February 15, 2024 • 25 mins
Will the recent surge in auction clearance rates hold steady, or are we skimming over deeper market undercurrents? We dissect the data, challenge the optimistic projections for 2024, and shine a spotlight on the Reserve Bank of Australia's monetary maneuvers influencing everything from household budgets to seller strategies. Prepare to look beyond the veneer of market statistics as we analyze postponed auctions and the strategic plays they may conceal.
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Episode Transcript
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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 (00:30):
Hello and welcome to another episode of Current
Market Insights.
I'm your host, kieran O'Brien,and, as always with me this week
is my good friend, mr PeterO'Malley.
Peter, hello G'day, kieran,great to see you, great to see
you, peter, and, as always,great to sit and chat about what
has been in the week of realestate.
I'd love to start this episodethis week just getting a bit of
a recap.
What have we learnt this week?
(00:50):
What have you seen out theretalking to people on the
hustings?
What's your general sense ofhow the market is going locally
for us?
Speaker 1 (00:57):
Second big auction weekend of the year, kieran, so
everybody's trying to get a goodread on where the market is at.
If we go to the Sydney auctionclearance rate, they came in at
59.1% on SQM researchers numbers.
That's a pretty healthy resultbecause SQM research do factor
in all the unreported resultsfrom the weekend and capture
(01:20):
them by the following Tuesday.
The results were so strong infact.
The auction clearance rate wasso strong in fact that Louis
Christopher, who's the CEO ofSQM research and had one of the
more pessimistic perspectives onthe Sydney property market for
2024, was really surprised athow strong results were, to the
degree that he said these werestrong results for Sydney.
(01:43):
Over the last week, the Saturdayclearance rate was actually 60%
on our numbers.
We are recording clearancerates higher than this time last
year and on stronger volumes.
If this keeps up, our forecastfor modest housing price falls
in Sydney will be wrong and thehousing market may rise at a
faster rate than 2023.
(02:04):
What I would say we saw here inthe inner west here, and we saw
a lot of auction campaigns thatwere postponed due to
insufficient buyer interest, youwould imagine, and redated for
February 24 or the 2nd of March.
So I think it would be tooearly myself to jump to the
conclusion that the Sydneyproperty market is going to
(02:26):
outperform for 2024,particularly given the auction
clearance rate is slightlyskewed by the amount of auctions
that were postponed due toinsufficient buyer interest.
Speaker 3 (02:38):
So a couple of things to talk about out of that data.
Peter, you mentioned theoverall clearance rate around
59% or almost 60%.
Now correct me if I'm wrong.
Did we report last week that itwas 54% or 55%?
So it has actually increased inthe week?
Yes, and that was also, I thinkwe said on numbers of 700 odd
properties going to auction,which was an increase of maybe
(02:59):
300 or 400.
So it's pretty clear we'reseeing higher clearance rates
and much higher volume than wehave seen in the past 12 months.
Speaker 1 (03:07):
That's right.
Volumes are up, as we alludedto, and that's coming through in
the data.
There were 731 auctionsscheduled, 83 were rescheduled.
So Louis does capture thepostponed auctions.
So, if you're looking to put anumber on it, over 10% were
postponed.
Of those remaining, there was215 that sold prior to auction
(03:30):
and 217 that sold at auctionunder the hammer.
So again, another consistenttrend from last year where it's
a clean 50% selling prior toauction and 50% selling at
auction of those that areconsidered auction sales.
Speaker 3 (03:47):
Yeah, certainly Certainly strong numbers to
start the year, and you can seewhy Louis has started to adjust
his predictions.
I wonder the postpones that weare seeing.
Do you think that is a measuremore of the fact that there is
such a high volume on the marketat the moment?
Speaker 1 (04:02):
Definitely.
Speaker 3 (04:03):
Definitely, or could it also be related to the fact
that there are some potentiallyopportunistic sellers running
with the frenzy or not thefrenzy, but the heat of what's
happening at the moment and thisobservation that it is such a
strong and active market?
Are people jumping on whenperhaps they're not price right
or they're not ready for marketand are just trying to ride the
wave?
Speaker 1 (04:23):
I think a lot of people looked at the headline
price growth for 2023 of 11% forthe year and said, hey, that
looks pretty good, we're goingto jump on board early in the
new year there.
The market has enjoyed somegood growth that I'd like to get
the best of it.
What that misses, of course,kieran, is that the auction
clearance rate and the market atlarge really struggled after
(04:46):
the November rate hike.
What you've seen here in thefirst six weeks of 2024 is a lot
of listings that have come tomarket at an unusually early
time of year.
Those auctions that werepostponed.
The agents fair enough to havemade the assumption that they're
better off holding off a littlebit longer to let that sort of
(05:08):
excess stock that's come tomarket work its way through the
system, if you like.
If we don't see another surgeof listings coming on to the
market in the next 10 days,that's absolutely the right
strategy.
But if we get another wave oranother surge of unusually high
listing activity, that will thenturn out to maybe be not such a
(05:29):
smart call, because you wouldsuspect the market will be under
sustained pressure from thereas buyers are faced with an
excess of listing options.
Speaker 3 (05:40):
Do you think it would be reasonable to assume that if
the RBA next time they meethold rates again which may be a
reasonable assumption at thispoint do you think it would be
reasonable then to assume thatother potential sellers who are
sitting on the sideline at themoment waiting may view that as
a sign that they could moveforward with their sale, knowing
that the market is holdingpotentially improving and is not
(06:04):
likely to go backwards, whichwould traditionally happen with
a rate rise?
Speaker 1 (06:08):
I think the RBA's movements with interest rates,
or even if they hold theirdecisions with interest rates,
are actually secondary now forhouseholds.
What's more important is what ishappening with individual
households' budgets and finances, and by that I mean that a lot
of people have had theirmortgage reset in the last six
(06:31):
months and it's easy to pay thefirst two or three mortgage
repayments at the higher rate.
But as those mortgagerepayments get out to six, nine,
12 months at the elevated rate,you may have been paying a
mortgage rate of two or two anda half percent and suddenly you
get dropped off and you're beingasked by the bank to pay 6.25
percent.
(06:51):
That's a really big change inyour finances and, as I say, you
can hang tough on waiting forthe rate cuts.
But if they're not forthcoming,the pressure builds on finances
there, particularly at a timeof cost of living.
So I think what the RBA do asfar as holding or increasing
rates, the damage for somepeople, unfortunately, is
(07:11):
already baked in and the onlything that would rescue people
who might have finances on aknife edge is rate cuts.
Speaker 3 (07:19):
I'm glad you mentioned the term baked in.
I read something this week acomment relating to real estate
agents and economists and howthey're discussing the
possibility of imminent or veryshort-term rate cuts and how
that's potentially that wasLaura Jays on Twitter.
Speaker 1 (07:33):
Yeah, yeah, correct.
And how they started realestate agents Correct Predicting
there'll be two rate cuts thisyear.
Speaker 3 (07:38):
Correct but interestingly predicting that
the language used by agents andperhaps some economists is
deliberately geared to subtlyand tie spies to bake in these
rate cuts so that they can be alittle bit more active in the
market.
Do you think that's a realproblem and do you think agents
are smart enough to think thatfar ahead and say you know what?
(07:59):
We should run the long gamehere and try and manipulate
people?
Speaker 1 (08:02):
I did mention, say to me last week that she's
advising her clients to takeherbuying clients to take advantage
of this indecision in themarket because once they do cut
rates later in the year it'llit's going to race again.
And when you look at the postthat Laura Jays put on Twitter
there, or ex as it's now calledI guess you got the sense that a
(08:24):
real estate agent had said thatdirectly to Laura Jays and she
took issue with that, which isfair enough.
There's no doubt that seasonedeconomists are calling for rate
cuts at the moment, so there'sno need for a real estate agent
to go out and make a call andput that call on their shoulders
.
In trying to entice a homebuyer to purchase a property or
(08:48):
bid on a property, the moreintelligent and right way to do
it is to show home buyers thatthis is, if you're a real estate
agent, is to show home buyers arange of forecasts as to what
other economists or economistsin the market think will happen
with interest rates.
But we are not economists hereand we have an interest in
(09:09):
economics, but we've never saidthis is what the RBA will do or
won't do.
Because A we're not the RBA andB we're not economists, so I
think all consumers need to bereally wary out there when a
real estate agent, who is arealtor paid by the vendor to
get the property sold for thebest price they can, tries to
induce you into buying thatproperty by telling you that
(09:31):
finance will be cheaper later inthe year.
Speaker 3 (09:34):
Yeah, really, really good point, and I think it's
important and I'm glad youhighlight that.
People do need to exercise alittle bit of caution, and we've
talked about this in so manyother ways on the podcast.
They need to do their ownresearch.
They need to make sure they'vegot a group of trusted advisors
they can turn to to get extrahelp as well.
Speaker 1 (09:50):
Paid agents are friendly.
They are not your friends.
Speaker 3 (09:54):
It's true.
I do want to touch on just verybriefly before we move on.
You did mention that Louis hastalked about adjust, or
potentially adjusting, hisforecasts.
Given that SQM in particularhas been really quite accurate
over the last few years withtheir forecasts, do you
personally take that as a bit ofa sign that the market may be
performing better than Louis hadpredicted, or Do you think that
(10:16):
he's just opening up the ideathat he may need to rethink his
position?
Speaker 1 (10:21):
Look, we're not going to, on this podcast, dissect
the market nuances this deep allyear Because, a it'll be
incredibly boring and, b there'sno room need to do so.
The reason last week and thisweek that we're really drilling
down into what is exactly ishappening in the market, because
early in the new year, after afour to six week break of
(10:44):
auctions, of meaningful listingactivity on market, of of
transactions being done,everybody, including ourselves,
is really keen to know where themarket is at at the moment and,
unsurprisingly, there'sconflicting signals.
So I Louis has not changed hisforecast.
He did qualify by saying ifthis were to keep up, I would
(11:06):
suspect that Sydney propertywill have a better year than I
anticipated.
But I would question whether,particularly with a post payment
rate comfortably over 10%,which is what was recorded Last
weekend for auctions, I wouldreally question whether the 60%
clearance rate can sustainitself in the market.
If it does, it does and I'mhappy to say, there you go.
(11:29):
What a surprise.
But speaking to buyers out inthe field, they too a little bit
Indecisive about where themarket is heading this year and
happy to sit on the sidelines inmany cases and just watch when
it's going and the.
The early trend that we pickedup, which is increased listing
activity this year and Decreasesales volumes, is still the case
(11:52):
Now, as we turn the corner forthe middle of February.
Speaker 3 (11:56):
Well, moving on slightly and talking of volumes
at the open homes I conductedover the weekend in the rental
space, I noticed that there isstill some activity, but it
didn't feel quite as hot as theother weeks in the year.
Have you any indications or anythoughts on whether this might
be a bit of a turning of thetide in the rental market and
potentially indicate a period ofplateau or slowing down in the
(12:19):
crisis that we've talked about?
Or is this just you know,potentially in a Aronius weekend
in an otherwise crazy, crazymarket?
Speaker 1 (12:28):
It's the peak letting season coming to an end, kieran
.
Yeah, that's that's.
That's what it is.
Mid mid February onwards, thosethat were looking to rehouse
themselves for the new new yearhave tended to do so.
So with the rental market, ifwe've got a lease that's due to
expire or does expire inDecember, for example, and the
tenant wants to renew, westrongly encourage the landlord
(12:50):
to offer a new lease renewalthat ends in the following
January.
We don't like leases ending inDecember because the landlord
can end up with a vacantInvestment property over
Christmas, which is the lasttime a year that you want an
investment Property empty,drawing cash from your savings
account to pay to pay the bills.
But what's really importantcoming out of out of Christmas
(13:13):
from there is that you haven'treleased by the end of January,
early February, because there isa flurry of leasing activity Up
until about mid February andthen from mid February to late
March it continues to cool andand from about April through to
August can be a very challengingtime to find a tenant Because,
(13:35):
for whatever reason, the Sydneyrental market does not perform
anywhere near as strongly duringwinter as what it does at the
beginning of the calendar year.
Speaker 3 (13:45):
Yeah, very likely tied to things like school and
university years, I mightimagine, given that they're very
calendar based in nature.
If you are a tenant out therein the market looking, do you
think it is a good time to tryand find a property at the
moment, as you say, thatfrenzy's kind of died off?
Does that mean that there isalso going to be less properties
available on the market as wemove into the next few months?
Speaker 1 (14:08):
Vacancy rates are really, really low and here at
Harris Partners our vacancy rateis essentially zero, which I've
never actually seen our vacancyrate so low.
Landlords, to help them fightthe cost of living, inflation,
higher mortgage costs, arelooking for rental increases.
They're not overstating it.
(14:28):
We're making market-basedrental increases based on what
else is available and what isfair for the respective property
.
And I believe in 98% of casesthe tenants are agreeing to the
offer of a rental increaserather than moving out.
So that means that a lot ofstock is not coming to market
and existing tenants are stayingwhere they are.
Speaker 3 (14:49):
Yeah, that's really interesting.
So would you say that in yourtime in real estate, would this
be a period where tenants aretending to stay still longer
than they have been in the past,and has that been the case
since COVID?
Speaker 1 (15:01):
I mean, given the massive disruptions to
everyone's lives, I would makesense is that, as the rental
market has risen strongly comingout of COVID, keeping in mind
at the start of COVID, therental market dropped a clean
10%.
I had lunch with a real estateagent from the Eastern suburbs
today who was reliving whathappened at the beginning of
(15:22):
COVID and he had in one day hehad 80 tenants walk sets of keys
back in 80 different tenants inone day and just hand the keys
back over the counter and sayingI'm living Australia, have your
rental property back.
So the rental market across theboard dropped 10%, but in some
(15:43):
of those inner city areas itdropped out to 20%, 25%.
So the rebound in prices wasnot actually the rental market
experiencing a rental crisis, itwas just the market reverting
to the mean.
We have gone past that point now, as we all know, and we are in
a fully fledged rental crisisnow.
(16:04):
That shows no signs of abating.
There might be periods ofconsolidation, as there always
is in any breakout.
That'll probably come mid-year,but it makes sense.
The tenants are staying lockedand loaded in leases and it's
much cheaper and advisable topay the rental increase than
(16:25):
hire a removal truck and movedown the road and get hit with
the same rental increase a fewmonths later anyway.
Speaker 3 (16:32):
Yeah, tough time for everyone in the rental market,
but certainly some good advice.
I want to transition, if we can, Peter.
I watched a video the other dayI think it was on your Twitter
feed, actually the Nine Newsreport talking about a young
couple who had purchased off theplan in a little I say little a
development just south west ofSydney.
And they were.
This was Wilton.
Speaker 1 (16:52):
Green At.
Speaker 3 (16:52):
Wilton Green.
Yeah, and basically from thenews piece, the discussion was
these guys had paid a prettysizeable chunk of money up front
for a house and land packageand some time later, a couple of
years, almost three years nowthe land was still not
registered.
And they're now being told thatthe company's collapsing and in
fact the land may not beregistered any time in the next
(17:13):
three to four years.
No-transcript.
Speaker 1 (17:24):
I think in reposting that particular story out, the
first thing that grabbed me isthat was Country Garden, the
second Chinese behemothdeveloper that's under financial
pressure and, as we know,evergrande has already imploded,
and Evergrande imploded onMonday, january 29.
And because we're recordingthis on Valentine's Day,
(17:45):
february 14, people can thinkthat, yes, a massive Chinese
developer with $320 billion indebts has imploded, both with
Chinese domestic bondholders andinternational bondholders.
It's imploded, but that's justan event that happened a few
weeks ago and it's business asnormal.
Things like that take time toripple through the system, and
(18:09):
watching that poor couple sortof outline their story as to
what's happened in WesternSydney with Evergrande's main
competitor, country Garden, justhighlighted to me very quickly
that the risks that are comingout of China are not over.
Can't have a behemoth to thetune of $320 billion, you know,
(18:31):
implode and there not be aripple effect or ramifications
from that.
So I think that's the first takeout.
If you're a home buyer andyou're looking at that and
saying what are the lessons here?
I don't want to be critical ofanyone that's purchased into
Wilton Garden or any off theplan arrangement, but the
reality is it was high on visionand it was dependent on the
(18:55):
story, the economic storystaying good, and clearly the
economic story for CountryGarden and Evergrande and the
Chinese market at large is notgood now, like it was two years
ago when they put their depositdown.
So when there's a large gapbetween your signing of a
contract and the delivery ofthat service, even if you're
(19:18):
buying a car let's cut across tocars you can sign a contract to
buy a car coming next year, butit's still got to get here and
that's, I think, the other takeout of that is it was high on
vision but low on substance,unfortunately.
Speaker 3 (19:34):
I must say the most interesting take for me from the
piece, other than what reallyis a tragic story for this young
couple, was the fact thatCountry Garden, or Riesland is
the company that are operatingunder in Australia, own 90% of
that development in WiltonGreens.
And to me as someone who knowsthe area relatively well and has
actually looked at that estatedriving past before, I would
(19:56):
never have once considered thatin fact that was a Chinese state
owned and managed development.
I just assumed it wasAustralian developers building
Australian land holdings and Ijust find it really interesting
that we are in some way sobeholden to the financial
success of a company thousandsof kilometres away who really
has no real footprint here inAustralia other than these
(20:19):
developments that you knowthey're taking money up front to
try and get off the ground inthe long term.
Speaker 1 (20:23):
Well, I could tell you one thing multiplex land
lease meritan.
They don't have any housingdevelopments in China.
You can put a deposit down.
Speaker 3 (20:32):
Yeah, it's true, Absolutely the other thing I
wanted to sort of talk aboutwith this piece.
Actually hold that Now reallyreally interesting, Peter, I
think I'd love to do an episodesometime in the future where we
actually step through some ofthe process involved in house
and land, because I think itmight be quite informative for
someone to learn.
You know what is involved andwhat is land registration, and
(20:54):
you know utilities, developmentand all the things that they may
not consider when they sign onto what sounds like a great deal
in the Southwest Corridor for,say, $700,000.
Sounds too good at the time andmay be that case.
Speaker 1 (21:06):
Look, and I wouldn't even be critical to say that
these people were hoodwinked and, you know, signed up for
something that was too good tobe true.
What a salesperson will alwaysdo in most instances is tell you
what their best case scenariois, and that's probably all the
salesperson did in signing thesepeople to the contract.
But when you get a contract,you must remember that there's
(21:28):
no such thing as a standardcontract, and the most powerful
time in any negotiation isbefore you sign the contract,
because the power in anegotiation rests with the
person that's prepared to walkaway.
And I helped someone elsenegotiate an agency agreement
for the sale of their investmentproperty down the South Coast
(21:48):
and he said I'm really sorry tolean on you, but this is your
forte, not mine.
Could you give me some guidancehere?
I was like no need to apologize.
The time to ask for help from aprofessional when signing
contracts is before you sign it,Because for every one person
that's ever asked me or you forguidance on signing a real
estate contract before they'vesigned it, we've had 10 people
(22:11):
that have signed a contract andregretted it and brought it in
and said do you reckon you couldget me out of this, or what are
my rights now?
What are my options?
So keep that in mind.
Whether it's buying a house andland, buying an off the plan
apartment or listing yourproperty on the market, the most
powerful time in thatnegotiation is before you sign
the paperwork.
Speaker 3 (22:32):
Yeah, exactly as we move towards the close tonight,
Peter, I just wanted to get asense of the week ahead.
We've got CPI numbers comingout in a couple of weeks' time
and then early next month,obviously, the RBA will meet
again.
What are your thoughts on whatwe might see in real estate this
week and do you think there'llbe any shifts in what we have
seen?
Speaker 1 (22:51):
Look, broadly speaking, the US had a bad
inflation number overnight.
Markets didn't like that.
They were looking for inflationto continue trending down and
it actually increased.
Hopefully that's isolated tothe US economy, Hopefully that's
isolated to one reading, butit's not a great indicator and
(23:13):
it does have markets a littlebit jittery.
We won't get our next CPIinflation number until the 28th
of February, so we won't quiteget that in the next week, but
that'll be a big number when itdrops.
To see how we're tracking inthat regard.
The RBA are not meeting on thefirst Tuesday of every month
anymore, as we know.
So the next three RBA meetingsbecause keeping in mind the
(23:36):
people are looking for a ratecut from here so the next three
times the RBA have anopportunity to cut interest
rates or announce an interestrate cut is March 19, May 7 and
June 18.
So that's mapping out what's infront of us for the RBA.
I don't think you'll see a ratecut personally in any of those
(24:00):
meetings, but if numbers arederailed from June 18 onwards
that's when the retail bankshave suggested you could start
possibly thinking about a ratecut at that point in time.
So, answering your question,coming back to the short term.
In the week ahead, I think weshould all be looking at stock
levels and how many auctions arepostponed versus being pushed
(24:26):
to auction on the day.
If there's another 10 to 15% ofauctions being rescheduled
because there's not enough buyerinterest this weekend, all that
means is the inevitability thatpressures that are building up
on the market is being pushedfrom February to March.
That's the big play at themoment for mine.
Speaker 3 (24:46):
Yeah, really good insights, peter, and, as always,
a really great episode.
I always value our chats and Ifeel like I learn something
every week, and I hope that ourlisteners do as well.
So thank you, pete, forchatting with us today.
Pleasure, kieran, given it isthe 14th today.
A happy Valentine's Day toeveryone out there.
Thanks for listening to CurrentMarket Insights and we look
forward to chatting with younext week.
Speaker 2 (25:07):
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 (00:30):
Hello and welcome to another episode of Current
Market Insights.
I'm your host, kieran O'Brien,and, as always with me this week
is my good friend, mr PeterO'Malley.
Peter, hello G'day, kieran,great to see you, great to see
you, peter, and, as always,great to sit and chat about what
has been in the week of realestate.
I'd love to start this episodethis week just getting a bit of
a recap.
What have we learnt this week?
(00:50):
What have you seen out theretalking to people on the
hustings?
What's your general sense ofhow the market is going locally
for us?
Speaker 1 (00:57):
Second big auction weekend of the year, kieran, so
everybody's trying to get a goodread on where the market is at.
If we go to the Sydney auctionclearance rate, they came in at
59.1% on SQM researchers numbers.
That's a pretty healthy resultbecause SQM research do factor
in all the unreported resultsfrom the weekend and capture
(01:20):
them by the following Tuesday.
The results were so strong infact.
The auction clearance rate wasso strong in fact that Louis
Christopher, who's the CEO ofSQM research and had one of the
more pessimistic perspectives onthe Sydney property market for
2024, was really surprised athow strong results were, to the
degree that he said these werestrong results for Sydney.
(01:43):
Over the last week, the Saturdayclearance rate was actually 60%
on our numbers.
We are recording clearancerates higher than this time last
year and on stronger volumes.
If this keeps up, our forecastfor modest housing price falls
in Sydney will be wrong and thehousing market may rise at a
faster rate than 2023.
(02:04):
What I would say we saw here inthe inner west here, and we saw
a lot of auction campaigns thatwere postponed due to
insufficient buyer interest, youwould imagine, and redated for
February 24 or the 2nd of March.
So I think it would be tooearly myself to jump to the
conclusion that the Sydneyproperty market is going to
(02:26):
outperform for 2024,particularly given the auction
clearance rate is slightlyskewed by the amount of auctions
that were postponed due toinsufficient buyer interest.
Speaker 3 (02:38):
So a couple of things to talk about out of that data.
Peter, you mentioned theoverall clearance rate around
59% or almost 60%.
Now correct me if I'm wrong.
Did we report last week that itwas 54% or 55%?
So it has actually increased inthe week?
Yes, and that was also, I thinkwe said on numbers of 700 odd
properties going to auction,which was an increase of maybe
(02:59):
300 or 400.
So it's pretty clear we'reseeing higher clearance rates
and much higher volume than wehave seen in the past 12 months.
Speaker 1 (03:07):
That's right.
Volumes are up, as we alludedto, and that's coming through in
the data.
There were 731 auctionsscheduled, 83 were rescheduled.
So Louis does capture thepostponed auctions.
So, if you're looking to put anumber on it, over 10% were
postponed.
Of those remaining, there was215 that sold prior to auction
(03:30):
and 217 that sold at auctionunder the hammer.
So again, another consistenttrend from last year where it's
a clean 50% selling prior toauction and 50% selling at
auction of those that areconsidered auction sales.
Speaker 3 (03:47):
Yeah, certainly Certainly strong numbers to
start the year, and you can seewhy Louis has started to adjust
his predictions.
I wonder the postpones that weare seeing.
Do you think that is a measuremore of the fact that there is
such a high volume on the marketat the moment?
Speaker 1 (04:02):
Definitely.
Speaker 3 (04:03):
Definitely, or could it also be related to the fact
that there are some potentiallyopportunistic sellers running
with the frenzy or not thefrenzy, but the heat of what's
happening at the moment and thisobservation that it is such a
strong and active market?
Are people jumping on whenperhaps they're not price right
or they're not ready for marketand are just trying to ride the
wave?
Speaker 1 (04:23):
I think a lot of people looked at the headline
price growth for 2023 of 11% forthe year and said, hey, that
looks pretty good, we're goingto jump on board early in the
new year there.
The market has enjoyed somegood growth that I'd like to get
the best of it.
What that misses, of course,kieran, is that the auction
clearance rate and the market atlarge really struggled after
(04:46):
the November rate hike.
What you've seen here in thefirst six weeks of 2024 is a lot
of listings that have come tomarket at an unusually early
time of year.
Those auctions that werepostponed.
The agents fair enough to havemade the assumption that they're
better off holding off a littlebit longer to let that sort of
(05:08):
excess stock that's come tomarket work its way through the
system, if you like.
If we don't see another surgeof listings coming on to the
market in the next 10 days,that's absolutely the right
strategy.
But if we get another wave oranother surge of unusually high
listing activity, that will thenturn out to maybe be not such a
(05:29):
smart call, because you wouldsuspect the market will be under
sustained pressure from thereas buyers are faced with an
excess of listing options.
Speaker 3 (05:40):
Do you think it would be reasonable to assume that if
the RBA next time they meethold rates again which may be a
reasonable assumption at thispoint do you think it would be
reasonable then to assume thatother potential sellers who are
sitting on the sideline at themoment waiting may view that as
a sign that they could moveforward with their sale, knowing
that the market is holdingpotentially improving and is not
(06:04):
likely to go backwards, whichwould traditionally happen with
a rate rise?
Speaker 1 (06:08):
I think the RBA's movements with interest rates,
or even if they hold theirdecisions with interest rates,
are actually secondary now forhouseholds.
What's more important is what ishappening with individual
households' budgets and finances, and by that I mean that a lot
of people have had theirmortgage reset in the last six
(06:31):
months and it's easy to pay thefirst two or three mortgage
repayments at the higher rate.
But as those mortgagerepayments get out to six, nine,
12 months at the elevated rate,you may have been paying a
mortgage rate of two or two anda half percent and suddenly you
get dropped off and you're beingasked by the bank to pay 6.25
percent.
(06:51):
That's a really big change inyour finances and, as I say, you
can hang tough on waiting forthe rate cuts.
But if they're not forthcoming,the pressure builds on finances
there, particularly at a timeof cost of living.
So I think what the RBA do asfar as holding or increasing
rates, the damage for somepeople, unfortunately, is
(07:11):
already baked in and the onlything that would rescue people
who might have finances on aknife edge is rate cuts.
Speaker 3 (07:19):
I'm glad you mentioned the term baked in.
I read something this week acomment relating to real estate
agents and economists and howthey're discussing the
possibility of imminent or veryshort-term rate cuts and how
that's potentially that wasLaura Jays on Twitter.
Speaker 1 (07:33):
Yeah, yeah, correct.
And how they started realestate agents Correct Predicting
there'll be two rate cuts thisyear.
Speaker 3 (07:38):
Correct but interestingly predicting that
the language used by agents andperhaps some economists is
deliberately geared to subtlyand tie spies to bake in these
rate cuts so that they can be alittle bit more active in the
market.
Do you think that's a realproblem and do you think agents
are smart enough to think thatfar ahead and say you know what?
(07:59):
We should run the long gamehere and try and manipulate
people?
Speaker 1 (08:02):
I did mention, say to me last week that she's
advising her clients to takeherbuying clients to take advantage
of this indecision in themarket because once they do cut
rates later in the year it'llit's going to race again.
And when you look at the postthat Laura Jays put on Twitter
there, or ex as it's now calledI guess you got the sense that a
(08:24):
real estate agent had said thatdirectly to Laura Jays and she
took issue with that, which isfair enough.
There's no doubt that seasonedeconomists are calling for rate
cuts at the moment, so there'sno need for a real estate agent
to go out and make a call andput that call on their shoulders
.
In trying to entice a homebuyer to purchase a property or
(08:48):
bid on a property, the moreintelligent and right way to do
it is to show home buyers thatthis is, if you're a real estate
agent, is to show home buyers arange of forecasts as to what
other economists or economistsin the market think will happen
with interest rates.
But we are not economists hereand we have an interest in
(09:09):
economics, but we've never saidthis is what the RBA will do or
won't do.
Because A we're not the RBA andB we're not economists, so I
think all consumers need to bereally wary out there when a
real estate agent, who is arealtor paid by the vendor to
get the property sold for thebest price they can, tries to
induce you into buying thatproperty by telling you that
(09:31):
finance will be cheaper later inthe year.
Speaker 3 (09:34):
Yeah, really, really good point, and I think it's
important and I'm glad youhighlight that.
People do need to exercise alittle bit of caution, and we've
talked about this in so manyother ways on the podcast.
They need to do their ownresearch.
They need to make sure they'vegot a group of trusted advisors
they can turn to to get extrahelp as well.
Speaker 1 (09:50):
Paid agents are friendly.
They are not your friends.
Speaker 3 (09:54):
It's true.
I do want to touch on just verybriefly before we move on.
You did mention that Louis hastalked about adjust, or
potentially adjusting, hisforecasts.
Given that SQM in particularhas been really quite accurate
over the last few years withtheir forecasts, do you
personally take that as a bit ofa sign that the market may be
performing better than Louis hadpredicted, or Do you think that
(10:16):
he's just opening up the ideathat he may need to rethink his
position?
Speaker 1 (10:21):
Look, we're not going to, on this podcast, dissect
the market nuances this deep allyear Because, a it'll be
incredibly boring and, b there'sno room need to do so.
The reason last week and thisweek that we're really drilling
down into what is exactly ishappening in the market, because
early in the new year, after afour to six week break of
(10:44):
auctions, of meaningful listingactivity on market, of of
transactions being done,everybody, including ourselves,
is really keen to know where themarket is at at the moment and,
unsurprisingly, there'sconflicting signals.
So I Louis has not changed hisforecast.
He did qualify by saying ifthis were to keep up, I would
(11:06):
suspect that Sydney propertywill have a better year than I
anticipated.
But I would question whether,particularly with a post payment
rate comfortably over 10%,which is what was recorded Last
weekend for auctions, I wouldreally question whether the 60%
clearance rate can sustainitself in the market.
If it does, it does and I'mhappy to say, there you go.
(11:29):
What a surprise.
But speaking to buyers out inthe field, they too a little bit
Indecisive about where themarket is heading this year and
happy to sit on the sidelines inmany cases and just watch when
it's going and the.
The early trend that we pickedup, which is increased listing
activity this year and Decreasesales volumes, is still the case
(11:52):
Now, as we turn the corner forthe middle of February.
Speaker 3 (11:56):
Well, moving on slightly and talking of volumes
at the open homes I conductedover the weekend in the rental
space, I noticed that there isstill some activity, but it
didn't feel quite as hot as theother weeks in the year.
Have you any indications or anythoughts on whether this might
be a bit of a turning of thetide in the rental market and
potentially indicate a period ofplateau or slowing down in the
(12:19):
crisis that we've talked about?
Or is this just you know,potentially in a Aronius weekend
in an otherwise crazy, crazymarket?
Speaker 1 (12:28):
It's the peak letting season coming to an end, kieran
.
Yeah, that's that's.
That's what it is.
Mid mid February onwards, thosethat were looking to rehouse
themselves for the new new yearhave tended to do so.
So with the rental market, ifwe've got a lease that's due to
expire or does expire inDecember, for example, and the
tenant wants to renew, westrongly encourage the landlord
(12:50):
to offer a new lease renewalthat ends in the following
January.
We don't like leases ending inDecember because the landlord
can end up with a vacantInvestment property over
Christmas, which is the lasttime a year that you want an
investment Property empty,drawing cash from your savings
account to pay to pay the bills.
But what's really importantcoming out of out of Christmas
(13:13):
from there is that you haven'treleased by the end of January,
early February, because there isa flurry of leasing activity Up
until about mid February andthen from mid February to late
March it continues to cool andand from about April through to
August can be a very challengingtime to find a tenant Because,
(13:35):
for whatever reason, the Sydneyrental market does not perform
anywhere near as strongly duringwinter as what it does at the
beginning of the calendar year.
Speaker 3 (13:45):
Yeah, very likely tied to things like school and
university years, I mightimagine, given that they're very
calendar based in nature.
If you are a tenant out therein the market looking, do you
think it is a good time to tryand find a property at the
moment, as you say, thatfrenzy's kind of died off?
Does that mean that there isalso going to be less properties
available on the market as wemove into the next few months?
Speaker 1 (14:08):
Vacancy rates are really, really low and here at
Harris Partners our vacancy rateis essentially zero, which I've
never actually seen our vacancyrate so low.
Landlords, to help them fightthe cost of living, inflation,
higher mortgage costs, arelooking for rental increases.
They're not overstating it.
(14:28):
We're making market-basedrental increases based on what
else is available and what isfair for the respective property
.
And I believe in 98% of casesthe tenants are agreeing to the
offer of a rental increaserather than moving out.
So that means that a lot ofstock is not coming to market
and existing tenants are stayingwhere they are.
Speaker 3 (14:49):
Yeah, that's really interesting.
So would you say that in yourtime in real estate, would this
be a period where tenants aretending to stay still longer
than they have been in the past,and has that been the case
since COVID?
Speaker 1 (15:01):
I mean, given the massive disruptions to
everyone's lives, I would makesense is that, as the rental
market has risen strongly comingout of COVID, keeping in mind
at the start of COVID, therental market dropped a clean
10%.
I had lunch with a real estateagent from the Eastern suburbs
today who was reliving whathappened at the beginning of
(15:22):
COVID and he had in one day hehad 80 tenants walk sets of keys
back in 80 different tenants inone day and just hand the keys
back over the counter and sayingI'm living Australia, have your
rental property back.
So the rental market across theboard dropped 10%, but in some
(15:43):
of those inner city areas itdropped out to 20%, 25%.
So the rebound in prices wasnot actually the rental market
experiencing a rental crisis, itwas just the market reverting
to the mean.
We have gone past that point now, as we all know, and we are in
a fully fledged rental crisisnow.
(16:04):
That shows no signs of abating.
There might be periods ofconsolidation, as there always
is in any breakout.
That'll probably come mid-year,but it makes sense.
The tenants are staying lockedand loaded in leases and it's
much cheaper and advisable topay the rental increase than
(16:25):
hire a removal truck and movedown the road and get hit with
the same rental increase a fewmonths later anyway.
Speaker 3 (16:32):
Yeah, tough time for everyone in the rental market,
but certainly some good advice.
I want to transition, if we can, Peter.
I watched a video the other dayI think it was on your Twitter
feed, actually the Nine Newsreport talking about a young
couple who had purchased off theplan in a little I say little a
development just south west ofSydney.
And they were.
This was Wilton.
Speaker 1 (16:52):
Green At.
Speaker 3 (16:52):
Wilton Green.
Yeah, and basically from thenews piece, the discussion was
these guys had paid a prettysizeable chunk of money up front
for a house and land packageand some time later, a couple of
years, almost three years nowthe land was still not
registered.
And they're now being told thatthe company's collapsing and in
fact the land may not beregistered any time in the next
(17:13):
three to four years.
No-transcript.
Speaker 1 (17:24):
I think in reposting that particular story out, the
first thing that grabbed me isthat was Country Garden, the
second Chinese behemothdeveloper that's under financial
pressure and, as we know,evergrande has already imploded,
and Evergrande imploded onMonday, january 29.
And because we're recordingthis on Valentine's Day,
(17:45):
february 14, people can thinkthat, yes, a massive Chinese
developer with $320 billion indebts has imploded, both with
Chinese domestic bondholders andinternational bondholders.
It's imploded, but that's justan event that happened a few
weeks ago and it's business asnormal.
Things like that take time toripple through the system, and
(18:09):
watching that poor couple sortof outline their story as to
what's happened in WesternSydney with Evergrande's main
competitor, country Garden, justhighlighted to me very quickly
that the risks that are comingout of China are not over.
Can't have a behemoth to thetune of $320 billion, you know,
(18:31):
implode and there not be aripple effect or ramifications
from that.
So I think that's the first takeout.
If you're a home buyer andyou're looking at that and
saying what are the lessons here?
I don't want to be critical ofanyone that's purchased into
Wilton Garden or any off theplan arrangement, but the
reality is it was high on visionand it was dependent on the
(18:55):
story, the economic storystaying good, and clearly the
economic story for CountryGarden and Evergrande and the
Chinese market at large is notgood now, like it was two years
ago when they put their depositdown.
So when there's a large gapbetween your signing of a
contract and the delivery ofthat service, even if you're
(19:18):
buying a car let's cut across tocars you can sign a contract to
buy a car coming next year, butit's still got to get here and
that's, I think, the other takeout of that is it was high on
vision but low on substance,unfortunately.
Speaker 3 (19:34):
I must say the most interesting take for me from the
piece, other than what reallyis a tragic story for this young
couple, was the fact thatCountry Garden, or Riesland is
the company that are operatingunder in Australia, own 90% of
that development in WiltonGreens.
And to me as someone who knowsthe area relatively well and has
actually looked at that estatedriving past before, I would
(19:56):
never have once considered thatin fact that was a Chinese state
owned and managed development.
I just assumed it wasAustralian developers building
Australian land holdings and Ijust find it really interesting
that we are in some way sobeholden to the financial
success of a company thousandsof kilometres away who really
has no real footprint here inAustralia other than these
(20:19):
developments that you knowthey're taking money up front to
try and get off the ground inthe long term.
Speaker 1 (20:23):
Well, I could tell you one thing multiplex land
lease meritan.
They don't have any housingdevelopments in China.
You can put a deposit down.
Speaker 3 (20:32):
Yeah, it's true, Absolutely the other thing I
wanted to sort of talk aboutwith this piece.
Actually hold that Now reallyreally interesting, Peter, I
think I'd love to do an episodesometime in the future where we
actually step through some ofthe process involved in house
and land, because I think itmight be quite informative for
someone to learn.
You know what is involved andwhat is land registration, and
(20:54):
you know utilities, developmentand all the things that they may
not consider when they sign onto what sounds like a great deal
in the Southwest Corridor for,say, $700,000.
Sounds too good at the time andmay be that case.
Speaker 1 (21:06):
Look, and I wouldn't even be critical to say that
these people were hoodwinked and, you know, signed up for
something that was too good tobe true.
What a salesperson will alwaysdo in most instances is tell you
what their best case scenariois, and that's probably all the
salesperson did in signing thesepeople to the contract.
But when you get a contract,you must remember that there's
(21:28):
no such thing as a standardcontract, and the most powerful
time in any negotiation isbefore you sign the contract,
because the power in anegotiation rests with the
person that's prepared to walkaway.
And I helped someone elsenegotiate an agency agreement
for the sale of their investmentproperty down the South Coast
(21:48):
and he said I'm really sorry tolean on you, but this is your
forte, not mine.
Could you give me some guidancehere?
I was like no need to apologize.
The time to ask for help from aprofessional when signing
contracts is before you sign it,Because for every one person
that's ever asked me or you forguidance on signing a real
estate contract before they'vesigned it, we've had 10 people
(22:11):
that have signed a contract andregretted it and brought it in
and said do you reckon you couldget me out of this, or what are
my rights now?
What are my options?
So keep that in mind.
Whether it's buying a house andland, buying an off the plan
apartment or listing yourproperty on the market, the most
powerful time in thatnegotiation is before you sign
the paperwork.
Speaker 3 (22:32):
Yeah, exactly as we move towards the close tonight,
Peter, I just wanted to get asense of the week ahead.
We've got CPI numbers comingout in a couple of weeks' time
and then early next month,obviously, the RBA will meet
again.
What are your thoughts on whatwe might see in real estate this
week and do you think there'llbe any shifts in what we have
seen?
Speaker 1 (22:51):
Look, broadly speaking, the US had a bad
inflation number overnight.
Markets didn't like that.
They were looking for inflationto continue trending down and
it actually increased.
Hopefully that's isolated tothe US economy, Hopefully that's
isolated to one reading, butit's not a great indicator and
(23:13):
it does have markets a littlebit jittery.
We won't get our next CPIinflation number until the 28th
of February, so we won't quiteget that in the next week, but
that'll be a big number when itdrops.
To see how we're tracking inthat regard.
The RBA are not meeting on thefirst Tuesday of every month
anymore, as we know.
So the next three RBA meetingsbecause keeping in mind the
(23:36):
people are looking for a ratecut from here so the next three
times the RBA have anopportunity to cut interest
rates or announce an interestrate cut is March 19, May 7 and
June 18.
So that's mapping out what's infront of us for the RBA.
I don't think you'll see a ratecut personally in any of those
(24:00):
meetings, but if numbers arederailed from June 18 onwards
that's when the retail bankshave suggested you could start
possibly thinking about a ratecut at that point in time.
So, answering your question,coming back to the short term.
In the week ahead, I think weshould all be looking at stock
levels and how many auctions arepostponed versus being pushed
(24:26):
to auction on the day.
If there's another 10 to 15% ofauctions being rescheduled
because there's not enough buyerinterest this weekend, all that
means is the inevitability thatpressures that are building up
on the market is being pushedfrom February to March.
That's the big play at themoment for mine.
Speaker 3 (24:46):
Yeah, really good insights, peter, and, as always,
a really great episode.
I always value our chats and Ifeel like I learn something
every week, and I hope that ourlisteners do as well.
So thank you, pete, forchatting with us today.
Pleasure, kieran, given it isthe 14th today.
A happy Valentine's Day toeveryone out there.
Thanks for listening to CurrentMarket Insights and we look
forward to chatting with younext week.
Speaker 2 (25:07):
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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