December 20, 2023 • 8 mins
The Sydney property market has been a subject of intense scrutiny, especially through the unexpected turns of the global pandemic. In this edition of 2GB Summer Nights, Michael sat down with Peter O'Malley from Harris Partners Real Estate, to dissect the resilience and vitality of Sydney's housing market. Despite widespread pessimism during the peak of COVID-19, the market not only persevered but also saw significant growth—a 12.5% increase in house prices and over 8% for apartments.
What factors have contributed to this surprising upturn? Immigration is one of the primary drivers, as it leads to a growing demand for housing. With a lag in housing supply, this imbalance has led to a staggering 15% surge in the rental market. Furthermore, the soft Australian dollar has proved attractive to international investors, funneling additional capital into the real estate sector. These dynamics have combined to create a robust market that continues to defy expectations.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Okay.
Well, it's time for the Mondaynight property wrap, looking at
the housing market and what'sbeen happening over the weekend
just gone.
I'm joined by Peter O'Malleytonight from Harris Partners
Real Estate.
He's on the line.
Peter, good evening to you.
Good evening to you, michael.
Before we look at the weekendper se, let's just have a sort
of a bit of a look back at theyear that's been, because some
of the stats are before me hereand the numbers are pretty clear
(00:22):
.
The housing market has beenresilient.
Sydney prices up about 12.5%for the year, apartments, I
think, just to tick over 8%.
So for all of the doom andgloom of the peak of COVID that
we're going to see 30% drops onthe rest of it, I mean it just
hasn't happened, has it?
Speaker 2 (00:40):
No, and the property market outperformed this year
against all expectations.
Michael, there's no doubt itwas a rough year last year, as
the market had to absorb higherinterest rates for the first
time in 12 years and a lot ofpeople felt that downturn would
continue into 2023.
Very few analysts and marketpundits predicted what happened
this year, and vendors were thewinner.
(01:01):
There's no doubt.
Speaker 1 (01:03):
As for the rental market, though and I mean this
is one that affects a lot ofpeople it is increasingly
newsworthy.
The Sydney rental market thatput all of the others in the
shade.
That was up 15% in the past 12months.
Speaker 2 (01:18):
Yes, it was driven by excess immigration and a lack
of housing, and I think thatwill continue into 2024.
So how we would describe themarket at the moment, michael,
is that it may not rise again interms of sales values the way
it did this year in 2024.
But the rental crisis willcontinue through to next year
and will continue to causeproblems politically for both
(01:41):
the state and federal governmentbecause, quite simply, they're
behind on the housing supplypopulation issue.
Speaker 1 (01:47):
They are big time.
Now this is something thataffects our Brisbane listeners,
sydney listeners, canberralisteners as well, and that is
the increase in offshore buying.
In the past 12 months thedollar has been softer.
Some of those overseas that arecashed up and looking to invest
their money in Australian realestate for whatever reason we
don't need to go into that nowbut for whatever reason, they
(02:08):
have been doing it more so inthe past 12 months.
Speaker 2 (02:11):
One of the big plays this year.
You've outlined it beautifullythere.
The Australian dollar has beenhovering around 10 year lows,
around 62, 63 cents, for sometime.
You know we've invited too manypeople into the country, so
when the currency is down andpopulation growth is high,
that's going to be reflected inproperty prices and it's one of
(02:32):
the major contributing factorsas to why price growth was so
strong this year, and I think itwould be a good thing if the
Australian dollar moved backtowards 70 cents.
The fact that the US FederalReserve are already talking
about rate cuts will naturallysee the Australian dollar drift
up, but I think an Australiandollar at 62, 63 cents to the US
(02:55):
is too low because itencourages offshore buying,
whether they're foreigninvestors or expats that are
earning the pound or the USdollar or the Japanese yen.
They've had a party of itbuying our real estate this year
, michael.
Speaker 1 (03:09):
They have.
Look, a number of them operatewithin the rule of the law, but
some don't either.
We know that.
But look, just tell ourlisteners for those that don't
know actually what goes onbehind the scenes here what
obligations are in place forreal estate agents and
solicitors and others involvedin the entire transaction
process If they suspectsomething isn't kosher here with
an overseas purchase.
(03:30):
My understanding let me put itthis way, peter my understanding
is that certainly the solicitorI don't know about the real
estate agent, but the solicitorsimply has to put all of the
relevant documents in the safein the office, doesn't have to
report it to the authorities, asmy understanding, even if they
suspect something's up, if theyget a knock on the door, they've
got to produce the papers andsay, well, okay, here's this
(03:50):
client and maybe this is whatyou should be looking at, but
they're not obliged to beproactive in that respect.
Am I right in that assumption?
Speaker 2 (03:59):
Look, I don't think the government would view
solicitors being willfullyignorant too well the same with
real estate agents.
We don't have a massiveobligation to report on foreign
buying, and whether it'slegitimate or not it does rest
with the foreign investmentreview board, michael.
But like most governmentagencies since COVID, they are
(04:20):
understaffed and overworked.
So there is no doubt that thereis foreign buying happening in
the property market thatshouldn't.
There is additional taxationfor some foreigners who do buy
in the country, and governmentshave a pretty good track record,
in fairness, of circling backto those that have exploited the
system and hitting them forthat.
Yeah, retrospectively gettingtheir tax from them.
(04:42):
But no, I don't think thatsolicitors should be dobbling
their own clients in.
But it's pretty obvious whensomeone is flaunting the rules
and, as a real estate agent, wehave been cautioned and we've
been told to expect additionalregulation in the next one to
two years on disclosingsuspicious activity.
Speaker 1 (05:01):
It's interesting Now it looks.
Something that is certainlyrelevant at the moment is the
role of the insurance sector inthe strata aspect of unit
complexes.
Put simply, over the lastdecade or so, we've also in the
headlines, also in the stories,some terrible construction among
otherwise good construction.
But this is frightening theinsurance sector, who don't
(05:21):
simply want to be ensuringfaulty, leaky, problematic
buildings from the get go andthen having to stump up the
capital when a successful claimis made.
And so we've seen premiums risesomething like 20% year on year
, haven't we?
Speaker 2 (05:36):
Yeah we have.
This is a really concerningissue that I think is only in
its infancy.
You've articulated it very wellthere.
It's not only faulty buildingsthat insurers are wary of,
michael, it's faulty builders aswell.
So the insurance sector hasbeen let down by the strata
sector and its payout ratio hasbeen far above what it's
(05:58):
collected in premiums.
And we're now under acorrection phase where, as you
quite correctly say, insurancepremiums have gone up 20% year
on year.
Stratas that are coming to themarket in their infancy and
being formed for the first time,one of the areas that insurance
companies are really hesitantto partake.
A lot of players have droppedout of the market and, sorry to
(06:21):
say, but all of this will feedthrough to inflation because
investors who own properties instrata title developments will
need to put rents up to offsetthe higher insurance costs.
Mortgage holders won'tnecessarily be able to afford
this.
So it's a really big issuethat's breeding in the property
(06:42):
market and hopefully there is aresolution to it in the next few
years.
I think that strata titleowners are going to be shocked
as they start seeing increasedinsurance premiums over the next
12 to 18 months.
Speaker 1 (06:55):
I mean the arrival of David Chandler and the building
commissioners and the like.
That will help, but it's goingto take time.
Before you go, the weekend justgone.
How did the market look?
Speaker 2 (07:05):
Like many other weekends.
Since the RBA increased interestrates in November, we're
hovering around a true auctionclearance rate Once all the
results are in of around 50%,michael.
All year the market seemed toshrug off the interest interest
rate increases that the RBA diddeliver, but the last one in
November hurt, unfortunately.
(07:25):
What we saw in June when theRBA increased rates is that it
pushed more sellers into themarket, but it didn't actually
detract any buyers when theywent.
In November, that interest raterise pushed more sellers into
the market at an unusual time ofyear, being a month before
Christmas, but it also killed bydemand and many auctions went
(07:48):
from being three or four auctionbidders down to one, possibly
two.
So if you do want to sell yourproperty at the moment, you do
need to be realistic about theprice expectations.
There are fair minded buyers inthe market, but the upward
pressure on prices due to manybuyers competing for one home is
over at the moment.
I don't think the market willstart overly enthusiastic in the
(08:12):
new year.
So vendors do need to beacutely aware that there was a
late shift in the propertymarket in 2023.
Speaker 1 (08:19):
All right.
Well, we'll see what happens.
The next year isn't that faraway as far as the calendar goes
.
Great to talk, Peter.
We'll talk again very soon.
If we don't speak beforeChristmas, though, and I don't
think we will have a very merryChristmas to you and your family
.
Speaker 2 (08:30):
Yeah, you too, Michael.
Thanks very much.
Speaker 1 (08:32):
My pleasure, peter O'Malley from Harris Partners
Real Estate.
Okay.
Well, it's time for the Mondaynight property wrap, looking at
the housing market and what'sbeen happening over the weekend
just gone.
I'm joined by Peter O'Malleytonight from Harris Partners
Real Estate.
He's on the line.
Peter, good evening to you.
Good evening to you, michael.
Before we look at the weekendper se, let's just have a sort
of a bit of a look back at theyear that's been, because some
of the stats are before me hereand the numbers are pretty clear
(00:22):
.
The housing market has beenresilient.
Sydney prices up about 12.5%for the year, apartments, I
think, just to tick over 8%.
So for all of the doom andgloom of the peak of COVID that
we're going to see 30% drops onthe rest of it, I mean it just
hasn't happened, has it?
Speaker 2 (00:40):
No, and the property market outperformed this year
against all expectations.
Michael, there's no doubt itwas a rough year last year, as
the market had to absorb higherinterest rates for the first
time in 12 years and a lot ofpeople felt that downturn would
continue into 2023.
Very few analysts and marketpundits predicted what happened
this year, and vendors were thewinner.
(01:01):
There's no doubt.
Speaker 1 (01:03):
As for the rental market, though and I mean this
is one that affects a lot ofpeople it is increasingly
newsworthy.
The Sydney rental market thatput all of the others in the
shade.
That was up 15% in the past 12months.
Speaker 2 (01:18):
Yes, it was driven by excess immigration and a lack
of housing, and I think thatwill continue into 2024.
So how we would describe themarket at the moment, michael,
is that it may not rise again interms of sales values the way
it did this year in 2024.
But the rental crisis willcontinue through to next year
and will continue to causeproblems politically for both
(01:41):
the state and federal governmentbecause, quite simply, they're
behind on the housing supplypopulation issue.
Speaker 1 (01:47):
They are big time.
Now this is something thataffects our Brisbane listeners,
sydney listeners, canberralisteners as well, and that is
the increase in offshore buying.
In the past 12 months thedollar has been softer.
Some of those overseas that arecashed up and looking to invest
their money in Australian realestate for whatever reason we
don't need to go into that nowbut for whatever reason, they
(02:08):
have been doing it more so inthe past 12 months.
Speaker 2 (02:11):
One of the big plays this year.
You've outlined it beautifullythere.
The Australian dollar has beenhovering around 10 year lows,
around 62, 63 cents, for sometime.
You know we've invited too manypeople into the country, so
when the currency is down andpopulation growth is high,
that's going to be reflected inproperty prices and it's one of
(02:32):
the major contributing factorsas to why price growth was so
strong this year, and I think itwould be a good thing if the
Australian dollar moved backtowards 70 cents.
The fact that the US FederalReserve are already talking
about rate cuts will naturallysee the Australian dollar drift
up, but I think an Australiandollar at 62, 63 cents to the US
(02:55):
is too low because itencourages offshore buying,
whether they're foreigninvestors or expats that are
earning the pound or the USdollar or the Japanese yen.
They've had a party of itbuying our real estate this year
, michael.
Speaker 1 (03:09):
They have.
Look, a number of them operatewithin the rule of the law, but
some don't either.
We know that.
But look, just tell ourlisteners for those that don't
know actually what goes onbehind the scenes here what
obligations are in place forreal estate agents and
solicitors and others involvedin the entire transaction
process If they suspectsomething isn't kosher here with
an overseas purchase.
(03:30):
My understanding let me put itthis way, peter my understanding
is that certainly the solicitorI don't know about the real
estate agent, but the solicitorsimply has to put all of the
relevant documents in the safein the office, doesn't have to
report it to the authorities, asmy understanding, even if they
suspect something's up, if theyget a knock on the door, they've
got to produce the papers andsay, well, okay, here's this
(03:50):
client and maybe this is whatyou should be looking at, but
they're not obliged to beproactive in that respect.
Am I right in that assumption?
Speaker 2 (03:59):
Look, I don't think the government would view
solicitors being willfullyignorant too well the same with
real estate agents.
We don't have a massiveobligation to report on foreign
buying, and whether it'slegitimate or not it does rest
with the foreign investmentreview board, michael.
But like most governmentagencies since COVID, they are
(04:20):
understaffed and overworked.
So there is no doubt that thereis foreign buying happening in
the property market thatshouldn't.
There is additional taxationfor some foreigners who do buy
in the country, and governmentshave a pretty good track record,
in fairness, of circling backto those that have exploited the
system and hitting them forthat.
Yeah, retrospectively gettingtheir tax from them.
(04:42):
But no, I don't think thatsolicitors should be dobbling
their own clients in.
But it's pretty obvious whensomeone is flaunting the rules
and, as a real estate agent, wehave been cautioned and we've
been told to expect additionalregulation in the next one to
two years on disclosingsuspicious activity.
Speaker 1 (05:01):
It's interesting Now it looks.
Something that is certainlyrelevant at the moment is the
role of the insurance sector inthe strata aspect of unit
complexes.
Put simply, over the lastdecade or so, we've also in the
headlines, also in the stories,some terrible construction among
otherwise good construction.
But this is frightening theinsurance sector, who don't
(05:21):
simply want to be ensuringfaulty, leaky, problematic
buildings from the get go andthen having to stump up the
capital when a successful claimis made.
And so we've seen premiums risesomething like 20% year on year
, haven't we?
Speaker 2 (05:36):
Yeah we have.
This is a really concerningissue that I think is only in
its infancy.
You've articulated it very wellthere.
It's not only faulty buildingsthat insurers are wary of,
michael, it's faulty builders aswell.
So the insurance sector hasbeen let down by the strata
sector and its payout ratio hasbeen far above what it's
(05:58):
collected in premiums.
And we're now under acorrection phase where, as you
quite correctly say, insurancepremiums have gone up 20% year
on year.
Stratas that are coming to themarket in their infancy and
being formed for the first time,one of the areas that insurance
companies are really hesitantto partake.
A lot of players have droppedout of the market and, sorry to
(06:21):
say, but all of this will feedthrough to inflation because
investors who own properties instrata title developments will
need to put rents up to offsetthe higher insurance costs.
Mortgage holders won'tnecessarily be able to afford
this.
So it's a really big issuethat's breeding in the property
(06:42):
market and hopefully there is aresolution to it in the next few
years.
I think that strata titleowners are going to be shocked
as they start seeing increasedinsurance premiums over the next
12 to 18 months.
Speaker 1 (06:55):
I mean the arrival of David Chandler and the building
commissioners and the like.
That will help, but it's goingto take time.
Before you go, the weekend justgone.
How did the market look?
Speaker 2 (07:05):
Like many other weekends.
Since the RBA increased interestrates in November, we're
hovering around a true auctionclearance rate Once all the
results are in of around 50%,michael.
All year the market seemed toshrug off the interest interest
rate increases that the RBA diddeliver, but the last one in
November hurt, unfortunately.
(07:25):
What we saw in June when theRBA increased rates is that it
pushed more sellers into themarket, but it didn't actually
detract any buyers when theywent.
In November, that interest raterise pushed more sellers into
the market at an unusual time ofyear, being a month before
Christmas, but it also killed bydemand and many auctions went
(07:48):
from being three or four auctionbidders down to one, possibly
two.
So if you do want to sell yourproperty at the moment, you do
need to be realistic about theprice expectations.
There are fair minded buyers inthe market, but the upward
pressure on prices due to manybuyers competing for one home is
over at the moment.
I don't think the market willstart overly enthusiastic in the
(08:12):
new year.
So vendors do need to beacutely aware that there was a
late shift in the propertymarket in 2023.
Speaker 1 (08:19):
All right.
Well, we'll see what happens.
The next year isn't that faraway as far as the calendar goes
.
Great to talk, Peter.
We'll talk again very soon.
If we don't speak beforeChristmas, though, and I don't
think we will have a very merryChristmas to you and your family
.
Speaker 2 (08:30):
Yeah, you too, Michael.
Thanks very much.
Speaker 1 (08:32):
My pleasure, peter O'Malley from Harris Partners
Real Estate.
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