 --> 00:02:56,679
Speaker 2: clearance rates is they've been very consistent and we've seen

60
00:02:56,680 --> 00:02:59,480
Speaker 2: a consistent improvement. And that's the type of thing you

61
00:02:59,480 --> 00:03:01,359
Speaker 2: want to be looking out when you're looking at market

62
00:03:01,400 --> 00:03:04,040
Speaker 2: momentum and whether that momentum is building not only in

63
00:03:04,080 --> 00:03:07,040
Speaker 2: clearance rates but across out other market metrics, and when

64
00:03:07,080 --> 00:03:09,200
Speaker 2: you have a look at how winter has performed, clearance

65
00:03:09,280 --> 00:03:12,160
Speaker 2: rates have been strong. When you look at monthly clearance

66
00:03:12,240 --> 00:03:15,799
Speaker 2: rates over the last decade. In June it was the

67
00:03:15,840 --> 00:03:18,520
Speaker 2: fourth highest clearance rate that we've seen over the past

68
00:03:18,560 --> 00:03:21,480
Speaker 2: decade in June, and then in July improved even more

69
00:03:21,680 --> 00:03:23,679
Speaker 2: and it was the third highest clearance rate that we've

70
00:03:23,720 --> 00:03:26,720
Speaker 2: seen for of July months over the last decade. We

71
00:03:26,760 --> 00:03:30,040
Speaker 2: haven't quite closed off August, but we're expecting a similar outcome.

72
00:03:30,200 --> 00:03:32,360
Speaker 2: You know, even when we look at the big auction

73
00:03:32,480 --> 00:03:36,480
Speaker 2: markets of Sydney and Melbourne, they've been consistently performing, consistently

74
00:03:36,560 --> 00:03:40,120
Speaker 2: seeing those clearance rates in the low seventies, and I think,

75
00:03:40,280 --> 00:03:42,200
Speaker 2: you know, for me, Melbourne is one of those markets

76
00:03:42,240 --> 00:03:45,080
Speaker 2: that's really seen a sharp turn around in market dynamics.

77
00:03:45,320 --> 00:03:48,000
Speaker 1: Okay, so clearly there is a lot of confidence, there's

78
00:03:48,040 --> 00:03:49,840
Speaker 1: a bit of optimism out there in the market. We've

79
00:03:49,840 --> 00:03:53,720
Speaker 1: had three interest rates so far now just one just

80
00:03:53,800 --> 00:03:56,160
Speaker 1: this month. The expectation there is that there will be

81
00:03:56,200 --> 00:03:58,880
Speaker 1: more to come. What is that going to do then

82
00:03:58,920 --> 00:04:01,880
Speaker 1: for prices? Are we going to see this cheaper borrowing

83
00:04:02,040 --> 00:04:03,480
Speaker 1: kind of supercharge spring.

84
00:04:04,040 --> 00:04:07,320
Speaker 2: It is absolutely helping to provide momentum. I think it's

85
00:04:07,840 --> 00:04:11,840
Speaker 2: giving buyers a bit more confidence, a bit more certainty.

86
00:04:12,360 --> 00:04:15,760
Speaker 2: And the interesting dynamic is our capital cities don't necessarily

87
00:04:15,800 --> 00:04:18,640
Speaker 2: react the same to a reduction in the cashret What

88
00:04:18,680 --> 00:04:20,800
Speaker 2: you tend to find is Sydney and Melbourne a much

89
00:04:20,880 --> 00:04:24,280
Speaker 2: more sensitive to changes in the cashret and it's amplified

90
00:04:24,320 --> 00:04:27,240
Speaker 2: through their housing markets at a quicker pace than our

91
00:04:27,360 --> 00:04:31,360
Speaker 2: other slightly more affordable capital cities. And that is exactly

92
00:04:31,360 --> 00:04:33,800
Speaker 2: what we're seeing. We're seeing momentum coming back in more

93
00:04:33,839 --> 00:04:36,600
Speaker 2: so to Sydney and Melbourne, and we're seeing those more

94
00:04:36,640 --> 00:04:41,520
Speaker 2: affordability driven markets that were Perth and Adelaide. They're still

95
00:04:41,520 --> 00:04:44,440
Speaker 2: growing in price, but they're certainly not losing a bit

96
00:04:44,480 --> 00:04:47,440
Speaker 2: of momentum compared to what they were seeing. And I

97
00:04:47,440 --> 00:04:51,160
Speaker 2: think you opened this question by asking about confidence. You know,

98
00:04:51,360 --> 00:04:55,479
Speaker 2: sentiment is a really powerful driver of housing dynamics and

99
00:04:55,520 --> 00:04:59,479
Speaker 2: when you look at overall Australia consumer confidence, it is

100
00:04:59,600 --> 00:05:03,080
Speaker 2: rising and it's still negative, but it's almost edged into

101
00:05:03,320 --> 00:05:05,800
Speaker 2: a positive, so it is rising. And what you tend

102
00:05:05,880 --> 00:05:08,560
Speaker 2: to find is when you have consumer sentiment rising, we've

103
00:05:08,560 --> 00:05:11,560
Speaker 2: also got the cash rate being reduced. This plays out

104
00:05:11,680 --> 00:05:16,120
Speaker 2: historically well for housing dynamics and particularly for sellers of homeowners.

105
00:05:16,360 --> 00:05:18,880
Speaker 1: Yeah, it's interesting, isn't When we talk about that consumer

106
00:05:18,960 --> 00:05:22,000
Speaker 1: confidence and that optimism. The sentiment, as you say, it

107
00:05:22,040 --> 00:05:24,320
Speaker 1: is still negative, but it's at its highest point in

108
00:05:24,360 --> 00:05:26,120
Speaker 1: three and a half years, so it is all relative.

109
00:05:26,120 --> 00:05:28,520
Speaker 1: All of a sudden, it feels like anything is possible,

110
00:05:28,520 --> 00:05:31,080
Speaker 1: and we are seeing this playing out. We've got prices

111
00:05:31,680 --> 00:05:34,560
Speaker 1: in the market have risen was it nine percent in

112
00:05:34,640 --> 00:05:37,039
Speaker 1: just six months this year. That's one of the strongest

113
00:05:37,040 --> 00:05:40,480
Speaker 1: starts in a decade. Now you would think then that

114
00:05:40,800 --> 00:05:42,640
Speaker 1: based on what we have seen now playing out over

115
00:05:42,680 --> 00:05:44,960
Speaker 1: the last month, that that pace can continue.

116
00:05:45,360 --> 00:05:48,560
Speaker 2: Look, I'm pretty confident that that pace is going to continue.

117
00:05:48,560 --> 00:05:50,280
Speaker 2: And I was always of the view if we saw

118
00:05:50,320 --> 00:05:53,120
Speaker 2: the RBA deliver a rate cart in August, that is

119
00:05:53,160 --> 00:05:57,760
Speaker 2: going to provide the platform for a robust spring selling season.

120
00:05:58,160 --> 00:06:01,000
Speaker 2: And then you've got to also there's a third ynamic here, Michael,

121
00:06:01,360 --> 00:06:04,839
Speaker 2: where we've got the government bringing forward their first home

122
00:06:04,880 --> 00:06:09,200
Speaker 2: buyer incentive to October, smack bang in the middle of

123
00:06:09,240 --> 00:06:12,320
Speaker 2: the spring selling season, right, So all of those first

124
00:06:12,320 --> 00:06:15,200
Speaker 2: home buyers that were waiting until next year to make

125
00:06:15,200 --> 00:06:19,000
Speaker 2: their purchase will be coming to market in spring. Because

126
00:06:19,080 --> 00:06:21,279
Speaker 2: the group of first home buyers that are going to

127
00:06:21,320 --> 00:06:25,200
Speaker 2: benefit from this fast tracked first home buyer policy are

128
00:06:25,240 --> 00:06:27,359
Speaker 2: going to be the ones that get in first, because

129
00:06:27,760 --> 00:06:30,240
Speaker 2: we know that anything on the demand side in terms

130
00:06:30,240 --> 00:06:33,440
Speaker 2: of policy does prop up property price, and what we're

131
00:06:33,600 --> 00:06:36,440
Speaker 2: likely to see is more affordable sectors of the market

132
00:06:36,440 --> 00:06:39,520
Speaker 2: and are going to grow faster, and unit prices will

133
00:06:39,520 --> 00:06:42,440
Speaker 2: also grow faster, particularly in our big capital cities that

134
00:06:42,480 --> 00:06:44,080
Speaker 2: are most expensive.

135
00:06:44,080 --> 00:06:47,359
Speaker 1: Because part of the changes to the first home Buyers

136
00:06:47,400 --> 00:06:49,000
Speaker 1: scheme there was not just bringing it forward, but it

137
00:06:49,080 --> 00:06:52,560
Speaker 1: was also increasing the caps, wasn't it For cities in Sydney?

138
00:06:52,560 --> 00:06:53,800
Speaker 1: I think it went up to one and a half

139
00:06:53,880 --> 00:06:57,159
Speaker 1: million dollars. How important was it for those changes to

140
00:06:57,160 --> 00:06:59,120
Speaker 1: be made in order to keep pace with the markets?

141
00:07:00,000 --> 00:07:03,000
Speaker 2: I think it was a very sensible decision to increase

142
00:07:03,400 --> 00:07:06,360
Speaker 2: the property price caps. And you're right in Sydney, it's

143
00:07:06,400 --> 00:07:09,160
Speaker 2: one point five In Melbourne and it's nine hundred and

144
00:07:09,200 --> 00:07:12,360
Speaker 2: fifty thousand. So what this does. It's not necessarily a

145
00:07:12,400 --> 00:07:15,600
Speaker 2: game changer for units because the old caps captured quite

146
00:07:15,600 --> 00:07:18,360
Speaker 2: a broad spectrum of suburbs for units, but it means

147
00:07:18,400 --> 00:07:20,280
Speaker 2: that there's more choice. If a first home buyer is

148
00:07:20,320 --> 00:07:22,600
Speaker 2: wanting to purchase a house, they've got more choice in

149
00:07:22,680 --> 00:07:25,720
Speaker 2: terms of the suburbs, but they've Also, there's no income caps,

150
00:07:25,760 --> 00:07:27,240
Speaker 2: so it doesn't matter if as long as you're a

151
00:07:27,280 --> 00:07:29,200
Speaker 2: first time buy it doesn't matter how much you're earning,

152
00:07:29,480 --> 00:07:32,880
Speaker 2: you're eligible for. This policy of is designed for all

153
00:07:32,920 --> 00:07:37,360
Speaker 2: Australians that are looking to purchase their first home. So

154
00:07:37,440 --> 00:07:39,960
Speaker 2: I think the increase in caps basically brings it in

155
00:07:39,960 --> 00:07:43,280
Speaker 2: line with where the market is. It gives greater choice,

156
00:07:43,520 --> 00:07:45,960
Speaker 2: and I do think that the more choice we provide

157
00:07:46,200 --> 00:07:48,640
Speaker 2: it doesn't pig in the whole. First home buyers to

158
00:07:48,720 --> 00:07:54,080
Speaker 2: certain suburbs or certain locations, diverse array of suburbs is key.

159
00:07:54,120 --> 00:07:57,320
Speaker 2: Giving them choice is key. But irrespective of that, we're

160
00:07:57,360 --> 00:08:00,720
Speaker 2: still likely to see prices being pushed. We've got three

161
00:08:00,960 --> 00:08:04,360
Speaker 2: really powerful dynamics going on that are going to drive

162
00:08:04,640 --> 00:08:06,280
Speaker 2: property prices upwards.

163
00:08:06,680 --> 00:08:08,720
Speaker 1: You made a comment before that really the one to

164
00:08:08,880 --> 00:08:11,720
Speaker 1: move earliest are the first home buyers that are going

165
00:08:11,760 --> 00:08:14,440
Speaker 1: to be able to take advantage of this. How big

166
00:08:14,480 --> 00:08:16,840
Speaker 1: a risk is there that this is really those three

167
00:08:16,960 --> 00:08:20,480
Speaker 1: factors that you've said are all going to combine push

168
00:08:20,640 --> 00:08:23,200
Speaker 1: house prices up to the point that really first home

169
00:08:23,200 --> 00:08:25,200
Speaker 1: buyers are priced out again pretty much by the end

170
00:08:25,200 --> 00:08:25,640
Speaker 1: of the year.

171
00:08:26,360 --> 00:08:29,200
Speaker 2: It's an absolute, almost like throwing a firelighter on the

172
00:08:29,280 --> 00:08:33,520
Speaker 2: house market in terms of a demand policy. I think

173
00:08:33,600 --> 00:08:36,920
Speaker 2: that particularly because there's no caps on the number and

174
00:08:36,960 --> 00:08:39,960
Speaker 2: there's no caps on the income. You know, we could

175
00:08:40,000 --> 00:08:42,960
Speaker 2: actually be staring down the barrel here of first home

176
00:08:43,000 --> 00:08:46,000
Speaker 2: buyer activity competing with levels we saw back in two

177
00:08:46,080 --> 00:08:50,240
Speaker 2: thousand and nine when we saw significant increases in grants

178
00:08:50,240 --> 00:08:53,600
Speaker 2: available for first home buyers. So I think we have

179
00:08:53,679 --> 00:08:56,480
Speaker 2: to be very cautious here that we could really see

180
00:08:56,480 --> 00:08:59,240
Speaker 2: a strong way for first home buyer activity coming into

181
00:08:59,240 --> 00:09:02,160
Speaker 2: the market. I think the winners here are going to

182
00:09:02,200 --> 00:09:04,960
Speaker 2: be those that get in early or already in the

183
00:09:04,960 --> 00:09:09,520
Speaker 2: housing market, because what we will absolutely see is stronger

184
00:09:09,600 --> 00:09:12,960
Speaker 2: rates of price growth the certain sectors sub sectors of

185
00:09:13,000 --> 00:09:13,920
Speaker 2: our housing market.

186
00:09:14,400 --> 00:09:15,880
Speaker 1: Do you think it's going to bring more houses to

187
00:09:16,040 --> 00:09:18,640
Speaker 1: market that the announcement by the federal government direct And

188
00:09:18,640 --> 00:09:20,880
Speaker 1: we will see an increase now in listings as well,

189
00:09:20,920 --> 00:09:24,720
Speaker 1: because there is this kind of hope that the market's

190
00:09:24,760 --> 00:09:26,400
Speaker 1: about to get super charged.

191
00:09:27,080 --> 00:09:29,320
Speaker 2: Look, you know, there might be those investors that think,

192
00:09:29,320 --> 00:09:31,560
Speaker 2: look now is the right time to sell. You know,

193
00:09:31,600 --> 00:09:33,560
Speaker 2: what you tend to find is first time buyers and

194
00:09:33,600 --> 00:09:37,240
Speaker 2: investors do compete for similar priced properties. It might be

195
00:09:37,240 --> 00:09:40,960
Speaker 2: a good spur as well for the developers, particularly in

196
00:09:41,080 --> 00:09:44,760
Speaker 2: pre sales. The development sector. The construction sector is still

197
00:09:45,000 --> 00:09:48,440
Speaker 2: very challenged and ultimately, I mean, you know you said

198
00:09:48,480 --> 00:09:51,359
Speaker 2: it in your question there, we still have an undersupplied

199
00:09:51,360 --> 00:09:54,600
Speaker 2: housing market and the aspect is we still need to

200
00:09:54,600 --> 00:09:58,840
Speaker 2: build more homes, and productivity in the construction sector is low.

201
00:09:59,440 --> 00:10:04,040
Speaker 2: Build times of lengthened significantly. We need to really still

202
00:10:04,080 --> 00:10:07,520
Speaker 2: focus on supply and I'm not a fan of demand policies.

203
00:10:07,600 --> 00:10:09,559
Speaker 2: I think it just makes it harder for the next

204
00:10:09,600 --> 00:10:11,840
Speaker 2: wave of buyers that come in, and I think we

205
00:10:11,880 --> 00:10:15,440
Speaker 2: should be doing everything in our power to ensure that supply,

206
00:10:15,640 --> 00:10:20,200
Speaker 2: affordable supply, increased densification, and a diverse array of housing

207
00:10:20,600 --> 00:10:23,200
Speaker 2: is delivered across our major capital cities and into some

208
00:10:23,240 --> 00:10:24,560
Speaker 2: of our regional markets as well.

209
00:10:24,880 --> 00:10:26,840
Speaker 1: All Right, we are out of time, Nicola, thank you

210
00:10:26,840 --> 00:10:27,960
Speaker 1: for talking to Fear and Greed.

211
00:10:28,200 --> 00:10:28,560
Speaker 2: Thank you.

212
00:10:28,880 --> 00:10:31,559
Speaker 1: That was doctor Nicola Powell, head of Research and economics

213
00:10:31,559 --> 00:10:33,680
Speaker 1: at Domain. If you've got something that you would like

214
00:10:33,720 --> 00:10:35,719
Speaker 1: to know on this podcast, then please send me you

215
00:10:35,720 --> 00:10:38,840
Speaker 1: a question on LinkedIn, Instagram, Facebook, or at Fearandegreed dot

216
00:10:38,880 --> 00:10:41,440
Speaker 1: com dot au. Are Michael Thompson and this is fear

217
00:10:41,480 --> 00:10:42,320
Speaker 1: and greed Q and a