1 00:00:05,820 --> 00:00:08,940 Adam Lang: Welcome to the Fear & Greed business interview. I'm Adam Lang. 2 00:00:09,270 --> 00:00:12,750 Adam Lang: More property sales are delivering a profit for vendors with 3 00:00:12,750 --> 00:00:17,579 Adam Lang: the median gross profit rising to a massive $ 310,000 late 4 00:00:17,579 --> 00:00:21,810 Adam Lang: last year. CoreLogic's latest pain and gain report is out 5 00:00:21,810 --> 00:00:25,800 Adam Lang: today looking at around 90, 000 resales across the final three 6 00:00:25,800 --> 00:00:29,700 Adam Lang: months of 2023, which saw that sellers of 94% of 7 00:00:29,700 --> 00:00:33,509 Adam Lang: property sales made a profit, loss- making resales fell to 6%. 8 00:00:34,199 --> 00:00:37,199 Adam Lang: And while that particular percentage will be painful, it is 9 00:00:37,200 --> 00:00:40,710 Adam Lang: more proof overall that the property market is gaining momentum. 10 00:00:41,040 --> 00:00:44,610 Adam Lang: Eliza Owen is CoreLogic's Head of Research. Eliza, welcome back 11 00:00:44,610 --> 00:00:45,360 Adam Lang: to Fear & Greed. 12 00:00:45,929 --> 00:00:47,100 Eliza Owen: Adam, thanks for having me. 13 00:00:47,490 --> 00:00:49,380 Adam Lang: Oh, it's a great pleasure to have you back. There 14 00:00:49,380 --> 00:00:52,829 Adam Lang: are some fascinating numbers in this report. The pain and 15 00:00:52,830 --> 00:00:56,760 Adam Lang: gain report across the quarter, how long were people typically 16 00:00:56,760 --> 00:00:58,980 Adam Lang: holding onto properties before they resold them? 17 00:00:59,700 --> 00:01:04,200 Eliza Owen: Across Australia, the median hold period was nine years, and 18 00:01:04,200 --> 00:01:06,959 Eliza Owen: that's a little bit higher than what we saw in 19 00:01:06,959 --> 00:01:11,129 Eliza Owen: the previous quarter. For profit making sales, there was a 20 00:01:11,129 --> 00:01:15,330 Eliza Owen: slightly higher level of hold period compared to those that 21 00:01:15,360 --> 00:01:19,559 Eliza Owen: made a nominal loss. But what was really interesting was 22 00:01:19,590 --> 00:01:24,599 Eliza Owen: that we started to see loss making sales associated with 23 00:01:24,599 --> 00:01:28,799 Eliza Owen: relatively short hold periods in some of the markets that 24 00:01:28,799 --> 00:01:33,780 Eliza Owen: have had more short, sharp declines in recent years. So 25 00:01:33,810 --> 00:01:41,009 Eliza Owen: across Sydney, Melbourne, Brisbane, Adelaide, and Hobart, loss making house 26 00:01:41,010 --> 00:01:44,910 Eliza Owen: sales were associated with these periods of holding for kind 27 00:01:44,910 --> 00:01:47,309 Eliza Owen: of two years, a little bit less in Brisbane 1. 28 00:01:47,670 --> 00:01:51,180 Eliza Owen: 7 years. So that kind of reflects where we've come 29 00:01:51,180 --> 00:01:55,290 Eliza Owen: off a massive upswing in home values and maybe some 30 00:01:55,290 --> 00:01:58,620 Eliza Owen: of those sellers not waiting until their property is getting 31 00:01:58,620 --> 00:02:01,050 Eliza Owen: back to a record high to make a sale. 32 00:02:01,770 --> 00:02:04,199 Adam Lang: So Eliza, amongst that data, what do you think was 33 00:02:04,199 --> 00:02:07,680 Adam Lang: driving those shorter term sales? What were the reasons that 34 00:02:07,680 --> 00:02:10,320 Adam Lang: people wanted to get in and out of their house 35 00:02:10,320 --> 00:02:11,010 Adam Lang: so quickly? 36 00:02:11,669 --> 00:02:13,919 Eliza Owen: Well, this is a big part of, I guess, why 37 00:02:13,919 --> 00:02:16,800 Eliza Owen: this data gets more and more scrutinized is because it's 38 00:02:16,800 --> 00:02:20,879 Eliza Owen: revealing what might be some of the implications of a 39 00:02:20,880 --> 00:02:24,989 Eliza Owen: rapid increase in mortgage rates over such a short period 40 00:02:24,990 --> 00:02:30,119 Eliza Owen: of time. For many households, adjusting to a higher interest 41 00:02:30,120 --> 00:02:35,608 Eliza Owen: rate environment means less discretionary spending or restructuring their mortgage 42 00:02:35,610 --> 00:02:40,020 Eliza Owen: payment or reducing their savings and putting more towards their 43 00:02:40,020 --> 00:02:44,489 Eliza Owen: housing costs. But unfortunately, for some people it might mean 44 00:02:44,790 --> 00:02:48,328 Eliza Owen: reselling their property after a relatively short period of time. 45 00:02:48,930 --> 00:02:51,360 Eliza Owen: So when we looked at short- term resales across the 46 00:02:51,360 --> 00:02:55,440 Eliza Owen: country, we saw an increase in the portion of short 47 00:02:55,440 --> 00:02:59,399 Eliza Owen: term sellers, people selling within a three- year period reached 48 00:02:59,400 --> 00:03:04,560 Eliza Owen: about 17% over 2023, people selling within two years was 49 00:03:04,620 --> 00:03:09,450 Eliza Owen: just under 10%. What is good though about the majority 50 00:03:09,450 --> 00:03:12,060 Eliza Owen: of those sales is that they are making a profit. 51 00:03:12,210 --> 00:03:16,379 Eliza Owen: And when we look at the December quarter, only about 52 00:03:16,379 --> 00:03:19,770 Eliza Owen: six and a half percent of properties resold within that 53 00:03:19,770 --> 00:03:22,530 Eliza Owen: three year actually made a nominal loss. 54 00:03:23,310 --> 00:03:28,740 Adam Lang: So in that period, '21, '22 and year to '23, we saw, as you mentioned, 55 00:03:28,740 --> 00:03:32,819 Adam Lang: unprecedented mortgage rate increases. Point one was the RBA set 56 00:03:32,820 --> 00:03:36,720 Adam Lang: rate through two 4. 35, and that rarely happens in 57 00:03:36,720 --> 00:03:39,990 Adam Lang: history, and I think many people were surprised by that. 58 00:03:40,440 --> 00:03:44,190 Adam Lang: Do you think that given that quick rise in interest 59 00:03:44,190 --> 00:03:47,909 Adam Lang: rates, that this actually only 6% of people making a 60 00:03:47,910 --> 00:03:50,129 Adam Lang: loss on their resale is actually a pretty small number 61 00:03:50,190 --> 00:03:51,210 Adam Lang: in these circumstances? 62 00:03:51,990 --> 00:03:54,660 Eliza Owen: I do, especially when we look at the people who 63 00:03:54,660 --> 00:03:59,610 Eliza Owen: have held between two and four years, only 4% of 64 00:03:59,880 --> 00:04:04,320 Eliza Owen: those resellers made the loss, and that's below the national rate 65 00:04:04,590 --> 00:04:07,380 Eliza Owen: of 6%. So when you take into account the resellers 66 00:04:07,380 --> 00:04:10,079 Eliza Owen: in a three- year period, it's a pretty marginal difference 67 00:04:10,080 --> 00:04:13,590 Eliza Owen: from the overall rate of loss making that we were 68 00:04:13,590 --> 00:04:17,549 Eliza Owen: seeing across the country. The key to this, and what 69 00:04:17,550 --> 00:04:21,058 Eliza Owen: we usually see when there's an increase in profitability is 70 00:04:21,059 --> 00:04:24,928 Eliza Owen: basically that housing values are rising. It comes back to 71 00:04:24,928 --> 00:04:28,949 Eliza Owen: the fact that despite that adjustment to a higher interest 72 00:04:28,949 --> 00:04:33,120 Eliza Owen: rate environment, national home values found a new record high 73 00:04:33,120 --> 00:04:37,170 Eliza Owen: in November last year, and they've only continued to increase 74 00:04:37,200 --> 00:04:40,469 Eliza Owen: over the past few months. So that suggests that when 75 00:04:40,469 --> 00:04:43,109 Eliza Owen: we do this same analysis for the March quarter, even 76 00:04:43,110 --> 00:04:47,758 Eliza Owen: fewer resellers, whether they're recent resellers or not, will be 77 00:04:47,760 --> 00:04:51,270 Eliza Owen: making a loss. And it really ties into that idea 78 00:04:51,270 --> 00:04:56,460 Eliza Owen: that financial stability in Australia's mortgage market is underscored by 79 00:04:56,460 --> 00:04:59,909 Eliza Owen: this ongoing increase in Australia's housing market. 80 00:05:00,630 --> 00:05:03,690 Adam Lang: Do you consider that given the supply constraints in property, 81 00:05:03,690 --> 00:05:06,120 Adam Lang: that this actually could be present for a while? 82 00:05:07,020 --> 00:05:10,409 Eliza Owen: I do. I think that the under supply in the 83 00:05:10,410 --> 00:05:15,029 Eliza Owen: housing market is something that is creating that additional pressure 84 00:05:15,029 --> 00:05:20,159 Eliza Owen: on values. There's the record levels of net overseas migration, 85 00:05:20,639 --> 00:05:25,230 Eliza Owen: changes in household formation where average household sites is reduced 86 00:05:25,230 --> 00:05:28,529 Eliza Owen: and people are demanding more property as a result of 87 00:05:28,529 --> 00:05:33,719 Eliza Owen: that. And I don't think that that's changing anytime soon 88 00:05:33,719 --> 00:05:37,198 Eliza Owen: because again, high interest rates mean that we've got this 89 00:05:37,200 --> 00:05:41,549 Eliza Owen: decline in new approvals coming through as well. New development 90 00:05:41,549 --> 00:05:45,539 Eliza Owen: projects don't stack up in terms of feasibility right now. 91 00:05:45,900 --> 00:05:49,830 Eliza Owen: So again, it all kind of ties into the tension 92 00:05:49,830 --> 00:05:56,159 Eliza Owen: between providing adequate supply for Australians and also the financial 93 00:05:56,160 --> 00:06:00,118 Eliza Owen: stability piece as well. It's even interesting when you consider 94 00:06:00,480 --> 00:06:03,480 Eliza Owen: some of the weaker markets over the past few years, 95 00:06:03,810 --> 00:06:07,890 Eliza Owen: like your outer suburban markets or inner city unit markets 96 00:06:08,190 --> 00:06:10,829 Eliza Owen: also tend to be the areas that are targeted for 97 00:06:10,830 --> 00:06:14,880 Eliza Owen: high growth more supply. So I think financial stability is 98 00:06:14,880 --> 00:06:19,650 Eliza Owen: a really interesting lens that you could apply to housing 99 00:06:19,650 --> 00:06:22,980 Eliza Owen: supply basically with the implication that maybe we should be 100 00:06:22,980 --> 00:06:26,339 Eliza Owen: targeting more high equity, high growth areas that can cop 101 00:06:26,339 --> 00:06:31,860 Eliza Owen: the additional supply from a mortgage serviceability perspective and equity position. 102 00:06:32,160 --> 00:06:34,440 Adam Lang: Stay with me Eliza, we'll be back in a minute. 103 00:06:41,730 --> 00:06:46,500 Adam Lang: I'm speaking to Eliza Owen, CoreLogic's Head of Research. If 104 00:06:46,500 --> 00:06:49,020 Adam Lang: you could take us now to the differences between housing 105 00:06:49,020 --> 00:06:52,320 Adam Lang: and units, can you spot a difference in the profit 106 00:06:52,320 --> 00:06:55,919 Adam Lang: figures between housing and units? Are more sellers making more 107 00:06:55,920 --> 00:06:57,570 Adam Lang: profits on houses than apartments? 108 00:06:58,440 --> 00:07:03,480 Eliza Owen: Absolutely. So reliably houses have been more profitable than units 109 00:07:03,480 --> 00:07:08,880 Eliza Owen: over time. In the December quarter, 97% of house resales 110 00:07:09,029 --> 00:07:14,910 Eliza Owen: made a nominal gain compared to 88% of unit resales. So 111 00:07:14,910 --> 00:07:19,050 Eliza Owen: this is a pretty big differential in profitability. It kind 112 00:07:19,050 --> 00:07:24,270 Eliza Owen: of peaked that differential earlier in the downswing in mid 113 00:07:24,270 --> 00:07:28,109 Eliza Owen: 2023, and has started to narrow not only that, but 114 00:07:28,109 --> 00:07:32,430 Eliza Owen: we tend to see that houses make a greater nominal 115 00:07:32,430 --> 00:07:39,149 Eliza Owen: gain from resales as well. So the nominal median gain 116 00:07:39,150 --> 00:07:44,010 Eliza Owen: of profit- making house sales was almost 380,000 in the 117 00:07:44,070 --> 00:07:49,470 Eliza Owen: December quarter compared to 170, 000 in units. So less than 118 00:07:49,470 --> 00:07:51,600 Eliza Owen: half the amount of the gain that we see from 119 00:07:51,600 --> 00:07:53,250 Eliza Owen: a house sale at the median level. 120 00:07:54,390 --> 00:07:56,820 Adam Lang: And what about regional areas? When we've spoken to you 121 00:07:56,820 --> 00:07:59,819 Adam Lang: before, you've noted differences in regional area results. What are 122 00:07:59,820 --> 00:08:00,870 Adam Lang: they showing this time? 123 00:08:01,380 --> 00:08:06,540 Eliza Owen: Regional markets showed more profitability than the capital cities. So 124 00:08:06,570 --> 00:08:10,740 Eliza Owen: in this latest quarter, we've seen the rate of profitability 125 00:08:10,740 --> 00:08:15,000 Eliza Owen: was almost 96% of resales in regional Australia compared to 126 00:08:15,030 --> 00:08:20,729 Eliza Owen: 93% in the capital cities. And when we look at 127 00:08:20,730 --> 00:08:25,140 Eliza Owen: the areas of particularly high loss- making sales, some of 128 00:08:25,140 --> 00:08:29,370 Eliza Owen: the biggest pockets of loss have been concentrated in high- 129 00:08:29,370 --> 00:08:32,700 Eliza Owen: density urban markets like Parramatta and Melbourne. 130 00:08:33,480 --> 00:08:37,140 Adam Lang: So if there was a league table for property markets, 131 00:08:37,200 --> 00:08:40,650 Adam Lang: Eliza, where were the most profitable markets overall? 132 00:08:41,730 --> 00:08:46,679 Eliza Owen: Some of the most profitable markets were in relatively high- 133 00:08:46,679 --> 00:08:51,449 Eliza Owen: end areas. So if you take Sydney for example, over 134 00:08:51,450 --> 00:08:57,389 Eliza Owen: 99% of resales made a profit in Mossman and Randwick. 135 00:08:57,389 --> 00:08:58,199 Adam Lang: Oh, wow. 136 00:08:58,440 --> 00:09:03,598 Eliza Owen: Yeah. When you look at some of the weaker markets 137 00:09:03,630 --> 00:09:07,679 Eliza Owen: by LGA, again, Melbourne probably stands out as one of 138 00:09:07,679 --> 00:09:12,420 Eliza Owen: the worst. Around 40% of resales in the Melbourne LGA 139 00:09:13,139 --> 00:09:14,459 Eliza Owen: made a nominal loss. 140 00:09:14,520 --> 00:09:17,009 Adam Lang: In the whole Melbourne local government area? 141 00:09:17,400 --> 00:09:20,100 Eliza Owen: Yeah. So what it is, is that it's largely unit 142 00:09:20,100 --> 00:09:24,059 Eliza Owen: resales. And historically when we've looked more deeply into the 143 00:09:24,059 --> 00:09:27,960 Eliza Owen: resales, we found most of them are investor owned and 144 00:09:27,960 --> 00:09:33,660 Eliza Owen: they have an average year built of 2012. So a 145 00:09:33,660 --> 00:09:37,020 Eliza Owen: lot of those kind of high density projects that were 146 00:09:37,050 --> 00:09:42,179 Eliza Owen: fueled by investor demand in the 2010s are the housing 147 00:09:42,179 --> 00:09:45,630 Eliza Owen: stock that have not gained much value over time. The 148 00:09:45,630 --> 00:09:48,660 Eliza Owen: market composition has changed. We're not in that sort of 149 00:09:48,660 --> 00:09:52,710 Eliza Owen: mid 2010s environment where 45% of the market was investors. 150 00:09:53,129 --> 00:09:55,828 Eliza Owen: So you'll see a lot more owner occupiers making up 151 00:09:55,830 --> 00:10:00,569 Eliza Owen: demand in the housing market nowadays, and that reflects the 152 00:10:00,570 --> 00:10:04,139 Eliza Owen: level of demand that you get for that high density, relatively 153 00:10:04,139 --> 00:10:08,489 Eliza Owen: cheap inner city unit stock. The Melbourne LGA unit market 154 00:10:08,880 --> 00:10:12,478 Eliza Owen: has barely moved in the past decade. Values there have 155 00:10:12,510 --> 00:10:16,260 Eliza Owen: ticked up about 1% in the past decade overall, and 156 00:10:16,260 --> 00:10:20,010 Eliza Owen: that's why we're seeing so much loss from resale, and 157 00:10:20,010 --> 00:10:22,588 Eliza Owen: it seems that investors are willing to cop it. 158 00:10:23,280 --> 00:10:26,070 Adam Lang: That's incredible. So if we take the composite of all 159 00:10:26,070 --> 00:10:29,429 Adam Lang: this data, what does it mean for the debate over 160 00:10:29,429 --> 00:10:33,390 Adam Lang: housing affordability? I imagine it fuels concerns about the difficulties 161 00:10:33,390 --> 00:10:35,250 Adam Lang: for first home buyers to get into the market in 162 00:10:35,250 --> 00:10:38,098 Adam Lang: the first place. But is that true? And what else 163 00:10:38,099 --> 00:10:38,850 Adam Lang: can it tell us? 164 00:10:40,650 --> 00:10:43,350 Eliza Owen: Well, what kind of stands out to me is the 165 00:10:43,410 --> 00:10:47,160 Eliza Owen: extraordinary gain of those who have benefited from ownership over 166 00:10:47,160 --> 00:10:50,550 Eliza Owen: a long period of time. When we look at the 167 00:10:50,820 --> 00:10:55,260 Eliza Owen: median result of different hold periods, we still have this 168 00:10:55,260 --> 00:10:59,099 Eliza Owen: old adage of time in the market ringing true. Those 169 00:10:59,099 --> 00:11:02,009 Eliza Owen: who held for 30 years or more had a median 170 00:11:02,009 --> 00:11:07,559 Eliza Owen: result from their resale of around $ 785, 000 in nominal 171 00:11:07,559 --> 00:11:12,420 Eliza Owen: increase. So I guess for those considering homeownership, this data 172 00:11:12,420 --> 00:11:14,519 Eliza Owen: shows us time and time again that the longer you're 173 00:11:14,520 --> 00:11:17,279 Eliza Owen: in the market, the more likely you would've been to 174 00:11:17,700 --> 00:11:23,129 Eliza Owen: achieve higher capital gains. It also reflects that there are areas 175 00:11:23,129 --> 00:11:26,280 Eliza Owen: where vendors are willing to sell at a loss, but 176 00:11:26,520 --> 00:11:29,280 Eliza Owen: they might not be the kinds of markets that first 177 00:11:29,280 --> 00:11:31,890 Eliza Owen: home buyers are interested in. They tend to be your 178 00:11:31,890 --> 00:11:37,560 Eliza Owen: high density investor concentrated markets. Like inner city Melbourne, Parramatta, 179 00:11:37,740 --> 00:11:40,949 Eliza Owen: even the Perth CBD is one of the weaker areas 180 00:11:40,949 --> 00:11:44,848 Eliza Owen: for profit making sales, even in the context of a 181 00:11:44,850 --> 00:11:48,300 Eliza Owen: massive uplift in Perth home values over the past few years. 182 00:11:48,809 --> 00:11:52,110 Adam Lang: Eliza, that is terrific information and perspective. Thank you very 183 00:11:52,110 --> 00:11:53,610 Adam Lang: much for talking to Fear & Greed. 184 00:11:54,240 --> 00:11:55,830 Eliza Owen: Absolutely. Thanks for having me. 185 00:11:56,370 --> 00:12:00,088 Adam Lang: That was Eliza Owen, CoreLogic's Head of Research. This is 186 00:12:00,090 --> 00:12:02,760 Adam Lang: the Fear & Greed business interview. Join us every morning for 187 00:12:02,760 --> 00:12:05,880 Adam Lang: the full episode of Fear & Greed Daily Business News for 188 00:12:05,880 --> 00:12:09,150 Adam Lang: people who make their own decisions. I'm Adam Lang. Enjoy 189 00:12:09,150 --> 00:12:09,630 Adam Lang: your day.