Speaker 1: Already and this is the Daily this is the Daily OS.
Speaker 2: Oh now it makes sense.
Speaker 1: Good morning and welcome to the Daily Odds. It's Friday,
Speaker 1: the seventh of March. I'm Sam, I'm Billy.
Speaker 2: Wait Sam, Before we start the podcast, yeah, I would
Speaker 2: like to acknowledge that we're in a new studio setup
Speaker 2: and we have these beautiful chairs. And if you watch
Speaker 2: us on YouTube, I'm looking at the camera now for
Speaker 2: the people following on YouTube, you'll see that we have
Speaker 2: these beautiful new chairs. I feel like I'm on the
Speaker 2: call her Daddy set. That's kind of what it looks like.
Speaker 1: It's the small things that make a huge difference to
Speaker 1: a podcast like the Daily OS. Yeah.
Speaker 2: I think it's really going to uplift the quality of
Speaker 2: our podcasts.
Speaker 1: It's fantastic. And I actually just said to you before, Billy,
Speaker 1: they feel like therapy chairs. Yes, and so maybe it
Speaker 1: means that when we have you know, Prime Minister in here,
Speaker 1: the opposition leader in here, they're going to be a
Speaker 1: bit more open, a bit more comfortable, more in touch.
Speaker 1: Love it. But that is enough chair chat for your Friday.
Speaker 1: Let's get into what we're talking about today, and that
Speaker 1: is the Australian housing market. It's been in the news
Speaker 1: again with property prices continuing to climb despite some interest
Speaker 1: rate relief from the RBA last month. So for young
Speaker 1: Australians hoping to buy their first home, the situation does
Speaker 1: seem to be getting increasingly challenging. And I think what
Speaker 1: interest rates dropping presented to us was a glimmer of
Speaker 1: hope ahead of a federal election where the cost of
Speaker 1: living and how and where young Australians are going to
Speaker 1: get their first home. We're going to have a discussion
Speaker 1: about whether the Australian dream is in more trouble than
Speaker 1: ever before. And to do that we're going to be
Speaker 1: joined by Tim Lawless. He is the head of research
Speaker 1: at core Logic, who released some new housing data this
Speaker 1: week that shows that despite the RBA cutting interest rates
Speaker 1: last month, house prices are ticking back up.
Speaker 2: So Sam. Housing affordability has been a topic that we
Speaker 2: have been talking about, well Australia has been talking about
Speaker 2: for dec really, but I feel like since the pandemic,
Speaker 2: the conversation about affordability of housing in Australia really ramped up.
Speaker 2: We saw a massive increase in the price of houses
Speaker 2: in Australia, not just the cost of a house but
Speaker 2: also the price of renting in Australia. I want to
Speaker 2: start by just looking at what is the state of play,
Speaker 2: what does the market look like right now when it
Speaker 2: comes to housing in Australia.
Speaker 1: So the base of this discussion with Tim is core
Speaker 1: logics finding that house prices went up point three percent
Speaker 1: in February, and that is after a three month period
Speaker 1: where house prices were dropping. And so you have the
Speaker 1: state of play in February being that in every capital
Speaker 1: city except Darwin and in regional Australia, it's more expensive
Speaker 1: to buy a house than it was a month ago.
Speaker 1: And that's a really interesting way into thinking about whether
Speaker 1: we're in a better spot than we were twelve months
Speaker 1: ago to try and buy a house. You're right about
Speaker 1: the renting point. That's a really interesting discussion and Tim
Speaker 1: had some really interesting stats about how incredible the rent
Speaker 1: rises were in the pandemic and they're better now but
Speaker 1: still not great. And then I asked him about the
Speaker 1: election and as an analyst, what he sees his role
Speaker 1: to be in trying to break down the housing policy.
Speaker 1: We're going to be thrown at in the next couple
Speaker 1: of weeks.
Speaker 2: Okay, I think that gives us some good context for
Speaker 2: your interview with Tim Lawless. In my mind, he's like
Speaker 2: a mini celebrity because I see him on every press
Speaker 2: release from Callhord Jick. So I'm excited to hear his
Speaker 2: voice and see his face put a face to the
Speaker 2: name on the press releases. So here is that chat.
Speaker 1: Tim, Thank you so much for joining us this morning,
Speaker 1: No problem, Sam, thanks for the invitation. So housing affordability
Speaker 1: has been something that we've talked about a number of
Speaker 1: times on this podcast. We saw a rate cut from
Speaker 1: the RBA in February. Did that relieve some of the
Speaker 1: pressure on house prices in Australia?
Speaker 3: Well, not really, because we actually saw house prices rise
Speaker 3: in February, breaking a three month downturn if you'd like
Speaker 3: to call it that. It was more of a pause
Speaker 3: in the marketplace where we saw a measure of home
Speaker 3: values nationally peaked in October and fell for three months,
Speaker 3: and then it bounds back by point three percent, virtually
Speaker 3: taking the market back to where it was at the
Speaker 3: end of last year. So yeah, I think in that
Speaker 3: sense we're still seeing affordability as a real challenge fair enough.
Speaker 3: Serviceability might have improved a little bit with a twenty
Speaker 3: five basis point rate cut, But in the grand scheme
Speaker 3: of things, if you're on say a seven hundred and
Speaker 3: fifty thousand dollars mortgage, that twenty five basis point rate
Speaker 3: cut means about one hundred and twenty dollars a month saving,
Speaker 3: So in the grand scheme of things, it's not much,
Speaker 3: and we need to see rates coming down a lot
Speaker 3: further before you'd really describe interst rates as being stimulatory.
Speaker 3: It's still quite high.
Speaker 1: So obviously we've got the benefit of hindsight here. But
Speaker 1: were you surprised to see those February numbers come through
Speaker 1: showing a tick back up.
Speaker 3: I'll say no, maybe kind of actually, because normally you
Speaker 3: wouldn't see markets responding that quickly to a rate cut.
Speaker 3: But I think what we drove values a little bit
Speaker 3: higher in February was probably just the sentiment that had
Speaker 3: already been growing as we saw expectations of a rate
Speaker 3: cut were building, and everybody knew it was just a
Speaker 3: matter of time or when, rather than if, so I
Speaker 3: think that's probably the biggest thing behind why we saw
Speaker 3: this fairly broad based rise in housing values in February.
Speaker 3: Albeit zero point three percent rise isn't that much at
Speaker 3: all in dollar terms. That means nationally we saw about
Speaker 3: a twenty four hundred dollars increase in the median value.
Speaker 3: But I think the key thing was almost everywhere saw
Speaker 3: a rise in values that there was only a couple
Speaker 3: of exceptions Darwin Regional Victoria with the two where we
Speaker 3: didn't see a rise in values. So yeah, I think
Speaker 3: it was more about sentiment than the actual rate cut itself.
Speaker 1: So is it easier to enter the housing market as
Speaker 1: a first time owner now or say twelve months ago
Speaker 1: from your perspective.
Speaker 3: Probably not, because over the past twelve months we've seen
Speaker 3: housing values nationally have increased by about four percent, or
Speaker 3: in dollar terms, they've gone up by nearly thirty thousand dollars.
Speaker 3: So I think for most people they wouldn't have seen
Speaker 3: a thirty thousand dollars boost to their income over the
Speaker 3: past twelve months. So yeah, even though serviceability might have
Speaker 3: improved a little bit, and that absolutely that's one of
Speaker 3: the barriers to getting into the marketplace is proving up
Speaker 3: to the bank that you can pay them back. So
Speaker 3: interest rates coming down a little bit definitely, that's a positive,
Speaker 3: but compared to a year ago, prices are quite a
Speaker 3: bit higher, especially if you're looking to buy into markets
Speaker 3: like say Perth, both housing prices are up about fourteen
Speaker 3: percent in twelve months. Adelaide Brisbane are also well have
Speaker 3: been very strong markets. If you're looking to get into
Speaker 3: a market like Melbourne, prices are actually quite a bit
Speaker 3: lower in Melbourne than there were twelve months ago. They're
Speaker 3: down in Melbourne by about three percent, or in dollar
Speaker 3: terms they're about twenty five thousand dollars lower than a
Speaker 3: year ago. So there are some exceptions to the rule,
Speaker 3: and I think you'll find that first home buyers do
Speaker 3: become more active in those markets. Melbourne, Hobart, Canberra all
Speaker 3: good examples where values have come down over the past
Speaker 3: twelve months and where there's probably a good opportunity to
Speaker 3: get into the marketplace at a bit of a discount,
Speaker 3: at least relative to recognize.
Speaker 1: How are things looking in the regions then tim especially
Speaker 1: for first time buyers, much.
Speaker 3: More resilient actually, so we haven't really seen the regional
Speaker 3: markets behaving like the capital cities. Sure they're slow down
Speaker 3: in the rate of growth, but they've still remained positive.
Speaker 3: But again there is a lot of diversity here. Some
Speaker 3: of the markets that are really driving the stronger regional
Speaker 3: trends tend to be quite rural markets areas like Gladstone
Speaker 3: or Townsville, Rockhampton. Go to somewhere like Ballarat or Geelong
Speaker 3: in Victoria and these markets are well down over the
Speaker 3: past twelve months, and from their peak. Areas like Newcastle
Speaker 3: or Woongong around Sydney have generally still seen growth, but
Speaker 3: much more subtle levels of growth as well. So it's
Speaker 3: quite diverse. But I think broadly regional markets are still
Speaker 3: experiencing this additional rate of population growth than what they're
Speaker 3: seeing pride of the pandemic. More people leaving the capital
Speaker 3: cities to go to regional Australia and that seems to
Speaker 3: be on a bit of a second wind at the moment.
Speaker 1: Isn't that interesting that we're seeing kind of another wave
Speaker 1: of regional movement two years after the pandemic ended.
Speaker 3: Yeah, and maybe that's related to still that the affordability
Speaker 3: of regional Australia relative to the capitals is still there,
Speaker 3: even though it's not as pronounced as it used to be,
Speaker 3: say prior to twenty twenty. But also I think it
Speaker 3: demonstrates some of this I guess permanency of hybrid working
Speaker 3: situations as well. A lot of people have returned to
Speaker 3: the office, but generally if you're in a professional or
Speaker 3: a white collar environment, tends to be sort of three
Speaker 3: days a week back in the office. So those sort
Speaker 3: of regional commutable markets, they're in that sweet spot of
Speaker 3: maybe being within an hour or two of a major
Speaker 3: capital city. I think that they've probably seen a structural
Speaker 3: change in their underlying demand where they probably will be
Speaker 3: more popular going forward than what they were prior to COVID.
Speaker 1: And just quickly talking about rental markets, a lot of
Speaker 1: our listeners would be renters. Have rental markets calmed down
Speaker 1: since the pretty wild days of the pandemic where we
Speaker 1: heard lots of stories anecdotally from our readers. I'm included
Speaker 1: in that bucket as well, the rents went up really quickly.
Speaker 3: Yeah, Sam, I think that's a good way to describe it.
Speaker 3: They have calmed down that they certainly haven't fallen, so
Speaker 3: we're still seeing rents rising, but nowhere near as rapidly
Speaker 3: is what they were. To give you a couple of examples,
Speaker 3: go back to the middle of twenty twenty one. That
Speaker 3: was the height of the rental boom, and we're seeing
Speaker 3: markets like Sydney and Melbourne, particularly the unit sectors of
Speaker 3: Sydney and Melbourne, were seeing rents rising fifteen sixteen percent
Speaker 3: per annum. It was extremes.
Speaker 1: That's a massive jump, but.
Speaker 3: It's huge, absolutely a typical rental market movement oversee the
Speaker 3: past ten years. An end or growth rate, a normal
Speaker 3: one would be about two to three percent. So yeah,
Speaker 3: there's fifteen to sixteen percent rise in rental values was
Speaker 3: an absolute shock to a lot of renters. The good
Speaker 3: news is we're now seeing vents rising at a much
Speaker 3: more mild level. Typically in Sydney and Melbourne, unit rents
Speaker 3: a rising two to three percent, house rents roughly the same,
Speaker 3: but still that comes after this period of extreme growth,
Speaker 3: and they're not going backwards in most cases, which means
Speaker 3: rental affordability is still a real challenge.
Speaker 1: We always have this conversation with our listeners about interest
Speaker 1: rates and cost of living and trying to kind of
Speaker 1: make the point that even if things slow down, your
Speaker 1: coffee that's five dollars is very unlikely to ever go
Speaker 1: back to being four dollars. Can you apply that logic
Speaker 1: to renting? I mean, you know you've mentioned there twice.
Speaker 1: Rents haven't gone backwards. Could we realistically expect them to
Speaker 1: go backwards?
Speaker 3: Well, we could see rents go backwards, but I think
Speaker 3: not not materially, not significantly. And I agree with you
Speaker 3: it's very rare to see the price of something actually retreat.
Speaker 3: There could be a situation where we do see rents
Speaker 3: go backwards temporarily. And at the moment, we are definitely
Speaker 3: seeing significant reduction in overseas migration, for example, and a
Speaker 3: big part of that boom in rental conditions was simply
Speaker 3: the additional demand we're seeing as borders reopened and an
Speaker 3: influx of temporary migrants came to Australia, and that really
Speaker 3: drove rental demand significantly higher at a time when households
Speaker 3: had become smaller across the country as well through the pandemic,
Speaker 3: which really amplified rental demand. We've now seen overseas migrations
Speaker 3: fallen by about sixty five percent from its peak back
Speaker 3: to much more normal levels, and that's helped to reduce
Speaker 3: rental demand a little bit. But we're also seeing rental
Speaker 3: households becoming larger. I think that luxury of having maybe
Speaker 3: the second or third bedroom as a home office for
Speaker 3: a lot of people is simply that a luxury, and
Speaker 3: they've had to tenant that room out to cover their
Speaker 3: mental costs.
Speaker 1: A final question from me, Tim, We're about to enter
Speaker 1: a federal election cycle. We're expecting the election to be
Speaker 1: called any day now. I'm not going to ask you
Speaker 1: to give me kind of analysis of which platform you
Speaker 1: think is better, but more I want to ask about
Speaker 1: your role in the election. How are you going to
Speaker 1: approach as a researcher, as an expert in this space.
Speaker 1: What signals are you going to be looking for as
Speaker 1: the parties come out with housing policy, and how are
Speaker 1: you going to try and help Australians make sense of
Speaker 1: it all.
Speaker 3: Yeah, great question, and I think as an analyst, I'm
Speaker 3: here to provide the information and the data to make
Speaker 3: informed decisions. And I think we could see this across
Speaker 3: at least the major political parties that Australia is in
Speaker 3: the grips of a massive supply issue. Housing supply issue.
Speaker 3: We need to be building more homes. And once you
Speaker 3: start building a lot more homes, then that starts to
Speaker 3: resolve some of the affordability challenges because it helps to
Speaker 3: keep a lid on price growth in housing prices. So
Speaker 3: I think that's probably the key to this election is
Speaker 3: those political parties that have a real supply side focus
Speaker 3: in their policies, trying to enable building more homes and
Speaker 3: a whole range of homes, not just apartments. We need
Speaker 3: to see more medium density and low density homes as well,
Speaker 3: and we need to see a lot more transport that's
Speaker 3: connecting these homes to make them desirable and efficient to
Speaker 3: commute from. So I think that's where we're probably see
Speaker 3: the most influential policies being announced that are going to
Speaker 3: be determining housing outcomes.
Speaker 1: A very interesting election period coming up. It's fascinating to
Speaker 1: kind of have this one rate drop before the election
Speaker 1: really goes into full swing, house prices being a bit
Speaker 1: stubborn and staying where they are, if not ticking upwards.
Speaker 1: And then yeah, the discussion, I agree with you, will
Speaker 1: focus more on supply. And I'm really relieved that you
Speaker 1: actually mentioned that point about transport because I find that
Speaker 1: that's often missed in these conversations about housing, and it's
Speaker 1: not just transport right, it's about schooling, and it's about
Speaker 1: employment opportunities in the regions where there's meant to be
Speaker 1: more houses being built. So I appreciate that a lot,
Speaker 1: and I'm really excited to see the dynamics of this
Speaker 1: housing conversation in this upcoming election.
Speaker 3: Well said Sam, and yeah, I think we could talk
Speaker 3: for days about the need for amenity and infrastructure linking
Speaker 3: up areas where new housing is going in. But fully
Speaker 3: agree with that.
Speaker 1: Thank you so much for joining us, Tim, appreciate it.
Speaker 2: Such a great conversation, and I think that gives us
Speaker 2: a lot of context going into this election campaign that
Speaker 2: we are very much about to enter.
Speaker 1: We know it's going to be a huge issue that
Speaker 1: you know, all major parties and minor parties are going
Speaker 1: to be talking about a lot. So whatever we can
Speaker 1: do to try and make sense of it is a
Speaker 1: good conversation.
Speaker 2: You have no doubt there will be a lot of
Speaker 2: policies being announced in the next couple of weeks about housing. Sam,
Speaker 2: thank you for the interview, Thanks Billy, and thank you
Speaker 2: so much for listening to this episode of The Daily OS.
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