March 13, 2024 • 19 mins
As forecasts of stubborn inflation and the specter of enduring high-interest rates loom over us, we dissect the stark warnings by economic titans like former RBA Governor Phillip Lowe and finance mogul Jamie Dimon. We also discuss the sales cycle in real terms, and finish with our usual weekly market wrap.
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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 with me again this week is
Mr Peter O'Malley.
Peter, good evening.
Speaker 1 (00:38):
G'day.
Speaker 3 (00:38):
Kieran.
Great to see you.
Great to see you, Peter.
I want to kick off this weekjust talking about former RBA.
Governor Low has made headlinesagain I saw today.
He's got a new job and hethought at the same time you
might talk a bit about what'shappening in the Australian
economy.
Did you get a chance to have alook at what he said and any
sense of what that means for us?
Speaker 1 (00:59):
Yeah, as reported by the Herald, former Reserve Bank
Governor Phillip Low has joinedthe chorus of voices warning
that stubborn inflation couldlead to interest rates staying
higher for longer than manyexpect.
World's most famous banker,jamie Diamond, is in Sydney this
week, kieran he has had asimilar message both for US
(01:20):
interest rates and Australianinterest rates, and Peter
Costello was in the news thisweek as well, and he said that
equity markets seem to havebaked in interest rate cuts
already and markets may have runahead of themselves.
And what if the forecast ratecuts don't happen in the fashion
that the markets haveanticipated?
We could be headed for a bit ofa correction there.
(01:41):
So that was one of the pointsthat we put in our January
newsletter is there was such abelief that interest rates would
be forthcoming that it would beinteresting to see if buyers,
both in equity markets andproperty markets, bake those
rate cut expectations into theirbehaviour.
There's many economies fallinginto recession around the world
(02:02):
and their stock marketsincluding Australia's, which is
not in recession is hittingall-time highs.
So that would suggest that themarkets front-running the
interest rate cuts and drivingstock markets to all-time highs.
And property markets aren't faroff it either, and there are
some record prices happeningaround the city in the property
market and they tend to be atthe higher price points, as
(02:25):
we've previously discussed.
But there's no doubt that manypeople are acting as their rate
cuts are a given.
Speaker 3 (02:31):
So we touched on maybe three or four weeks ago.
I mentioned that one of themajor banks had already forecast
some rate cuts into theirdecision making and in fact had
brought down fixed rates in linewith where they thought rates
would go.
Off the back of these comments,particularly from Jamie Dimon,
who you know with JPMorgan, runsa huge bank in the US and is
(02:51):
obviously at the forefront ofthe financial markets and their
impact on property in particular, do you think that we are
likely to see the RBA respondwith rate changes sooner than we
had initially predicted?
Speaker 1 (03:05):
I personally don't believe.
So I think that the economy isstill ticking over.
Unfortunately, there's manypeople that are adversely
affected by the current ratesetting.
But I think if you look at theoverall economy and where the
inflation rate's at, I stillthink it's a bit too high for
comfort and if they did cutrates too soon they could cause
(03:26):
another inflationary outbreak.
I think that's the fear thatall central banks would have.
A great point that was made thisweek by a gentleman by the name
of Cameron Cusher who's aneconomist at realestatecom.
He put out there on socialmedia what are the chances that
as the RBA cuts rates, thatmacro-prudential policies are
(03:47):
tightened further if propertyprices continue to rise.
So what Cusher's suggestingthere is that when the RBA does
cut rates, they want those ratecuts to flow through to the pain
areas of the economy.
What they won't want to seethose rate cuts do when they do
come is stimulate propertyprices higher at a time we don't
(04:10):
need higher property prices.
So they may actually introducetighter lending standards, just
manufacturing them to ensurethat they keep the property
markets subdued.
Now nobody knows if that's whatwill happen later in the year,
but I think it's a really,really good point to raise at
this stage of the cycle.
And it's such a good point toraise because the RBA and APRA
(04:32):
have got form for acting inunison like this in the past.
Speaker 3 (04:36):
So a couple of things to touch on there.
Cameron Cush's comment aboutthe lending changes or potential
lending tightening We've talkedat length before about the
serviceability buffer being theprimary tool that the banks have
.
Is that likely to be an avenueof attack should they decide to
actually regulate the lendingsector a little bit further?
Speaker 1 (04:55):
That is one way that they've attacked it in the past
here, and another way they'veattacked it is that they've
forced the banks to charge ahigher interest rate for
investment loans than home loans, for example.
Essentially, when you'relooking at policy tightening,
you look at where the market ismost exuberant and you just
invent a policy tightening ofsome description in order to
(05:16):
keep the market subdued fromoverheating for its own good.
So I wouldn't speculate at thisstage what the exact change may
be, but look out for APRAacting in unison with rate cuts
in the RBA later in the year andcoming up with a tighter
monetary policy.
Speaker 3 (05:33):
Yeah, good point, peter.
You also mentioned there thatone of the things they don't
want to happen, obviously, is tosee a surge in property prices
when rates do come down.
What do you think will happen,though, if the RBA say look, in
fact inflation is so much stickythan we thought it might be,
and they are forced to makeanother rate rise before we
(05:53):
finish out 2024?
Speaker 1 (05:55):
That'll be very painful for a lot of people.
I guess it can never be ruledout, but it doesn't seem to be
on anyone's radar, depending onwho you talk to.
There is a suggestion thatinflation may win the day here,
where central banks are forcedto cut rates before they've won
the inflation battle, meaningthat inflation will potentially
stay higher for longer and morepersistent.
(06:17):
Hardheads in this space, likePhilip Lowe, jamie Diamond,
peter Costello, are notsuggesting that's the case and
that the RBA and the FederalReserve in the US will break
markets if they have to get theinflation story under control.
But one thing that everybodydoes seem to have discounted at
the moment is there will befurther rate hikes.
Speaker 3 (06:39):
So, given the scenario that we are in right
now and the cost of livingpressure that people are under,
seems to me that it's fairlyreasonable.
To say, though, that if the RBAdecide not to cut rates anytime
soon, that may as well be asgood as a rate rise in many
cases for a lot of people thatare living potentially on the
edge of the mortgage cliff andare facing real financial stress
(06:59):
, time is their rate riseeffectively, in my mind anyway.
Is that reasonable?
Speaker 1 (07:04):
How I think an economist would phrase it, is
that the current interest ratesetting is restrictive at its
current level to clamp down onaggressive speculation in the
property market and and andoverspending in the economy.
Speaker 3 (07:20):
Before we wrap up this, this part of the
conversation, I'm interested toget a sense from you, given that
there is a lot of talk aboutthe strength in the economy
still there's, there's, you know, sticky inflation, but there's
certainly money out there in theproperty sector how you finding
conversations are on the groundwith buyers at the properties
that you are selling, in termsof what kind of decisions
they're making, what kind ofstress they might be under and
(07:43):
how position they are toactually, you know, act on
property at the moment.
Speaker 1 (07:46):
Well, sydney house prices for the last 12 months to
the beginning of March are up11.7% for the year on core
logics numbers, and over thesame 12 month period, apartments
were up 7.8%.
So home buyers have got a lotof confidence in the Sydney
property market, particularlywith the immigration story
(08:06):
creating additional demand onessentially no new supply.
So there is confidence amongsthome buyers that if I buy a
property and I need to sell itfor whatever reason whether it's
a change of plans, a jobtransfer, or I can't afford the
property there'll always besomeone there that can take the
property off my hands.
Because, let's face it, theproperty market had a, you know,
(08:28):
a fairly sharp downturn afterthe boom, that downturn being in
2022.
But it's bounced back really,really strongly in the last 12
months and whilst the market hada sluggish start to 2024, the
transaction rate is actuallyfairly strong at the moment,
particularly given we're seeingvolume listing volumes up 30%
(08:49):
this year on the same periodlast year.
So there's a lot of people outthere buying real estate at the
moment?
Speaker 3 (08:54):
yeah, there certainly is, and, if I could sort of
bring it all together in a bitof a summary, I view this as an
interesting time in the marketbecause we do have multiple
factors at play.
But, as you say, we've also gotan environment where we may see
lending Titan.
We may see changes to, perhapsthe, the way investment loans
are delivered out and the accessto money for people who are
(09:17):
looking at potentially investing, but that would only be in
unison with rate cuts.
Yeah, of course, of course, butto me it's it's a potential
change to the, thebiodemographic out there, and
hopefully we may see a bit of aredistribution of owner occupies
in the market to help offsetsome of the you know, 680 or you
know maybe 700,000 new peoplethat have come into the country
(09:37):
this year alone.
Speaker 1 (09:39):
Yeah.
Well, most of those people dostart off or begin life in the
rental market.
As we've previously discussed,australia had more millionaires
move to the country than anyother country in the world last
year.
That was at a time that ourcurrency is fairly depressed.
So when you've had moremillionaires move to your
country than anywhere else inthe world and your currency is
(10:01):
depressed, it's unsurprisingthat those new entrants into the
economy are going to makethemselves felt in the property
market, which is exactly what'shappened in the last 12 months.
And they've made their presencefelt, that's for sure.
How sustainable that is willdepend on where interest rates
go from here, how buy confidenceperforms and how the economy
(10:23):
performs.
And that's why I said earlierin the year that I don't think
the RBA can be one of the firstcentral banks to cut rates,
because if they do, they'll sendthe currency lower, which will
fuel overseas money a lot moreat a time that we actually don't
need anymore overseas moneybuying our prime assets
underneath our nose.
Speaker 3 (10:43):
Absolutely, and as you mentioned previously, peter,
we've also still got some ofthe lowest one of the lowest
cash rates in the world, sowe're actually not sitting as an
outlier, at the top of the pilehere and needing to come back
into line.
I wanted to shift theconversation a little bit
towards understanding thelisting cycle, and we've talked
very briefly in the past abouttrends and seasons and the
(11:03):
cyclical nature of real estate.
But given we're talking about aperiod with increased listing
volumes, I thought it might begood just to get a very quick
recap on what the primaryseasons or cycles are in real
estate, particularly in Sydney,and what you think, or how you
think, they're going to play outfor the rest of this year
anyway.
Speaker 1 (11:22):
Well, there tends to be five unofficial cycles here,
and the first is the new yearlistings, which is where we're
at at the moment.
That's the Australia dataEaster listing cycle and that's
always a particularly strong one.
The new year listing cycle isprobably, in terms of volume,
second highest to spring.
There's no doubt that this newyear listing cycle is higher
(11:42):
than the same period last year,as discussed, by about 30% more
listings on the market this year.
Once we get through Easter,which falls over the end of
March and the beginning of Aprilthis year, we come into what we
call the post Easter autumnmarket, where people do see
winter coming and say, hey, myhouse doesn't present so well
(12:03):
over the winter.
The weather is very pleasant inSydney over autumn, as we know,
so let's get a sale afterEaster and before the winter
chill sets in and the gardenlooks depressed.
So that's another good listingcycle.
Probably the flat spot forlistings not sales necessarily,
but the flat spot for newlistings is the winter market.
(12:24):
As we know, there's a tendencyfor vendors to avoid that time
of year.
The funny thing is is becauselistings tighten so much over
the winter, that can create somestrength in the market because
buyers find themselves competingfor less stock than what they
normally would be.
Obviously, coming out of thewinter we hit the spring market,
(12:45):
which is most sellerspreference.
We find each year thatclearance rates drop and days on
markets blow out during springbecause too much stock comes to
market together.
And then there's the fifthunofficial cycle in the market
and that's what we call thepre-Christmas market, where
people look at the calendar inearly November, mid-november,
(13:07):
and say, hey, instead of sellingearly next year, I think I'd
rather wrap this sale up beforeChristmas.
Call a couple of agents and seeif they've got any buys on
their books that are, by this,leading into Christmas.
And the pre-Christmas marketsees more transactions than a
lot of people imagine.
People think the propertymarket sort of finishes up in
the first week of December, butagents will continue selling
(13:30):
properties right up intoChristmas Eve, and one of our
agents last year actually sold aproperty between Christmas and
New Year Eve, just to show youthat if there's a willing seller
and there's a willing buyer, aproperty can happen at any time
of the year.
Speaker 3 (13:43):
There's always a deal that can be done.
I'm interested to get yourthoughts.
Given the increased listingvolumes we have seen to start
2024, I'm really interested toget a sense of what you think is
going to play out in the winter, which is typically, as you've
just said, a lower listingperiod, and also what's gonna
happen in the spring, given as,I say, that we have such a
strong volume of properties onthe market at the moment.
Speaker 1 (14:05):
Yeah, well, look, there seems to be about 1300
properties going to auctionaround Sydney each weekend at
the moment, which parallels withthe average of 800 a week.
For this time last year you gotit somewhere in the vicinity of
500 extra properties a weekgoing to market at the moment
Now.
Is that seller demand that'scome forward because there's
(14:28):
some interest rate pressure, orthey put the decision off last
year and they've made thedecision now.
No one would really know whythe stock levels are truly so
much more elevated this autumnthan what they were last year.
I think in winter it willfollow a seasonal trend where
stock will tighten.
Buyers will have less choice.
The spring market's a little bitmore difficult to assess this
(14:51):
year because if there are goingto be rate cuts, it's predicted
that those rate cuts willprobably flow somewhere from
August through to Christmas andif there is easing of interest
rates, that will give somepeople that who might otherwise
come to market with theirlistings a little bit more
runway.
So I think the listing flow isgoing to be in sync with what
(15:15):
interest rates do or don't do,and there's no doubt that
there's not one reason why stocklevels are so elevated to begin
this year.
But one of the manycontributing factors is that
November rate rise from latelast year.
Speaker 3 (15:28):
So, given that the topic of this little section is
timing the sale, peter, I'mgoing to put you on the spot.
If you had to sell your housein 2024, I'm talking about you
personally when, this year, fromnow till December, would you
think is probably the best timefor you to maximise your
campaign result but also reducethe amount of time on market?
Speaker 1 (15:50):
Well, history will only tell us what is the best
time of year to have sold in acalendar year when we look back
on December 31.
But I've never been a fan ofspring selling.
I think I've been pretty.
It's not that you can't get agood price in spring
individually, but as a realestate agent over a long time I
(16:10):
have always felt that spring wasan overrated selling season.
If I had a home that was not,in my personal view, presenting
really poorly and at its worstin winter, I'd be comfortable
with a winter sale.
But in saying that there isreasonable confidence in the
market now.
So I think a post-easter saleand probably somewhere after the
(16:34):
school holidays in April iswhen I'd look to go.
Speaker 3 (16:37):
Not bad advice at all , Peter.
As we move to wrap up today, Iwould love to just get around
and do our usual market wrap.
You mentioned 1,300 propertieswent under the hammer or went to
sale this week.
Can you give me a sense of whatthe clearance rates have looked
like and how they do comparewith last week and this time
last year?
Speaker 1 (16:57):
Last week they were 56%.
On the weekend just gone theywere 54%, from around 1,300
auctions in both weekends.
So yeah, volumes are holdingsteady and clearance rates are
holding steady, so I thinkthat's a pretty good result.
Speaker 3 (17:13):
Yeah, it sounds.
I can't remember exact figures,but I think 54% to 55% was
roughly what we had last week aswell.
So it seems to me like there isa pretty consistent number of
listings and sales occurringweek on week at the moment.
Speaker 1 (17:26):
Yeah, and what's interesting is that more sold
under the hammer last weekendthan sold prior.
That's the first time we'veseen that in probably a month
actually.
Speaker 3 (17:35):
I was going to say maybe the first time this year.
I also noticed in REA's data.
They talked about how I thinkit was 1,800 properties went to
sale last week not at auction,which still says to me that if
they're closing out roughly1,300 going to auction and 1,800
not, then still there is.
One there's a lot of strengthin the market, but two, there's
(17:56):
also a lot of people who areopting not to go to the public
route for their sale.
Would that be fair?
Speaker 1 (18:01):
Oh, that's very fair.
Negotiated transactions havealways outnumbered auction sales
.
But auction sales tend to drawthe most publicity, which is why
they get spoken about the most.
They have higher advertisingcampaigns.
They're a transparent streettheatre, if you like, where
people can turn up and watch it,so that's why they draw a lot
(18:21):
more commentary.
But yeah, if you're a pure dataanalyst and you're saying, well
, how do most people choose totransact or end up transacting
on their primary assets in theproperty market?
It is by negotiation.
Speaker 3 (18:35):
Certainly lots to digest this week.
Peter, I really thank you forcoming in and taking the time to
talk with us.
Speaker 1 (18:41):
Thanks, kieran, great to see you.
Speaker 3 (18:42):
Thanks to everyone for listening to Current Market
Insights.
We look forward to talking withyou next time.
Speaker 2 (18:46):
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 with me again this week is
Mr Peter O'Malley.
Peter, good evening.
Speaker 1 (00:38):
G'day.
Speaker 3 (00:38):
Kieran.
Great to see you.
Great to see you, Peter.
I want to kick off this weekjust talking about former RBA.
Governor Low has made headlinesagain I saw today.
He's got a new job and hethought at the same time you
might talk a bit about what'shappening in the Australian
economy.
Did you get a chance to have alook at what he said and any
sense of what that means for us?
Speaker 1 (00:59):
Yeah, as reported by the Herald, former Reserve Bank
Governor Phillip Low has joinedthe chorus of voices warning
that stubborn inflation couldlead to interest rates staying
higher for longer than manyexpect.
World's most famous banker,jamie Diamond, is in Sydney this
week, kieran he has had asimilar message both for US
(01:20):
interest rates and Australianinterest rates, and Peter
Costello was in the news thisweek as well, and he said that
equity markets seem to havebaked in interest rate cuts
already and markets may have runahead of themselves.
And what if the forecast ratecuts don't happen in the fashion
that the markets haveanticipated?
We could be headed for a bit ofa correction there.
(01:41):
So that was one of the pointsthat we put in our January
newsletter is there was such abelief that interest rates would
be forthcoming that it would beinteresting to see if buyers,
both in equity markets andproperty markets, bake those
rate cut expectations into theirbehaviour.
There's many economies fallinginto recession around the world
(02:02):
and their stock marketsincluding Australia's, which is
not in recession is hittingall-time highs.
So that would suggest that themarkets front-running the
interest rate cuts and drivingstock markets to all-time highs.
And property markets aren't faroff it either, and there are
some record prices happeningaround the city in the property
market and they tend to be atthe higher price points, as
(02:25):
we've previously discussed.
But there's no doubt that manypeople are acting as their rate
cuts are a given.
Speaker 3 (02:31):
So we touched on maybe three or four weeks ago.
I mentioned that one of themajor banks had already forecast
some rate cuts into theirdecision making and in fact had
brought down fixed rates in linewith where they thought rates
would go.
Off the back of these comments,particularly from Jamie Dimon,
who you know with JPMorgan, runsa huge bank in the US and is
(02:51):
obviously at the forefront ofthe financial markets and their
impact on property in particular, do you think that we are
likely to see the RBA respondwith rate changes sooner than we
had initially predicted?
Speaker 1 (03:05):
I personally don't believe.
So I think that the economy isstill ticking over.
Unfortunately, there's manypeople that are adversely
affected by the current ratesetting.
But I think if you look at theoverall economy and where the
inflation rate's at, I stillthink it's a bit too high for
comfort and if they did cutrates too soon they could cause
(03:26):
another inflationary outbreak.
I think that's the fear thatall central banks would have.
A great point that was made thisweek by a gentleman by the name
of Cameron Cusher who's aneconomist at realestatecom.
He put out there on socialmedia what are the chances that
as the RBA cuts rates, thatmacro-prudential policies are
(03:47):
tightened further if propertyprices continue to rise.
So what Cusher's suggestingthere is that when the RBA does
cut rates, they want those ratecuts to flow through to the pain
areas of the economy.
What they won't want to seethose rate cuts do when they do
come is stimulate propertyprices higher at a time we don't
(04:10):
need higher property prices.
So they may actually introducetighter lending standards, just
manufacturing them to ensurethat they keep the property
markets subdued.
Now nobody knows if that's whatwill happen later in the year,
but I think it's a really,really good point to raise at
this stage of the cycle.
And it's such a good point toraise because the RBA and APRA
(04:32):
have got form for acting inunison like this in the past.
Speaker 3 (04:36):
So a couple of things to touch on there.
Cameron Cush's comment aboutthe lending changes or potential
lending tightening We've talkedat length before about the
serviceability buffer being theprimary tool that the banks have
.
Is that likely to be an avenueof attack should they decide to
actually regulate the lendingsector a little bit further?
Speaker 1 (04:55):
That is one way that they've attacked it in the past
here, and another way they'veattacked it is that they've
forced the banks to charge ahigher interest rate for
investment loans than home loans, for example.
Essentially, when you'relooking at policy tightening,
you look at where the market ismost exuberant and you just
invent a policy tightening ofsome description in order to
(05:16):
keep the market subdued fromoverheating for its own good.
So I wouldn't speculate at thisstage what the exact change may
be, but look out for APRAacting in unison with rate cuts
in the RBA later in the year andcoming up with a tighter
monetary policy.
Speaker 3 (05:33):
Yeah, good point, peter.
You also mentioned there thatone of the things they don't
want to happen, obviously, is tosee a surge in property prices
when rates do come down.
What do you think will happen,though, if the RBA say look, in
fact inflation is so much stickythan we thought it might be,
and they are forced to makeanother rate rise before we
(05:53):
finish out 2024?
Speaker 1 (05:55):
That'll be very painful for a lot of people.
I guess it can never be ruledout, but it doesn't seem to be
on anyone's radar, depending onwho you talk to.
There is a suggestion thatinflation may win the day here,
where central banks are forcedto cut rates before they've won
the inflation battle, meaningthat inflation will potentially
stay higher for longer and morepersistent.
(06:17):
Hardheads in this space, likePhilip Lowe, jamie Diamond,
peter Costello, are notsuggesting that's the case and
that the RBA and the FederalReserve in the US will break
markets if they have to get theinflation story under control.
But one thing that everybodydoes seem to have discounted at
the moment is there will befurther rate hikes.
Speaker 3 (06:39):
So, given the scenario that we are in right
now and the cost of livingpressure that people are under,
seems to me that it's fairlyreasonable.
To say, though, that if the RBAdecide not to cut rates anytime
soon, that may as well be asgood as a rate rise in many
cases for a lot of people thatare living potentially on the
edge of the mortgage cliff andare facing real financial stress
(06:59):
, time is their rate riseeffectively, in my mind anyway.
Is that reasonable?
Speaker 1 (07:04):
How I think an economist would phrase it, is
that the current interest ratesetting is restrictive at its
current level to clamp down onaggressive speculation in the
property market and and andoverspending in the economy.
Speaker 3 (07:20):
Before we wrap up this, this part of the
conversation, I'm interested toget a sense from you, given that
there is a lot of talk aboutthe strength in the economy
still there's, there's, you know, sticky inflation, but there's
certainly money out there in theproperty sector how you finding
conversations are on the groundwith buyers at the properties
that you are selling, in termsof what kind of decisions
they're making, what kind ofstress they might be under and
(07:43):
how position they are toactually, you know, act on
property at the moment.
Speaker 1 (07:46):
Well, sydney house prices for the last 12 months to
the beginning of March are up11.7% for the year on core
logics numbers, and over thesame 12 month period, apartments
were up 7.8%.
So home buyers have got a lotof confidence in the Sydney
property market, particularlywith the immigration story
(08:06):
creating additional demand onessentially no new supply.
So there is confidence amongsthome buyers that if I buy a
property and I need to sell itfor whatever reason whether it's
a change of plans, a jobtransfer, or I can't afford the
property there'll always besomeone there that can take the
property off my hands.
Because, let's face it, theproperty market had a, you know,
(08:28):
a fairly sharp downturn afterthe boom, that downturn being in
2022.
But it's bounced back really,really strongly in the last 12
months and whilst the market hada sluggish start to 2024, the
transaction rate is actuallyfairly strong at the moment,
particularly given we're seeingvolume listing volumes up 30%
(08:49):
this year on the same periodlast year.
So there's a lot of people outthere buying real estate at the
moment?
Speaker 3 (08:54):
yeah, there certainly is, and, if I could sort of
bring it all together in a bitof a summary, I view this as an
interesting time in the marketbecause we do have multiple
factors at play.
But, as you say, we've also gotan environment where we may see
lending Titan.
We may see changes to, perhapsthe, the way investment loans
are delivered out and the accessto money for people who are
(09:17):
looking at potentially investing, but that would only be in
unison with rate cuts.
Yeah, of course, of course, butto me it's it's a potential
change to the, thebiodemographic out there, and
hopefully we may see a bit of aredistribution of owner occupies
in the market to help offsetsome of the you know, 680 or you
know maybe 700,000 new peoplethat have come into the country
(09:37):
this year alone.
Speaker 1 (09:39):
Yeah.
Well, most of those people dostart off or begin life in the
rental market.
As we've previously discussed,australia had more millionaires
move to the country than anyother country in the world last
year.
That was at a time that ourcurrency is fairly depressed.
So when you've had moremillionaires move to your
country than anywhere else inthe world and your currency is
(10:01):
depressed, it's unsurprisingthat those new entrants into the
economy are going to makethemselves felt in the property
market, which is exactly what'shappened in the last 12 months.
And they've made their presencefelt, that's for sure.
How sustainable that is willdepend on where interest rates
go from here, how buy confidenceperforms and how the economy
(10:23):
performs.
And that's why I said earlierin the year that I don't think
the RBA can be one of the firstcentral banks to cut rates,
because if they do, they'll sendthe currency lower, which will
fuel overseas money a lot moreat a time that we actually don't
need anymore overseas moneybuying our prime assets
underneath our nose.
Speaker 3 (10:43):
Absolutely, and as you mentioned previously, peter,
we've also still got some ofthe lowest one of the lowest
cash rates in the world, sowe're actually not sitting as an
outlier, at the top of the pilehere and needing to come back
into line.
I wanted to shift theconversation a little bit
towards understanding thelisting cycle, and we've talked
very briefly in the past abouttrends and seasons and the
(11:03):
cyclical nature of real estate.
But given we're talking about aperiod with increased listing
volumes, I thought it might begood just to get a very quick
recap on what the primaryseasons or cycles are in real
estate, particularly in Sydney,and what you think, or how you
think, they're going to play outfor the rest of this year
anyway.
Speaker 1 (11:22):
Well, there tends to be five unofficial cycles here,
and the first is the new yearlistings, which is where we're
at at the moment.
That's the Australia dataEaster listing cycle and that's
always a particularly strong one.
The new year listing cycle isprobably, in terms of volume,
second highest to spring.
There's no doubt that this newyear listing cycle is higher
(11:42):
than the same period last year,as discussed, by about 30% more
listings on the market this year.
Once we get through Easter,which falls over the end of
March and the beginning of Aprilthis year, we come into what we
call the post Easter autumnmarket, where people do see
winter coming and say, hey, myhouse doesn't present so well
(12:03):
over the winter.
The weather is very pleasant inSydney over autumn, as we know,
so let's get a sale afterEaster and before the winter
chill sets in and the gardenlooks depressed.
So that's another good listingcycle.
Probably the flat spot forlistings not sales necessarily,
but the flat spot for newlistings is the winter market.
(12:24):
As we know, there's a tendencyfor vendors to avoid that time
of year.
The funny thing is is becauselistings tighten so much over
the winter, that can create somestrength in the market because
buyers find themselves competingfor less stock than what they
normally would be.
Obviously, coming out of thewinter we hit the spring market,
(12:45):
which is most sellerspreference.
We find each year thatclearance rates drop and days on
markets blow out during springbecause too much stock comes to
market together.
And then there's the fifthunofficial cycle in the market
and that's what we call thepre-Christmas market, where
people look at the calendar inearly November, mid-november,
(13:07):
and say, hey, instead of sellingearly next year, I think I'd
rather wrap this sale up beforeChristmas.
Call a couple of agents and seeif they've got any buys on
their books that are, by this,leading into Christmas.
And the pre-Christmas marketsees more transactions than a
lot of people imagine.
People think the propertymarket sort of finishes up in
the first week of December, butagents will continue selling
(13:30):
properties right up intoChristmas Eve, and one of our
agents last year actually sold aproperty between Christmas and
New Year Eve, just to show youthat if there's a willing seller
and there's a willing buyer, aproperty can happen at any time
of the year.
Speaker 3 (13:43):
There's always a deal that can be done.
I'm interested to get yourthoughts.
Given the increased listingvolumes we have seen to start
2024, I'm really interested toget a sense of what you think is
going to play out in the winter, which is typically, as you've
just said, a lower listingperiod, and also what's gonna
happen in the spring, given as,I say, that we have such a
strong volume of properties onthe market at the moment.
Speaker 1 (14:05):
Yeah, well, look, there seems to be about 1300
properties going to auctionaround Sydney each weekend at
the moment, which parallels withthe average of 800 a week.
For this time last year you gotit somewhere in the vicinity of
500 extra properties a weekgoing to market at the moment
Now.
Is that seller demand that'scome forward because there's
(14:28):
some interest rate pressure, orthey put the decision off last
year and they've made thedecision now.
No one would really know whythe stock levels are truly so
much more elevated this autumnthan what they were last year.
I think in winter it willfollow a seasonal trend where
stock will tighten.
Buyers will have less choice.
The spring market's a little bitmore difficult to assess this
(14:51):
year because if there are goingto be rate cuts, it's predicted
that those rate cuts willprobably flow somewhere from
August through to Christmas andif there is easing of interest
rates, that will give somepeople that who might otherwise
come to market with theirlistings a little bit more
runway.
So I think the listing flow isgoing to be in sync with what
(15:15):
interest rates do or don't do,and there's no doubt that
there's not one reason why stocklevels are so elevated to begin
this year.
But one of the manycontributing factors is that
November rate rise from latelast year.
Speaker 3 (15:28):
So, given that the topic of this little section is
timing the sale, peter, I'mgoing to put you on the spot.
If you had to sell your housein 2024, I'm talking about you
personally when, this year, fromnow till December, would you
think is probably the best timefor you to maximise your
campaign result but also reducethe amount of time on market?
Speaker 1 (15:50):
Well, history will only tell us what is the best
time of year to have sold in acalendar year when we look back
on December 31.
But I've never been a fan ofspring selling.
I think I've been pretty.
It's not that you can't get agood price in spring
individually, but as a realestate agent over a long time I
(16:10):
have always felt that spring wasan overrated selling season.
If I had a home that was not,in my personal view, presenting
really poorly and at its worstin winter, I'd be comfortable
with a winter sale.
But in saying that there isreasonable confidence in the
market now.
So I think a post-easter saleand probably somewhere after the
(16:34):
school holidays in April iswhen I'd look to go.
Speaker 3 (16:37):
Not bad advice at all , Peter.
As we move to wrap up today, Iwould love to just get around
and do our usual market wrap.
You mentioned 1,300 propertieswent under the hammer or went to
sale this week.
Can you give me a sense of whatthe clearance rates have looked
like and how they do comparewith last week and this time
last year?
Speaker 1 (16:57):
Last week they were 56%.
On the weekend just gone theywere 54%, from around 1,300
auctions in both weekends.
So yeah, volumes are holdingsteady and clearance rates are
holding steady, so I thinkthat's a pretty good result.
Speaker 3 (17:13):
Yeah, it sounds.
I can't remember exact figures,but I think 54% to 55% was
roughly what we had last week aswell.
So it seems to me like there isa pretty consistent number of
listings and sales occurringweek on week at the moment.
Speaker 1 (17:26):
Yeah, and what's interesting is that more sold
under the hammer last weekendthan sold prior.
That's the first time we'veseen that in probably a month
actually.
Speaker 3 (17:35):
I was going to say maybe the first time this year.
I also noticed in REA's data.
They talked about how I thinkit was 1,800 properties went to
sale last week not at auction,which still says to me that if
they're closing out roughly1,300 going to auction and 1,800
not, then still there is.
One there's a lot of strengthin the market, but two, there's
(17:56):
also a lot of people who areopting not to go to the public
route for their sale.
Would that be fair?
Speaker 1 (18:01):
Oh, that's very fair.
Negotiated transactions havealways outnumbered auction sales
.
But auction sales tend to drawthe most publicity, which is why
they get spoken about the most.
They have higher advertisingcampaigns.
They're a transparent streettheatre, if you like, where
people can turn up and watch it,so that's why they draw a lot
(18:21):
more commentary.
But yeah, if you're a pure dataanalyst and you're saying, well
, how do most people choose totransact or end up transacting
on their primary assets in theproperty market?
It is by negotiation.
Speaker 3 (18:35):
Certainly lots to digest this week.
Peter, I really thank you forcoming in and taking the time to
talk with us.
Speaker 1 (18:41):
Thanks, kieran, great to see you.
Speaker 3 (18:42):
Thanks to everyone for listening to Current Market
Insights.
We look forward to talking withyou next time.
Speaker 2 (18:46):
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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