January 15, 2025 • 23 mins
Hosts Ciaran O'Brien and Peter O'Malley explore the potential ripple effects of a Trump presidency on the Australian economy and its implications for Sydney's 2025 property market. Peter analyses why the market is off to a surprisingly strong start despite recent downturns, with interest rate cuts speculated amidst falling inflation, low unemployment, and a volatile Australian dollar.
We also discuss January’s bustling open houses, Peter Dutton’s proposal to use superannuation for home purchases, and insights from experts like Louis Christopher and Shane Oliver on economic trends, immigration, and housing demand.
As discussed throughout the episode, to access the Harris Partners Real Estate Report we reference, read your copy here.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Mark as Played
Transcript
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 son
Congratulations.
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 another edition of Current
Market Insights.
I'm your host, kieran O'Brien,and with me is my good friend in
2025, mr Peter O'Malley.
Peter, hello, happy.
Speaker 1 (00:37):
New Year, kieran, great to see you.
Speaker 3 (00:39):
Really happy New Year to you, peter, and very much so
to our listeners who are tuningback into the podcast in the
new year.
I know that on the show lastweek, pete, there was a great
episode of yourself with LouisChristopher from SQM Research
kicking us off for 2025 with theTalking Property Edition, and I
do know that Louis went intosome incredible depth about his
(01:01):
predictions for the year andwhat things are looking like.
I also know, and many of oursubscribers and listeners will
also know, that in your monthlynewsletter to kick off the year,
you've also done a bit of amarket preview for 2025.
So I thought on today's episode, we might step through what
Sydney property looks like in2025, the year ahead in your
(01:23):
experience, and also just get asense of how the year's actually
started, because we have beenback on the hustings now for a
little bit, despite many peoplenot being back at work yet.
Speaker 1 (01:33):
Yeah, thanks, kieran.
Look, 2025 will begin with aweek leading from 2024.
Corelogic's numbers up toDecember 31 show that Sydney
property did in fact fall in thelast quarter of 2024.
Now people will jump to alogical conclusion that that'll
continue in 2025.
(01:53):
But the narrative has changedagain over Christmas around
interest rates, kieran, just asit did the year before, where we
came out in the new year in2024 and everyone was expecting
rate cuts and the market behavedaccordingly and actually had a
really strong start to 2024.
And what we're seeing this yearis again over the summer.
(02:14):
The narrative around interestrates has changed.
Where an imminent rate cut isexpected, most retail banks and
commentators and the moneymarkets have all pulled their
expectations of the next ratecut in from sort of the middle
of the year or May into Februaryand we have seen not much
(02:36):
happen to begin the year so far.
We have put two or threeproperties under contract, but
inspections have been wellattended.
We don't know if thoseinspections have been well
attended because we've hadproperties open at a time where
most of the market is shut.
We are expecting a lot of stockto come to market over the next
month, but the early signs inJanuary 2025 are actually
(02:59):
stronger than how the marketfinished in December 2024.
Speaker 3 (03:04):
I must admit I'm not entirely surprised.
I think certainly my experience.
You know people come into a newyear with optimism that they
didn't necessarily have the yearbefore it's.
You know everyone setsthemselves resolutions because
we love this idea of renewal anda brighter year.
I've also heard some chattermyself and read some articles
talking about the interest ratechanges and I think for our
listeners, probably the mostinteresting part of today's
(03:28):
topic really is people want toknow when it's going to happen.
The RBA set to meet again onthe 18th of February.
Based on the chatter and basedon some of the comments from not
just the money commentators butthe money markets and the big
banks, do you think that we arelikely to see Michelle Bullock
follow that lead and actuallymake the first cut in February?
Speaker 1 (03:49):
I personally think that they will.
Okay, yeah, there's two piecesof data or elements to this
equation that will suggest theywon't.
One is the low unemploymentnumber, which on last reading
was 3.9%.
So the labour market is tighterthan the RBA would like if they
were to start cutting rates.
(04:11):
And then the other point is theAustralian dollar has crashed
and it's testing.
It's on the verge of testing 60cents, which is quite
remarkable.
As we speak today, I think it's0.614 against the US, but
that's really really soft forthe Australian dollar.
They're the two reasons why theRBA won't cut.
Underlying inflation is justabout to move within its target
(04:35):
band and the headline inflationnumber is well inside its target
rate.
Now the quarterly inflationnumber is due on January 29, and
most people expect that thatwill fall within the RBA's
target band setting up a ratecut in February.
Speaker 3 (04:55):
We talked at the end of last year about the impact of
an incoming Trump presidency.
The Australian dollar is havinga tough time, the stock market
is having a tough time,unemployment is low and
inflation, both underlying andheadline, is coming back.
Do you think that there isstill the likelihood of a risk
to the rate setting based onTrump's inauguration, which
(05:19):
really is not that far away?
Speaker 1 (05:21):
Look, you can't really respond to anything that
Trump says.
You can only respond to whatTrump does because he says so
many wild and conflicting thingswhen it comes to the Australian
dollar, which I think is a bigreason why the RBA may not be
able to go.
There's a couple of pointsthere.
The first is there's talk thatthe RBA could start buying the
(05:43):
Australian dollar to prop thecurrency up.
That'd be an interesting playif the RBA intervened, buying
the Australian dollar to propthe currency up.
That'd be an interesting playif the RBA intervened in the
market to that degree.
The other thing, kieran, is thatmoney markets tend to front run
and all markets tend to frontrun policy.
So if the money markets andthis has not really been
discussed in the media to date,but if the money markets have
(06:04):
formed the view that the RBAwill have to cut due to
households in Australia runningcash flow negative which we know
that many households are andthe pressure on the economy, the
money markets could have got infront of the RBA's impending
rate cuts and driven theAustralian dollar down for that
reason, not just China comingoff.
(06:24):
So the popular narrative at themoment is that the Australian
dollar down for that reason, notjust China coming off.
So the popular narrative at themoment is that the Australian
dollar's off because the Chineseeconomy's off, which it is, and
that's going to impact us.
But iron ore's still over 100US a tonne, so that's the
primary export that Australiaenjoys at the moment.
But the Australian dollar iscrashing.
Has it gone too far?
If the RBA believe it have,they'll have no problems
(06:45):
intervening in the market andbuying it.
A lot of people have quiterightly pointed out that if
Australian dollar does stay low,that will be inflationary in
and of itself.
So there's a few dynamics toplay out here.
Speaker 3 (06:58):
Yeah, certainly.
I think anyone who is payingattention will be watching with
abated breath for what doeshappen in February.
I know certainly everyone wespeak to, and myself included,
is hoping for a bit of relief,that's for sure.
Speaker 1 (07:11):
I felt all along the RBA were talking tougher than
they were going to actually act.
They were jawboning the marketinto place and that's their job.
To do so is to manage theeconomy and get it to a point
where it doesn't derail.
But you just get the feeling youdon't need to see the data to
know that people are pullingback on expenditure.
Whether you see it socially,whether you see it at
(07:31):
restaurants, whether you see itdown the shops, whether you
heard about where people didn'tdidn't go on their Christmas
holidays, you just feel rightacross the board that that
certainly coming out of theOctober long weekend, that there
was a shift there heading intoChristmas.
People were playing it tightand the data that we've already
got, even the Black Friday salesShane Oliver put a a tremendous
(07:53):
post out when the Black Fridaysales came out saying anyone
who's talking about you knowBlack Friday sales and Christmas
sales, you know being 2.7billion, is not really paying
attention because that'sactually lower year on year than
it was the year before and italso comes at a time where more
people have entered the country,so you've got more people
(08:14):
spending about the same or alittle bit less, suggesting that
consumer sentiment is well off.
Speaker 3 (08:20):
Yeah, it's certainly been my observation.
I guess the other reallyimportant factor then, just
before we talk a little bitabout what has happened in your,
with your you know yourobservation so far, since we've
come back to to uh trading, wehave an impending election.
It could come not long afterthese announcements or it could
come a couple of months later.
(08:40):
Do you think that, uh, you know, we're likely to see any large
or impactful labor party inparticular, or liberal party
announcements that may have anyinfluence on the property market
and or the rba's decisionmaking, sort of tree?
Speaker 1 (08:56):
oh, look.
Well, just on the first point,um, I I believe the the labor
party will call an electionfairly immediately after the
February rate cut.
That's my prediction,especially if it's a cut.
Yeah, yeah, yeah, yeah, that'swhat I'm saying.
I believe there'll be a cut inFebruary.
I'm not saying it's a faitaccompli.
I accept that if they don't cut, it'll be because of the
(09:18):
unemployment rate is so low andor what has happened with the
Australian dollar.
But outside of that, I believewe are absolutely headed for a
cut in February.
I'll put my name to that.
And then I believe that theLabor Party will very, very
quickly call an election.
Speaker 3 (09:33):
Yeah, oh, look, it makes sense politically.
You know it's come off the backof some relief.
Finally some good news.
Speaker 1 (09:38):
It was a tough back half of the year for the
government last year as the costof living really bit and let's
face it, the other thing we'vegot to keep in mind about a rate
cut is everyone thinks a ratecut equals a rising property
market and, as I say in thenewsletter that you referenced,
kieran, you might see a reliefrally when the rate cut comes.
That's a distinct possibilityand the government are going to,
(10:00):
in my view, if there is a ratecut, go straight to an election
because they want people votingwhen that relief rally is is
occurring.
But fundamentally, um andyou're seeing this discussion
happen in the media at themoment about people have really
locked on to the point that wetouched on six months ago is the
median house price in sydney is1.45 million.
(10:21):
When you start playing with acalculator about average
earnings versus the median houseprice, it doesn't stack up, and
this is a real point in themedia that everyone's talking
about at the moment andeveryone's trying to come up
with a solution.
I'll tell you there's only onesolution to that equation and
that's falling house prices ohlook, it's incredibly topical,
you know.
Speaker 3 (10:40):
You've only got to look at the other media at the
moment talking about all thepsychiatrists walking off the
job in in New South Walesbecause of the the amount of pay
they get, and at the same timeyou've got the nurses fighting
for a pay rise and I had thesame discussion with someone
else.
How do those nurses live withina stone's throw of any of the
hospitals they need to work at?
It is so expensive to beanywhere near the infrastructure
(11:01):
.
It really is.
There's a massive disconnect.
Speaker 1 (11:03):
So our advice to vendors this year is if there is
a relief rally after a rate cut, sell into it, because
fundamentally, unless the rbaare going to really go hard with
the rate cuts which I don'tbelieve they are they'll throw a
few in there for a spite.
The fundamental fact thataverage earnings and the median
house price disconnected insydney still remains.
(11:25):
Don't get me wrong.
There are suburbs that will beimmune from the point I'm making
.
I'm making a Sydney-widecomment here and there will be
properties that still set recordprices.
But the mathematics averageearnings or average household
earnings and what it takes tobuy the median house price does
not stack up.
And if you're saying peoplealways ask us, where should I
(11:47):
invest?
Where should I invest, like weknow of some sleeper suburb in
Sydney that's underpriced youknow sitting down in a corner of
the harbour it doesn't workthat way.
If you want to know where toinvest at the moment, probably
the place that represents themost value is Melbourne, because
the state government there haveintroduced measures that have
actively driven property pricesdown and some of them will be
(12:09):
elected the Liberal Partyprobably will be elected at the
next state election promising toroll back the taxation that's
driven the property market down,but if you're an investor and
you're looking for value formoney, australia's most, second
most populous or most populouscity is actually the fifth most
expensive now.
Speaker 3 (12:28):
Yeah, that has been a massive change, and we've
certainly talked about Melbournea lot, so we won't go much
further into that today.
In the interest of movingthings along, though, Pete, I'd
really love to get a sense of.
You know, real estate is one ofthose industries that doesn't
really stop.
You know you have a small breakover Christmas, but really, you
know you're always kind of onthe job.
You have been back at work nowfor a little while.
(12:50):
What's your experience been sofar?
At open homes and talking withvendors and talking with
possible or potential buyers in2025, as opposed to, let's say,
the the rat, you know the finalsix weeks of 2024.
Speaker 1 (13:06):
Look, stock levels are always really, really low in
the first three quarters ofJanuary and whatever stock you
do have tends to get goodinterest and, as I mentioned
earlier, we've bagged a fewsales under competitive bias
situation too.
So vendors constantly tell usthat nothing happens in the
Sydney property market untilFebruary.
But what happens in February isall the listings and all the
(13:29):
agents are back at work.
I was back at work on the 2ndof January and doing open houses
on Thursday the 2nd of Januaryand Saturday the 4th of January
and sales came from bothweekends that we've shown so far
.
And one of my colleagues, ross,was particularly surprised
where, across six open houses onSaturday the 4th of Januaryuary
(13:50):
, he saw 55 buyers yeah, wow,that's so much, you know.
Much busier than I think anyonewould expect, yeah, and and and
one of those properties achieveda price kieran um.
Uh.
That was higher than what itwas offered in um in 2024 yeah,
interesting that, uh, that newyear's optimism certainly
playing a role.
So don't get me wrong, we'reinterested to see how the stock
(14:12):
and how the open houses performwhen all of the agents and all
of the listings are back onmarket, because one of the
things that benefited buyerslate last year was there was too
many listings on market and theauction clearance rate, as we
discussed, you know, failed tocrack 50% since August 2024 into
Christmas.
But, yes, a very, very positivestart in the first two weeks of
(14:34):
the year.
Speaker 3 (14:35):
Yeah, certainly be interesting to see what happens
and, as we say, you know, afterthe likely rate cut there could
be some shifts, one of thethings that I asked before but
you didn't actually necessarilyaddress.
Obviously we expect the LaborParty's going to make an
announcement, if there's a ratecut, to go to the election.
But do you think that in theremaining six to twelve,
(15:00):
fourteen weeks, whatever it maybe, until the election, do you
think there's likely to be anyproperty focused policy or
legislation announced to try andjust temper people's
expectations?
Speaker 1 (15:11):
Let's go to Dutton's speech on the weekend here.
Did you watch that?
Speaker 3 (15:14):
I didn't.
I just saw that he had given aspeech with his plan to become
PM, but I certainly didn't catchit.
Speaker 1 (15:20):
Okay, Well, look as much as you can take out of that
was Dutton sort of drawingbattle lines, if you like to use
Tony Abbott's word, battlelines.
Where he came through withproperty was that people can
start using $50,000 of theirsuperannuation young Australians
(15:41):
to get on the property ladderand ladies that are divorced who
have been divorced later inlife can also access some of
their super to help them get onthe property ladder.
So that's as far as the LiberalParty ventured into housing in
Dutton's first majorpre-election speech.
As we all know, the Labor Partyhave got a very, very
(16:05):
optimistic $1.2 million $1.2million new dwellings target,
which they're well behind therun rate on already.
So Dutton, as you do inopposition, will pin the
government's failures to thewall and highlight that at every
turn.
And a version of what Duttonsuggested on the weekend.
(16:28):
The Liberal Party were tryingto get up late in their term at
the last election, so it's notactually an overly new policy.
If you do go to Dutton's speech, it was very value-driven,
culture-driven about what hesees as the Liberal Party
standing for in 2025, and it waslight on property.
(16:51):
Other than that point aroundsuperannuation, if I'm honest, I
think he's got such a big jobto convince the electorate that
nuclear is the way to go.
And nuclear is obviously lowemissions and it's going to be
so expensive and there's goingto be so much debate around
(17:12):
costings that I don't thinkDutton will open up too many
battlefronts on himself,particularly when the
government's under pressurearound power and electricity and
they're behind in their owntarget for new housing dwellings
.
Speaker 3 (17:26):
He'll he'll leave the pressure on them so property
specific announcements aside,then, one of the other major
things we talked about throughall of last year was the kind of
ancillary effects that areimpacting the property market
most notably is immigration.
Have there been any for ourlisteners?
There's been any newannouncements or any new
(17:47):
positions taken that will impactthe immigration numbers coming
in and as a result, you know,likely impact the availability
of housing supply in sydney.
Speaker 1 (17:56):
They're both going to say they're listening to
australia and there needs to bea sensible discussion and we
need to manage this, and they'reboth going to allow people to
pour through the front door.
Yeah, because australia wouldbe in a recession without the
immigration policy that we'vecurrently got.
Households are in a per capitarecession as it is at the moment
(18:18):
and the only reason the countryis not in a recession is
because of the immigrationpolicy of the day.
And you saw before Christmasthat Dutton backtracked from his
I'm going to cap immigrationimmigration at 160,000 per annum
to.
We've got to have a sensiblediscussion about this, because
someone probably tapped him andsaid hey, pete, let us just show
(18:40):
you some modelling on yourimmigration numbers and what the
economy looks like.
And, as Louis Christopher saidin that Talking Property podcast
last week, christopher said inthat Talking Property podcast
last week no bureaucrat nopolitician wants to have a
recession on their hands.
Speaker 3 (19:03):
Yeah, just got to ask Keating how that went.
It's interesting because itties perfectly back into your
point that Shane Oliver had madethat.
You know, when you look at theBlack Friday sales, et cetera,
if you exclude new entrants, wehave spent exponentially less
than you know.
When you look at the BlackFriday sales, et cetera, if you
exclude new entrants, we havespent exponentially less than
you know any of the forecasts.
Do you spend less thisChristmas?
Oh, absolutely.
I don't think we boughtanything on Black Friday.
I mean, there's no free moneyto do that this time.
Speaker 1 (19:24):
But we consciously cut back because you just got to
.
It's just not the time to beout there with high expenditure.
Speaker 3 (19:32):
That's true.
Look, really good discussiontoday.
Peter, we're going to head towrap up, but I'm going to ask
you a tough question.
Seeing as I finally got you onthe record as committing to one
of your statements around theinterest rate cut, I'm going to
push you even further and askyou to tell our listeners your
prediction of where you thinkthe cash rate will end up.
(19:54):
I'm not talking about, you know, mid-year.
Where do you think we're goingto end up in the long run out of
this, given you know we were atsuch record lows for so long
that we will likely never, evergo back there?
Where do you think?
Speaker 1 (20:06):
is it going to be a middle ground, not as low as
people want?
Yeah, is it going to be amiddle ground scenario?
Let's go to the US.
The US had a couple of ratecuts Kieran, and then all their
numbers are bouncing back up,which are threatening to unleash
inflation again.
If Trump's tariffs do come intobeing, even half of what Trump
has said comes into being,that'll be inflationary.
(20:27):
So there won't be as many ratecuts as people want there to be.
Speaker 3 (20:33):
Okay, so where do we think?
I mean, we're 4.35 now.
Do you think we'll end up inthe twos no, no.
Speaker 1 (20:39):
Two to three cuts.
We won't end up in the twos no.
Speaker 3 (20:47):
The only way we'll end up in the twos is if we go
into a massive financial crisis.
Speaker 1 (20:50):
Okay, so where do you think the 10-year rate will sit
, sort of like 3.7?
Speaker 3 (20:53):
Yeah 3.5, 3.75.
Speaker 1 (20:58):
Yeah, definitely much higher than people would like.
Yeah, that's right.
Yeah, and you're already seeingthis in America at the moment,
where the stock markets are very, very wobbly at the moment
because the US Fed has basicallyflagged we could be done with
rate cuts.
So, in that newsletter thatyou're referencing, the Harris
Partners real estate report, Isay that there's little doubt
the next move in interest ratesin Australia is down.
(21:19):
Everybody seems to accept thatpoint.
Now, yeah yeah, we don't knowwhen it'll be down, but it'll be
down.
So let's talk about the timingof the next cut, where in
America a debate is emerging.
Maybe there's one more cut init, but then after the next cut,
if there is one more cut, whatis the next move after that?
And there's a suggestion notputting a timing on it that the
(21:41):
next move after that could beback up.
Speaker 3 (21:43):
Yeah Well, I certainly.
I suspect Michelle Bullock andthe board don't want to enter a
scenario where they have to flipand flop and try and correct
this course.
They will try and be as smoothas possible.
Yes and no, it's engineer usoff landing right, that was the
idea.
Speaker 1 (21:57):
The purpose of interest rates is to govern this
.
So I don't think the RBA, theirego would not be damaged in
their view if they had to cut acouple of times and then
stimulated it too much.
They have to then put anincrease in 18 months down the
track just to take the edge offit again.
(22:18):
They've got form for that, notunder michelle bullock, but
under glenn stevens.
They did.
If you look, if you look at thepolicy, the interest rate
movements between 2008 and 2012.
There was lots of up and downsin there as the RBA were dealing
with these dynamic factors.
You know, obviously the GFC getrates as low as possible.
(22:38):
Government have put too muchstimulus in.
Slow it down.
Jeez, the rates have hit theeconomy harder than we expected.
Now the stimulus has wound off.
Let's cut back a bit and theymanaged it pretty well through
that period.
Speaker 3 (22:51):
Oh look, certainly I think yeah, they'll be aiming
for a smooth course, but alwaysopen to doing whatever we need
to keep the economy stable.
Speaker 1 (22:58):
The person that will be filthy if there's no rate
cuts in America is Trump becausehe will put maximum pressure on
Jerome Powell for rate cuts.
He wants a highly stimulatedeconomy, and what happens at the
end of his term is not reallyhis concern.
Speaker 3 (23:12):
Yeah, he's not too worried about that.
Look, really really greatdiscussion today.
Peter, good to be back in thechair with you and, you know,
really great report.
If anyone hasn't had a read, Iwill put a copy online for
anyone who wants to access it.
But, as always, if you have anyquestions for us on the podcast
or anything you'd like us toaddress, please reach out.
Get in touch and we will talkabout it for you, as always,
(23:32):
peter, thanks so much for comingin.
Really great chat.
Thanks, kieran, all the bestand thanks to everyone for
listening to Current MarketInsights.
We look forward to speakingwith you next time.
Speaker 2 (23:40):
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 son
Congratulations.
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 another edition of Current
Market Insights.
I'm your host, kieran O'Brien,and with me is my good friend in
2025, mr Peter O'Malley.
Peter, hello, happy.
Speaker 1 (00:37):
New Year, kieran, great to see you.
Speaker 3 (00:39):
Really happy New Year to you, peter, and very much so
to our listeners who are tuningback into the podcast in the
new year.
I know that on the show lastweek, pete, there was a great
episode of yourself with LouisChristopher from SQM Research
kicking us off for 2025 with theTalking Property Edition, and I
do know that Louis went intosome incredible depth about his
(01:01):
predictions for the year andwhat things are looking like.
I also know, and many of oursubscribers and listeners will
also know, that in your monthlynewsletter to kick off the year,
you've also done a bit of amarket preview for 2025.
So I thought on today's episode, we might step through what
Sydney property looks like in2025, the year ahead in your
(01:23):
experience, and also just get asense of how the year's actually
started, because we have beenback on the hustings now for a
little bit, despite many peoplenot being back at work yet.
Speaker 1 (01:33):
Yeah, thanks, kieran.
Look, 2025 will begin with aweek leading from 2024.
Corelogic's numbers up toDecember 31 show that Sydney
property did in fact fall in thelast quarter of 2024.
Now people will jump to alogical conclusion that that'll
continue in 2025.
(01:53):
But the narrative has changedagain over Christmas around
interest rates, kieran, just asit did the year before, where we
came out in the new year in2024 and everyone was expecting
rate cuts and the market behavedaccordingly and actually had a
really strong start to 2024.
And what we're seeing this yearis again over the summer.
(02:14):
The narrative around interestrates has changed.
Where an imminent rate cut isexpected, most retail banks and
commentators and the moneymarkets have all pulled their
expectations of the next ratecut in from sort of the middle
of the year or May into Februaryand we have seen not much
(02:36):
happen to begin the year so far.
We have put two or threeproperties under contract, but
inspections have been wellattended.
We don't know if thoseinspections have been well
attended because we've hadproperties open at a time where
most of the market is shut.
We are expecting a lot of stockto come to market over the next
month, but the early signs inJanuary 2025 are actually
(02:59):
stronger than how the marketfinished in December 2024.
Speaker 3 (03:04):
I must admit I'm not entirely surprised.
I think certainly my experience.
You know people come into a newyear with optimism that they
didn't necessarily have the yearbefore it's.
You know everyone setsthemselves resolutions because
we love this idea of renewal anda brighter year.
I've also heard some chattermyself and read some articles
talking about the interest ratechanges and I think for our
listeners, probably the mostinteresting part of today's
(03:28):
topic really is people want toknow when it's going to happen.
The RBA set to meet again onthe 18th of February.
Based on the chatter and basedon some of the comments from not
just the money commentators butthe money markets and the big
banks, do you think that we arelikely to see Michelle Bullock
follow that lead and actuallymake the first cut in February?
Speaker 1 (03:49):
I personally think that they will.
Okay, yeah, there's two piecesof data or elements to this
equation that will suggest theywon't.
One is the low unemploymentnumber, which on last reading
was 3.9%.
So the labour market is tighterthan the RBA would like if they
were to start cutting rates.
(04:11):
And then the other point is theAustralian dollar has crashed
and it's testing.
It's on the verge of testing 60cents, which is quite
remarkable.
As we speak today, I think it's0.614 against the US, but
that's really really soft forthe Australian dollar.
They're the two reasons why theRBA won't cut.
Underlying inflation is justabout to move within its target
(04:35):
band and the headline inflationnumber is well inside its target
rate.
Now the quarterly inflationnumber is due on January 29, and
most people expect that thatwill fall within the RBA's
target band setting up a ratecut in February.
Speaker 3 (04:55):
We talked at the end of last year about the impact of
an incoming Trump presidency.
The Australian dollar is havinga tough time, the stock market
is having a tough time,unemployment is low and
inflation, both underlying andheadline, is coming back.
Do you think that there isstill the likelihood of a risk
to the rate setting based onTrump's inauguration, which
(05:19):
really is not that far away?
Speaker 1 (05:21):
Look, you can't really respond to anything that
Trump says.
You can only respond to whatTrump does because he says so
many wild and conflicting thingswhen it comes to the Australian
dollar, which I think is a bigreason why the RBA may not be
able to go.
There's a couple of pointsthere.
The first is there's talk thatthe RBA could start buying the
(05:43):
Australian dollar to prop thecurrency up.
That'd be an interesting playif the RBA intervened, buying
the Australian dollar to propthe currency up.
That'd be an interesting playif the RBA intervened in the
market to that degree.
The other thing, kieran, is thatmoney markets tend to front run
and all markets tend to frontrun policy.
So if the money markets andthis has not really been
discussed in the media to date,but if the money markets have
(06:04):
formed the view that the RBAwill have to cut due to
households in Australia runningcash flow negative which we know
that many households are andthe pressure on the economy, the
money markets could have got infront of the RBA's impending
rate cuts and driven theAustralian dollar down for that
reason, not just China comingoff.
(06:24):
So the popular narrative at themoment is that the Australian
dollar down for that reason, notjust China coming off.
So the popular narrative at themoment is that the Australian
dollar's off because the Chineseeconomy's off, which it is, and
that's going to impact us.
But iron ore's still over 100US a tonne, so that's the
primary export that Australiaenjoys at the moment.
But the Australian dollar iscrashing.
Has it gone too far?
If the RBA believe it have,they'll have no problems
(06:45):
intervening in the market andbuying it.
A lot of people have quiterightly pointed out that if
Australian dollar does stay low,that will be inflationary in
and of itself.
So there's a few dynamics toplay out here.
Speaker 3 (06:58):
Yeah, certainly.
I think anyone who is payingattention will be watching with
abated breath for what doeshappen in February.
I know certainly everyone wespeak to, and myself included,
is hoping for a bit of relief,that's for sure.
Speaker 1 (07:11):
I felt all along the RBA were talking tougher than
they were going to actually act.
They were jawboning the marketinto place and that's their job.
To do so is to manage theeconomy and get it to a point
where it doesn't derail.
But you just get the feeling youdon't need to see the data to
know that people are pullingback on expenditure.
Whether you see it socially,whether you see it at
(07:31):
restaurants, whether you see itdown the shops, whether you
heard about where people didn'tdidn't go on their Christmas
holidays, you just feel rightacross the board that that
certainly coming out of theOctober long weekend, that there
was a shift there heading intoChristmas.
People were playing it tightand the data that we've already
got, even the Black Friday salesShane Oliver put a a tremendous
(07:53):
post out when the Black Fridaysales came out saying anyone
who's talking about you knowBlack Friday sales and Christmas
sales, you know being 2.7billion, is not really paying
attention because that'sactually lower year on year than
it was the year before and italso comes at a time where more
people have entered the country,so you've got more people
(08:14):
spending about the same or alittle bit less, suggesting that
consumer sentiment is well off.
Speaker 3 (08:20):
Yeah, it's certainly been my observation.
I guess the other reallyimportant factor then, just
before we talk a little bitabout what has happened in your,
with your you know yourobservation so far, since we've
come back to to uh trading, wehave an impending election.
It could come not long afterthese announcements or it could
come a couple of months later.
(08:40):
Do you think that, uh, you know, we're likely to see any large
or impactful labor party inparticular, or liberal party
announcements that may have anyinfluence on the property market
and or the rba's decisionmaking, sort of tree?
Speaker 1 (08:56):
oh, look.
Well, just on the first point,um, I I believe the the labor
party will call an electionfairly immediately after the
February rate cut.
That's my prediction,especially if it's a cut.
Yeah, yeah, yeah, yeah, that'swhat I'm saying.
I believe there'll be a cut inFebruary.
I'm not saying it's a faitaccompli.
I accept that if they don't cut, it'll be because of the
(09:18):
unemployment rate is so low andor what has happened with the
Australian dollar.
But outside of that, I believewe are absolutely headed for a
cut in February.
I'll put my name to that.
And then I believe that theLabor Party will very, very
quickly call an election.
Speaker 3 (09:33):
Yeah, oh, look, it makes sense politically.
You know it's come off the backof some relief.
Finally some good news.
Speaker 1 (09:38):
It was a tough back half of the year for the
government last year as the costof living really bit and let's
face it, the other thing we'vegot to keep in mind about a rate
cut is everyone thinks a ratecut equals a rising property
market and, as I say in thenewsletter that you referenced,
kieran, you might see a reliefrally when the rate cut comes.
That's a distinct possibilityand the government are going to,
(10:00):
in my view, if there is a ratecut, go straight to an election
because they want people votingwhen that relief rally is is
occurring.
But fundamentally, um andyou're seeing this discussion
happen in the media at themoment about people have really
locked on to the point that wetouched on six months ago is the
median house price in sydney is1.45 million.
(10:21):
When you start playing with acalculator about average
earnings versus the median houseprice, it doesn't stack up, and
this is a real point in themedia that everyone's talking
about at the moment andeveryone's trying to come up
with a solution.
I'll tell you there's only onesolution to that equation and
that's falling house prices ohlook, it's incredibly topical,
you know.
Speaker 3 (10:40):
You've only got to look at the other media at the
moment talking about all thepsychiatrists walking off the
job in in New South Walesbecause of the the amount of pay
they get, and at the same timeyou've got the nurses fighting
for a pay rise and I had thesame discussion with someone
else.
How do those nurses live withina stone's throw of any of the
hospitals they need to work at?
It is so expensive to beanywhere near the infrastructure
(11:01):
.
It really is.
There's a massive disconnect.
Speaker 1 (11:03):
So our advice to vendors this year is if there is
a relief rally after a rate cut, sell into it, because
fundamentally, unless the rbaare going to really go hard with
the rate cuts which I don'tbelieve they are they'll throw a
few in there for a spite.
The fundamental fact thataverage earnings and the median
house price disconnected insydney still remains.
(11:25):
Don't get me wrong.
There are suburbs that will beimmune from the point I'm making
.
I'm making a Sydney-widecomment here and there will be
properties that still set recordprices.
But the mathematics averageearnings or average household
earnings and what it takes tobuy the median house price does
not stack up.
And if you're saying peoplealways ask us, where should I
(11:47):
invest?
Where should I invest, like weknow of some sleeper suburb in
Sydney that's underpriced youknow sitting down in a corner of
the harbour it doesn't workthat way.
If you want to know where toinvest at the moment, probably
the place that represents themost value is Melbourne, because
the state government there haveintroduced measures that have
actively driven property pricesdown and some of them will be
(12:09):
elected the Liberal Partyprobably will be elected at the
next state election promising toroll back the taxation that's
driven the property market down,but if you're an investor and
you're looking for value formoney, australia's most, second
most populous or most populouscity is actually the fifth most
expensive now.
Speaker 3 (12:28):
Yeah, that has been a massive change, and we've
certainly talked about Melbournea lot, so we won't go much
further into that today.
In the interest of movingthings along, though, Pete, I'd
really love to get a sense of.
You know, real estate is one ofthose industries that doesn't
really stop.
You know you have a small breakover Christmas, but really, you
know you're always kind of onthe job.
You have been back at work nowfor a little while.
(12:50):
What's your experience been sofar?
At open homes and talking withvendors and talking with
possible or potential buyers in2025, as opposed to, let's say,
the the rat, you know the finalsix weeks of 2024.
Speaker 1 (13:06):
Look, stock levels are always really, really low in
the first three quarters ofJanuary and whatever stock you
do have tends to get goodinterest and, as I mentioned
earlier, we've bagged a fewsales under competitive bias
situation too.
So vendors constantly tell usthat nothing happens in the
Sydney property market untilFebruary.
But what happens in February isall the listings and all the
(13:29):
agents are back at work.
I was back at work on the 2ndof January and doing open houses
on Thursday the 2nd of Januaryand Saturday the 4th of January
and sales came from bothweekends that we've shown so far
.
And one of my colleagues, ross,was particularly surprised
where, across six open houses onSaturday the 4th of Januaryuary
(13:50):
, he saw 55 buyers yeah, wow,that's so much, you know.
Much busier than I think anyonewould expect, yeah, and and and
one of those properties achieveda price kieran um.
Uh.
That was higher than what itwas offered in um in 2024 yeah,
interesting that, uh, that newyear's optimism certainly
playing a role.
So don't get me wrong, we'reinterested to see how the stock
(14:12):
and how the open houses performwhen all of the agents and all
of the listings are back onmarket, because one of the
things that benefited buyerslate last year was there was too
many listings on market and theauction clearance rate, as we
discussed, you know, failed tocrack 50% since August 2024 into
Christmas.
But, yes, a very, very positivestart in the first two weeks of
(14:34):
the year.
Speaker 3 (14:35):
Yeah, certainly be interesting to see what happens
and, as we say, you know, afterthe likely rate cut there could
be some shifts, one of thethings that I asked before but
you didn't actually necessarilyaddress.
Obviously we expect the LaborParty's going to make an
announcement, if there's a ratecut, to go to the election.
But do you think that in theremaining six to twelve,
(15:00):
fourteen weeks, whatever it maybe, until the election, do you
think there's likely to be anyproperty focused policy or
legislation announced to try andjust temper people's
expectations?
Speaker 1 (15:11):
Let's go to Dutton's speech on the weekend here.
Did you watch that?
Speaker 3 (15:14):
I didn't.
I just saw that he had given aspeech with his plan to become
PM, but I certainly didn't catchit.
Speaker 1 (15:20):
Okay, Well, look as much as you can take out of that
was Dutton sort of drawingbattle lines, if you like to use
Tony Abbott's word, battlelines.
Where he came through withproperty was that people can
start using $50,000 of theirsuperannuation young Australians
(15:41):
to get on the property ladderand ladies that are divorced who
have been divorced later inlife can also access some of
their super to help them get onthe property ladder.
So that's as far as the LiberalParty ventured into housing in
Dutton's first majorpre-election speech.
As we all know, the Labor Partyhave got a very, very
(16:05):
optimistic $1.2 million $1.2million new dwellings target,
which they're well behind therun rate on already.
So Dutton, as you do inopposition, will pin the
government's failures to thewall and highlight that at every
turn.
And a version of what Duttonsuggested on the weekend.
(16:28):
The Liberal Party were tryingto get up late in their term at
the last election, so it's notactually an overly new policy.
If you do go to Dutton's speech, it was very value-driven,
culture-driven about what hesees as the Liberal Party
standing for in 2025, and it waslight on property.
(16:51):
Other than that point aroundsuperannuation, if I'm honest, I
think he's got such a big jobto convince the electorate that
nuclear is the way to go.
And nuclear is obviously lowemissions and it's going to be
so expensive and there's goingto be so much debate around
(17:12):
costings that I don't thinkDutton will open up too many
battlefronts on himself,particularly when the
government's under pressurearound power and electricity and
they're behind in their owntarget for new housing dwellings
.
Speaker 3 (17:26):
He'll he'll leave the pressure on them so property
specific announcements aside,then, one of the other major
things we talked about throughall of last year was the kind of
ancillary effects that areimpacting the property market
most notably is immigration.
Have there been any for ourlisteners?
There's been any newannouncements or any new
(17:47):
positions taken that will impactthe immigration numbers coming
in and as a result, you know,likely impact the availability
of housing supply in sydney.
Speaker 1 (17:56):
They're both going to say they're listening to
australia and there needs to bea sensible discussion and we
need to manage this, and they'reboth going to allow people to
pour through the front door.
Yeah, because australia wouldbe in a recession without the
immigration policy that we'vecurrently got.
Households are in a per capitarecession as it is at the moment
(18:18):
and the only reason the countryis not in a recession is
because of the immigrationpolicy of the day.
And you saw before Christmasthat Dutton backtracked from his
I'm going to cap immigrationimmigration at 160,000 per annum
to.
We've got to have a sensiblediscussion about this, because
someone probably tapped him andsaid hey, pete, let us just show
(18:40):
you some modelling on yourimmigration numbers and what the
economy looks like.
And, as Louis Christopher saidin that Talking Property podcast
last week, christopher said inthat Talking Property podcast
last week no bureaucrat nopolitician wants to have a
recession on their hands.
Speaker 3 (19:03):
Yeah, just got to ask Keating how that went.
It's interesting because itties perfectly back into your
point that Shane Oliver had madethat.
You know, when you look at theBlack Friday sales, et cetera,
if you exclude new entrants, wehave spent exponentially less
than you know.
When you look at the BlackFriday sales, et cetera, if you
exclude new entrants, we havespent exponentially less than
you know any of the forecasts.
Do you spend less thisChristmas?
Oh, absolutely.
I don't think we boughtanything on Black Friday.
I mean, there's no free moneyto do that this time.
Speaker 1 (19:24):
But we consciously cut back because you just got to
.
It's just not the time to beout there with high expenditure.
Speaker 3 (19:32):
That's true.
Look, really good discussiontoday.
Peter, we're going to head towrap up, but I'm going to ask
you a tough question.
Seeing as I finally got you onthe record as committing to one
of your statements around theinterest rate cut, I'm going to
push you even further and askyou to tell our listeners your
prediction of where you thinkthe cash rate will end up.
(19:54):
I'm not talking about, you know, mid-year.
Where do you think we're goingto end up in the long run out of
this, given you know we were atsuch record lows for so long
that we will likely never, evergo back there?
Where do you think?
Speaker 1 (20:06):
is it going to be a middle ground, not as low as
people want?
Yeah, is it going to be amiddle ground scenario?
Let's go to the US.
The US had a couple of ratecuts Kieran, and then all their
numbers are bouncing back up,which are threatening to unleash
inflation again.
If Trump's tariffs do come intobeing, even half of what Trump
has said comes into being,that'll be inflationary.
(20:27):
So there won't be as many ratecuts as people want there to be.
Speaker 3 (20:33):
Okay, so where do we think?
I mean, we're 4.35 now.
Do you think we'll end up inthe twos no, no.
Speaker 1 (20:39):
Two to three cuts.
We won't end up in the twos no.
Speaker 3 (20:47):
The only way we'll end up in the twos is if we go
into a massive financial crisis.
Speaker 1 (20:50):
Okay, so where do you think the 10-year rate will sit
, sort of like 3.7?
Speaker 3 (20:53):
Yeah 3.5, 3.75.
Speaker 1 (20:58):
Yeah, definitely much higher than people would like.
Yeah, that's right.
Yeah, and you're already seeingthis in America at the moment,
where the stock markets are very, very wobbly at the moment
because the US Fed has basicallyflagged we could be done with
rate cuts.
So, in that newsletter thatyou're referencing, the Harris
Partners real estate report, Isay that there's little doubt
the next move in interest ratesin Australia is down.
(21:19):
Everybody seems to accept thatpoint.
Now, yeah yeah, we don't knowwhen it'll be down, but it'll be
down.
So let's talk about the timingof the next cut, where in
America a debate is emerging.
Maybe there's one more cut init, but then after the next cut,
if there is one more cut, whatis the next move after that?
And there's a suggestion notputting a timing on it that the
(21:41):
next move after that could beback up.
Speaker 3 (21:43):
Yeah Well, I certainly.
I suspect Michelle Bullock andthe board don't want to enter a
scenario where they have to flipand flop and try and correct
this course.
They will try and be as smoothas possible.
Yes and no, it's engineer usoff landing right, that was the
idea.
Speaker 1 (21:57):
The purpose of interest rates is to govern this
.
So I don't think the RBA, theirego would not be damaged in
their view if they had to cut acouple of times and then
stimulated it too much.
They have to then put anincrease in 18 months down the
track just to take the edge offit again.
(22:18):
They've got form for that, notunder michelle bullock, but
under glenn stevens.
They did.
If you look, if you look at thepolicy, the interest rate
movements between 2008 and 2012.
There was lots of up and downsin there as the RBA were dealing
with these dynamic factors.
You know, obviously the GFC getrates as low as possible.
(22:38):
Government have put too muchstimulus in.
Slow it down.
Jeez, the rates have hit theeconomy harder than we expected.
Now the stimulus has wound off.
Let's cut back a bit and theymanaged it pretty well through
that period.
Speaker 3 (22:51):
Oh look, certainly I think yeah, they'll be aiming
for a smooth course, but alwaysopen to doing whatever we need
to keep the economy stable.
Speaker 1 (22:58):
The person that will be filthy if there's no rate
cuts in America is Trump becausehe will put maximum pressure on
Jerome Powell for rate cuts.
He wants a highly stimulatedeconomy, and what happens at the
end of his term is not reallyhis concern.
Speaker 3 (23:12):
Yeah, he's not too worried about that.
Look, really really greatdiscussion today.
Peter, good to be back in thechair with you and, you know,
really great report.
If anyone hasn't had a read, Iwill put a copy online for
anyone who wants to access it.
But, as always, if you have anyquestions for us on the podcast
or anything you'd like us toaddress, please reach out.
Get in touch and we will talkabout it for you, as always,
(23:32):
peter, thanks so much for comingin.
Really great chat.
Thanks, kieran, all the bestand thanks to everyone for
listening to Current MarketInsights.
We look forward to speakingwith you next time.
Speaker 2 (23:40):
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.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.