1 00:00:03,930 --> 00:00:07,469 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. House 2 00:00:07,470 --> 00:00:11,459 Sean Aylmer: prices are bouncing back recording the strongest monthly growth since 3 00:00:11,460 --> 00:00:15,719 Sean Aylmer: November 2021. CoreLogic's National Home Value Index shows the pace 4 00:00:15,719 --> 00:00:20,850 Sean Aylmer: of growth accelerating sharply during May, to 1. 2%. Now, that follows 5 00:00:20,850 --> 00:00:23,910 Sean Aylmer: a rise of 0.6% in March and 0. 5% in 6 00:00:23,910 --> 00:00:27,120 Sean Aylmer: April. Let's break it down and find out which cities 7 00:00:27,120 --> 00:00:29,220 Sean Aylmer: are leading the growth and which parts of the country 8 00:00:29,400 --> 00:00:32,190 Sean Aylmer: are lagging behind. Tim Lawless is the head of research 9 00:00:32,190 --> 00:00:34,649 Sean Aylmer: for CoreLogic. Tim, welcome back to Fear and Greed. 10 00:00:35,219 --> 00:00:38,159 Tim Lawless: Many thanks. One of my favorites. Good to be here again. 11 00:00:38,640 --> 00:00:42,150 Sean Aylmer: Thank you. What is going on, particularly in the Sydney market? 12 00:00:42,240 --> 00:00:46,260 Sean Aylmer: Wow. I mean, did you expect this three, six months ago? 13 00:00:46,889 --> 00:00:49,920 Tim Lawless: No, absolutely not. And it's a very strong rate of 14 00:00:49,920 --> 00:00:53,489 Tim Lawless: growth in Sydney, up 1. 8% in one month alone. 15 00:00:54,090 --> 00:00:57,390 Tim Lawless: And since that market bottomed out in January, we've now 16 00:00:57,390 --> 00:01:01,500 Tim Lawless: seen four months of growth. Values there are up about 4. 17 00:01:01,530 --> 00:01:07,859 Tim Lawless: 8%. So, if we want to look at a dollar value change 18 00:01:07,860 --> 00:01:11,669 Tim Lawless: here, just the last month alone, we've seen Sydney housing 19 00:01:11,670 --> 00:01:16,800 Tim Lawless: values increase a little bit more than $ 18, 000. Yeah, 20 00:01:16,800 --> 00:01:20,069 Tim Lawless: well and truly bouncing back, but of course, it comes 21 00:01:20,069 --> 00:01:22,889 Tim Lawless: after the market fell by nearly 14% through what was 22 00:01:22,889 --> 00:01:24,899 Tim Lawless: a very short but sharp downturn. 23 00:01:25,289 --> 00:01:27,149 Sean Aylmer: Okay. Now, we'll get to some of the reasons in 24 00:01:27,150 --> 00:01:28,590 Sean Aylmer: a moment, but we might just go through some of 25 00:01:28,590 --> 00:01:30,660 Sean Aylmer: the numbers. How about Melbourne, how's that going, that city? 26 00:01:31,740 --> 00:01:34,860 Tim Lawless: Yeah, well, Melbourne's increasing pretty quickly as well, but on 27 00:01:34,860 --> 00:01:37,830 Tim Lawless: the monthly numbers only at half the pace of Sydney, 28 00:01:37,890 --> 00:01:43,319 Tim Lawless: up 0. 9%. And Melbourne's recorded three months consecutively now 29 00:01:43,319 --> 00:01:46,830 Tim Lawless: of values rising. So, it's up 1. 6% over the 30 00:01:46,830 --> 00:01:51,240 Tim Lawless: quarter. That's added nearly $12, 000 to the typical price of 31 00:01:51,240 --> 00:01:54,540 Tim Lawless: a home. So, yeah, Melbourne definitely lagging a little bit 32 00:01:54,540 --> 00:01:58,500 Tim Lawless: behind. Sydney tends to lead the cycles, and that's certainly 33 00:01:58,500 --> 00:02:01,529 Tim Lawless: standing out once again through this current recovery trend. 34 00:02:01,950 --> 00:02:05,129 Sean Aylmer: What about the other capital cities? Any others following the 35 00:02:05,129 --> 00:02:06,870 Sean Aylmer: lead of Sydney and Melbourne at this point? 36 00:02:07,800 --> 00:02:11,610 Tim Lawless: Well, pretty much everywhere. There wasn't a single capital city 37 00:02:11,610 --> 00:02:15,179 Tim Lawless: that didn't record a rise in value through May, but 38 00:02:15,179 --> 00:02:17,758 Tim Lawless: there are a few that are lagging the trend quite 39 00:02:17,758 --> 00:02:20,520 Tim Lawless: clearly. If you look at the rolling quarterly change, for 40 00:02:20,520 --> 00:02:24,780 Tim Lawless: example, it's still negative in Canberra, or roughly flat, down 0. 41 00:02:25,020 --> 00:02:29,070 Tim Lawless: 1%. Darwin, which tends to be a lot more volatile, 42 00:02:29,160 --> 00:02:33,270 Tim Lawless: is down 1. 3%, but mostly that's due to a fairly 43 00:02:33,270 --> 00:02:36,418 Tim Lawless: weak unit market. And then Hobart, down half a percent 44 00:02:36,480 --> 00:02:39,179 Tim Lawless: as well over the rolling quarter. Then you can look 45 00:02:39,179 --> 00:02:41,969 Tim Lawless: at markets like Perth, and even though Perth values aren't 46 00:02:41,969 --> 00:02:45,120 Tim Lawless: rising as quickly as Sydney, they're up 2. 4% the 47 00:02:45,120 --> 00:02:48,540 Tim Lawless: last three months. It's the only capital city that's recovered 48 00:02:48,540 --> 00:02:52,229 Tim Lawless: back to a new record high in May. Although, even 49 00:02:52,230 --> 00:02:54,990 Tim Lawless: though that sounds quite spectacular, it's still a very cheap 50 00:02:54,990 --> 00:02:58,859 Tim Lawless: market, which just reflects that long- term downturn that Perth 51 00:02:58,859 --> 00:03:00,000 Tim Lawless: went through between about 2014 and 2020. 52 00:03:00,300 --> 00:03:04,980 Sean Aylmer: Okay. And then Brisbane, we better not forget ... Well, we 53 00:03:04,980 --> 00:03:06,389 Sean Aylmer: better not forget Brisbane and Adelaide. 54 00:03:07,290 --> 00:03:10,710 Tim Lawless: No, no, of course not. I mean, the performance in 55 00:03:10,710 --> 00:03:14,008 Tim Lawless: both those cities is still very positive, but the trajectory's 56 00:03:14,008 --> 00:03:17,219 Tim Lawless: been quite different. Adelaide's been a very resilient market through 57 00:03:17,219 --> 00:03:20,310 Tim Lawless: the rate hiking cycle. Values are up nearly 1% over the month and 58 00:03:21,690 --> 00:03:24,360 Tim Lawless: a bit more than 1% over the rolling quarter, but 59 00:03:24,360 --> 00:03:27,600 Tim Lawless: they're only, compared to where the market peaked, only down about 1. 60 00:03:27,600 --> 00:03:31,860 Tim Lawless: 2% from the peak back in July. Whereas, Brisbane looks 61 00:03:31,860 --> 00:03:34,830 Tim Lawless: like a stronger recovery trend, up nearly 2% over the 62 00:03:34,830 --> 00:03:39,480 Tim Lawless: past three months, but values there are still about 9.4% below 63 00:03:39,480 --> 00:03:41,310 Tim Lawless: where they peaked back in June last year. 64 00:03:41,880 --> 00:03:45,540 Sean Aylmer: Okay. And what about, I mean, houses v. apartments, is 65 00:03:45,540 --> 00:03:48,630 Sean Aylmer: it more noticeable in one area or the other? 66 00:03:49,020 --> 00:03:51,420 Tim Lawless: Well, it is a little bit, and I know that's 67 00:03:51,420 --> 00:03:54,600 Tim Lawless: not a very good response, but at a broad level, 68 00:03:54,630 --> 00:03:56,940 Tim Lawless: it looks like houses are bouncing back a little bit 69 00:03:56,940 --> 00:03:59,940 Tim Lawless: faster than what units are in their recovery trends. So, 70 00:03:59,940 --> 00:04:03,420 Tim Lawless: across the capital cities, house value is up 3% the 71 00:04:03,420 --> 00:04:06,690 Tim Lawless: last quarter, the rolling quarter at least, and unit value 72 00:04:06,690 --> 00:04:10,260 Tim Lawless: is up 2. 3%. But there's quite a few examples 73 00:04:10,260 --> 00:04:14,790 Tim Lawless: where units are outperforming houses, Brisbane, for example, where the 74 00:04:14,790 --> 00:04:17,640 Tim Lawless: unit markets had a really long run of hardly any 75 00:04:17,640 --> 00:04:21,599 Tim Lawless: growth. In fact, values now are hardly any different what 76 00:04:21,599 --> 00:04:24,630 Tim Lawless: they were 10 years ago. So, unit markets showing a 77 00:04:24,630 --> 00:04:28,138 Tim Lawless: stronger return there. Also, a little bit more resilient in 78 00:04:28,139 --> 00:04:31,440 Tim Lawless: Canberra as well. And interestingly enough, similar to Brisbane, that's 79 00:04:31,440 --> 00:04:34,890 Tim Lawless: been a relatively subdued performer across the unit market because 80 00:04:34,890 --> 00:04:38,309 Tim Lawless: of a long- running overhang of supply, which now seems 81 00:04:38,309 --> 00:04:41,070 Tim Lawless: to have been absorbed. But most other markets seems to 82 00:04:41,070 --> 00:04:43,620 Tim Lawless: be a story more about houses bouncing back a little 83 00:04:43,620 --> 00:04:47,339 Tim Lawless: bit more quickly, following a larger drop in house values 84 00:04:47,339 --> 00:04:49,529 Tim Lawless: through the downturn, where units were a little bit more 85 00:04:49,529 --> 00:04:50,910 Tim Lawless: resilient to price falls. 86 00:04:51,630 --> 00:04:53,430 Sean Aylmer: Stay with me, Tim, we'll be back in a minute. 87 00:04:59,520 --> 00:05:02,009 Sean Aylmer: My guest this morning is Tim Lawless, head of research 88 00:05:02,009 --> 00:05:06,149 Sean Aylmer: at CoreLogic. Now, during COVID, we heard lots of stories 89 00:05:06,150 --> 00:05:09,599 Sean Aylmer: about people, tree changes and sea changes and pushing up 90 00:05:09,600 --> 00:05:13,979 Sean Aylmer: regional prices. Have they turned around yet? And when we 91 00:05:13,980 --> 00:05:15,960 Sean Aylmer: talk about regional prices, Tim, you better explain it to 92 00:05:15,960 --> 00:05:19,080 Sean Aylmer: us, because my hometown of Orange in New South Wales 93 00:05:19,080 --> 00:05:21,359 Sean Aylmer: is very different to the Gold Coast, which is very 94 00:05:21,360 --> 00:05:24,450 Sean Aylmer: different to Ballarat. So, regionals is a great catchall, really. 95 00:05:25,200 --> 00:05:28,620 Tim Lawless: Yeah, absolutely. Regionals is pretty much anything outside of a 96 00:05:28,620 --> 00:05:31,589 Tim Lawless: capital city. And of course, the capital city boundaries defined 97 00:05:31,589 --> 00:05:35,849 Tim Lawless: by the ASGS set of boundaries from the ABS, I 98 00:05:35,849 --> 00:05:39,210 Tim Lawless: won't go into technical details, but essentially anything outside of 99 00:05:39,210 --> 00:05:43,529 Tim Lawless: the metro area would be considered regional. And there's definitely 100 00:05:43,529 --> 00:05:46,440 Tim Lawless: apples and oranges mixed in with that. As you say, 101 00:05:46,440 --> 00:05:49,440 Tim Lawless: like Orange, interestingly enough, I was just looking at the 102 00:05:49,440 --> 00:05:52,289 Tim Lawless: numbers for Orange before, and it's been a pretty strong 103 00:05:52,290 --> 00:05:55,919 Tim Lawless: market. Most of the agricultural markets around the country have 104 00:05:55,920 --> 00:06:00,150 Tim Lawless: really bucked this softer trend through the rate hiking cycle. 105 00:06:00,600 --> 00:06:03,390 Tim Lawless: They tend to be a lot more disconnected from the 106 00:06:03,390 --> 00:06:06,540 Tim Lawless: rate hiking cycle and more connected to their own local 107 00:06:06,630 --> 00:06:11,279 Tim Lawless: economic microcosm, be it agriculture, mining or tourism, or whatever 108 00:06:11,279 --> 00:06:14,070 Tim Lawless: it tends to be. But we're definitely seeing some signs 109 00:06:14,070 --> 00:06:17,909 Tim Lawless: that regional markets are turning around. They didn't see as 110 00:06:17,910 --> 00:06:20,820 Tim Lawless: deep a trough in the correction that we just had, 111 00:06:21,450 --> 00:06:24,299 Tim Lawless: but they're not seeing a recovery trend as pronounced as 112 00:06:24,300 --> 00:06:29,219 Tim Lawless: the capital cities either. So overall, about a 0.8% rise in 113 00:06:29,219 --> 00:06:32,070 Tim Lawless: regional markets over the past three months compared to a 2. 114 00:06:32,370 --> 00:06:36,149 Tim Lawless: 8% lift in capital city values. And interestingly enough, you 115 00:06:36,150 --> 00:06:38,190 Tim Lawless: can look at a really good report that comes out 116 00:06:38,190 --> 00:06:41,729 Tim Lawless: of the Regional Australia Institute. It's pretty clear that that 117 00:06:41,730 --> 00:06:46,349 Tim Lawless: trend towards regional population growth is very different now. There's 118 00:06:46,349 --> 00:06:48,539 Tim Lawless: a lot more people leaving the regions to come back 119 00:06:48,540 --> 00:06:51,419 Tim Lawless: to the capital cities, as well as more people leaving 120 00:06:51,420 --> 00:06:53,940 Tim Lawless: the cities to go to the regions. So, much more 121 00:06:53,940 --> 00:06:56,039 Tim Lawless: of a balanced internal migration flow. 122 00:06:56,520 --> 00:06:59,190 Sean Aylmer: Okay. So, the two big questions. The first one's why? 123 00:06:59,190 --> 00:07:01,020 Sean Aylmer: And the second's, will it keep going? So, let's start 124 00:07:01,020 --> 00:07:04,230 Sean Aylmer: with the why. Why are we suddenly seeing this turnaround 125 00:07:04,529 --> 00:07:08,039 Sean Aylmer: in the market when many market watches, in fact, the 126 00:07:08,040 --> 00:07:10,469 Sean Aylmer: consensus view was that the market would fall more than 127 00:07:10,469 --> 00:07:10,949 Sean Aylmer: it has? 128 00:07:11,969 --> 00:07:15,540 Tim Lawless: Yeah, it's fascinating. And normally when you look for a 129 00:07:15,540 --> 00:07:18,930 Tim Lawless: turning point in the market, you'd be looking for a 130 00:07:18,930 --> 00:07:21,360 Tim Lawless: rate cut or you'd be looking for credit to become 131 00:07:21,360 --> 00:07:25,199 Tim Lawless: more available or maybe some sort of fiscal policy like 132 00:07:25,200 --> 00:07:28,230 Tim Lawless: the boost to the first home buyers grant. None of 133 00:07:28,230 --> 00:07:31,770 Tim Lawless: that's obviously happens. This is really, this turnaround in market 134 00:07:31,770 --> 00:07:36,390 Tim Lawless: conditions just simply comes back to really low supply levels 135 00:07:36,450 --> 00:07:40,889 Tim Lawless: running headlong into stronger demand. So, if you look at 136 00:07:40,889 --> 00:07:44,699 Tim Lawless: supply, the best way, I think, to measure effective supply 137 00:07:44,700 --> 00:07:46,440 Tim Lawless: at least, is just look at how many homes are 138 00:07:46,440 --> 00:07:50,610 Tim Lawless: available for sale. And across the capital cities, our listings 139 00:07:50,610 --> 00:07:54,630 Tim Lawless: data is tracking about 24% below the five- year average 140 00:07:54,630 --> 00:07:58,019 Tim Lawless: for this time of the year, about 15% below last 141 00:07:58,020 --> 00:08:01,410 Tim Lawless: year as well. And it's trending lower still, it's not 142 00:08:01,410 --> 00:08:05,129 Tim Lawless: starting to pick up. So, you've got listings about 24% 143 00:08:05,129 --> 00:08:09,000 Tim Lawless: below average, and you've got demonstrated demand, being the number 144 00:08:09,000 --> 00:08:12,780 Tim Lawless: of homes actually being purchased. Sure, it's down pretty sharply 145 00:08:12,780 --> 00:08:15,869 Tim Lawless: from the highs we saw back in 2021, but it's 146 00:08:15,870 --> 00:08:18,480 Tim Lawless: only fallen back to roughly around the five- year average 147 00:08:18,480 --> 00:08:21,989 Tim Lawless: levels. So, you've got roughly an average level of home 148 00:08:21,990 --> 00:08:25,620 Tim Lawless: buying activity against a really, really low level of supply 149 00:08:25,620 --> 00:08:29,670 Tim Lawless: down about 24% on average. That's where this disconnect is. 150 00:08:29,730 --> 00:08:33,030 Tim Lawless: And for buyers, there's not a lot to choose from. 151 00:08:33,059 --> 00:08:37,049 Tim Lawless: So, it looks like buyers are becoming increasingly competitive. We 152 00:08:37,049 --> 00:08:40,650 Tim Lawless: can see this in clearance rates holding up above 70%, 153 00:08:40,650 --> 00:08:45,840 Tim Lawless: generally. Homes are selling faster and vendors selling by private 154 00:08:45,840 --> 00:08:49,530 Tim Lawless: treaty aren't negotiating as much either. So, whichever way you 155 00:08:49,530 --> 00:08:51,540 Tim Lawless: look at it, it looks like vendors have taken a 156 00:08:51,540 --> 00:08:54,450 Tim Lawless: little bit more leverage back at the negotiation table and 157 00:08:55,170 --> 00:08:57,330 Tim Lawless: are enjoying some pretty strong selling conditions. 158 00:08:57,630 --> 00:08:59,579 Sean Aylmer: So, how does it play out? We know that new 159 00:08:59,580 --> 00:09:02,970 Sean Aylmer: building approvals are down about, I think it was 24% 160 00:09:02,970 --> 00:09:05,429 Sean Aylmer: earlier in the week, they came out from over the 161 00:09:05,429 --> 00:09:09,270 Sean Aylmer: past few months. We obviously have higher interest rates. We 162 00:09:09,270 --> 00:09:11,610 Sean Aylmer: had the Reserve Bank Governor, Philip Lowe, talking about the 163 00:09:11,610 --> 00:09:15,330 Sean Aylmer: rental crisis and talking about, I think he said 15% 164 00:09:15,330 --> 00:09:18,240 Sean Aylmer: of people could be underwater in terms of their free 165 00:09:18,330 --> 00:09:22,679 Sean Aylmer: cashflow, post- mortgage, et cetera. So much going on in the 166 00:09:22,679 --> 00:09:26,520 Sean Aylmer: market. What's it mean for house prices? I get that 167 00:09:26,520 --> 00:09:28,978 Sean Aylmer: in the short- term there's a supply issue, but at 168 00:09:28,980 --> 00:09:31,380 Sean Aylmer: some point that will come on. Of course, I haven't 169 00:09:31,380 --> 00:09:33,299 Sean Aylmer: mentioned migration either, Tim, so we better throw that one 170 00:09:33,299 --> 00:09:35,790 Sean Aylmer: in. When you put all that into the mixing pot, 171 00:09:35,850 --> 00:09:38,010 Sean Aylmer: what does the next year, two, three years look like? 172 00:09:39,000 --> 00:09:41,640 Tim Lawless: Yeah, I think the net result of what you just 173 00:09:41,640 --> 00:09:45,179 Tim Lawless: explained there is just a sheer level of uncertainty, to 174 00:09:45,179 --> 00:09:45,720 Tim Lawless: be honest. 175 00:09:47,490 --> 00:09:47,700 Sean Aylmer: Yeah. 176 00:09:47,700 --> 00:09:50,639 Tim Lawless: And I look at the numbers in front of me 177 00:09:50,639 --> 00:09:53,190 Tim Lawless: at the moment, Sydney up 1. 8% in a month. 178 00:09:53,670 --> 00:09:56,819 Tim Lawless: I wouldn't describe that as being sustainable. You'd have to 179 00:09:56,820 --> 00:10:00,270 Tim Lawless: think that if we did see housing prices continuing to 180 00:10:00,270 --> 00:10:02,849 Tim Lawless: rise as quickly, I think it would probably be weighing 181 00:10:02,849 --> 00:10:06,630 Tim Lawless: on the RBA to lift rates, just out of fear 182 00:10:06,630 --> 00:10:10,228 Tim Lawless: of a reestablishment of the wealth effect and consumer spending 183 00:10:10,230 --> 00:10:13,440 Tim Lawless: holding higher for longer, which flies in the face of 184 00:10:13,440 --> 00:10:17,760 Tim Lawless: bringing inflation down. And obviously, the RBA doesn't target asset 185 00:10:17,760 --> 00:10:20,400 Tim Lawless: prices. They were pretty clear to explain that in the 186 00:10:20,400 --> 00:10:23,488 Tim Lawless: minutes from the last meeting, but they were pretty clear 187 00:10:23,490 --> 00:10:26,578 Tim Lawless: to point out also, they're watching asset prices very carefully. 188 00:10:26,700 --> 00:10:30,960 Tim Lawless: So, I think reading between the lines, higher housing prices 189 00:10:31,080 --> 00:10:34,500 Tim Lawless: could potentially be one factor influencing a decision to push 190 00:10:34,500 --> 00:10:37,350 Tim Lawless: rates higher, as well as the fact that inflation's looking 191 00:10:37,350 --> 00:10:41,520 Tim Lawless: pretty sticky as well on the monthly inflation indicator that 192 00:10:41,520 --> 00:10:44,458 Tim Lawless: came out earlier in the week. So yeah, I think 193 00:10:44,460 --> 00:10:46,679 Tim Lawless: if interest rates do end up rising, you'd have to 194 00:10:46,679 --> 00:10:49,290 Tim Lawless: expect that's going to quell some of this exuberance that 195 00:10:49,290 --> 00:10:52,050 Tim Lawless: we've seen in the market. And even beyond that, we 196 00:10:52,050 --> 00:10:56,040 Tim Lawless: know that affordability is still fairly stretched across most markets 197 00:10:56,099 --> 00:10:56,670 Tim Lawless: as well. 198 00:10:57,420 --> 00:10:59,218 Sean Aylmer: Tim, great time to have your job, really. 199 00:11:01,230 --> 00:11:03,000 Tim Lawless: It's quite the rollercoaster ride, isn't it? 200 00:11:03,000 --> 00:11:03,750 Sean Aylmer: Yeah. 201 00:11:03,929 --> 00:11:04,920 Tim Lawless: It's good time to be alive. 202 00:11:05,369 --> 00:11:08,670 Sean Aylmer: Yeah, exactly. Tim, thank you very much for talking this 203 00:11:08,670 --> 00:11:09,838 Sean Aylmer: morning to Fear and Greed. 204 00:11:10,350 --> 00:11:12,150 Tim Lawless: Absolute pleasure. Thanks for the invitation. 205 00:11:12,809 --> 00:11:15,660 Sean Aylmer: That was Tim Lawless, head of research at CoreLogic. This 206 00:11:15,660 --> 00:11:18,059 Sean Aylmer: is the Fear and Greed Daily Interview. Join us every 207 00:11:18,059 --> 00:11:20,369 Sean Aylmer: morning for the full episode of Fear and Greed, Australia's 208 00:11:20,370 --> 00:11:23,670 Sean Aylmer: most popular business podcast. I'm Sean Aylmer. Enjoy your day.