1 00:00:05,920 --> 00:00:07,840 Speaker 1: Welcome to Fear and Greek Q and A, where we 2 00:00:07,920 --> 00:00:11,920 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:12,080 --> 00:00:14,760 Speaker 1: Armshaw and Aylmer House. Prices are on the rise with 4 00:00:14,840 --> 00:00:17,960 Speaker 1: government incentives, lower interest rates, rising real incomes and pick 5 00:00:18,079 --> 00:00:21,720 Speaker 1: up in consumer sentiment helping the market across all capital 6 00:00:21,720 --> 00:00:25,120 Speaker 1: cities and regions. But how far will they run? And 7 00:00:25,120 --> 00:00:26,960 Speaker 1: what about the perennial this year around? The lack of 8 00:00:27,040 --> 00:00:29,840 Speaker 1: supply for the market helped me sort through the outlook. 9 00:00:29,880 --> 00:00:31,840 Speaker 1: I welcome back to Fear and Greed. Tim Lawless, head 10 00:00:31,880 --> 00:00:36,360 Speaker 1: of research for Totality. Morning, Tim get A, Sean, let's 11 00:00:36,400 --> 00:00:39,440 Speaker 1: talk about what's happened so far. Have you been surprised 12 00:00:39,479 --> 00:00:40,800 Speaker 1: by the price appreciation? 13 00:00:41,600 --> 00:00:43,240 Speaker 2: Not really, mates, I mean that there's a lot of 14 00:00:43,280 --> 00:00:47,080 Speaker 2: stuff supporting prices at the moment that there's clearly interst 15 00:00:47,159 --> 00:00:51,040 Speaker 2: rates which have come down seventy five basis points, and 16 00:00:51,440 --> 00:00:55,040 Speaker 2: that's aligned with this this I guess renewed upswing we're seeing. 17 00:00:55,080 --> 00:00:58,000 Speaker 2: But it's happening against this backdrop, as you said in 18 00:00:58,000 --> 00:01:00,880 Speaker 2: the intro, just really low supply eye levels, and I 19 00:01:00,880 --> 00:01:05,280 Speaker 2: think more importantly it's about listing numbers that are really 20 00:01:05,360 --> 00:01:08,319 Speaker 2: driving this sort of acceleration in the market. We're seeing 21 00:01:08,319 --> 00:01:12,440 Speaker 2: at the moment, Capital city listings are tracking about nineteen 22 00:01:12,480 --> 00:01:14,880 Speaker 2: percent below average for this time of the year. Regional 23 00:01:14,880 --> 00:01:18,240 Speaker 2: listings are down about twenty three percent, and they don't 24 00:01:18,280 --> 00:01:20,880 Speaker 2: really seem to be budging. Even though we're seeing vendors 25 00:01:21,240 --> 00:01:24,520 Speaker 2: becoming a bit more active through spring, that new stock 26 00:01:24,600 --> 00:01:27,520 Speaker 2: level is just being absorbed really quickly. Clearance rates are 27 00:01:27,600 --> 00:01:31,200 Speaker 2: up around seventy percent. Tom market's coming down, there's hardly 28 00:01:31,200 --> 00:01:34,039 Speaker 2: any discounting, So I think that the biggest part of 29 00:01:34,080 --> 00:01:37,919 Speaker 2: this upswing really comes back to just really tight levels 30 00:01:37,920 --> 00:01:41,680 Speaker 2: of supply and that scarcity is just running headlong into 31 00:01:41,920 --> 00:01:42,880 Speaker 2: a pickup in demand. 32 00:01:43,480 --> 00:01:46,480 Speaker 1: Can we talk about Melbourne for a moment. The clearance 33 00:01:46,560 --> 00:01:52,960 Speaker 1: rates are strong, relatively strong, yet the price rises aren't 34 00:01:53,400 --> 00:01:55,840 Speaker 1: huge compared to some of the other capitalist cities. Again, 35 00:01:55,920 --> 00:01:58,480 Speaker 1: is that a supply issue or something else going on there? 36 00:01:58,680 --> 00:02:01,040 Speaker 2: Yeah, I think there's a few things going on in Melbourne, 37 00:02:01,160 --> 00:02:03,880 Speaker 2: so supply used to be an issue. But even in 38 00:02:03,920 --> 00:02:06,720 Speaker 2: Melbourne we're now seeing listing numbers are tracking about five 39 00:02:06,760 --> 00:02:09,840 Speaker 2: percent below average, so it's nowhere near as extreme a 40 00:02:09,919 --> 00:02:12,560 Speaker 2: level of scarcity as we're seeing in like Perth or 41 00:02:12,720 --> 00:02:14,919 Speaker 2: Darwin for that matter. You know, Darwin listening is about 42 00:02:14,919 --> 00:02:16,679 Speaker 2: half of what there would normally be for this time 43 00:02:16,680 --> 00:02:20,440 Speaker 2: of the year, but absolutely supply levels have come down. 44 00:02:20,480 --> 00:02:24,280 Speaker 2: A year ago Melbourne listenings were above average. But there's 45 00:02:24,320 --> 00:02:27,280 Speaker 2: also much less investment activity at the moment. I think 46 00:02:27,280 --> 00:02:31,600 Speaker 2: that will gradually change. The market's quite affordable. There's still 47 00:02:31,639 --> 00:02:36,560 Speaker 2: I think this this framework of disincentives around higher taxes, 48 00:02:37,040 --> 00:02:39,880 Speaker 2: there's still seem to spook a lot of people. And 49 00:02:40,000 --> 00:02:42,080 Speaker 2: you know, I think medium to long term Melbourne's got 50 00:02:42,120 --> 00:02:44,560 Speaker 2: to have some legs. We haven't seen a gap between 51 00:02:44,720 --> 00:02:47,160 Speaker 2: Sydney and Melbourne in terms of prices this wide since 52 00:02:47,200 --> 00:02:51,080 Speaker 2: about nineteen ninety nine. Yields are higher. Definitely starting to 53 00:02:51,080 --> 00:02:55,200 Speaker 2: see some more positive media stories about Melbourne investors becoming 54 00:02:55,200 --> 00:02:57,440 Speaker 2: more active as well. So I think it's a case 55 00:02:57,440 --> 00:02:59,760 Speaker 2: to watch this space. But as you say, it's you know, 56 00:02:59,760 --> 00:03:02,480 Speaker 2: it's market where values are up half a percent in September. 57 00:03:03,080 --> 00:03:05,480 Speaker 2: That's a little bit better than than half the combined 58 00:03:05,520 --> 00:03:09,600 Speaker 2: capital's average zero point nine percent. So it's rising, which 59 00:03:09,680 --> 00:03:12,600 Speaker 2: is a positive inflection, but nowhere near as strong as 60 00:03:12,760 --> 00:03:15,000 Speaker 2: markets like Perth or Brisbane or Darwin. 61 00:03:15,720 --> 00:03:18,919 Speaker 1: In pers Prison Darwin. Is that mostly a supply side issue. 62 00:03:19,680 --> 00:03:21,799 Speaker 2: That's a big part of it. I mean, Darwin, even 63 00:03:21,840 --> 00:03:23,800 Speaker 2: though it's a tiny market, it doesn't really tend to 64 00:03:23,840 --> 00:03:26,000 Speaker 2: move the headline numbers around very much. It's a really 65 00:03:26,080 --> 00:03:29,280 Speaker 2: interesting market to look at. It was only sort of 66 00:03:29,560 --> 00:03:33,080 Speaker 2: six months ago that Darwin actually regained a historic high 67 00:03:33,280 --> 00:03:35,240 Speaker 2: from the previous record high was all the way back 68 00:03:35,240 --> 00:03:39,400 Speaker 2: in twenty fourteen. So it's extraordinarily affordable. It's seen a 69 00:03:39,440 --> 00:03:43,040 Speaker 2: doubling of investment activity over the past twelve months. Listing 70 00:03:43,120 --> 00:03:46,640 Speaker 2: numbers have really come down. They're like fifty three percent 71 00:03:46,640 --> 00:03:49,560 Speaker 2: below average. The unit market used to be a real 72 00:03:49,680 --> 00:03:53,240 Speaker 2: drag if you remember, Darwin had this huge influx of 73 00:03:53,400 --> 00:03:56,440 Speaker 2: high rise apartment supply around the inner city suburbs at 74 00:03:56,480 --> 00:04:00,680 Speaker 2: a time when the impects the big infrastructure project underway 75 00:04:01,120 --> 00:04:04,920 Speaker 2: that had a really long overhang hangover of supply. That's 76 00:04:04,960 --> 00:04:07,800 Speaker 2: really been absorbed and we're seeing unit values actually rising 77 00:04:07,840 --> 00:04:09,640 Speaker 2: pretty decently in Darwin now as well. 78 00:04:10,080 --> 00:04:12,520 Speaker 1: The Sydney listeners be better quickly mentioned Sydney. What's going 79 00:04:12,560 --> 00:04:12,960 Speaker 1: on there? 80 00:04:14,040 --> 00:04:15,600 Speaker 2: Yeah, I mean a part from the fact that it's 81 00:04:15,640 --> 00:04:19,240 Speaker 2: extraordinarily expensive. You got a median house value of one 82 00:04:19,240 --> 00:04:22,479 Speaker 2: point five to five million. The unit market's getting pretty 83 00:04:22,480 --> 00:04:25,120 Speaker 2: close to a mediate of nine hundred thousand. The prices 84 00:04:25,160 --> 00:04:29,120 Speaker 2: are still rising pretty quickly despite that. Sean up there 85 00:04:29,160 --> 00:04:33,440 Speaker 2: at point eight percent through the month of September, or 86 00:04:33,440 --> 00:04:36,720 Speaker 2: in dollar terms, that means we've seen a rise of 87 00:04:36,760 --> 00:04:39,160 Speaker 2: nearly ten thousand dollars just in one month off a 88 00:04:39,160 --> 00:04:42,720 Speaker 2: pretty high base, of course. So yeah, surprisingly the Sydney 89 00:04:42,760 --> 00:04:45,120 Speaker 2: market is still quite strong, and it really is that 90 00:04:45,320 --> 00:04:50,120 Speaker 2: lower end of the marketplace, the lower quartel, that's leading 91 00:04:50,160 --> 00:04:53,000 Speaker 2: that strength. I think we've talked about this before. There's 92 00:04:53,000 --> 00:04:56,600 Speaker 2: a real deflection of demand, it seems from mainstream demand 93 00:04:56,720 --> 00:04:59,520 Speaker 2: really moving towards that lower end of the pricing spectrum 94 00:05:00,160 --> 00:05:03,360 Speaker 2: because that's where they can afford to pay down alone. 95 00:05:03,640 --> 00:05:05,919 Speaker 1: Okay, so we'll come to supplying a moment. Just a 96 00:05:05,920 --> 00:05:08,560 Speaker 1: couple of the government incentives. We've had the first changes 97 00:05:08,600 --> 00:05:11,200 Speaker 1: to the first Home Buy Scheme kick in, which at 98 00:05:11,240 --> 00:05:14,160 Speaker 1: the margin I'm sure adds to demand, but they help 99 00:05:14,279 --> 00:05:16,720 Speaker 1: to buy scheme. And again it's probably at the margin 100 00:05:17,160 --> 00:05:19,479 Speaker 1: that's one where ten thousand places a year we'll see 101 00:05:19,480 --> 00:05:21,839 Speaker 1: the government take a thirty to forty percent equity stake. 102 00:05:22,200 --> 00:05:26,960 Speaker 1: How important over are those types of schemes. I mean, 103 00:05:27,560 --> 00:05:30,240 Speaker 1: I appreciate they may not be huge numbers, but they 104 00:05:30,240 --> 00:05:33,080 Speaker 1: certainly add to demand across the economy. 105 00:05:33,560 --> 00:05:37,719 Speaker 2: Absolutely, these are pure demand side measures and they tend 106 00:05:37,720 --> 00:05:41,479 Speaker 2: to be quite popular, particularly the expanded deposit guarantee. I 107 00:05:41,480 --> 00:05:43,279 Speaker 2: think they help the buyer scheme of the shared equity 108 00:05:43,320 --> 00:05:46,479 Speaker 2: scheme you mentioned is also going to be quite popular, 109 00:05:46,600 --> 00:05:51,359 Speaker 2: but I think realistically it's the expanded deposit guarantee that 110 00:05:51,480 --> 00:05:57,000 Speaker 2: doesn't have any income assessments, has unlimited places and seen 111 00:05:57,200 --> 00:06:01,000 Speaker 2: a significant rise in the minimum that's the maximum caps. 112 00:06:01,240 --> 00:06:03,640 Speaker 2: You know, Sydney's up to one point five million now, 113 00:06:04,200 --> 00:06:06,200 Speaker 2: So I think that's going to be the most popular scheme, 114 00:06:06,440 --> 00:06:09,080 Speaker 2: and it won't be too long I think before the 115 00:06:09,120 --> 00:06:14,440 Speaker 2: most desirable suburbs breach those pricing caps. Just using Sydney 116 00:06:14,440 --> 00:06:17,760 Speaker 2: as an example that there's a small pocket of suburbs 117 00:06:18,080 --> 00:06:21,200 Speaker 2: in the western suburbs just on the twenty kilometer mark 118 00:06:21,279 --> 00:06:23,760 Speaker 2: that are around that one point five million mark, just 119 00:06:23,800 --> 00:06:25,960 Speaker 2: below it. I don't think it'll take very long for 120 00:06:26,040 --> 00:06:28,719 Speaker 2: them to exceed the price caps, and we'll probably see 121 00:06:28,760 --> 00:06:31,960 Speaker 2: demand just gradually rippling a little bit further afield, or 122 00:06:32,000 --> 00:06:36,080 Speaker 2: maybe even towards the apartment sector as the more desirable 123 00:06:36,080 --> 00:06:37,840 Speaker 2: suburbs exceed those price caps. 124 00:06:38,480 --> 00:06:42,279 Speaker 1: On supply side, I mean O Shane Oliver from IMP 125 00:06:42,400 --> 00:06:44,640 Speaker 1: I think his number is somewhere two hundred two hundred 126 00:06:44,640 --> 00:06:50,960 Speaker 1: and fifty thousand shortfall on houses on dwellings. What's your 127 00:06:51,120 --> 00:06:54,800 Speaker 1: take is the government? I don't know, Tim, I'm not 128 00:06:54,800 --> 00:06:57,160 Speaker 1: assuming what short I'm asking here, like, how does it 129 00:06:57,240 --> 00:06:59,839 Speaker 1: play out ultimately over the next couple of years? Will 130 00:06:59,839 --> 00:07:01,600 Speaker 1: we ever have enough supply? 131 00:07:02,800 --> 00:07:05,880 Speaker 2: Yeah? I think eventually we will. Shaw. Maybe that's a 132 00:07:05,880 --> 00:07:10,400 Speaker 2: contrarian view because I agree with Shane and the housing 133 00:07:10,400 --> 00:07:14,120 Speaker 2: supply cancil. You know, the stretch objective for the federal 134 00:07:14,160 --> 00:07:17,720 Speaker 2: government is delivering one point two million homes in five years. 135 00:07:18,040 --> 00:07:22,120 Speaker 2: The timeframes well underway. It expires in June or twenty 136 00:07:22,200 --> 00:07:24,600 Speaker 2: twenty nine. No, I agree, we'll probably get to maybe 137 00:07:24,720 --> 00:07:27,840 Speaker 2: nine hundred and fifty thousand somewhere around that, So a 138 00:07:27,880 --> 00:07:30,920 Speaker 2: pretty long way from from one point two million. You 139 00:07:30,920 --> 00:07:34,360 Speaker 2: can see the dwining approvals numbers, they're tracking way below 140 00:07:34,360 --> 00:07:36,360 Speaker 2: where they need to be to get anywhere close to 141 00:07:36,400 --> 00:07:39,760 Speaker 2: that number. So yeah, it does look like the supply 142 00:07:39,880 --> 00:07:42,880 Speaker 2: system still quite broken. But even beyond that, I think 143 00:07:42,920 --> 00:07:45,239 Speaker 2: it's going to be another eighteen to twenty four months 144 00:07:45,240 --> 00:07:48,760 Speaker 2: before it simply becomes feasible to deliver a material amount 145 00:07:48,800 --> 00:07:51,239 Speaker 2: of housing stock to the market, especially in the multi 146 00:07:51,320 --> 00:07:54,200 Speaker 2: unit sector. So the reason I'm a bit more optimistic, 147 00:07:54,240 --> 00:07:56,560 Speaker 2: I suppose over the long run, maybe not within this 148 00:07:56,840 --> 00:07:59,640 Speaker 2: five year time frame, but ultimately there is going to 149 00:07:59,680 --> 00:08:03,720 Speaker 2: be a fly response, and you know, maybe when it 150 00:08:03,760 --> 00:08:06,320 Speaker 2: finally does come, it's going to overshoot. We do tend 151 00:08:06,360 --> 00:08:08,400 Speaker 2: to have a tendency of doing that in Australia. Just 152 00:08:08,440 --> 00:08:11,640 Speaker 2: look at the high rise apartment sectors. They tend to 153 00:08:11,680 --> 00:08:14,800 Speaker 2: go through the cyclical booms of delivering supply to the 154 00:08:14,840 --> 00:08:18,120 Speaker 2: market that takes some time to get over. We're still 155 00:08:18,120 --> 00:08:21,160 Speaker 2: seeing a lot of those high rise precincts like Melbourne 156 00:08:21,240 --> 00:08:25,760 Speaker 2: CBD or a paramatter in Sydney are generally still selling 157 00:08:26,520 --> 00:08:29,400 Speaker 2: high rise apartments that were sold off the plan for 158 00:08:29,440 --> 00:08:31,720 Speaker 2: similar prices to what you're paying now, maybe even sometimes 159 00:08:31,800 --> 00:08:34,400 Speaker 2: or less. So I think with that in mind, yeah, 160 00:08:34,400 --> 00:08:36,640 Speaker 2: that there will be a supply response, but in the 161 00:08:36,679 --> 00:08:41,200 Speaker 2: short term we're going to be nowhere near adequate. There's 162 00:08:41,240 --> 00:08:44,679 Speaker 2: a lot of changes underway with how planning policies trying 163 00:08:44,679 --> 00:08:48,600 Speaker 2: to streamline the approval system. But I think at the 164 00:08:48,640 --> 00:08:51,360 Speaker 2: moment that the biggest impediment, in the biggest of barrier 165 00:08:51,480 --> 00:08:53,720 Speaker 2: to getting more supply into the market is simply the 166 00:08:53,720 --> 00:08:57,040 Speaker 2: fact that the cost base is really high for inputs, 167 00:08:57,559 --> 00:09:00,560 Speaker 2: and the workforce is extraordinarily scarce, and there's a lot 168 00:09:00,559 --> 00:09:03,320 Speaker 2: of competition with big infrastructure. Those things are going to 169 00:09:03,320 --> 00:09:04,480 Speaker 2: get fixed anytime soon. 170 00:09:04,920 --> 00:09:06,800 Speaker 1: So what's it mean for prices, Like the bottom line 171 00:09:06,840 --> 00:09:09,360 Speaker 1: of many people trying to buy into the market who 172 00:09:09,400 --> 00:09:12,119 Speaker 1: own a home already, what does it mean for prices 173 00:09:12,400 --> 00:09:14,360 Speaker 1: in the short, medium and long term. 174 00:09:14,800 --> 00:09:17,680 Speaker 2: Well, in the short term, I'd really be looking rather 175 00:09:17,720 --> 00:09:19,960 Speaker 2: than at a new dwelling construction, I'll be looking at 176 00:09:20,000 --> 00:09:23,560 Speaker 2: listing numbers. That's the real immediacy of supply in the market, 177 00:09:23,600 --> 00:09:27,280 Speaker 2: and that's really tight. Even through spring. You normally expect 178 00:09:27,320 --> 00:09:29,040 Speaker 2: to see a bit of a rise. We're seeing a 179 00:09:29,040 --> 00:09:30,880 Speaker 2: bit of a rise at the moment in new listings, 180 00:09:30,880 --> 00:09:34,280 Speaker 2: but total listings are staying really low, just simply because 181 00:09:34,280 --> 00:09:36,319 Speaker 2: of a very rapid rate of absorption. So I think 182 00:09:36,600 --> 00:09:38,400 Speaker 2: with that in mind that the short term view is 183 00:09:38,440 --> 00:09:40,800 Speaker 2: going to be onwards and upwards. We're going to be 184 00:09:40,840 --> 00:09:44,679 Speaker 2: seeing further upwards pressure on prices because demand is about 185 00:09:44,720 --> 00:09:48,280 Speaker 2: seven percent above average, supply is nearly twenty percent below average. 186 00:09:48,640 --> 00:09:52,000 Speaker 2: Medium term, I don't think we can sustain the sort 187 00:09:52,040 --> 00:09:54,360 Speaker 2: of price growth we're seeing at the moment. Remember, we're 188 00:09:54,400 --> 00:09:58,480 Speaker 2: all ready in an environment where housing affordability is pretty 189 00:09:58,520 --> 00:10:01,079 Speaker 2: much back to record highs. We've only got numbers to 190 00:10:01,160 --> 00:10:02,640 Speaker 2: June at the moment, but I think when we see 191 00:10:02,640 --> 00:10:05,440 Speaker 2: our September numbers, which are just waiting. On the income 192 00:10:05,480 --> 00:10:08,920 Speaker 2: side of things, we'll probably see a dwelling value to 193 00:10:08,960 --> 00:10:12,480 Speaker 2: income measure that's back to new record highs, tuervisibility measure 194 00:10:12,520 --> 00:10:15,319 Speaker 2: that's back to new record highs. And with that in mind, 195 00:10:15,920 --> 00:10:19,400 Speaker 2: we can see clearly the RBA and Opera canceled. Financial 196 00:10:19,440 --> 00:10:23,160 Speaker 2: regulators are really quite watchful for any signs of a 197 00:10:23,400 --> 00:10:28,400 Speaker 2: rise in household debt levels. So I think, thinking just 198 00:10:28,400 --> 00:10:31,680 Speaker 2: about the sustainability of housing prices, we'd have to see 199 00:10:31,679 --> 00:10:34,040 Speaker 2: a slow down on the rate of growth coming into 200 00:10:34,080 --> 00:10:38,240 Speaker 2: next year, but probably still positive long term. It's much 201 00:10:38,240 --> 00:10:41,160 Speaker 2: harder to tell, and I think, as I said, eventually 202 00:10:41,200 --> 00:10:43,280 Speaker 2: there will be a supply response, or we might see 203 00:10:43,320 --> 00:10:46,880 Speaker 2: demand diminishing, maybe some sort of structural change in how 204 00:10:46,920 --> 00:10:51,280 Speaker 2: households are forming, because I just can't see households becoming 205 00:10:51,280 --> 00:10:54,560 Speaker 2: more and more stretched in terms of their financial position. 206 00:10:55,640 --> 00:10:58,360 Speaker 2: But fair enough, I mean, vacancy rates are like record lows, 207 00:10:58,360 --> 00:11:01,160 Speaker 2: They're one and a half percent, So maybe it simply 208 00:11:01,200 --> 00:11:05,920 Speaker 2: means we're going to a period of austerity and households 209 00:11:05,920 --> 00:11:07,679 Speaker 2: are going to have to be dedicating more of their 210 00:11:07,679 --> 00:11:11,880 Speaker 2: incomes towards housing, either through rental or purchases. 211 00:11:12,240 --> 00:11:14,120 Speaker 1: Tim, thank you for talking to Fear and Greed, Q 212 00:11:14,240 --> 00:11:14,400 Speaker 1: and A. 213 00:11:14,840 --> 00:11:15,559 Speaker 2: Absolutely pleasure. 214 00:11:15,600 --> 00:11:18,640 Speaker 1: Thanks mate. As Tim Lawler's head of research for Coatality, 215 00:11:18,760 --> 00:11:20,480 Speaker 1: this is Fear and Greed. Q and A. Join us 216 00:11:20,480 --> 00:11:22,960 Speaker 1: every morning for the full episode of Fear and Greed. 217 00:11:23,000 --> 00:11:29,679 Speaker 1: I'm Sean Elmer. Enjoy your day.