January 24, 2024 • 23 mins
This episode isn't just about market predictions; it's your vantage point to see beyond the horizon of real estate dynamics, influenced by international economics and geopolitical tensions. We'll navigate the global monetary policies and fiscal maneuvers that could echo through the corridors of Australian homes, preparing you with the wisdom to make informed decisions in a market that's anything but predictable.
As we pivot to the political chessboard, we discuss the Australian government's move to suspend the 'golden visa', unraveling the threads of foreign investment in the fabric of our urban real estate tapestry. The ripple effects in Sydney and Melbourne markets take center stage, with a candid look at the shifting sands of buyer demographics amidst a burgeoning rental crisis. Whether you're a hopeful seller seeking strategy in an evolving market, or a keen observer of immigration's interplay with housing availability, this episode promises to arm you with insights and advice that could redefine your perspective on property's place in tomorrow’s Australia.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
All down, all silent, going, going, going.
Go on, stop the black noise.
Speaker 2 (00:07):
Welcome to the Current Market Insights podcast
brought to you by HarrisPartners Real Estate.
Each episode we chat with realestate author and industry
leader, peter O'Malley, todiscuss the current property
market conditions and provideinsights to assist you on your
property journey.
Speaker 3 (00:29):
Hello and welcome to our first New Year's edition of
Current Market Insights.
I'm your host, kieran O'Brien,and with me in the new year is
Mr Peter O'Malley.
G'day, kieran, happy new yearto you.
Happy new year to you, peter,and happy new year to all of our
listeners as well.
Welcome back, peter, and Ireally am hoping that you'll
join me today in just kickingoff the podcast this year with a
bit of a look ahead, a forecastof sorts of what we think 2024
(00:53):
is going to look like in termsof Sydney property.
We have touched briefly on thissubject at the end of last year
, but I think, now that we're inthe fray of 2024, we should get
a sense of what it's lookinglike on the road ahead.
Speaker 1 (01:05):
Kieran, the market had a bit of a soft finish to
last year after what wasotherwise a great year.
House prices in Sydney were up11%, but that growth was stopped
in its tracks by the Novemberinterest rate rise.
Both from what the US FederalReserve and the RBA have
suggested, the property marketis looking for interest rate
(01:27):
cuts at some stage this year.
There's a sense that, whilst wemay not have an implosion due
to the mortgage cliff, there's asense that at some stage in
2024, economic performance isgoing to be severely impacted by
people's mortgages being resetfrom their COVID lows and that
the RBA is going to need tothrow in some relief there.
(01:48):
If we remain on the currenttrajectory, I think that's
probably a reasonable assessment.
The X factor in all of this, ofcourse, is what's happening in
the Middle East, and things aregetting very testy over there,
and that could cause aninflationary outbreak if Western
society can't have its supplychain function appropriately.
So I think on the trajectorywe're on, the inflation rate is
(02:10):
coming down very sharply andit's giving central banks scope
to cut interest rates at somestage this year, which will
support property markets.
But geopolitically we could seean inflationary outbreak Due to
supply chain functionsresulting from the Middle East.
They're the big ones for mine.
Speaker 3 (02:29):
Yeah, unfortunately, there's always so many factors
that seem to be impacting usfrom overseas in terms of
inflation.
We touched on at the end oflast year that we would have a
better sense of what the RBA'sposition was and what the
economic forecast was like as wegot into the start of this year
.
Do you think that we're stillon track for those predictions
(02:50):
we did sort of make last year interms of when those cuts will
come through, or do you thinkthe RBA may be forced to make
some decisions a little bitearlier, as you say, in line
with what's happening overseas?
Speaker 1 (02:59):
Look the economic data that's come out so far for
2024 has been on the pessimisticside, not dramatically downbeat
, but certainly underperformingwhat everyone would like, and
the RBA are probably happy withthat.
So new job ads have fallen.
Consumer confidence is down.
So whilst we saw a bump leadinginto Christmas from the Black
(03:21):
Friday sales, it doesn't looklike it was replicated over the
summer and the Christmas period.
So the numbers that are comingthrough are subdued.
I think the CPI number comesout early next week, so
somewhere between the 29th andthe 31st of January, that's the
big number the RBA will belooking for.
So everything suggests thatrates will be going down.
(03:45):
The IMF came out this week andsaid that they still believe
that the RBA may need toincrease interest rates one or
two more times, based on thetrajectory that we are on.
The government's running abudget surplus, of course, so
that's a good story.
The iron ore price is abovebudget estimates by a long way,
(04:05):
so that's a good story.
The government have theleverage to introduce tax cuts,
so that, although the originalplan may, and probably will, be
altered, which we can discusslater.
So, yeah, okay, things aresettling down in Australia, but
economically we're still in apretty good place.
When you look at Germany,they're in deflationary mode at
(04:25):
the moment.
China I saw this morninglooking at introducing a mammoth
stimulus bill to try andkickstart their economy, which
still hasn't restarted afterCOVID.
The Japanese property stockmarket has increased to its
highest level in 33 years thisweek, so that's a good story.
Getting a true understanding ofwhere America is really at is a
(04:48):
little bit difficult becausethere's still a lot of stimulus
money washing around there, sothere's lots of conflicting
signals out there for people towatch.
Speaker 3 (04:56):
So certainly, though, what I'm hearing is, hopefully
by late next week, maybe earlyFebruary, we should get a better
sense of where we arepositioned economically and then
hopefully use that as a tool totry and predict what may happen
for us as homeowners andhouseholds around the country.
With that in mind, do you thinkthat if the CPI numbers come in
favourable next week, that wemight see cuts a little bit
(05:19):
earlier than we had originallythought?
I think the RBA may still holdand just see what the year kind
of pans out like.
Speaker 1 (05:26):
Particularly with that supply chain issue.
I think the RBA would be welladvised to just be patient with
rate cuts.
It's going to be painful formany people in the everyday
economy to hear that, probably,but there is history of thinking
the inflation battle is won tooearly, backing off, and then
(05:46):
inflation springs back to life.
What we must keep in mind isthis, kieran, is that when they
say that the inflation rate iscoming down, that is not to be
confused with prices falling.
That just means the rate atwhich prices are rising is
slowing.
So all of the price hikes thatwe have seen baked into the
(06:08):
economy over the last two yearsare still there, and the only
way that you would see pricesfall is if we hit deflation,
which is what Germany is seeinga version of at the moment.
So I think the RBA will look tokeep interest rates elevated
for a little bit longer thanmost people would like, myself
included, but I'm a realistabout what's in front of them.
Speaker 3 (06:30):
Just for our listeners and I'm glad that you
touched on what inflation reallyis a measure of For anyone who
does try to follow theinflationary figures what kind
of lag do we see in theinflationary figures that we
have on the ground and wherethat data really has come from
in terms of money movements andprices across the board?
Speaker 1 (06:49):
I think the CPI number that we're waiting on
next week will be the DecemberCPI, and they've got all ways of
skinning that seasonallyadjusted.
What does a normal Decemberlook like year on year?
There'll be a basket there, sothey're always itemising things
into the CPI basket and takingthings out.
(07:11):
Rent is one of the biggestaspects of the CPI basket, as is
fuel, energy, electricity, andthe oil price has settled down,
which is great news for theinflation fight.
But you can tell our audience,kieran, what you've seen at
Rental Open Houses so far thisyear.
Speaker 3 (07:30):
It's been absolutely manic.
I mean, it's certainlydetermined by the location of
the property and its features,but my experience has been
absolutely crazy.
In short time periods, I'vebeen absolutely overwhelmed,
trying to get the number ofpeople through, and every single
person asks me the samequestions how can I get this
property?
How can I bid out those guysthere?
(07:51):
What's the process?
Speaker 1 (07:53):
because we need something now, yeah well, my
first Saturday back at work thisyear I went and did a couple of
rental opens as well, because Iwanted to surf for myself on
the ground and my experienceabsolutely dovetails with that.
It was crazy and I can't seeany relief in sight there.
So that's going to continue toput upward pressure on the
(08:14):
inflation story.
It's not maybe going toincrease inflation in and of
itself higher rents but it'sgoing to add to the pressure,
that's for sure.
Speaker 3 (08:24):
Absolutely, and I certainly hope there is some
relief out there.
Just before we sort of move on.
I did hear on the radio thismorning a pretty well known
economist talking about theamount of mortgage stress that
is out at the moment.
You and I have touched on themortgage cliff and the
implications that we'll have forhouseholds, and obviously we're
talking about inflation at themoment.
Have you seen or have you beenhearing of any rise in the
(08:44):
incidence of mortgage stress inthe market at the moment, or do
you think that it's held prettytightly or pretty level from
where we were last year?
Speaker 1 (08:53):
Look, I think a lot of people's financial model is
out of whack and what's keepingthem going is selling down
assets, cutting back on costs,maybe delaying bills using
savings, those sorts of measures, all of which are short term,
and the RBA will be monitoringall of this.
(09:13):
There's no doubt, being theaffluent country that we are,
that in Australia we had a lotof runway to insulate ourselves
from these rate hikes that we'veexperienced over the last 19,
20 months.
But all of those points thatI've highlighted there are
temporary, and I do get thesense that the record savings
that Australians enjoyed comingout of COVID have been run down
(09:36):
in the last two years, and thatis why many people are pointing
to the broken budgets of manyhouseholds and why the RBA will
hit a point where they'll needto quickly adjust their interest
rates setting to offer therelief.
Speaker 3 (09:53):
Well, certainly we'll talk about it on here when that
time does come.
I want to transition Pete andtalk a little bit about
Australian politics, somethingwe don't really do on the
podcast.
We try to keep those interestsseparate, but it's been a pretty
big few days, I think, in termsof government rumours, slash,
announcements, slash, thingshappening and there's been a
(10:14):
couple of things talked about,in particular the golden visa,
which I'd really love to get asense from you of what that is
for our listeners and reallywhat the implications of the
potential changes are and alsotouch on some tax changes.
But if we can start, it wasmentioned or broken in the last
48 hours or so that thegovernment is looking or has
already started the process ofmaking changes to the so-called
(10:37):
golden visa.
For me, I had never heard ofthis and I'm sure there's many
out there that haven't.
Can you, I guess, give us someinsight into what the golden
visa is and then what thesechanges mean for it?
Speaker 1 (10:47):
Well, let's tie the two points in together the
tweaking of the tax cuts and thesuspension.
At this stage, kieran, it's notactually cancelling the golden
visa as it stands.
It's been suspended in averticommas, which is obviously
the first step towardscancelling it outright, but also
reserving the right toreintroduce it down the track if
(11:10):
they see fit.
Obviously, someone saw fit tointroduce the golden visa
initially and they now see fitto suspend it until further
notice.
But one of the things we don'ttalk much about politics in our
podcast, because it's a propertypodcast but one of the things
we have spoken about in ourdiscussions last year is the
(11:31):
evident and unfortunate wealthgap that is developing in
Australia, where it's really,really obvious and I'm no
socialist, but it's reallyobvious that the richer getting
richer and the mainstream arefalling further behind and there
is a widening gap between richand poor, with what feels like I
(11:53):
don't get all of the data thata government agency would get,
or neither do you, but it feelslike the middle class is getting
squeezed in all of this, but asinterest rates have gone up,
it's like it's almost benefitedthe very wealthy, if you like,
the tax cut changes that arebeing discussed in the media at
the time that we're recording.
This suggests that there will bea reversal of some of those tax
(12:16):
cuts for higher income earnersand it will be redistributed
more evenly amongst low incomeearners in the form of a higher
tax free threshold from $18,000up to $20,000.
And that is, in and of itself,is not going to rebalance the
deteriorating wealth gapscenario in Australia, but it's
(12:38):
a good move and it's goodpolitics by Anthony Albanese,
who I think everybody wouldconcede needs a really good
start to reverse what was anabsolute shocker of a year last
year.
And, as I say, that move in andof itself is not going to
reverse the widening gap betweenrich and poor, but it's a step
in the right direction.
And with suspending the goldenvisa rule for wealthy overseas
(13:04):
investors, and that is reallycode for stopping the flow of
wealthy Chinese buying assetsand houses in Australia.
And the reason I say that'scode for that because of the
people who took up thesignificant investor golden visa
.
It's reported that 90% of thosewere from China.
Speaker 3 (13:27):
Okay, so couple of things to sort of unpack there,
just, I guess, for our listenersbenefit.
The tax cuts we're referring toare the ones that have had
plenty of media time over thelast couple of years.
The stage three cuts, yes, andthis, as you say, this
redistribution of sorts, is notonly a good move by Anthony
Albinezi in terms of hisposition, but really is, as
we've just talked about,something to help alleviate some
(13:48):
of that stress that isdefinitely felt by families,
whether you've got mortgagestress or not.
Cost of living, cost of livingis tough right now.
The golden visa, though you'vecalled it there, the significant
investment visa, so the goldenvisa is just a nickname.
Speaker 1 (14:03):
It's true, name is the significant investor.
Speaker 3 (14:05):
Okay, so you mentioned that 90% of the people
who took up this visa wereChinese.
Do you have any, I guess,outline of what the requirements
are for the visa or what thatmeans for people looking to come
in?
Speaker 1 (14:19):
You've got to invest $5 million in the country and
you enjoy some lighter criteriathan what a normal immigrant
coming into the country wouldneed to satisfy, because you've
essentially got $5 million ormore to invest into the
Australian economy.
The Australian government I'mtrying to keep this basic and
not bore people, the Australiangovernment saying we want you
(14:41):
because you've got money and youwant to bring it to our country
.
The significant investor visaleads straight into permanent
residency.
Permanent residency leadsstraight into the ability to buy
Australian property, andparticularly Melbourne real
estate agents but Sydney realestate agents as well, to a
lesser degree in 2023 wereseeing very, very wealthy
(15:03):
Chinese people snap up exclusivereal estate and pay very high
prices for it, as thesesignificant investors were
looking to lock in substantialamounts of money outside the
Chinese economy which, as we'vejust discussed, is really under
pressure at the moment.
So the money pouring out ofChina it's no doubt pouring out
of China globally, and manyother countries have got
(15:24):
versions of this happening.
I know that New Zealand had totake a pretty tough stance on a
similar version to the goldenvisa last year to stop the flood
of money and distorting theireconomy.
Canada's experienced the sameand here we are beginning 2024,
where the government is sayingwe don't want your money
effectively because you'redistorting many aspects of
(15:47):
Australian society.
Speaker 3 (15:48):
So we talked to all the end of last year about the
increasing prevalence of Chinesebuyers buying up these
properties, as you justmentioned.
Do you think that changes tothe suspension, as you say, of
this significant investor visais going to have an impact on
the amount or the rapidity orthe regularity of sales in that
high end market across Sydney inparticular?
Speaker 1 (16:10):
Oh, yes, I do.
So the people that are alreadyhere are good.
It's not retrospective.
So those people, those Chinesethat wanted their money out of
China or wanted their money intoAustralia whichever way you
choose to look at the equation,they're okay.
But, yes, you won't necessarilysee the flood of high end
Chinese buyers continuing tocome into the market now.
Speaker 3 (16:32):
So, given that we talked about the impact that
money had on just propping upthe increase in property prices
last year and some of theforecasts that we did talk about
in terms of growth in propertyprices this year, do you think
that those forecasts now, withthis new information, may in
fact change and we may see justa slight tempering of the growth
this year?
Speaker 1 (16:52):
I think so.
We have to rely to some degreeon anecdotal evidence, because
we can only deal with what we'reseeing on the ground and trying
to piece information togetherin terms of reports and sales
and stories that we hear acrossthe board.
The government would have abetter idea.
So you would have to say thatif the government have gone out
and spent political capital inthis space, they deem it as
(17:15):
something that needs to be done.
Anecdotally.
I wouldn't say it's going to bea dominating aspect that will
cause, you know, the lack ofsignificant investors pulling
out or being forced out of theAustralian market will see
prestige property pricescollapse, because the people who
are operating at that end ofthe market only tend to sell
when they're happy with theprice they achieve.
(17:37):
And it's not that the Chinesewere an all dominant buyer
profile at that end of themarket.
They were just an additionalpercentage of the demand that
was coming into an alreadyoverheated sector of the
property market.
And the prestige end of theproperty market, as we know, has
been the strongest for the lastthree or four years.
Speaker 3 (17:57):
Yeah, well, certainly safe to say that we'll have to
sit on the fence a little bithere and just wait and see what
happens as we move forward, aswe sort of move towards wrapping
up today.
Peter, I'd love to get a bit ofa market wrap for how we've
started off in 2024.
You mentioned you started theyear back showing some rental
properties, which you may nothave done for a little while in
your real estate career, butit'd be nice to get a sense of
(18:18):
what you've seen so far sinceyou've been back around.
Particularly, we've touched onrents and how busy it is at
rental opens.
But in terms of sales opens, interms of buyer inquiry the
usual metrics we kind of look atin, you know, sydney property-
Kieran, coming into this year, Iprobably had three thoughts on
the property market.
Speaker 1 (18:36):
There would be more sellers in 2024.
There would be less buyers in2024.
None of that is to suggestthere'll be a property crash,
but I think the equation thesupply demand equation will be
closer together or tighter thanwhat it was in 2023.
We must keep in mind that the2023 property market occurred
(18:58):
due to an absolute lack oflistings and sales volumes were
really tight, so those buyersthat were wanting to buy,
needing to buy, found themselvescompeting with more buyer
competition and less availablestock in 2023.
Becoming into this year, we werereally confident that we would
see, you know, across the city,more listings, and that's the
(19:20):
way it's playing out.
And when we do put a listing onthe market, the buyer inquiry
is probably not as robust aswhat it was this time last year,
and that's unsurprising becausewe've had a full percentage
point in interest rate increasessince last January.
I've never seen so much stockon the market before Australia
Day as what we've seen thisJanuary, so I think that's
(19:43):
really interesting.
And then the third point thatwe expected in the 2024 property
market is the rental market, orthe rental crisis would
continue to become more acute,and that is exactly how it's
playing thus far, as we'vealready discussed.
Speaker 3 (19:58):
We certainly are seeing a bit of a crisis on the
ground with the rentals.
Just with the buyer inquiry,have you seen a shift in the
type of buyer that is lookingfor properties at the moment?
Is it a particular subset?
Is it those that have held overfrom last year that were
unsuccessful?
Is it new people entering, oris it a bit of a mixture of all
at the moment?
Speaker 1 (20:16):
What we're not seeing is investors.
So we're not having people ringus up and say the rental market
is strong, therefore I'd liketo buy an investment property
and take advantage of it, thevendors that are coming to
market.
There are a lot of investorsthat are saying I'd like to move
this investment property on.
So that trend of investorsselling out at a higher rate
(20:36):
than those buying in is going tobe there in 2024, tightening
the rental pool even further.
New building starts collapsedlate last year.
They fell by 22%, I think I sawin one report.
So we are inviting more peopleinto the country.
I know the government aretrying to slow that, but we are
inviting more people into thecountry than what we have new
(20:59):
housing for those people.
So that's going to continue topush the rents up.
But in terms of who's buying atthe moment we haven't seen a
great deal of large family homescome to market yet, so it's a
bit hard to gauge what the buyerdemand for those are.
But you're standard terraced inthe NOS, which is what we sell
a lot of.
I showed an open house inRoselle on Saturday and for the
(21:21):
first inspection 24 partiesarrived.
Some of those people weretaking a look at the new year
stock and just marketresearching.
Some of those were particularlykeen to buy sooner rather than
later if they could find theright property Down sizes we've
seen a lot of down sizes lookingto potentially sell down their
long held family home and moveinto luxury apartment type
(21:46):
living and I think they'llbecome more active as the year
goes on.
Speaker 3 (21:50):
So, as we wrap up, peter, if there's any potential
sellers out there listening atthe moment, if there was a
particular section of the marketthat you think might have
pretty good success beforeAustralia Day or even just
afterwards, any thoughts on whatpart of the market might do
well at the moment?
Speaker 1 (22:05):
No, look.
We have seen a few sales acrossthe market and there's no
consistency at the moment herein as to what is selling and
what's not.
That'll become more evident bythe end of February, I think.
But, as I say, vendors need tobe realistic and not overly
aggressive in their pricingstrategies coming into the
market this year, becausethere's more seller competition
(22:26):
there to meet them than whatthere has been for quite some
time.
To begin a new year.
Speaker 3 (22:31):
So I've got to price it right and they'll sell it,
you reckon.
Speaker 1 (22:34):
Got to price it right and work with the market.
Now.
I'm not suggesting the marketcan't rise in the first quarter
of this year, but as it standshere and now, I don't think it
is going to increase and it maymoderately soften if too much
stock comes to market at once.
Speaker 3 (22:51):
Very good wrap up, peter, and, as always, it's an
insightful conversation with you, particularly around the
nuances of the Sydney propertymarket, as always.
Thank you so much for your timeand I look forward to chatting
to you next time.
Yeah, indeed, thanks, kiran.
Thank you, and thank you forlistening to Current Market
Insights.
We'll see you next time.
Speaker 2 (23:07):
Thanks for joining us on the Current Market Insights
podcast brought to you by HarrisPartners Real Estate, the
podcast providing real estateinsights you won't find anywhere
else.
All down, all silent, going, going, going.
Go on, stop the black noise.
Speaker 2 (00:07):
Welcome to the Current Market Insights podcast
brought to you by HarrisPartners Real Estate.
Each episode we chat with realestate author and industry
leader, peter O'Malley, todiscuss the current property
market conditions and provideinsights to assist you on your
property journey.
Speaker 3 (00:29):
Hello and welcome to our first New Year's edition of
Current Market Insights.
I'm your host, kieran O'Brien,and with me in the new year is
Mr Peter O'Malley.
G'day, kieran, happy new yearto you.
Happy new year to you, peter,and happy new year to all of our
listeners as well.
Welcome back, peter, and Ireally am hoping that you'll
join me today in just kickingoff the podcast this year with a
bit of a look ahead, a forecastof sorts of what we think 2024
(00:53):
is going to look like in termsof Sydney property.
We have touched briefly on thissubject at the end of last year
, but I think, now that we're inthe fray of 2024, we should get
a sense of what it's lookinglike on the road ahead.
Speaker 1 (01:05):
Kieran, the market had a bit of a soft finish to
last year after what wasotherwise a great year.
House prices in Sydney were up11%, but that growth was stopped
in its tracks by the Novemberinterest rate rise.
Both from what the US FederalReserve and the RBA have
suggested, the property marketis looking for interest rate
(01:27):
cuts at some stage this year.
There's a sense that, whilst wemay not have an implosion due
to the mortgage cliff, there's asense that at some stage in
2024, economic performance isgoing to be severely impacted by
people's mortgages being resetfrom their COVID lows and that
the RBA is going to need tothrow in some relief there.
(01:48):
If we remain on the currenttrajectory, I think that's
probably a reasonable assessment.
The X factor in all of this, ofcourse, is what's happening in
the Middle East, and things aregetting very testy over there,
and that could cause aninflationary outbreak if Western
society can't have its supplychain function appropriately.
So I think on the trajectorywe're on, the inflation rate is
(02:10):
coming down very sharply andit's giving central banks scope
to cut interest rates at somestage this year, which will
support property markets.
But geopolitically we could seean inflationary outbreak Due to
supply chain functionsresulting from the Middle East.
They're the big ones for mine.
Speaker 3 (02:29):
Yeah, unfortunately, there's always so many factors
that seem to be impacting usfrom overseas in terms of
inflation.
We touched on at the end oflast year that we would have a
better sense of what the RBA'sposition was and what the
economic forecast was like as wegot into the start of this year
.
Do you think that we're stillon track for those predictions
(02:50):
we did sort of make last year interms of when those cuts will
come through, or do you thinkthe RBA may be forced to make
some decisions a little bitearlier, as you say, in line
with what's happening overseas?
Speaker 1 (02:59):
Look the economic data that's come out so far for
2024 has been on the pessimisticside, not dramatically downbeat
, but certainly underperformingwhat everyone would like, and
the RBA are probably happy withthat.
So new job ads have fallen.
Consumer confidence is down.
So whilst we saw a bump leadinginto Christmas from the Black
(03:21):
Friday sales, it doesn't looklike it was replicated over the
summer and the Christmas period.
So the numbers that are comingthrough are subdued.
I think the CPI number comesout early next week, so
somewhere between the 29th andthe 31st of January, that's the
big number the RBA will belooking for.
So everything suggests thatrates will be going down.
(03:45):
The IMF came out this week andsaid that they still believe
that the RBA may need toincrease interest rates one or
two more times, based on thetrajectory that we are on.
The government's running abudget surplus, of course, so
that's a good story.
The iron ore price is abovebudget estimates by a long way,
(04:05):
so that's a good story.
The government have theleverage to introduce tax cuts,
so that, although the originalplan may, and probably will, be
altered, which we can discusslater.
So, yeah, okay, things aresettling down in Australia, but
economically we're still in apretty good place.
When you look at Germany,they're in deflationary mode at
(04:25):
the moment.
China I saw this morninglooking at introducing a mammoth
stimulus bill to try andkickstart their economy, which
still hasn't restarted afterCOVID.
The Japanese property stockmarket has increased to its
highest level in 33 years thisweek, so that's a good story.
Getting a true understanding ofwhere America is really at is a
(04:48):
little bit difficult becausethere's still a lot of stimulus
money washing around there, sothere's lots of conflicting
signals out there for people towatch.
Speaker 3 (04:56):
So certainly, though, what I'm hearing is, hopefully
by late next week, maybe earlyFebruary, we should get a better
sense of where we arepositioned economically and then
hopefully use that as a tool totry and predict what may happen
for us as homeowners andhouseholds around the country.
With that in mind, do you thinkthat if the CPI numbers come in
favourable next week, that wemight see cuts a little bit
(05:19):
earlier than we had originallythought?
I think the RBA may still holdand just see what the year kind
of pans out like.
Speaker 1 (05:26):
Particularly with that supply chain issue.
I think the RBA would be welladvised to just be patient with
rate cuts.
It's going to be painful formany people in the everyday
economy to hear that, probably,but there is history of thinking
the inflation battle is won tooearly, backing off, and then
(05:46):
inflation springs back to life.
What we must keep in mind isthis, kieran, is that when they
say that the inflation rate iscoming down, that is not to be
confused with prices falling.
That just means the rate atwhich prices are rising is
slowing.
So all of the price hikes thatwe have seen baked into the
(06:08):
economy over the last two yearsare still there, and the only
way that you would see pricesfall is if we hit deflation,
which is what Germany is seeinga version of at the moment.
So I think the RBA will look tokeep interest rates elevated
for a little bit longer thanmost people would like, myself
included, but I'm a realistabout what's in front of them.
Speaker 3 (06:30):
Just for our listeners and I'm glad that you
touched on what inflation reallyis a measure of For anyone who
does try to follow theinflationary figures what kind
of lag do we see in theinflationary figures that we
have on the ground and wherethat data really has come from
in terms of money movements andprices across the board?
Speaker 1 (06:49):
I think the CPI number that we're waiting on
next week will be the DecemberCPI, and they've got all ways of
skinning that seasonallyadjusted.
What does a normal Decemberlook like year on year?
There'll be a basket there, sothey're always itemising things
into the CPI basket and takingthings out.
(07:11):
Rent is one of the biggestaspects of the CPI basket, as is
fuel, energy, electricity, andthe oil price has settled down,
which is great news for theinflation fight.
But you can tell our audience,kieran, what you've seen at
Rental Open Houses so far thisyear.
Speaker 3 (07:30):
It's been absolutely manic.
I mean, it's certainlydetermined by the location of
the property and its features,but my experience has been
absolutely crazy.
In short time periods, I'vebeen absolutely overwhelmed,
trying to get the number ofpeople through, and every single
person asks me the samequestions how can I get this
property?
How can I bid out those guysthere?
(07:51):
What's the process?
Speaker 1 (07:53):
because we need something now, yeah well, my
first Saturday back at work thisyear I went and did a couple of
rental opens as well, because Iwanted to surf for myself on
the ground and my experienceabsolutely dovetails with that.
It was crazy and I can't seeany relief in sight there.
So that's going to continue toput upward pressure on the
(08:14):
inflation story.
It's not maybe going toincrease inflation in and of
itself higher rents but it'sgoing to add to the pressure,
that's for sure.
Speaker 3 (08:24):
Absolutely, and I certainly hope there is some
relief out there.
Just before we sort of move on.
I did hear on the radio thismorning a pretty well known
economist talking about theamount of mortgage stress that
is out at the moment.
You and I have touched on themortgage cliff and the
implications that we'll have forhouseholds, and obviously we're
talking about inflation at themoment.
Have you seen or have you beenhearing of any rise in the
(08:44):
incidence of mortgage stress inthe market at the moment, or do
you think that it's held prettytightly or pretty level from
where we were last year?
Speaker 1 (08:53):
Look, I think a lot of people's financial model is
out of whack and what's keepingthem going is selling down
assets, cutting back on costs,maybe delaying bills using
savings, those sorts of measures, all of which are short term,
and the RBA will be monitoringall of this.
(09:13):
There's no doubt, being theaffluent country that we are,
that in Australia we had a lotof runway to insulate ourselves
from these rate hikes that we'veexperienced over the last 19,
20 months.
But all of those points thatI've highlighted there are
temporary, and I do get thesense that the record savings
that Australians enjoyed comingout of COVID have been run down
(09:36):
in the last two years, and thatis why many people are pointing
to the broken budgets of manyhouseholds and why the RBA will
hit a point where they'll needto quickly adjust their interest
rates setting to offer therelief.
Speaker 3 (09:53):
Well, certainly we'll talk about it on here when that
time does come.
I want to transition Pete andtalk a little bit about
Australian politics, somethingwe don't really do on the
podcast.
We try to keep those interestsseparate, but it's been a pretty
big few days, I think, in termsof government rumours, slash,
announcements, slash, thingshappening and there's been a
(10:14):
couple of things talked about,in particular the golden visa,
which I'd really love to get asense from you of what that is
for our listeners and reallywhat the implications of the
potential changes are and alsotouch on some tax changes.
But if we can start, it wasmentioned or broken in the last
48 hours or so that thegovernment is looking or has
already started the process ofmaking changes to the so-called
(10:37):
golden visa.
For me, I had never heard ofthis and I'm sure there's many
out there that haven't.
Can you, I guess, give us someinsight into what the golden
visa is and then what thesechanges mean for it?
Speaker 1 (10:47):
Well, let's tie the two points in together the
tweaking of the tax cuts and thesuspension.
At this stage, kieran, it's notactually cancelling the golden
visa as it stands.
It's been suspended in averticommas, which is obviously
the first step towardscancelling it outright, but also
reserving the right toreintroduce it down the track if
(11:10):
they see fit.
Obviously, someone saw fit tointroduce the golden visa
initially and they now see fitto suspend it until further
notice.
But one of the things we don'ttalk much about politics in our
podcast, because it's a propertypodcast but one of the things
we have spoken about in ourdiscussions last year is the
(11:31):
evident and unfortunate wealthgap that is developing in
Australia, where it's really,really obvious and I'm no
socialist, but it's reallyobvious that the richer getting
richer and the mainstream arefalling further behind and there
is a widening gap between richand poor, with what feels like I
(11:53):
don't get all of the data thata government agency would get,
or neither do you, but it feelslike the middle class is getting
squeezed in all of this, but asinterest rates have gone up,
it's like it's almost benefitedthe very wealthy, if you like,
the tax cut changes that arebeing discussed in the media at
the time that we're recording.
This suggests that there will bea reversal of some of those tax
(12:16):
cuts for higher income earnersand it will be redistributed
more evenly amongst low incomeearners in the form of a higher
tax free threshold from $18,000up to $20,000.
And that is, in and of itself,is not going to rebalance the
deteriorating wealth gapscenario in Australia, but it's
(12:38):
a good move and it's goodpolitics by Anthony Albanese,
who I think everybody wouldconcede needs a really good
start to reverse what was anabsolute shocker of a year last
year.
And, as I say, that move in andof itself is not going to
reverse the widening gap betweenrich and poor, but it's a step
in the right direction.
And with suspending the goldenvisa rule for wealthy overseas
(13:04):
investors, and that is reallycode for stopping the flow of
wealthy Chinese buying assetsand houses in Australia.
And the reason I say that'scode for that because of the
people who took up thesignificant investor golden visa
.
It's reported that 90% of thosewere from China.
Speaker 3 (13:27):
Okay, so couple of things to sort of unpack there,
just, I guess, for our listenersbenefit.
The tax cuts we're referring toare the ones that have had
plenty of media time over thelast couple of years.
The stage three cuts, yes, andthis, as you say, this
redistribution of sorts, is notonly a good move by Anthony
Albinezi in terms of hisposition, but really is, as
we've just talked about,something to help alleviate some
(13:48):
of that stress that isdefinitely felt by families,
whether you've got mortgagestress or not.
Cost of living, cost of livingis tough right now.
The golden visa, though you'vecalled it there, the significant
investment visa, so the goldenvisa is just a nickname.
Speaker 1 (14:03):
It's true, name is the significant investor.
Speaker 3 (14:05):
Okay, so you mentioned that 90% of the people
who took up this visa wereChinese.
Do you have any, I guess,outline of what the requirements
are for the visa or what thatmeans for people looking to come
in?
Speaker 1 (14:19):
You've got to invest $5 million in the country and
you enjoy some lighter criteriathan what a normal immigrant
coming into the country wouldneed to satisfy, because you've
essentially got $5 million ormore to invest into the
Australian economy.
The Australian government I'mtrying to keep this basic and
not bore people, the Australiangovernment saying we want you
(14:41):
because you've got money and youwant to bring it to our country
.
The significant investor visaleads straight into permanent
residency.
Permanent residency leadsstraight into the ability to buy
Australian property, andparticularly Melbourne real
estate agents but Sydney realestate agents as well, to a
lesser degree in 2023 wereseeing very, very wealthy
(15:03):
Chinese people snap up exclusivereal estate and pay very high
prices for it, as thesesignificant investors were
looking to lock in substantialamounts of money outside the
Chinese economy which, as we'vejust discussed, is really under
pressure at the moment.
So the money pouring out ofChina it's no doubt pouring out
of China globally, and manyother countries have got
(15:24):
versions of this happening.
I know that New Zealand had totake a pretty tough stance on a
similar version to the goldenvisa last year to stop the flood
of money and distorting theireconomy.
Canada's experienced the sameand here we are beginning 2024,
where the government is sayingwe don't want your money
effectively because you'redistorting many aspects of
(15:47):
Australian society.
Speaker 3 (15:48):
So we talked to all the end of last year about the
increasing prevalence of Chinesebuyers buying up these
properties, as you justmentioned.
Do you think that changes tothe suspension, as you say, of
this significant investor visais going to have an impact on
the amount or the rapidity orthe regularity of sales in that
high end market across Sydney inparticular?
Speaker 1 (16:10):
Oh, yes, I do.
So the people that are alreadyhere are good.
It's not retrospective.
So those people, those Chinesethat wanted their money out of
China or wanted their money intoAustralia whichever way you
choose to look at the equation,they're okay.
But, yes, you won't necessarilysee the flood of high end
Chinese buyers continuing tocome into the market now.
Speaker 3 (16:32):
So, given that we talked about the impact that
money had on just propping upthe increase in property prices
last year and some of theforecasts that we did talk about
in terms of growth in propertyprices this year, do you think
that those forecasts now, withthis new information, may in
fact change and we may see justa slight tempering of the growth
this year?
Speaker 1 (16:52):
I think so.
We have to rely to some degreeon anecdotal evidence, because
we can only deal with what we'reseeing on the ground and trying
to piece information togetherin terms of reports and sales
and stories that we hear acrossthe board.
The government would have abetter idea.
So you would have to say thatif the government have gone out
and spent political capital inthis space, they deem it as
(17:15):
something that needs to be done.
Anecdotally.
I wouldn't say it's going to bea dominating aspect that will
cause, you know, the lack ofsignificant investors pulling
out or being forced out of theAustralian market will see
prestige property pricescollapse, because the people who
are operating at that end ofthe market only tend to sell
when they're happy with theprice they achieve.
(17:37):
And it's not that the Chinesewere an all dominant buyer
profile at that end of themarket.
They were just an additionalpercentage of the demand that
was coming into an alreadyoverheated sector of the
property market.
And the prestige end of theproperty market, as we know, has
been the strongest for the lastthree or four years.
Speaker 3 (17:57):
Yeah, well, certainly safe to say that we'll have to
sit on the fence a little bithere and just wait and see what
happens as we move forward, aswe sort of move towards wrapping
up today.
Peter, I'd love to get a bit ofa market wrap for how we've
started off in 2024.
You mentioned you started theyear back showing some rental
properties, which you may nothave done for a little while in
your real estate career, butit'd be nice to get a sense of
(18:18):
what you've seen so far sinceyou've been back around.
Particularly, we've touched onrents and how busy it is at
rental opens.
But in terms of sales opens, interms of buyer inquiry the
usual metrics we kind of look atin, you know, sydney property-
Kieran, coming into this year, Iprobably had three thoughts on
the property market.
Speaker 1 (18:36):
There would be more sellers in 2024.
There would be less buyers in2024.
None of that is to suggestthere'll be a property crash,
but I think the equation thesupply demand equation will be
closer together or tighter thanwhat it was in 2023.
We must keep in mind that the2023 property market occurred
(18:58):
due to an absolute lack oflistings and sales volumes were
really tight, so those buyersthat were wanting to buy,
needing to buy, found themselvescompeting with more buyer
competition and less availablestock in 2023.
Becoming into this year, we werereally confident that we would
see, you know, across the city,more listings, and that's the
(19:20):
way it's playing out.
And when we do put a listing onthe market, the buyer inquiry
is probably not as robust aswhat it was this time last year,
and that's unsurprising becausewe've had a full percentage
point in interest rate increasessince last January.
I've never seen so much stockon the market before Australia
Day as what we've seen thisJanuary, so I think that's
(19:43):
really interesting.
And then the third point thatwe expected in the 2024 property
market is the rental market, orthe rental crisis would
continue to become more acute,and that is exactly how it's
playing thus far, as we'vealready discussed.
Speaker 3 (19:58):
We certainly are seeing a bit of a crisis on the
ground with the rentals.
Just with the buyer inquiry,have you seen a shift in the
type of buyer that is lookingfor properties at the moment?
Is it a particular subset?
Is it those that have held overfrom last year that were
unsuccessful?
Is it new people entering, oris it a bit of a mixture of all
at the moment?
Speaker 1 (20:16):
What we're not seeing is investors.
So we're not having people ringus up and say the rental market
is strong, therefore I'd liketo buy an investment property
and take advantage of it, thevendors that are coming to
market.
There are a lot of investorsthat are saying I'd like to move
this investment property on.
So that trend of investorsselling out at a higher rate
(20:36):
than those buying in is going tobe there in 2024, tightening
the rental pool even further.
New building starts collapsedlate last year.
They fell by 22%, I think I sawin one report.
So we are inviting more peopleinto the country.
I know the government aretrying to slow that, but we are
inviting more people into thecountry than what we have new
(20:59):
housing for those people.
So that's going to continue topush the rents up.
But in terms of who's buying atthe moment we haven't seen a
great deal of large family homescome to market yet, so it's a
bit hard to gauge what the buyerdemand for those are.
But you're standard terraced inthe NOS, which is what we sell
a lot of.
I showed an open house inRoselle on Saturday and for the
(21:21):
first inspection 24 partiesarrived.
Some of those people weretaking a look at the new year
stock and just marketresearching.
Some of those were particularlykeen to buy sooner rather than
later if they could find theright property Down sizes we've
seen a lot of down sizes lookingto potentially sell down their
long held family home and moveinto luxury apartment type
(21:46):
living and I think they'llbecome more active as the year
goes on.
Speaker 3 (21:50):
So, as we wrap up, peter, if there's any potential
sellers out there listening atthe moment, if there was a
particular section of the marketthat you think might have
pretty good success beforeAustralia Day or even just
afterwards, any thoughts on whatpart of the market might do
well at the moment?
Speaker 1 (22:05):
No, look.
We have seen a few sales acrossthe market and there's no
consistency at the moment herein as to what is selling and
what's not.
That'll become more evident bythe end of February, I think.
But, as I say, vendors need tobe realistic and not overly
aggressive in their pricingstrategies coming into the
market this year, becausethere's more seller competition
(22:26):
there to meet them than whatthere has been for quite some
time.
To begin a new year.
Speaker 3 (22:31):
So I've got to price it right and they'll sell it,
you reckon.
Speaker 1 (22:34):
Got to price it right and work with the market.
Now.
I'm not suggesting the marketcan't rise in the first quarter
of this year, but as it standshere and now, I don't think it
is going to increase and it maymoderately soften if too much
stock comes to market at once.
Speaker 3 (22:51):
Very good wrap up, peter, and, as always, it's an
insightful conversation with you, particularly around the
nuances of the Sydney propertymarket, as always.
Thank you so much for your timeand I look forward to chatting
to you next time.
Yeah, indeed, thanks, kiran.
Thank you, and thank you forlistening to Current Market
Insights.
We'll see you next time.
Speaker 2 (23:07):
Thanks for joining us on the Current Market Insights
podcast brought to you by HarrisPartners Real Estate, the
podcast providing real estateinsights you won't find anywhere
else.
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