February 5, 2025 • 23 mins
Hosts Ciaran O'Brien and Peter O'Malley break down the latest trends in the Sydney property market as buyers navigate stricter lending limits and persistently low auction clearance rates. While new listings have surged, genuine buyer interest remains subdued, with many waiting on the RBA’s next move.
We analyze the impact of rising listings outpacing sales, shifting dynamics in the rental market, and an increase in prestige home supply. With financial constraints shaping buyer behavior and growing interest in alternative markets like Melbourne and Brisbane, we explore how vendor motivations and competition levels could evolve in the months ahead.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Episode Transcript
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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 (00:30):
Hello and welcome to another edition of Current
Market Insights.
I'm your host, kieran O'Brien,and with me is my good friend,
mr Peter O'Malley.
Peter, hello, kieran O'Brien,great to see you.
It's good to see you, peter.
It's been a couple of weekssince we chatted.
Start of the year means thatlife's gotten away from us a
little bit, but thankfully we'reback in the studio and we're
here to talk Sydney property inparticular.
(00:50):
Last time we caught up we didtalk a little bit about what you
had seen getting started forthe year and I know we mentioned
that you were one of the firstagents, and in fact one of the
first agencies collectively, tobe back on the hustings quite
early.
But I'm really interested toget a bit of a sense from you
now where the market's gone overthe sort of four or five weeks
(01:11):
since the years kicked back offand, given that we're sort of
approaching CPI numbers and anRBA meeting and et cetera, et
cetera, what kind of thingsyou're seeing out there with
your buyers and your sellers andwhether there's, I guess, a bit
of chatter and some sentimentaround that things are
potentially going to change inthe near future.
Speaker 1 (01:30):
Yeah, thanks, kieran.
Look, there's no doubt that inthe last two to three weeks that
new listings on market haveoutpaced sales being made by
maybe five or six to one.
Okay, so what that has causedor done to the market as such is
it's seen a lot of buyers go tothe sidelines and say, well, I
want to see how some of thisstock performs before I jump in.
(01:52):
There's no doubt that anyonethat was out there pushing real
estate in the first three weeksof the year would have been
really, really happy with thenumbers they were seeing.
And I was hearing throughindustry podcasts et cetera that
agents were surprised about thenew year vibe in those first
three weeks.
But as you close in on AustraliaDay in Sydney and Melbourne
(02:15):
stock levels jump sharply.
Last weekend was probably thefirst proper weekend for
auctions in terms of volumesthat one could read anything
meaningful into the results.
And out of 563 auctions inSydney last weekend, which ended
(02:35):
for the week of the 2nd ofFebruary being Sunday, the 2nd
of February the auctionclearance rate came in at 45.3%.
So most agents will tell youthat from history, the first
couple of weekends, auctions inFebruary are usually pretty
strong because there's been somepent up demand over the summer
due to a lack of stock.
(02:56):
But here we are again and themarket has opened 2025 exactly
as it finished 2024, with a sub50% auction clearance rate.
Speaker 3 (03:08):
So a couple of things I want to touch on there.
The clearance rate, obviouslywe've been talking about now for
months and months and it reallyhasn't changed too much.
Maybe surprising to some people, maybe not so surprising to
others.
I'm interested to get your readon not just the sub 50%
clearance rate but also the rawauction numbers themselves.
I think you said 560 odd.
(03:29):
That to me is obviously quitelow compared to some of the
numbers we've seen over the last12 months.
Do you think that you know?
Actually two questions, I guess.
Firstly, do you think that thatfive or six to one increase in
listings to sales that we'veseen is congruent with just the
traditional Australia Day boom,or do you think we're seeing
(03:51):
more or less than we might haveseen?
And the second part of myquestion given that there's a
low clearance rate but alsorelatively low auction numbers,
do you think that in three weekstime or so, four weeks or so
after Australia Day, that we'relikely to see a big surge in the
number of properties actuallygoing to auction?
Speaker 1 (04:08):
I think the RBA decision on February 18 will be
a massive determinant and Ithink we can just about bank a
cut on February 18 which willadd some support for the market.
But on these numbers and thisis somewhat hypothetical because
I think they will cut onfebruary 18, but on these
numbers, if they didn't cutinterest rates on february 18,
(04:33):
the auction clearance rate willend up in the 30s yeah, wow,
that's.
Speaker 3 (04:36):
I mean, that would be unheard of right.
Speaker 1 (04:38):
No, no, no, it's been lower yes it's gone into the
20s.
Yeah, no, it wouldn't be unheardof.
But it does reflect clearly avery depressed auction market,
stroke property market.
And if we are seeing, after noauctions for six weeks and the
first auction weekend of theyear with any meaningful volume
(05:02):
being 563, which is about 30%,40%, the norm, if that comes in
at 45.3%, when that number turnsinto 1500, as it will in the
weeks ahead, without a rate cutabsolutely that would turn into
somewhere in the high 30s.
And that's not a big shockbecause late last year on one of
(05:23):
the weekends it recorded anauction clearance rate of 41%.
But that's all hypothetical.
I think they will cut.
I think the needle has turnedclearly and decisively If you
follow the RBA's messaging overthe last three years.
They said we're data dependent.
The data now says it's time tocut and there will be immense
(05:45):
political pressure on them to doso and I think they will heed
the market's message that theAustralian economy needs an
interest rate cut on Feb 18.
Speaker 3 (05:55):
So from the numbers over the weekend, do you think
that the clearance rate is stilllow for is it unrealistic price
expectations?
Do you think that the buyerdemand is not there?
Do you think people are being alittle bit cautious or do you
suspect maybe some people arestill just holding out to see if
(06:15):
the RBA do cut, to give them alittle bit more buying power
potentially?
Speaker 1 (06:19):
Well, this clearance rate of 45.3, it's kind of like
the same clearance rate we weretalking about for the last four
months of last year, wasn't?
Speaker 3 (06:28):
it, it is, it's almost identical.
Speaker 1 (06:29):
So, despite the talk of a rate cut and the
probability of a rate cut onFebruary 18, what the clearance
rate here is telling us is ithasn't moved by sentiment, yeah,
by sentiment in the face of,yes, we're getting a rate cut in
all probability, but even still, they haven't come to the table
(06:50):
with any great enthusiasm.
So we've spoken about what mighthappen to the market if they
don't cut rates, and I thinkthat's the least likely outcome
from here.
The more likely outcome is whathappens to the market when they
do cut rates on February 18.
And what you're seeing here inthis clearance rate is it's
going to take some time for arate cut to have any meaningful
(07:15):
positive impact on the propertymarket meaningful positive
impact on the property market.
Economists will tell you thatit takes about six weeks for the
impact of a rate cut to sort of.
You know people to feel it, ifyou like, in their, in their hip
pocket, and people will be, um,you know, en masse.
There's obviously people doingwell in this environment, but
there'll be a lot of people thatwill be cautious, um, after the
(07:37):
last three years, and theywon't be jumping straight back
in knowing that interest ratesdo go up after all.
That's what we've all learnedin the last three years.
Speaker 3 (07:46):
Traditionally, and as someone who hasn't been in the
real estate industry for as manyyears as yourself, in your
experience traditionally, howlong does it take for the retail
banks to pass on one of thesecuts?
So if we let's say, you know,for argument's sake, they give
us a 0.25% cut on the 18th, howlong are we actually likely to
(08:06):
wait as consumers?
And, you know, is it reallygoing to impact anyone in the
short term if they're on thebreadline, so to speak?
Speaker 1 (08:12):
Well, let me answer it another way.
They pass on a hike immediately.
Speaker 3 (08:19):
Oh, literally within 24 hours I get my mortgage
notice saying it's time to go up.
Speaker 1 (08:22):
Uh, they've got form for holding back a rate cut.
You know, sometimes two weeks,um, it's usually about two weeks
that they hold back a rate cut.
Um, we put in our februarynewsletter that they will be
under immense political pressureto pass the rate cut straight
through.
Speaker 3 (08:39):
Yep, We've already seen the election cycle started
right.
Speaker 1 (08:42):
That's right.
I think you'll see, jimChalmers, if and when there's a
rate cut, will be leaning on anyof the big four retail banks
that don't pass it on to theircustomers straight away.
And you know what?
I think the retail banks knowhow much many households are
hanging out for this rate cut,how much many households are
hanging out for this rate cut,and I think I'll be surprised if
(09:03):
they all hold back 14 daysbefore they pass on the cut, as
they've done historically.
But hey, they are banks andanything is possible.
But I've just got a feelingthere'll be immense social and
political pressure for the banksto act quickly in terms of
passing on this rate cut.
Speaker 3 (09:20):
I also feel like, as a consumer, it's good business
to lead the way here.
You know, it actually shows abit of goodwill and you may even
earn yourself some newcustomers or potentially, you
know, get some refinances comingyour way if you do lead in the
right space here as a bank.
Speaker 1 (09:32):
Look when there's a second and or a third rate cut.
If one comes in this cycle, Ido believe that'll be held back
for 14 days.
Speaker 3 (09:41):
Yep.
Speaker 1 (09:48):
But I just think with this first one, the banks may
well just say the consumer needsit and wants it, and we don't
want to be the ones that are,you know, causing the consumer
to consider their options afterthey've done it so tough for the
last three years.
Speaker 3 (09:58):
Yeah, I tend to agree , I think, peter.
One of the questions I wantedto ask just goes back to the
auctions clearance rate a littlebit and I've just been thinking
about the idea that you know,we're roughly one third of the
auction numbers at the momentand the clearance rate is still
sitting at the same spot.
You know arbitrarily which saysin real terms the actual
clearance numbers are much lowerSales volumes.
(10:22):
The sales volume is so muchlower.
Do you think is there anypotential that the Sydney market
has reached something of asaturation point and the sales
volumes and the clearance rateare coming down because there
really just isn't thetransaction demand that there
has been in years gone by, thatpeople maybe are just a bit, you
know, everyone's I'm not goingto say settled, but everyone's
(10:43):
relatively stable.
You know, we've just kind ofentered a phase where people are
saying, well, it's not, I don'twant to think about engaging in
property at the moment.
Speaker 1 (10:54):
Look if I can answer that by jumping to the rental
market for a moment, we have notthat by jumping to the rental
market for a moment, we have notfelt the pull on the rental
market for the new year anywherenear to the degree that we have
in the previous three JanuaryFebruarys.
Speaker 3 (11:11):
In terms of people coming to inspections.
Speaker 1 (11:13):
That's right, and in terms of overseas students
arriving into town, et cetera,yep.
So I have a sense that thegovernment and we'll see what
the next batch of immigrationnumbers suggest.
But they are peeling back onthat, if you like, and with the
extra listings that have goneout onto the market relative to
(11:35):
the previous three years, theextra listings that have been on
market over the last four tofive months, I think that's
diluting by demand and somemarkets are handling that better
than others.
I must say it's reallyinteresting, really interesting,
how many prestige homes havebeen listed for the new year
around the inner west.
(11:57):
I prestige home is somewherebetween five and nine million in
the inner west.
There is multi-year highs inproperties of that ilk coming to
market this january, february.
Read into that what you will.
I don't know what to make of it, other than there are more
prestige homes hit the marketthis january february than I've
(12:18):
seen in um in one go for quitesome time.
Speaker 3 (12:23):
I'd love to get your thoughts on, I guess, just
another element or considerationof this topic.
I, in doing some reading, youknow, as I do week in, week out,
before we come on the show andI try to look at, uh, you know
what what's happening across thecountry and what what's the
general sentiment, and one ofthe things I do is I kind of go
through, uh, you know, placeslike reddit and social media and
I'm trying to engage with um.
(12:45):
You know, discussion forumsthat are outside just the
mainstream media, and one of theunderlying messages I see quite
often at the moment is,particularly amongst the younger
consumers, there is a greatpull towards Victoria off the
back of the changes that we'vetalked about.
Speaker 1 (13:00):
Yeah, it's interesting.
I'm not surprised.
Speaker 3 (13:02):
I'm not surprised either, and you know prices have
changed as a result of thegovernment's aggressive policy
down there.
Do you think that the grass isgreener?
Mentality in terms of placeslike Victoria, places like
Brisbane, is having an impact onSydney property market at the
moment.
Speaker 1 (13:19):
Oh well, not Brisbane , because that's now the second
most expensive capital city inthe country.
So that story's closed out andif you're investing in Brisbane
at the moment, you're basicallytrading on a bubble.
You're at the end of the boomand you're hoping that it keeps
going, and sometimes it does andsometimes it doesn't.
Be very careful there.
But yeah, I've been watchingthe Melbourne market closely for
(13:41):
the last six months and if youare an essential worker and you
have a fixed income a goodincome, but a fixed income, but
a fixed income why wouldn't youmove to Melbourne, where the
median house price is $950,000versus $1,450,000 in Sydney, for
argument's sake, or $1 millionin Brisbane, as we've just
(14:02):
discussed?
So it's not for me to say thatthe policy down there is good or
bad.
They have driven house pricesdown by driving landlords out of
the market, but an adjunctive,that is, they've driven prices
down and it's probablyattracting, as you say, young
people looking to get onto theproperty ladder.
(14:23):
And I'm not looking to investin residential real estate at
the moment, but if I was, Iwould be buying in Melbourne.
Speaker 3 (14:31):
Yeah, well, you'd have to think that with a likely
and or potential governmentchange down there that some of
those policies could be reversedand prices may change.
Speaker 1 (14:40):
The existing government probably don't like
the policies either, and they'dlike to get away from them, and
will in due course, and whenthey do, that market will pop.
So yeah, the Melbourne market.
It is Australia's second mostpopular city, if not most
populated now, with good demand,and it's got a depressed market
, so it's one to have a look atinvestors for sure.
Speaker 3 (15:02):
So, coming back then, briefly, to something you do
know more about and with all ofthis in mind a lot of
theoretical discussions aroundwhy things are happening in the
market at the moment and why thenumbers are low, et cetera, et
cetera what's been yourexperience over the last couple
of weeks since we last spokewith the types of buyers that
you're meeting?
I know that yourself and theagency have done very well to
start the year with some greatsales, and you've had momentum.
(15:24):
What's been the real driversfor yourself and the sales that
you've seen around the area?
What's the vibe like on theground with those that are
actually buying property at themoment?
Speaker 1 (15:36):
There's people that want to buy, but they're
governed by borrowing limits,kieran, yep.
So they're saying, hey, I likethis property, I'll buy this
property.
This is what the bank willallow me to pay for this
property.
Therefore, that's my offer.
Can you take it to the vendor?
And the vendor says Iappreciate the offer, but I want
(15:58):
more.
So tell them to come up.
And it's like, uh-uh, theycan't come up.
Speaker 3 (16:03):
Yeah, the banks aren't moving.
Speaker 1 (16:05):
There's no more money , there's a cap.
There's no more money, there'sa cap.
There's a cap on the offer andyou take it or you leave it, and
some vendors are taking it andsome are leaving it, but that's
what I've started to pick up inthe last four months in the
inner west anyway, more so thanthe time before.
That is, buyers are reallygoverned by buying limits.
Speaker 3 (16:24):
Yeah, Okay, and do you think that?
Do you get the feeling from thebuyers that you are talking to
that they are serious?
Or do you think there's peopleyou know, lots of tire kickers
around that are either notlocked in on finance or are
quite capped on finance but arejust, you know, pie in the sky,
optimistic looking around?
Speaker 1 (16:42):
Look, even last Saturday we were seeing pretty
healthy inspection numbers.
I don't want to call anyone atyre kicker.
If it's a public open forinspection, you're entitled to
walk through it, regardless ofwhat your motive is.
There's no doubt that someproperties do enjoy really good
inspection numbers, but thepeople amongst those high
(17:02):
numbers that are serious aboutsecuring a piece of real estate
for themselves is probably twoout of ten, maybe, maybe, maybe
three out of ten okay, which is,you know, maybe not surprising,
because it ties exactly in withthe auction clearance numbers.
Speaker 3 (17:17):
I mean, yeah, or you know virtually the same.
So you, you know, what you'reseeing does really correlate and
reflect what, what is beingseen out there in the market and
and a lot of those people thatI'm not counting in the two or
three that are serious.
Speaker 1 (17:29):
I think there's an attitude amongst the buyers I
can buy.
I'm reading that the market'sfalling.
I'm reading the market's underpressure.
I'll move for the rightopportunity at the right price.
So I think and real estateagents don't like this buyer
profile because it's hard towork with, but there's an
indifferent or discretionarybuyer in the market at the
(17:51):
moment and as a real estateagent you need really good skill
set to talk that buyer in offthe sideline into partaking.
Speaker 3 (17:59):
Yeah, so they're the ones you suggest.
They're just kind of sittingaround saying well, you know, if
it all lines up and I like it,I'll go for it.
Speaker 1 (18:12):
But I don't need to.
And one of my colleagues isdealing with a buyer and he's
only met this buyer throughselling the property that we're
selling.
And the buyer is reticent tomake an offer because all that
happened to him last year ishe'd see a property advertised
for one three.
He'd try and buy it pre-auction.
No, the vendor wants this oneto go to auction, sir, and then
it would sell at auction for$1.7.
So that's one of those buyersthat we're trying to talk in off
the sideline to say, well, ifyou make your offer, we'll
(18:34):
negotiate a fair price in goodfaith with you.
And it's like, pal, I've heardit all before and I've ended up
on the wrong side of the stick.
So I don't know if I want topartake again.
I might just, you know, justwatch the market for a few more
weeks.
That's the sort of attitudethat's out there.
(18:54):
So real estate agents havebrought that on themselves by
continually lying to buyersabout what they can buy a
property for and then, you know,smacking them with reality on
auction day.
Speaker 3 (19:05):
Yeah it's certainly unfortunate that you know the
vocal minority have sullied theindustry for so many.
As we wrap up the episode, then, peter, one of the well, I
guess the final question I'vegot for you we often talk about
in our market wraps what the buysentiment is at the time.
You know, this week, this month, this fortnight, whatever.
What are the buyers doing andwhat are they saying?
(19:25):
Given the fortnight, whatever,what are the buyers doing?
What are they saying, given the, the market conditions we're in
at the moment?
For your vendors that are onmarket at the moment, and the
ones that you're talking with,what do you think is the?
The major motivator for peoplethat you're dealing with at the
moment?
Are we, you know?
Are you seeing a sense of, uh,people who are under some
financial distress, or are youreally just dealing with people
that are making, you know,choices about just where they
(19:46):
want to be in their life and andnow's the time for them?
Speaker 1 (19:49):
I think overwhelmingly.
The major vendor profile thatwe're seeing in the market, not
just with our agency but acrossthe board, is still investment
properties being sold off and alot of downsizers, baby boomers
selling long-held investmentproperties at the moment as part
of their retirement strategy.
The property's positivelygeared, they're about to retire
(20:13):
or have retired, so the taxationbenefits are somewhat
diminished.
As I say, I do note.
I do note that there's aabnormally high number of
prestige five million dollarplus listings that have come to
the market this January,february and, if I can speculate
(20:33):
on what I think is happeningthere, there was a run of very
good sales in that pricecategory in the middle of last
year and it's tempted a wave ofsellers into the market and at
that sort of price bracket andit remains to be seen whether
(20:53):
there's buy demand to continueabsorbing the increased stock
levels at the prestige levels.
Because what happens at theprestige market?
You can really overpay reallyeasily and that is you fall in
love with a property.
There isn't anything elsethat's been on the market like
it for six months.
You think there may not beanything else on the market.
(21:14):
Like it for six months, youthink there may not be anything
else on the market like it forthe next six months.
You really want this particularone, you can afford to pay the
premium to get it.
You buy the premium and thensix, seven months later there's
a wave of similar listings thatcome to market and end up
selling for 15 20 percent belowwhat you've paid.
And it's at that point you'verealised that you've gone too
(21:36):
hard and too heavy.
But the reason you did isyou're in a competitive
situation with only one listingon the market and the price
swings in a falling market andthe haircuts that people receive
is actually much higherhistorically in the higher price
points than it is in the lowerprice points.
(21:56):
Because when the tide goes outin the prestige market, a surge
of listings can come on and thebuyers say, hey, well, you know
I've got a range of choices here.
I'm going to be an opportunist,so I'm not saying that's going
to happen to the prestige marketto begin this year.
But I will say that I don'tbelieve the buyer demand will be
(22:17):
there to absorb all of theseprestige listings that have come
to market and already there'stoo much stock on the market for
the new year that is notselling for me to think that
there's any chance of a strongor a robust market around the
corner.
Speaker 3 (22:35):
Yeah, really good insights, Peter, and I think
certainly the future is going tobe very interesting in a week
or two's time when the RBA domake their decision and the
impact that may have on thelistings on the market.
I know that you've seen someinteresting things on the
hustings and I certainly knowthat our listeners love to hear
about what is actually happeningand what is likely to happen.
So thanks so much for coming inand we look forward to chatting
(22:57):
with you next week.
Good on you, Kieran.
Speaker 1 (22:59):
Thanks very much.
Speaker 3 (23:00):
And thanks to everyone for listening to
Current Market Insights.
We look forward to speakingwith you next time.
Speaker 2 (23:04):
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 (00:30):
Hello and welcome to another edition of Current
Market Insights.
I'm your host, kieran O'Brien,and with me is my good friend,
mr Peter O'Malley.
Peter, hello, kieran O'Brien,great to see you.
It's good to see you, peter.
It's been a couple of weekssince we chatted.
Start of the year means thatlife's gotten away from us a
little bit, but thankfully we'reback in the studio and we're
here to talk Sydney property inparticular.
(00:50):
Last time we caught up we didtalk a little bit about what you
had seen getting started forthe year and I know we mentioned
that you were one of the firstagents, and in fact one of the
first agencies collectively, tobe back on the hustings quite
early.
But I'm really interested toget a bit of a sense from you
now where the market's gone overthe sort of four or five weeks
(01:11):
since the years kicked back offand, given that we're sort of
approaching CPI numbers and anRBA meeting and et cetera, et
cetera, what kind of thingsyou're seeing out there with
your buyers and your sellers andwhether there's, I guess, a bit
of chatter and some sentimentaround that things are
potentially going to change inthe near future.
Speaker 1 (01:30):
Yeah, thanks, kieran.
Look, there's no doubt that inthe last two to three weeks that
new listings on market haveoutpaced sales being made by
maybe five or six to one.
Okay, so what that has causedor done to the market as such is
it's seen a lot of buyers go tothe sidelines and say, well, I
want to see how some of thisstock performs before I jump in.
(01:52):
There's no doubt that anyonethat was out there pushing real
estate in the first three weeksof the year would have been
really, really happy with thenumbers they were seeing.
And I was hearing throughindustry podcasts et cetera that
agents were surprised about thenew year vibe in those first
three weeks.
But as you close in on AustraliaDay in Sydney and Melbourne
(02:15):
stock levels jump sharply.
Last weekend was probably thefirst proper weekend for
auctions in terms of volumesthat one could read anything
meaningful into the results.
And out of 563 auctions inSydney last weekend, which ended
(02:35):
for the week of the 2nd ofFebruary being Sunday, the 2nd
of February the auctionclearance rate came in at 45.3%.
So most agents will tell youthat from history, the first
couple of weekends, auctions inFebruary are usually pretty
strong because there's been somepent up demand over the summer
due to a lack of stock.
(02:56):
But here we are again and themarket has opened 2025 exactly
as it finished 2024, with a sub50% auction clearance rate.
Speaker 3 (03:08):
So a couple of things I want to touch on there.
The clearance rate, obviouslywe've been talking about now for
months and months and it reallyhasn't changed too much.
Maybe surprising to some people, maybe not so surprising to
others.
I'm interested to get your readon not just the sub 50%
clearance rate but also the rawauction numbers themselves.
I think you said 560 odd.
(03:29):
That to me is obviously quitelow compared to some of the
numbers we've seen over the last12 months.
Do you think that you know?
Actually two questions, I guess.
Firstly, do you think that thatfive or six to one increase in
listings to sales that we'veseen is congruent with just the
traditional Australia Day boom,or do you think we're seeing
(03:51):
more or less than we might haveseen?
And the second part of myquestion given that there's a
low clearance rate but alsorelatively low auction numbers,
do you think that in three weekstime or so, four weeks or so
after Australia Day, that we'relikely to see a big surge in the
number of properties actuallygoing to auction?
Speaker 1 (04:08):
I think the RBA decision on February 18 will be
a massive determinant and Ithink we can just about bank a
cut on February 18 which willadd some support for the market.
But on these numbers and thisis somewhat hypothetical because
I think they will cut onfebruary 18, but on these
numbers, if they didn't cutinterest rates on february 18,
(04:33):
the auction clearance rate willend up in the 30s yeah, wow,
that's.
Speaker 3 (04:36):
I mean, that would be unheard of right.
Speaker 1 (04:38):
No, no, no, it's been lower yes it's gone into the
20s.
Yeah, no, it wouldn't be unheardof.
But it does reflect clearly avery depressed auction market,
stroke property market.
And if we are seeing, after noauctions for six weeks and the
first auction weekend of theyear with any meaningful volume
(05:02):
being 563, which is about 30%,40%, the norm, if that comes in
at 45.3%, when that number turnsinto 1500, as it will in the
weeks ahead, without a rate cutabsolutely that would turn into
somewhere in the high 30s.
And that's not a big shockbecause late last year on one of
(05:23):
the weekends it recorded anauction clearance rate of 41%.
But that's all hypothetical.
I think they will cut.
I think the needle has turnedclearly and decisively If you
follow the RBA's messaging overthe last three years.
They said we're data dependent.
The data now says it's time tocut and there will be immense
(05:45):
political pressure on them to doso and I think they will heed
the market's message that theAustralian economy needs an
interest rate cut on Feb 18.
Speaker 3 (05:55):
So from the numbers over the weekend, do you think
that the clearance rate is stilllow for is it unrealistic price
expectations?
Do you think that the buyerdemand is not there?
Do you think people are being alittle bit cautious or do you
suspect maybe some people arestill just holding out to see if
(06:15):
the RBA do cut, to give them alittle bit more buying power
potentially?
Speaker 1 (06:19):
Well, this clearance rate of 45.3, it's kind of like
the same clearance rate we weretalking about for the last four
months of last year, wasn't?
Speaker 3 (06:28):
it, it is, it's almost identical.
Speaker 1 (06:29):
So, despite the talk of a rate cut and the
probability of a rate cut onFebruary 18, what the clearance
rate here is telling us is ithasn't moved by sentiment, yeah,
by sentiment in the face of,yes, we're getting a rate cut in
all probability, but even still, they haven't come to the table
(06:50):
with any great enthusiasm.
So we've spoken about what mighthappen to the market if they
don't cut rates, and I thinkthat's the least likely outcome
from here.
The more likely outcome is whathappens to the market when they
do cut rates on February 18.
And what you're seeing here inthis clearance rate is it's
going to take some time for arate cut to have any meaningful
(07:15):
positive impact on the propertymarket meaningful positive
impact on the property market.
Economists will tell you thatit takes about six weeks for the
impact of a rate cut to sort of.
You know people to feel it, ifyou like, in their, in their hip
pocket, and people will be, um,you know, en masse.
There's obviously people doingwell in this environment, but
there'll be a lot of people thatwill be cautious, um, after the
(07:37):
last three years, and theywon't be jumping straight back
in knowing that interest ratesdo go up after all.
That's what we've all learnedin the last three years.
Speaker 3 (07:46):
Traditionally, and as someone who hasn't been in the
real estate industry for as manyyears as yourself, in your
experience traditionally, howlong does it take for the retail
banks to pass on one of thesecuts?
So if we let's say, you know,for argument's sake, they give
us a 0.25% cut on the 18th, howlong are we actually likely to
(08:06):
wait as consumers?
And, you know, is it reallygoing to impact anyone in the
short term if they're on thebreadline, so to speak?
Speaker 1 (08:12):
Well, let me answer it another way.
They pass on a hike immediately.
Speaker 3 (08:19):
Oh, literally within 24 hours I get my mortgage
notice saying it's time to go up.
Speaker 1 (08:22):
Uh, they've got form for holding back a rate cut.
You know, sometimes two weeks,um, it's usually about two weeks
that they hold back a rate cut.
Um, we put in our februarynewsletter that they will be
under immense political pressureto pass the rate cut straight
through.
Speaker 3 (08:39):
Yep, We've already seen the election cycle started
right.
Speaker 1 (08:42):
That's right.
I think you'll see, jimChalmers, if and when there's a
rate cut, will be leaning on anyof the big four retail banks
that don't pass it on to theircustomers straight away.
And you know what?
I think the retail banks knowhow much many households are
hanging out for this rate cut,how much many households are
hanging out for this rate cut,and I think I'll be surprised if
(09:03):
they all hold back 14 daysbefore they pass on the cut, as
they've done historically.
But hey, they are banks andanything is possible.
But I've just got a feelingthere'll be immense social and
political pressure for the banksto act quickly in terms of
passing on this rate cut.
Speaker 3 (09:20):
I also feel like, as a consumer, it's good business
to lead the way here.
You know, it actually shows abit of goodwill and you may even
earn yourself some newcustomers or potentially, you
know, get some refinances comingyour way if you do lead in the
right space here as a bank.
Speaker 1 (09:32):
Look when there's a second and or a third rate cut.
If one comes in this cycle, Ido believe that'll be held back
for 14 days.
Speaker 3 (09:41):
Yep.
Speaker 1 (09:48):
But I just think with this first one, the banks may
well just say the consumer needsit and wants it, and we don't
want to be the ones that are,you know, causing the consumer
to consider their options afterthey've done it so tough for the
last three years.
Speaker 3 (09:58):
Yeah, I tend to agree , I think, peter.
One of the questions I wantedto ask just goes back to the
auctions clearance rate a littlebit and I've just been thinking
about the idea that you know,we're roughly one third of the
auction numbers at the momentand the clearance rate is still
sitting at the same spot.
You know arbitrarily which saysin real terms the actual
clearance numbers are much lowerSales volumes.
(10:22):
The sales volume is so muchlower.
Do you think is there anypotential that the Sydney market
has reached something of asaturation point and the sales
volumes and the clearance rateare coming down because there
really just isn't thetransaction demand that there
has been in years gone by, thatpeople maybe are just a bit, you
know, everyone's I'm not goingto say settled, but everyone's
(10:43):
relatively stable.
You know, we've just kind ofentered a phase where people are
saying, well, it's not, I don'twant to think about engaging in
property at the moment.
Speaker 1 (10:54):
Look if I can answer that by jumping to the rental
market for a moment, we have notthat by jumping to the rental
market for a moment, we have notfelt the pull on the rental
market for the new year anywherenear to the degree that we have
in the previous three JanuaryFebruarys.
Speaker 3 (11:11):
In terms of people coming to inspections.
Speaker 1 (11:13):
That's right, and in terms of overseas students
arriving into town, et cetera,yep.
So I have a sense that thegovernment and we'll see what
the next batch of immigrationnumbers suggest.
But they are peeling back onthat, if you like, and with the
extra listings that have goneout onto the market relative to
(11:35):
the previous three years, theextra listings that have been on
market over the last four tofive months, I think that's
diluting by demand and somemarkets are handling that better
than others.
I must say it's reallyinteresting, really interesting,
how many prestige homes havebeen listed for the new year
around the inner west.
(11:57):
I prestige home is somewherebetween five and nine million in
the inner west.
There is multi-year highs inproperties of that ilk coming to
market this january, february.
Read into that what you will.
I don't know what to make of it, other than there are more
prestige homes hit the marketthis january february than I've
(12:18):
seen in um in one go for quitesome time.
Speaker 3 (12:23):
I'd love to get your thoughts on, I guess, just
another element or considerationof this topic.
I, in doing some reading, youknow, as I do week in, week out,
before we come on the show andI try to look at, uh, you know
what what's happening across thecountry and what what's the
general sentiment, and one ofthe things I do is I kind of go
through, uh, you know, placeslike reddit and social media and
I'm trying to engage with um.
(12:45):
You know, discussion forumsthat are outside just the
mainstream media, and one of theunderlying messages I see quite
often at the moment is,particularly amongst the younger
consumers, there is a greatpull towards Victoria off the
back of the changes that we'vetalked about.
Speaker 1 (13:00):
Yeah, it's interesting.
I'm not surprised.
Speaker 3 (13:02):
I'm not surprised either, and you know prices have
changed as a result of thegovernment's aggressive policy
down there.
Do you think that the grass isgreener?
Mentality in terms of placeslike Victoria, places like
Brisbane, is having an impact onSydney property market at the
moment.
Speaker 1 (13:19):
Oh well, not Brisbane , because that's now the second
most expensive capital city inthe country.
So that story's closed out andif you're investing in Brisbane
at the moment, you're basicallytrading on a bubble.
You're at the end of the boomand you're hoping that it keeps
going, and sometimes it does andsometimes it doesn't.
Be very careful there.
But yeah, I've been watchingthe Melbourne market closely for
(13:41):
the last six months and if youare an essential worker and you
have a fixed income a goodincome, but a fixed income, but
a fixed income why wouldn't youmove to Melbourne, where the
median house price is $950,000versus $1,450,000 in Sydney, for
argument's sake, or $1 millionin Brisbane, as we've just
(14:02):
discussed?
So it's not for me to say thatthe policy down there is good or
bad.
They have driven house pricesdown by driving landlords out of
the market, but an adjunctive,that is, they've driven prices
down and it's probablyattracting, as you say, young
people looking to get onto theproperty ladder.
(14:23):
And I'm not looking to investin residential real estate at
the moment, but if I was, Iwould be buying in Melbourne.
Speaker 3 (14:31):
Yeah, well, you'd have to think that with a likely
and or potential governmentchange down there that some of
those policies could be reversedand prices may change.
Speaker 1 (14:40):
The existing government probably don't like
the policies either, and they'dlike to get away from them, and
will in due course, and whenthey do, that market will pop.
So yeah, the Melbourne market.
It is Australia's second mostpopular city, if not most
populated now, with good demand,and it's got a depressed market
, so it's one to have a look atinvestors for sure.
Speaker 3 (15:02):
So, coming back then, briefly, to something you do
know more about and with all ofthis in mind a lot of
theoretical discussions aroundwhy things are happening in the
market at the moment and why thenumbers are low, et cetera, et
cetera what's been yourexperience over the last couple
of weeks since we last spokewith the types of buyers that
you're meeting?
I know that yourself and theagency have done very well to
start the year with some greatsales, and you've had momentum.
(15:24):
What's been the real driversfor yourself and the sales that
you've seen around the area?
What's the vibe like on theground with those that are
actually buying property at themoment?
Speaker 1 (15:36):
There's people that want to buy, but they're
governed by borrowing limits,kieran, yep.
So they're saying, hey, I likethis property, I'll buy this
property.
This is what the bank willallow me to pay for this
property.
Therefore, that's my offer.
Can you take it to the vendor?
And the vendor says Iappreciate the offer, but I want
(15:58):
more.
So tell them to come up.
And it's like, uh-uh, theycan't come up.
Speaker 3 (16:03):
Yeah, the banks aren't moving.
Speaker 1 (16:05):
There's no more money , there's a cap.
There's no more money, there'sa cap.
There's a cap on the offer andyou take it or you leave it, and
some vendors are taking it andsome are leaving it, but that's
what I've started to pick up inthe last four months in the
inner west anyway, more so thanthe time before.
That is, buyers are reallygoverned by buying limits.
Speaker 3 (16:24):
Yeah, Okay, and do you think that?
Do you get the feeling from thebuyers that you are talking to
that they are serious?
Or do you think there's peopleyou know, lots of tire kickers
around that are either notlocked in on finance or are
quite capped on finance but arejust, you know, pie in the sky,
optimistic looking around?
Speaker 1 (16:42):
Look, even last Saturday we were seeing pretty
healthy inspection numbers.
I don't want to call anyone atyre kicker.
If it's a public open forinspection, you're entitled to
walk through it, regardless ofwhat your motive is.
There's no doubt that someproperties do enjoy really good
inspection numbers, but thepeople amongst those high
(17:02):
numbers that are serious aboutsecuring a piece of real estate
for themselves is probably twoout of ten, maybe, maybe, maybe
three out of ten okay, which is,you know, maybe not surprising,
because it ties exactly in withthe auction clearance numbers.
Speaker 3 (17:17):
I mean, yeah, or you know virtually the same.
So you, you know, what you'reseeing does really correlate and
reflect what, what is beingseen out there in the market and
and a lot of those people thatI'm not counting in the two or
three that are serious.
Speaker 1 (17:29):
I think there's an attitude amongst the buyers I
can buy.
I'm reading that the market'sfalling.
I'm reading the market's underpressure.
I'll move for the rightopportunity at the right price.
So I think and real estateagents don't like this buyer
profile because it's hard towork with, but there's an
indifferent or discretionarybuyer in the market at the
(17:51):
moment and as a real estateagent you need really good skill
set to talk that buyer in offthe sideline into partaking.
Speaker 3 (17:59):
Yeah, so they're the ones you suggest.
They're just kind of sittingaround saying well, you know, if
it all lines up and I like it,I'll go for it.
Speaker 1 (18:12):
But I don't need to.
And one of my colleagues isdealing with a buyer and he's
only met this buyer throughselling the property that we're
selling.
And the buyer is reticent tomake an offer because all that
happened to him last year ishe'd see a property advertised
for one three.
He'd try and buy it pre-auction.
No, the vendor wants this oneto go to auction, sir, and then
it would sell at auction for$1.7.
So that's one of those buyersthat we're trying to talk in off
the sideline to say, well, ifyou make your offer, we'll
(18:34):
negotiate a fair price in goodfaith with you.
And it's like, pal, I've heardit all before and I've ended up
on the wrong side of the stick.
So I don't know if I want topartake again.
I might just, you know, justwatch the market for a few more
weeks.
That's the sort of attitudethat's out there.
(18:54):
So real estate agents havebrought that on themselves by
continually lying to buyersabout what they can buy a
property for and then, you know,smacking them with reality on
auction day.
Speaker 3 (19:05):
Yeah it's certainly unfortunate that you know the
vocal minority have sullied theindustry for so many.
As we wrap up the episode, then, peter, one of the well, I
guess the final question I'vegot for you we often talk about
in our market wraps what the buysentiment is at the time.
You know, this week, this month, this fortnight, whatever.
What are the buyers doing andwhat are they saying?
(19:25):
Given the fortnight, whatever,what are the buyers doing?
What are they saying, given the, the market conditions we're in
at the moment?
For your vendors that are onmarket at the moment, and the
ones that you're talking with,what do you think is the?
The major motivator for peoplethat you're dealing with at the
moment?
Are we, you know?
Are you seeing a sense of, uh,people who are under some
financial distress, or are youreally just dealing with people
that are making, you know,choices about just where they
(19:46):
want to be in their life and andnow's the time for them?
Speaker 1 (19:49):
I think overwhelmingly.
The major vendor profile thatwe're seeing in the market, not
just with our agency but acrossthe board, is still investment
properties being sold off and alot of downsizers, baby boomers
selling long-held investmentproperties at the moment as part
of their retirement strategy.
The property's positivelygeared, they're about to retire
(20:13):
or have retired, so the taxationbenefits are somewhat
diminished.
As I say, I do note.
I do note that there's aabnormally high number of
prestige five million dollarplus listings that have come to
the market this January,february and, if I can speculate
(20:33):
on what I think is happeningthere, there was a run of very
good sales in that pricecategory in the middle of last
year and it's tempted a wave ofsellers into the market and at
that sort of price bracket andit remains to be seen whether
(20:53):
there's buy demand to continueabsorbing the increased stock
levels at the prestige levels.
Because what happens at theprestige market?
You can really overpay reallyeasily and that is you fall in
love with a property.
There isn't anything elsethat's been on the market like
it for six months.
You think there may not beanything else on the market.
(21:14):
Like it for six months, youthink there may not be anything
else on the market like it forthe next six months.
You really want this particularone, you can afford to pay the
premium to get it.
You buy the premium and thensix, seven months later there's
a wave of similar listings thatcome to market and end up
selling for 15 20 percent belowwhat you've paid.
And it's at that point you'verealised that you've gone too
(21:36):
hard and too heavy.
But the reason you did isyou're in a competitive
situation with only one listingon the market and the price
swings in a falling market andthe haircuts that people receive
is actually much higherhistorically in the higher price
points than it is in the lowerprice points.
(21:56):
Because when the tide goes outin the prestige market, a surge
of listings can come on and thebuyers say, hey, well, you know
I've got a range of choices here.
I'm going to be an opportunist,so I'm not saying that's going
to happen to the prestige marketto begin this year.
But I will say that I don'tbelieve the buyer demand will be
(22:17):
there to absorb all of theseprestige listings that have come
to market and already there'stoo much stock on the market for
the new year that is notselling for me to think that
there's any chance of a strongor a robust market around the
corner.
Speaker 3 (22:35):
Yeah, really good insights, Peter, and I think
certainly the future is going tobe very interesting in a week
or two's time when the RBA domake their decision and the
impact that may have on thelistings on the market.
I know that you've seen someinteresting things on the
hustings and I certainly knowthat our listeners love to hear
about what is actually happeningand what is likely to happen.
So thanks so much for coming inand we look forward to chatting
(22:57):
with you next week.
Good on you, Kieran.
Speaker 1 (22:59):
Thanks very much.
Speaker 3 (23:00):
And thanks to everyone for listening to
Current Market Insights.
We look forward to speakingwith you next time.
Speaker 2 (23:04):
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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