June 4, 2025 • 47 mins
Hosts Ciaran O'Brien and Peter O'Malley unpack Premier Chris Minns’ potential pivot to Glebe Island for housing development, after the collapse of the Rose Hill Racecourse plan. With Sydney’s median house price pushing $1.486 million and economic growth flatlining, we examine the state’s struggle to address a worsening housing shortage. From strata issues to land tax pressures and investor flight, this episode highlights the complex dynamics facing buyers, landlords, and policymakers alike.
As mentioned in this episode, find the latest Harris Partners Real Estate Report here.
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 co-host and
good friend, mr Peter O'Malley.
Peter hello, kieran, great tosee you, great to be with you
again, peter.
I want to reverse things alittle bit this week and just
change up the way that wedeliver the podcast.
We always start with a cooltopic and then kind of finish
with our raps.
But I'd love to start tonightby just getting a bit of a recap
(00:52):
on some things that have beenhappening in the property space
across Australia, but also inSydney.
I saw an article in the Heraldthat was released.
I saw an article in the Heraldthat was released two days ago
now that talks about ChrisMinn's plan.
Obviously, as our listeners I'msure will know, the New South
Wales government had a very boldplan to rezone and rebuild Rose
(01:15):
Hill Racecourse, reclaim it andturn it into a housing space
25,000 dwellings or somethinglike that, I think it was and
recently the Turf Club or theJockey Club decided that they
didn't want to go ahead withthat proposal and it's been
shelved.
Chris Minns, according to thisarticle, has suggested that
Glebe Island might be anothersuitable location.
(01:36):
Now I know Glebe Islandreasonably well.
I mean, I drive past it quiteoften.
I wondered, pete, if, to startoff the episode tonight, you
might be able to, I guess, givea little bit more insight to our
listeners into glib islanditself, but also what this
proposal looks like and whetheror not you think it's a
reasonable alternative so at nostage has chris min said that he
(01:58):
would use all of the sites yepum for housing, but he's
suggesting through the mediathat it does not.
Speaker 1 (02:07):
In his words, it's not necessarily part of a
fallback plan, despitespeculation was next in line.
He says there's a couple ofoptions that we're looking into
right now and he said that itdoesn't necessarily need to be
all used as housing, so it couldbe part port, part housing.
Lots of opposition to to theidea that the port could take
(02:31):
housing on and it could costjobs.
Rose Hill Racecourse was a bigblow to Premier Minns, there's
no doubt about it, because Ithink he really had that slated
in his own mind and his ownstrategy for breaking the back
or, you know, making a largecontribution to the housing
(02:51):
supply in this city.
So essentially, as we'vetouched on in previous podcasts,
his legacy is in, you know, isin deep jeopardy here, where he
knows that his term of thepremiership needs to be about
creating new housing in Sydneyand he has barely made a start
(03:14):
on it.
Speaker 3 (03:15):
To be fair, I guess in his defence you mentioned on
the podcast last week or theweek before that one of the
things Chris Minns had said wasthat he was committed to
finishing projects right, and hewas talking about
infrastructure and typically, Ithink, transport in that space.
But he has made the point thathe wants to, you know, be known
as someone who follows throughand completes the task, because
I guess it does kind of fit thathe is looking for alternatives.
(03:39):
I know that the Bays Precinctis something that's kind of been
worked on and it's a proposalfor, you know, roselle and the
Balmain Foreshore.
It's a, you know, there's I'veseen some original plans.
There's new walkways andwaterfronts and restaurants and
all kinds of things.
This article is suggesting thatGlebe Island was kind of slated
for part of that precinct anywayand that this, you know, may
(04:00):
yield up to 10,000 homes.
Given that those proposals forthe precinct were pretty well
established and already outthere for the public to look at
initially, do you think thatthere's any, you know?
Do you think that he'll be ableto get this project moving
forward without really too muchopposition?
As you say, there is some fromthe ports?
Speaker 1 (04:18):
Oh, there'll be opposition If you take any time,
you take an iconic location inSydney like that out of play and
push it in any direction.
The same amount of people thatyou please you essentially
alienate.
I was going to say piss offthere, so I might as well follow
through with it, just keep itin.
Yeah, yeah, that's it, you pissoff twice as many.
So I think what Chris Minnssaid at the end of this article
(04:46):
is probably a true insight intohis thinking, kieran, which is
in the past we've had a culturewhere we've tried to rule out
new housing developments ratherthan rule them in.
So he welcomes debate.
I think Chris Minns wantspeople talking about this
because whilst they're talkingabout what should be the next
major housing site, what they'reinadvertently doing is
(05:12):
justifying the fact that we needit.
Yeah, um.
So I think this is a bit of aan ambit claim, um by chris
minns just to get theconversation going.
Um, yes, he did say that inregards to um absorbing a lot of
the trades people in the cityto finish off transport projects
, and he didn't want to cancelthose transport projects to let
more labour leak back into theeconomy, because labour does
have a poor record of finishingtransport infrastructure.
(05:37):
He wanted to see that through,but the reality is that when
Gladys Berejiklian and BarryO'Farrell came to power, they
did have a mandate to bringmuch-needed infrastructure
overhaul to the city, which theysucceeded in doing, not in
their first term, but theysucceeded in doing through the
(05:57):
O'Farrell, baird, berejiklianand then Perrottet governments.
Chris Minns was elected on amandate of creating housing and
he was very, very strident inMarch 2023 that he would create
tens of thousands of newdwellings in the city to house
(06:19):
all of the people that thefederal government have invited
in, and he's barely made a dent.
Housing approvals we didn'ttalk about this last week the
people that the federalgovernment have invited in and
he's barely made a dent.
Housing approvals we didn't talkabout this last week, but last
week when the housing approvalnumbers came out, they'd gone
down yeah so the population iscontinuing to grow, as you can
see on the streets when you'redriving around everywhere you go
in sydney at the moment.
(06:40):
I had to go to.
I had to go west on saturdaynight and I know it's vivid, but
I tell you from haberfield,where I got onto the m4 heading
west to st claire, there's fourlanes of traffic at 5 30 in the
afternoon coming back into thecity yeah, yeah the city is it's
horrible.
(07:00):
It's overcrowded, it is cooked,so there's not enough room for
people on the roads and there'sclearly not enough housing for
the people that are in the city,and that's evidenced by what's
happening at rental open housesat the moment.
So I believe chris minns isunder pressure because
infrastructure doesn't happenovernight and he's struggling.
You know his signature housing,um, a signature housing, uh
(07:25):
location has just been voteddown, last week, as you say, by
the Jockey Club.
Speaker 3 (07:30):
Yeah, yeah, look, he's certainly on the ropes, I
think, and he is just swinging,hoping for a solution Before we
move on.
One of the things in thearticle that I find interesting
is the suggestion was that theand I mentioned this just before
, but the site might yield up to10,000 homes, which is
obviously not.
You know, it's less than halfof what Glebe Island.
Speaker 2 (07:51):
Glebe.
Speaker 3 (07:52):
Island right is less than half of what was proposed
in Rose Hill to begin with.
But one of the things, one ofthe other comments in the
article talks about a spokesmanfor the cement group, cement
Australia, the lobbyists forthat industry, and their or his
comments, or their comments,were that if the proposal goes
ahead and the port facility,particularly for the cement
(08:13):
space, is shifted to Port Kemblaor Newcastle, that that shift
alone might add 50 billiondollars in costs to the
construction sector.
Now, given that this is aproposal to get housing up more
readily and more efficiently andat an affordable cost for
people, does this not like?
To me that just seems likeinsanity.
Right to disrupt a whilst thelocation's great, disrupting an
(08:37):
entire sector to just pushthrough on your promise or your
commitment at inflated costs andat a time when approvals are
down, et cetera.
It just seems like a recipe fordisaster.
Speaker 1 (08:48):
Oh, 100%, kieran.
You've read the Herald articleon this.
I read the Daily Telegraph oneand some of the comments that
the Daily Telegraph had werealong those lines.
So great point you make.
Paul Nicolaou said Governmentmust not gamble Sydney's future
on a short-sighted, economicallydestructive decision, that's it
(09:08):
, turning a working port intohousing.
Margie Osman said thousands ofjobs are related to these port
activities.
It would dislocate a wholegroup of Sydney workers.
Alistair Kelch said anythingthat increases the cost of home
construction is the last thingthat Sydney needs at the height
of a housing crisis.
(09:28):
And and clearly, sending youknow the cement providers, as
you've just outlined, back outof town and having it
transported back in at a hugecost would do exactly that.
If you go back to WestConnex abit of a raw topic.
Speaker 3 (09:47):
No one in.
Speaker 1 (09:47):
Roselle has forgotten that.
Yeah, a bit of a raw topic forour audience, but if you go back
to how the Liberal governmentat that time managed that, they
had some outrageous designs thatthey leaked to the media I
don't know if you remember them,but basically spaghetti
junctions and all of it allhappening around the end of
(10:07):
anzac bridge and where the citywest link and victoria road all
come together and it made itlook like you know one of those
american metropolises and itwould have been ghastly.
It wasn't discreet andunderground like it is now.
And I don't think that when theState Government at that time
was releasing those conceptplans, they ever truly expected
(10:32):
to even attempt to get thoseplans through.
What they were doing is theywere managing the public's
expectations so that when theyfinally came through with the
eventual plan, everyone wentwell, that's a lot more
reasonable than we started with.
So Minns may or may not be doingsomething there where he's
picking some sacred sites andsaying, hey, well, we need more
(10:54):
housing.
There's a place there whenMinns got it wrong is.
He said at the start of hispremiership that he believes
that Sydney-siders understandthe need for a lot more
inner-city units.
Speaker 3 (11:08):
Yeah, high density yeah high density.
Speaker 1 (11:10):
I don't know who you hang around and socialise with,
Kieran.
I know who I hang around andsocialise with, but nobody was
in agreement with what ChrisMinns felt that Sydney-siders
were looking for at the start ofhis tenure.
If you ask me, he's inventedthat.
Speaker 3 (11:26):
Yeah, he's invented that narrative.
Some bureaucrat somewhere hasgiven him that kind of line and
said this is the solution, thisis the narrative to bring the
people with you.
Speaker 1 (11:34):
The reality is is that if you ask most
Sydneysiders, they think theplace is full, and why are we
continuing to invite literallyhundreds of thousands of people
here each year?
In terms of interesting sitesand controversial sites, where
it's like, yeah, okay, let'stalk about that.
(11:54):
There's a site that's beenmentioned in the last week that
I like, and that's Long Bay Jail.
Speaker 3 (12:01):
So I mean, La Perouse has just had a new.
Is it like an Aboriginal LandCouncil or an Aboriginal Reserve
like allotment set aside outthere, which is obviously not
far from Long Bay?
I don't know whether you'rejust making a joke there, or has
Long Bay actually been proposedas a housing site?
Oh, absolutely yeah.
Speaker 1 (12:21):
Yeah, but see, look, a working port.
You can't put housing on aworking port, where you
shouldn't put housing,particularly in a city like
Sydney, but Long Bay Jail.
You can rehouse a jail back tothe city fringe in a cheaper
land location and it's not withrespect to those that are
(12:43):
involved with the jail andthere's always unintended
consequences consequences, aswe've always said, but there's
not the same impact or loss ofproductivity to the overall
economy as there would be at aworking port.
Speaker 2 (12:53):
Yeah.
Speaker 1 (12:54):
So, look, I'm just again.
I'm just saying that's one sitethat's been proposed where it's
like, well, at face value,without giving it deep, deep,
deep thought, that could makesense rehouse the jail, and then
the jail becomes what is nowthe.
The long bay jail becomes theuh, you know that's.
This is a pretty substantialland holding in a, in a location
(13:14):
that a lot of people would liketo be, but there will be
associated costs.
That's kind of a one road in,one road out, yeah, scenario to
get there, isn't it?
Speaker 3 (13:22):
oh it is, yeah, yeah, I mean, that area has evolved
incredibly since I was a kid,anyway and used to.
You know, I learned to playgolf out there at St Michael's
some 30-something years ago.
Speaker 1 (13:31):
That's why I was there for golf.
I wasn't going to the junkyard.
Oh yeah, that's right.
Speaker 3 (13:34):
Yeah, that's why I saw you there.
Yeah, yeah, you look good inyour.
It doesn't escape me, though,that both of those sites let's
use Glebe Island and Long Baythey're both in prime real
estate.
Right To me, it seems likethey're clutching at locations
that they potentially couldclaim, but they're also not
(13:54):
going to make any of thataffordable.
It's not going to be practicalfor people to live there on a,
you know, Although, mandated.
Speaker 1 (14:01):
So if I can jump in there, if you go back to our
chat about tigers last week, orthe week before the government's
pushed it forward and said goknock yourself out, build it,
but there's 59 affordablehousing in there now 59
affordable housing dwellings, aswe, as we laughed at the time,
is not going to turn the housingcrisis around, but it's a
(14:23):
template for what you will seegoing forward.
Speaker 3 (14:26):
Yeah, oh, look, of course It'd be interesting to
look.
I think, personally, it's goingto be very interesting to
follow this story, particularlyas someone who was in the Navy
for many years.
They use Glebe Island whenGarden Island is full as
overflow, and I can't imaginethat, you know, the Australian
military is just going to givethat up for Chris Minns to put
some apartments up, to be honest.
(14:47):
So I'll certainly be keeping myeyes on this one as we move
forward.
Then I would love to get somedata.
I know the Australian HomeValue Index was released this
week, and then we've also gotsome market details to cover off
before we move on to a topic, amajor topic I want to talk
about.
So, if you can, it's been alittle while since we spoke
(15:09):
about the home value index, soyou're able to just give a bit
of a I guess, a recap for ourlisteners as to what the index
is, yes, a cotality, which isthe old core logic.
Speaker 1 (15:18):
According the Sydney median house price as of June 1,
for $1.486 million, kieran.
Speaker 2 (15:26):
Yep.
Speaker 1 (15:26):
And the next most expensive capital city as far as
median house price goes isactually Brisbane.
$1 million neat and $422 is themedian house price in Brisbane.
Melbourne's got a median houseprice of $939 and Canber's got a
median house price of $939 andCanberra has a median house
price of $975.
(15:47):
So you're seeing there thatwith the next most expensive
capital city in Australia afterSydney, the Sydneysiders are
having to pay 50% more to livehere.
Speaker 3 (15:59):
Yeah, and for many people it's probably a shock, I
think, to hear that it'sbrisbane, because we just, you
know, obviously we've talked alot about how brisbane's seen a
boom over the last few years,particularly through covid.
There was a lot of peoplemoving there, but I I suspect
most people who don't pay closeattention just naturally assume
that melbourne is going to bethe next most expensive because
it's the next most popular city,right?
Speaker 1 (16:21):
it's the next most popular city.
Right, it's the next mostpopulous city.
It's definitely not the nextmost popular city.
Speaker 3 (16:28):
Oh, I think it's declining in popularity, to be
honest.
Speaker 1 (16:32):
Yeah, so the way that place is being run at the
moment, there's a massive leakthere and has been since COVID
and the way it was managed.
So I think that's the big onethere out of those numbers.
When it comes to apartments,that's a little bit more of a
closer field there where itlooks like Sydney's running at a
median house price forapartments over $800,000.
(16:55):
But there's so much variance inthe apartment sector, both in
location, standard, build ageand offering that it's a little
bit harder to get a nuanced feelthere.
So I think discussing the medianhouse prices is the one.
In the last quarter, sydneyhouse prices rose 1.3%.
(17:15):
So if you annualise that that's5.2%.
That's back over the rate ofinflation.
So it wasn't hovering at thoselevels in recent times and that
might just be a nice segue.
To go straight into today's GDPnumbers, which, reading the
(17:35):
forecast yesterday, I saw thatCBA forecasts the Australian
economy will have expanded by0.3% in the March quarter when
the numbers are released, andWestpac have downgraded their
GDP forecast to 0.1% for thequarter.
So they were at differing odds.
(17:57):
And then, lo and behold, thenumber did come out today.
Australia's economy grew 0.2%percentage points in the March
quarter, an absolute shocker,according to one finance
journalist who said that GDP percapita is minus 0.4 in the year
to March.
Speaker 3 (18:15):
Yeah right.
Speaker 1 (18:17):
So productivity has gone backwards as well.
So what we're seeing there isthat inflation is still in the
mid-twos, but the economy isgrowing at a rate of 0.8
percentage points.
So what is happening is thegovernment can stand up and say
we've got inflation undercontrol.
The economy is slowly butsurely growing, but not greatly.
(18:39):
But where the inflation rate is, and what the rate of growth is
, the average household is goingbackwards, which is no surprise
to most people listening.
Speaker 3 (18:47):
Yeah, I suspect most people feel that Certainly they
don't need the numbers to tellthem.
Did the GDP figures talk aboutwhat the primary driver was or
what groups of you know productor activity has helped boost GDP
in this quarter?
Speaker 1 (19:04):
No, I didn't go that deep into it, I was just looking
at the headline numbers.
What it does do is probablycause a rate cut in July,
basically a lock, subject to anymore rogue data.
Interestingly, kieran, becauseI know you've been caught up in
some other things, the rbaminutes were released this week
(19:29):
from their may meeting and quoteunquote the rba considered a
0.5 interest rate cut to reachthe terminal cash rate sooner to
provide greater insuranceagainst more adverse scenarios.
Speaker 3 (19:43):
Interesting, which is in line with what you said was
possible.
But you know, when theyreleased the statement they did
make the point that whilst itwas on the table it wasn't quite
, you know, the conditionsweren't quite right that
employment number probably tookit back away as well as the
creep up in the underlyinginflation from 2.7 to 2.8.
Speaker 1 (20:04):
But yeah, when we said on that podcast, look, 0.5
can't be ruled out.
Here it's in the zone a lot ofpeople said to me there that
they absolutely saw absolutelyno chance that that could
possibly happen.
But here it is.
It's come out in the Mayminutes.
Speaker 3 (20:20):
It's on the record.
Speaker 1 (20:22):
It was on the table yeah, the uh.
Speaker 3 (20:24):
Just before we move on, then I the only comment I
want to make on the, the averagehouse price.
I find interesting that you,you know annualized growth of
shade over five percent for theyear, uh, but at a time of
restrictive you know interestrate settings, still, you know
we've had very little relief, uh, but we still had a five
percent growth in the market,which you know interest rate
settings still, you know we'vehad very little relief, but we
(20:45):
still had a 5% growth in themarket which you know just shows
the resilience of the city.
Speaker 1 (20:47):
Oh, we haven't had a 5% growth.
Sorry If the current rate ofgrowth was annualised.
Speaker 3 (20:50):
Oh, if it was maintained, right, okay.
Speaker 1 (20:52):
Yeah, so it was 1.3% for the quarter Annualised.
That would work out.
Speaker 3 (20:57):
Yeah, okay right, oh Okay right.
That makes more sense.
Well, given that we've had a1.3% growth for the quarter and
every week we talk about whatthe auction numbers are and what
the clearance rate is doing,can you run us through the
clearance data for this week,keeping in mind for our
listeners that may have missedour last one?
It was one of, if not the firstweek that we've reported a
(21:18):
clearance rate over 50% for avery long time.
Yeah, since February, sinceFebruary so week that we've
reported a clearance rate over50% for a very long time, and
certainly Since February.
Speaker 1 (21:23):
Since February, so the first few auctions of the
year when they cut rates andstock.
You know New Year stock wascoming on.
It cracked 50% twice inFebruary and then reverted to
where it's been running sincelast August, which is in the mid
to high 40s.
Speaker 3 (21:37):
Yeah, well, I think we hit a low of 44 somewhere in
April, possibly mid to earlyApril.
So last week we hit a low of 44somewhere in April, possibly
mid to early April.
So last week we had a bit of abounce.
How has this week gone for theSydney market?
Speaker 1 (21:46):
Look line ball interesting number 49.5%.
Speaker 3 (21:50):
Overall.
Speaker 1 (21:51):
Overall midweek and Saturday auctions, but on heavy
volumes, so not a bad result.
I saw Louis Christopher of SQMResearch, who owns these results
, say that yes, it was below 50only just, but given the volumes
it was a pretty decent result,and I've seen locally some
properties that didn't sellunder the hammer last weekend
(22:12):
have since been marked up assold, so it probably did trickle
past 50 percent.
Um, you know if you considerthe sold after yeah, those ones
by the end of the week.
So a decent result.
And on the ground we're feelingthe same thing.
We're seeing some good results.
Buyers are more prepared to act.
They know there's more ratecuts coming.
(22:33):
How I would describe it?
You know, you look at that asyou say.
Annualized, the market isrunning on trend at about five
percent if this rate of growthkeeps up, which is which is
pretty healthy.
So what that's telling us isthat the sydney property market
probably doesn't need any morerate cuts at the moment, but the
broader economy does.
Yeah, so the broader economy.
(22:54):
This is really interesting.
This is a nuanced point the rbaflagged a few weeks ago house
prices are not our issue.
Yeah, we're not here to runmonetary policy for the broader
economy based on what houseprices are doing.
So basically they're saying ifhouse prices are too high and
are rising at a time when theyshould be falling, it's because
(23:17):
the government are piling up toomuch demand and haven't done
their job on bringing supply tomarket.
Don't try and make that theproblem of Martin Place to deal
with.
Speaker 2 (23:28):
Yeah.
Speaker 1 (23:29):
Our job's to manage inflation and job stability and
price stability in the economy,and they're doing a good job of
that.
But it was just good that theyreally set those guidelines that
, as we cut interest rates tosupport the broader economy, if
house prices pop, don't startthrowing rocks at us, because
(23:50):
we're not the ones that haveinvited a million people into
the country in the last fewyears and we're not the ones
that have got a structure and abureaucracy that's choking on
itself and you can barely put upa tent, never mind build 1.2
million houses that they'vepromised.
Speaker 3 (24:09):
Oh, absolutely.
I mean Sydney house prices haveconsistently performed well for
decades and, as we've talkedabout, the RBA can't base
economic policy on the value ofa four-bedroom house in the
Sydney suburbs.
I mean that's absurd.
They have to look at jobs,employment, you know, business
viability, economic growth,exports, you know it's a much
(24:32):
larger equation.
The side effect, of course, ishouse prices typically, do you
know, move as we talk about.
They're up and down pattern,based on seasons and interest
rates et cetera.
But you know, as we often talkabout, I can't help but think
you know one of the unfortunateside effects, of course,
increased numbers of peoplecoming in house prices going is,
you know the rental markettends to spike and that of
(24:55):
course then contributes to CPIand inflation and you know the
cycle just kind of continues.
It's an unfortunate side effect.
But, as you say, it's not theRBA's problem to fix housing or
to support it or to back it orto whatever they're looking
after the cash rate.
Speaker 1 (25:08):
It was really good that they came out and were
really really clear is thathouse prices are not under our
remit.
Speaker 3 (25:13):
Yeah.
Speaker 1 (25:14):
So if this pops, real estate agents will like it and
people will throw rocks at theRBA and they're saying, not our
problem, not our remit.
Speaker 3 (25:22):
Yeah, it's good for jobs because all these people,
when there's a boom, you knowthey'll come and join the
industry to try and capitalise.
Speaker 1 (25:29):
Yes, that's what Sydney needs more real estate.
Speaker 3 (25:30):
That's what they need .
That's what they need.
All right, as we move on then,pete, I want to finish up
tonight's episode.
Often we talk about your realestate report, which is a
newsletter you put out throughyour agency in Balmain, harris
Partners, and, at the risk of,you know, inflating your ego a
little, you usually write prettyinsightful articles, I find,
(25:54):
and you've written a great onein this this month's episode, or
this month's edition, I shouldsay, which is the six unreported
trends in the current market.
And given that our podcast isliterally the current market
insights, I thought it might bea good idea to run our listeners
through this article and, Iguess, give an audio
(26:15):
representation of what those sixunreported trends are and how
they influence the market inSydney.
Speaker 1 (26:22):
Thanks, Kieran.
Well, look the first of thesesort of unreported trends are
and how they influence themarket in Sydney.
Thanks, Kieran.
Well, look, the first of thesesort of unreported trends that
are playing a big role in themarket is apartment buyers are
hypersensitive to strata issues,and well-run stratas and
disciplined stratas sell well,sell quicker and sell for more
(26:42):
than buildings with defects,obviously.
But buildings and this isprobably the tragedy and why I
touched on this topic there's anumber of buildings around town
where, at their core, they'regood buildings.
Speaker 3 (26:56):
Yep.
Speaker 1 (26:57):
But they're poorly managed because every grievance
that an occupant has, whetherit's a tenant or an owner there,
gets captured in the minutes.
And as a real estate agent, yougive the prospective purchaser a
strata report before they maketheir offer.
They read the minutes and seethat the building's full of
conflict because Johnny had themusic up too loud last week and
(27:22):
Sue's worried about the airconditioning running at night,
and everyone's grievances arecaptured in the minutes and then
make their way into the Stratareport and scare buyers off.
So there's things that need tobe in a Strata report that are
not optional.
A buyer's entitled to knowabout them the finances, the
expenditure, the special levies,the, the budget, where it's all
(27:42):
going.
But I think and you're seeingthis in another way with the
criticism and the strata managerwho was struck off recently for
mismanagement there's a realarea of opportunity to clean up
strata management and get theseapartment buildings running
better for the ultimate benefitof the occupants whilst they
(28:05):
live there and the owners asthey decide to sell because of
all of the press with mascottowers um, what was the one in
homebush?
the opal, opal tower, um buyersare hypersensitive to strata
issues and they're nowoverreacting, if I can say, in
some instances not every, but insome instances they're
(28:26):
overreacting on nothing, burgers, such as the damage that's been
done to that sector of theproperty market yeah, look, I'm
not surprised as someone whoowns in strata.
Speaker 3 (28:37):
I just, yeah, it absolutely baffles me the, the
content and the things that goto the strata managers to be
resolved and the things that,yeah, you know, everyone's got
their grievances in life, but,as you say, had I.
Uh, you know, if some of thethings that come through our
strata, for example, were madeaware to me when I bought some
years ago, I would have walkedaway, that's for sure it needs a
(28:59):
strong chairman that sendspeople with nonsense issues away
.
Yeah, absolutely.
Which is hard to find right,Send them packing Hard to find a
volunteer In this.
Speaker 1 (29:08):
PC world we're in.
I guess it is, but you knowit's not doing anyone any
favours.
You know documenting all ofyour minor grievances in a
strata report and then the nexttime someone decides to sell
they get 50 grand wiped offtheir value.
Because it's a whingy wine,peter doesn't like yellow
flowers in the garden.
Speaker 3 (29:29):
Yeah, no, exactly.
The next topic you mentioned inyour trends is rental
regulation.
Now you, I think, correct me ifI'm wrong, but you're
referencing regulations designedto protect tenants and, you
know, give them some certaintyand security in their housing.
How, I mean, given that thatsounds, you know, broadly, like
(29:55):
a great initiative, how is thatsomething that's actually
impacting market conditions?
Speaker 1 (29:59):
What we say in the report here is that the
government has inadvertently yetdecisively tipped the scales
against landlords.
So no grounds, evictions, theimposition of a re-letting
restriction period, a new petpolicy, an inability to enable a
proper competitive biddingprocess for in-demand properties
(30:20):
are all in the new regulationsimposed on landlords in recent
times.
So say the no rental bidding,for example.
Agents were abusing that and itneeded to be tidied up.
Don't get me wrong.
But here we have here where thegovernment have effectively
capped, in an open marketoperation, a landlord's ability
(30:42):
to get full and fair you knowrent for their property in an
environment where rentalproperties are in demand and
therefore the price is going up.
Now, if the price is going upbecause the government has, let
me repeat it again, invited toomany people into the country and
not built enough houses, it'snot up to the individual
(31:07):
property investor to startcompensating tenants for that.
Speaker 3 (31:09):
Yeah.
Speaker 1 (31:10):
And that's where we've got to, where the
government hasn't done its joband they're now pushing the pain
of fixing or putting Band-Aidsolutions onto the private
sector because they haven't donetheir job, they haven't met
their own brief, their ownmandate, which is to manage
migration levels at asustainable level, which they
(31:31):
haven't done.
It's very clear Just go for adrive peak hour in Sydney and
you can't move and clearlynowhere near creating housing
for these people that have comein.
And it's not playing out in thesales market.
We just discussed the salesmarket 1.3% growth for the last
quarter, which was the bestquarter in some time.
(31:51):
So the lack of dwelling supplyand the excess people in town is
not playing out in propertyprices, it's playing out in the
rental market.
Speaker 3 (32:00):
Yeah, and it has to be said too that even removing
rental bidding, you know, theargument was obviously that it's
fair out in the rental market.
Yeah, and it has to be said toothat even removing rental
bidding, you know, the argumentwas obviously that it's fair on
tenants et cetera, and you knowit's.
But it doesn't change the factthat people come and overbid
silently anyway.
I mean, when you get to arental and there's 150 people
lined up to get it, and let'ssay it's $500, there is always
(32:21):
going to be someone there saying, well, there's so many people
here, I just want to lock it in,I'm going to pay more anyway.
So even though bidding is notopen and transparent, it's not
making it cheaper for tenantsanyway.
It's just restricting theamount of rentals out there,
which is part of the broaderproblem, as you say.
Speaker 1 (32:38):
Well, look, if it was just that one change in and of
itself, as it was originallywhen MINS first came to
government, people would say,well, I don't like it, but
combined with everything else,I'll take the good with the bad.
What this point in the articleis highlighting, kieran, is that
no grounds eviction.
So if you do want to take yourproperty back or you do want a
(33:02):
different tenant in yourproperty, you don't necessarily
get a say on that anymore.
Yeah, so to give you an idea ofsome of the things that are
going on out there, we listed aproperty last week that's listed
with another agent.
Yeah, right, Under the newregulations and I had to double
check this was correct and thatthe other agent wasn't being a
smarty I had to send a copy ofmy agency agreement to a
(33:25):
competitor to show that, yes,the owners had indeed listed the
property on the market andthat's why we were politely
giving the tenants notice toleave so we could tidy it up and
sell it.
Yeah, so that's the sort ofknock-on effect from this
regulation, where I've never in25 years sent a copy of my
(33:50):
agency agreement to a competitor.
Here I am last week, inresponse to these new laws,
having to do that.
There's restrictions on howlandlords can and can't act with
their own property, even ifthey're acting with decency.
They're falling outside theselaws.
And what I'm saying is, whenyou put these, when you stitch
(34:10):
these laws together, this newlegislation together that's been
introduced over the last twoyears, do you know what the
investor says?
I'm not interested.
I'm not interested.
Speaker 3 (34:20):
How much?
Speaker 1 (34:20):
equity is in it.
What's it worth?
Yeah, I know exactly what I cando with that money.
So they're selling out.
And who do they sell?
To An owner-occupier.
Right, we barely sell toinvestors anymore.
We barely sell to investorsanymore.
Every time we sell somethingoff our rent roll, it sells to
an owner-occupier, and that'snot just in this office, that's
across the industry.
(34:40):
I'm hearing it.
Speaker 3 (34:41):
Yeah.
Speaker 1 (34:42):
So the rental pool across Sydney is shrinking at a
time that the governmentdesperately need more investors
in the market to create moresupply for the people that
they've brought into town.
Speaker 3 (34:57):
Yeah, that ties in perfectly to your next point in
the article, which is that oneof the other things that is
prohibitive in the investmentspace is land tax.
Now, land tax has been one ofthose things that's been
contentious for a very long time, I think, but if you can give
our listeners some insight intowhat kind of impact land tax
actually has on the investmentmarket itself, look it says.
Speaker 1 (35:18):
The article says, quote unquote land tax is
driving landlords out of themarket.
Many landlords receive a landtax bill in the first quarter of
the calendar year, a bill thatabsorbs 100 of their rental
income for the first three tofour months of that year yeah
that's like a huge amount.
So the landlord needs to paytheir remaining costs, such as
(35:39):
water, council rates, agentsfees, maintenance repairs and
mortgage repayments from eightor nine months rental income and
again they're severelynegatively geared.
They're having to prop up themoney, prop up the, the mortgage
and the you know keep to keepthe investment going each month.
And then they've got a bigchunk of equity in there and
(36:01):
they say just sell it, put theequity against my home mortgage
where it's non-tax deductible.
I've got other investments Iwant to play with.
I don't.
I don't need this in my life.
Speaker 3 (36:13):
Yeah, especially when you couple it with all the
other rental changes, the stressof tenants, the fees, the
ongoing costs, etc.
Moving forward then, the nextcouple of points talk a little
bit more about the sales side ofthe market.
So underquoting is a topic thatyou talk about here which we
have spoken about to death, andI'm sure we have spoken about to
(36:34):
death and I'm sure we will comeback to many, many times in the
future because it is such ascourge.
On real estate.
You say here that underquotingbites vendors when bidding wars
fails to materialise, which isreally the crux of what we've
talked about in the past.
So I guess we have spoken aboutthe impact that underquoting
(36:55):
has, but how is it?
I mean, you talk about this asa kind of unreported measure in
the market, but I feel like thisis a topic that's pretty out
there and he's talked aboutquite often uh, what we under
quote it's usually, it's usuallydiscussed, kieran is
underquoting hurts or inputnegatively impacts the buyers
right.
Speaker 1 (37:14):
what the article's saying is underquoting hurts or
negatively impacts the buyersRight.
What the article is saying isunderquoting bites vendors Right
.
So what I'm saying is that instronger markets sometimes
agents will say to the vendor Iknow you want 2.1, let me quote
1.75 and a bidding war willerupt and it will probably go
through 2.1.
(37:34):
And what has happened withnumerous examples that I've seen
recently is the bidding wardoesn't materialise.
And it's not necessarily notmaterialising because the market
conditions are not strongenough.
Buyers are fed up.
Speaker 3 (37:51):
Yeah.
Speaker 1 (37:52):
They're fed up with going to auctions and having it
go wildly past theirexpectations, so they're
refusing to partake.
And then the bidding war thatthe vendor was promised, even
though they're under-quoted by10% to 20%, doesn't happen and
their auction passes in for alow price, which damages any
chance of them achieving adecent price, which damages any
(38:14):
chance of them achieving adecent price.
I spoke to a governmentemployee yesterday that is
charged with selling a number ofgovernment properties and he
was telling me how they went toauction on one of their
properties and there were nobidders.
Speaker 3 (38:32):
Right.
Speaker 1 (38:33):
No bidders on this property and he said if there
was a bidder at X on thatproperty on that day they would
have bought it for that.
After the auction on the Mondaythey put it on the market at an
asking price higher than whathe would have accepted on the
day.
Four bidders came in at thatasking price and then the price
(38:54):
went up higher yeah, well and hesaid that's just was evidence
there that people weren'tprepared to partake in the
process.
But when they had certaintyabout where the vendors
expectations were that thisthing will sell, they all rushed
in and that has.
That's what's happened to themarketplace with this.
Systemic underquoting isincreasingly.
(39:17):
Buyers are sick of turning upto auctions and being cannon
fodder.
Speaker 3 (39:22):
Yeah, which you know.
You can't blame them.
I certainly don't.
The Bank of Mum and Dad hasbeen heavily in the media
recently as it pertains to thesales market, but you make the
point in your article that theBank of mum and dad is also
playing a role in the rentalmarket.
Now, the only time I've everseen mums and dads at a rental
inspection is, you know, if thekids are out of town or overseas
or whatever.
(39:42):
So what, what's your take on?
Uh, parents getting involved inrental inspections, in sydney
in particular?
Speaker 1 (39:48):
well, if you've got a um adult child who's studying
at university first time out ofhome, they don't have a rental
history, you know, and you wantthem to live independently as a
parent and get started and youknow, move out of your space.
Yeah, do all those sorts ofthings.
You know how hard it is to toto gain credibility, um, on a
(40:10):
rental application, when you'vegot no history.
Speaker 3 (40:12):
Yeah.
Speaker 1 (40:13):
So increasingly, parents are backing up the kids'
rental application because themarket is so fierce as we've
described.
Yeah, and it's not going tochange.
Speaker 3 (40:22):
So is this a case of parents making the application
and then letting the child livethere?
Speaker 1 (40:27):
or just coming in as supporters and saying look,
paying the rent sometime, beingguarantor for the rent going on
the lease Paying up front thatkind of thing Paying the rent
sometime, being guarantor forthe rent going on the lease,
paying up front, that kind ofthing, all sorts of things.
Speaker 3 (40:35):
That's right yeah okay, which again just makes it
even more competitive in amarket where it's already tight.
Speaker 1 (40:40):
Yeah, that's right.
Well, it's very, very common.
We lease a lot of propertiesaround Camperdown to
international students.
Very common for Chinesestudents' parents to pay 12
months rent on the first day.
Speaker 3 (40:54):
Yeah, yeah, oh look, I've experienced that myself,
you know, especially around theUniversity of Sydney.
Speaker 1 (40:59):
Yeah, of course you know it's the Chinese bank of
mum and dad.
But if you've got a Chineseparent in China paying 12 months
rent straight up front I hearit quite often as they're
reviewing an application in therental department here and
they'll say to the landlord look, there's no risk, you won't get
paid because you get.
Speaker 3 (41:19):
You're getting it all on day one.
Yeah and exactly.
And how does anyone elsecompete?
Right, I've been to so many, Ihave shown so many rentals over
the years where I have, you know, like, say, two young guys or
two young girls or whatever,coming up to me afterwards just
saying what do we need to do?
Because we've been trying formonths, we did.
And I would say to them put inan application like everyone
else.
But this is kind of what you'recompeting against, these people
that are dropped six months upfront.
In some cases we might betalking like $20,000 or $30,000
(41:42):
up front.
Speaker 1 (41:43):
I think it's $40,000, $45,000.
You're talking $900 a week for12 months.
Speaker 3 (41:49):
For 12 months.
Yeah, some of these six to 12months is a huge drop of cash.
Speaker 1 (41:54):
For 12 months, yeah, but yeah, some of these, you
know six to 12 months is a hugedrop of cash, so it's not a
massive trend, but it is outthere.
Because the media made a very,very big issue, of course, when
the bank of mum and dad were outthere helping kids buy at
auctions, and you'll see anarticle every second week where
dad buys daughter and mum helpsson and all that sort of thing.
But most people can't relate tothat.
But more and more people canrelate to.
(42:17):
We've come down from thecountry to attend the rental
open house with our kids who aregoing to university or just got
their first job here and wejust want the real estate agent
to know we're good people andall we want is a good property
for our kids and we'll we'llstand behind the application.
We just need them them to getstarted and get going and it's
(42:37):
just sad really that that'swhere the city's at at the
moment.
We have good people that arecoming from the bush, kids that
are moving from the suburbs tomove close to the inner city to
kick off their new job as anintern or whatever Can't get
basic housing.
Speaker 3 (42:50):
Yeah, yeah, as we've talked about, there's so many
factors that have made this timeparticularly tough, and that's
why you know there's not manylandlords that are going to turn
down six or 12 months rent paidup front at a time of cost of
living pressure, right?
The final point in your articlethen ties everything really
together.
You know you talk about thefact that developers aren't
interested in taking on newprojects.
(43:12):
We have said in this episodealone, but also in many others,
that approvals are at anall-time low, housing supplies
are at an all-time low,immigrations that are high, cost
of production, labour materialset cetera is at an all-time
high, and now all of thosefactors are coming together and
developers aren't interested inplaying the game.
Given that, again, you knowChris Minns and his government
(43:33):
has a mandate and a promise todeliver for the people of New
South Wales.
How much is this having aneffect and how serious is this
going to be over the you knowthe coming years?
Do you think?
Speaker 1 (43:45):
Oh look, it's a perfect storm.
I think that's what they callit, isn't it really?
Yeah, so you know, we've hadunrenovated terraces and
big-time apartment developerscome through and say, yeah, this
might just tie us over for alittle while.
It's like why do you want this?
And he's like I don't.
He said, peter, I don't mindbuying this, renovating it and
(44:05):
reselling, and as long as I atleast break even, that's good
enough, as long as I can justkeep my tradies going until this
whole scenario breaks in ourfavour.
But no feasibility on certainsize projects is stacking up at
the moment.
Speaker 3 (44:22):
Do you think?
The pessimist in me says thatthis scenario may never break?
Speaker 1 (44:28):
You know, I wonder.
No, it's all cycles.
No, it'll always break.
Speaker 3 (44:32):
I mean, I wonder, obviously there'll be easing of
cost of living, there'll beeasing of supply costs, et
cetera.
But I wonder truly, you know,do things ever really go back In
a supply and demand scenario?
Do they ever truly go back totheir baseline?
Because I feel like costs arealways going to be slightly
inflated.
Speaker 1 (44:48):
Oh, this is what Japan have had, not China Japan.
There's disinflation, which isthe rate of inflation is falling
.
That's what we've got inAustralia disinflation, and then
there's deflation where thecost of things are going
backwards, but that's one way itcan correct is deflation, where
(45:10):
suddenly we just have aneconomic event where the whole
deck of cards comes down andwe've got to rebuild it.
Not, but that's one way.
The other way is that I've saidhere tonight that the the whole
equation of too many peoplecoming into the city and not
enough dwellings is playing outin the rental market and the
growth in the property market issomewhat contained at 1.3.
(45:32):
Another way that it can break,or the bubble can pop at a
different perspective, is thatsuddenly property prices go on a
tremendous tear.
And I just said to a clienttonight who asked for a
valuation on his one-bedroomunit is, I said, the reality.
I gave him a valuation that wasa little bit above what he
expected and I said well, here'sthe direct comparable to your
(45:55):
property.
So you can see why I'm sayingwhat I'm saying.
And the reality is, as interestrates come down and the rental
market keeps going up, firsthome buyers are saying now's
probably the time to go all inon buying a property and that's
why the bottom end of theproperty market has probably got
more life in it at the momentthan it has for some time oh,
(46:16):
and couple it with the federalgovernment's, you know, stimulus
and and home equity schemes andall that kind of thing.
Speaker 3 (46:22):
I mean it really is.
It's a perfect storm and I, Iso property prices do pop, tying
it off.
Speaker 1 (46:29):
If property prices do pop, then that puts a different
shade of light on thefeasibility yeah, of course,
because then you know themargins get bigger again, and
yeah of course correct, so thecycle will go around.
But this is a really awkwardpoint in in in the cycle at the
moment and it's driven by thecost of materials and the cost
of labor and the shortage ofboth oh, and just decades of
(46:54):
government mismanagement aroundhousing and allocations, et
cetera.
Speaker 3 (46:57):
Look, really great chat tonight, peter.
It's been a long one for ourlisteners, but I think it's
important we cover it off on,obviously, what's happening in
the market at the moment, andyou know particularly what's
happening with the Minskgovernment, but also I'm glad we
crossed over on the sixunreported trends, because I do
know I value the articles youwrite and I know they are well
informed and insightful, andthere are certainly some of our
(47:19):
listeners who may not be awareof the newsletter itself.
So, for our listeners, I willmake sure I put a copy of that
article up with the podcast soyou can have a read if you like.
As always, though, peter,really great chat and I thank
you for coming in.
Good on you.
Thanks, kieran, all the best.
Thank you, really great chat,and I thank you for coming in.
Good on you.
Thanks, Kieran, all the best.
Thank you, and thanks toeveryone for listening to
Current Market Insights.
Speaker 2 (47:37):
We look forward to speaking with you next time
thanks for joining us on theCurrent 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 co-host and
good friend, mr Peter O'Malley.
Peter hello, kieran, great tosee you, great to be with you
again, peter.
I want to reverse things alittle bit this week and just
change up the way that wedeliver the podcast.
We always start with a cooltopic and then kind of finish
with our raps.
But I'd love to start tonightby just getting a bit of a recap
(00:52):
on some things that have beenhappening in the property space
across Australia, but also inSydney.
I saw an article in the Heraldthat was released.
I saw an article in the Heraldthat was released two days ago
now that talks about ChrisMinn's plan.
Obviously, as our listeners I'msure will know, the New South
Wales government had a very boldplan to rezone and rebuild Rose
(01:15):
Hill Racecourse, reclaim it andturn it into a housing space
25,000 dwellings or somethinglike that, I think it was and
recently the Turf Club or theJockey Club decided that they
didn't want to go ahead withthat proposal and it's been
shelved.
Chris Minns, according to thisarticle, has suggested that
Glebe Island might be anothersuitable location.
(01:36):
Now I know Glebe Islandreasonably well.
I mean, I drive past it quiteoften.
I wondered, pete, if, to startoff the episode tonight, you
might be able to, I guess, givea little bit more insight to our
listeners into glib islanditself, but also what this
proposal looks like and whetheror not you think it's a
reasonable alternative so at nostage has chris min said that he
(01:58):
would use all of the sites yepum for housing, but he's
suggesting through the mediathat it does not.
Speaker 1 (02:07):
In his words, it's not necessarily part of a
fallback plan, despitespeculation was next in line.
He says there's a couple ofoptions that we're looking into
right now and he said that itdoesn't necessarily need to be
all used as housing, so it couldbe part port, part housing.
Lots of opposition to to theidea that the port could take
(02:31):
housing on and it could costjobs.
Rose Hill Racecourse was a bigblow to Premier Minns, there's
no doubt about it, because Ithink he really had that slated
in his own mind and his ownstrategy for breaking the back
or, you know, making a largecontribution to the housing
(02:51):
supply in this city.
So essentially, as we'vetouched on in previous podcasts,
his legacy is in, you know, isin deep jeopardy here, where he
knows that his term of thepremiership needs to be about
creating new housing in Sydneyand he has barely made a start
(03:14):
on it.
Speaker 3 (03:15):
To be fair, I guess in his defence you mentioned on
the podcast last week or theweek before that one of the
things Chris Minns had said wasthat he was committed to
finishing projects right, and hewas talking about
infrastructure and typically, Ithink, transport in that space.
But he has made the point thathe wants to, you know, be known
as someone who follows throughand completes the task, because
I guess it does kind of fit thathe is looking for alternatives.
(03:39):
I know that the Bays Precinctis something that's kind of been
worked on and it's a proposalfor, you know, roselle and the
Balmain Foreshore.
It's a, you know, there's I'veseen some original plans.
There's new walkways andwaterfronts and restaurants and
all kinds of things.
This article is suggesting thatGlebe Island was kind of slated
for part of that precinct anywayand that this, you know, may
(04:00):
yield up to 10,000 homes.
Given that those proposals forthe precinct were pretty well
established and already outthere for the public to look at
initially, do you think thatthere's any, you know?
Do you think that he'll be ableto get this project moving
forward without really too muchopposition?
As you say, there is some fromthe ports?
Speaker 1 (04:18):
Oh, there'll be opposition If you take any time,
you take an iconic location inSydney like that out of play and
push it in any direction.
The same amount of people thatyou please you essentially
alienate.
I was going to say piss offthere, so I might as well follow
through with it, just keep itin.
Yeah, yeah, that's it, you pissoff twice as many.
So I think what Chris Minnssaid at the end of this article
(04:46):
is probably a true insight intohis thinking, kieran, which is
in the past we've had a culturewhere we've tried to rule out
new housing developments ratherthan rule them in.
So he welcomes debate.
I think Chris Minns wantspeople talking about this
because whilst they're talkingabout what should be the next
major housing site, what they'reinadvertently doing is
(05:12):
justifying the fact that we needit.
Yeah, um.
So I think this is a bit of aan ambit claim, um by chris
minns just to get theconversation going.
Um, yes, he did say that inregards to um absorbing a lot of
the trades people in the cityto finish off transport projects
, and he didn't want to cancelthose transport projects to let
more labour leak back into theeconomy, because labour does
have a poor record of finishingtransport infrastructure.
(05:37):
He wanted to see that through,but the reality is that when
Gladys Berejiklian and BarryO'Farrell came to power, they
did have a mandate to bringmuch-needed infrastructure
overhaul to the city, which theysucceeded in doing, not in
their first term, but theysucceeded in doing through the
(05:57):
O'Farrell, baird, berejiklianand then Perrottet governments.
Chris Minns was elected on amandate of creating housing and
he was very, very strident inMarch 2023 that he would create
tens of thousands of newdwellings in the city to house
(06:19):
all of the people that thefederal government have invited
in, and he's barely made a dent.
Housing approvals we didn'ttalk about this last week the
people that the federalgovernment have invited in and
he's barely made a dent.
Housing approvals we didn't talkabout this last week, but last
week when the housing approvalnumbers came out, they'd gone
down yeah so the population iscontinuing to grow, as you can
see on the streets when you'redriving around everywhere you go
in sydney at the moment.
(06:40):
I had to go to.
I had to go west on saturdaynight and I know it's vivid, but
I tell you from haberfield,where I got onto the m4 heading
west to st claire, there's fourlanes of traffic at 5 30 in the
afternoon coming back into thecity yeah, yeah the city is it's
horrible.
(07:00):
It's overcrowded, it is cooked,so there's not enough room for
people on the roads and there'sclearly not enough housing for
the people that are in the city,and that's evidenced by what's
happening at rental open housesat the moment.
So I believe chris minns isunder pressure because
infrastructure doesn't happenovernight and he's struggling.
You know his signature housing,um, a signature housing, uh
(07:25):
location has just been voteddown, last week, as you say, by
the Jockey Club.
Speaker 3 (07:30):
Yeah, yeah, look, he's certainly on the ropes, I
think, and he is just swinging,hoping for a solution Before we
move on.
One of the things in thearticle that I find interesting
is the suggestion was that theand I mentioned this just before
, but the site might yield up to10,000 homes, which is
obviously not.
You know, it's less than halfof what Glebe Island.
Speaker 2 (07:51):
Glebe.
Speaker 3 (07:52):
Island right is less than half of what was proposed
in Rose Hill to begin with.
But one of the things, one ofthe other comments in the
article talks about a spokesmanfor the cement group, cement
Australia, the lobbyists forthat industry, and their or his
comments, or their comments,were that if the proposal goes
ahead and the port facility,particularly for the cement
(08:13):
space, is shifted to Port Kemblaor Newcastle, that that shift
alone might add 50 billiondollars in costs to the
construction sector.
Now, given that this is aproposal to get housing up more
readily and more efficiently andat an affordable cost for
people, does this not like?
To me that just seems likeinsanity.
Right to disrupt a whilst thelocation's great, disrupting an
(08:37):
entire sector to just pushthrough on your promise or your
commitment at inflated costs andat a time when approvals are
down, et cetera.
It just seems like a recipe fordisaster.
Speaker 1 (08:48):
Oh, 100%, kieran.
You've read the Herald articleon this.
I read the Daily Telegraph oneand some of the comments that
the Daily Telegraph had werealong those lines.
So great point you make.
Paul Nicolaou said Governmentmust not gamble Sydney's future
on a short-sighted, economicallydestructive decision, that's it
(09:08):
, turning a working port intohousing.
Margie Osman said thousands ofjobs are related to these port
activities.
It would dislocate a wholegroup of Sydney workers.
Alistair Kelch said anythingthat increases the cost of home
construction is the last thingthat Sydney needs at the height
of a housing crisis.
(09:28):
And and clearly, sending youknow the cement providers, as
you've just outlined, back outof town and having it
transported back in at a hugecost would do exactly that.
If you go back to WestConnex abit of a raw topic.
Speaker 3 (09:47):
No one in.
Speaker 1 (09:47):
Roselle has forgotten that.
Yeah, a bit of a raw topic forour audience, but if you go back
to how the Liberal governmentat that time managed that, they
had some outrageous designs thatthey leaked to the media I
don't know if you remember them,but basically spaghetti
junctions and all of it allhappening around the end of
(10:07):
anzac bridge and where the citywest link and victoria road all
come together and it made itlook like you know one of those
american metropolises and itwould have been ghastly.
It wasn't discreet andunderground like it is now.
And I don't think that when theState Government at that time
was releasing those conceptplans, they ever truly expected
(10:32):
to even attempt to get thoseplans through.
What they were doing is theywere managing the public's
expectations so that when theyfinally came through with the
eventual plan, everyone wentwell, that's a lot more
reasonable than we started with.
So Minns may or may not be doingsomething there where he's
picking some sacred sites andsaying, hey, well, we need more
(10:54):
housing.
There's a place there whenMinns got it wrong is.
He said at the start of hispremiership that he believes
that Sydney-siders understandthe need for a lot more
inner-city units.
Speaker 3 (11:08):
Yeah, high density yeah high density.
Speaker 1 (11:10):
I don't know who you hang around and socialise with,
Kieran.
I know who I hang around andsocialise with, but nobody was
in agreement with what ChrisMinns felt that Sydney-siders
were looking for at the start ofhis tenure.
If you ask me, he's inventedthat.
Speaker 3 (11:26):
Yeah, he's invented that narrative.
Some bureaucrat somewhere hasgiven him that kind of line and
said this is the solution, thisis the narrative to bring the
people with you.
Speaker 1 (11:34):
The reality is is that if you ask most
Sydneysiders, they think theplace is full, and why are we
continuing to invite literallyhundreds of thousands of people
here each year?
In terms of interesting sitesand controversial sites, where
it's like, yeah, okay, let'stalk about that.
(11:54):
There's a site that's beenmentioned in the last week that
I like, and that's Long Bay Jail.
Speaker 3 (12:01):
So I mean, La Perouse has just had a new.
Is it like an Aboriginal LandCouncil or an Aboriginal Reserve
like allotment set aside outthere, which is obviously not
far from Long Bay?
I don't know whether you'rejust making a joke there, or has
Long Bay actually been proposedas a housing site?
Oh, absolutely yeah.
Speaker 1 (12:21):
Yeah, but see, look, a working port.
You can't put housing on aworking port, where you
shouldn't put housing,particularly in a city like
Sydney, but Long Bay Jail.
You can rehouse a jail back tothe city fringe in a cheaper
land location and it's not withrespect to those that are
(12:43):
involved with the jail andthere's always unintended
consequences consequences, aswe've always said, but there's
not the same impact or loss ofproductivity to the overall
economy as there would be at aworking port.
Speaker 2 (12:53):
Yeah.
Speaker 1 (12:54):
So, look, I'm just again.
I'm just saying that's one sitethat's been proposed where it's
like, well, at face value,without giving it deep, deep,
deep thought, that could makesense rehouse the jail, and then
the jail becomes what is nowthe.
The long bay jail becomes theuh, you know that's.
This is a pretty substantialland holding in a, in a location
(13:14):
that a lot of people would liketo be, but there will be
associated costs.
That's kind of a one road in,one road out, yeah, scenario to
get there, isn't it?
Speaker 3 (13:22):
oh it is, yeah, yeah, I mean, that area has evolved
incredibly since I was a kid,anyway and used to.
You know, I learned to playgolf out there at St Michael's
some 30-something years ago.
Speaker 1 (13:31):
That's why I was there for golf.
I wasn't going to the junkyard.
Oh yeah, that's right.
Speaker 3 (13:34):
Yeah, that's why I saw you there.
Yeah, yeah, you look good inyour.
It doesn't escape me, though,that both of those sites let's
use Glebe Island and Long Baythey're both in prime real
estate.
Right To me, it seems likethey're clutching at locations
that they potentially couldclaim, but they're also not
(13:54):
going to make any of thataffordable.
It's not going to be practicalfor people to live there on a,
you know, Although, mandated.
Speaker 1 (14:01):
So if I can jump in there, if you go back to our
chat about tigers last week, orthe week before the government's
pushed it forward and said goknock yourself out, build it,
but there's 59 affordablehousing in there now 59
affordable housing dwellings, aswe, as we laughed at the time,
is not going to turn the housingcrisis around, but it's a
(14:23):
template for what you will seegoing forward.
Speaker 3 (14:26):
Yeah, oh, look, of course It'd be interesting to
look.
I think, personally, it's goingto be very interesting to
follow this story, particularlyas someone who was in the Navy
for many years.
They use Glebe Island whenGarden Island is full as
overflow, and I can't imaginethat, you know, the Australian
military is just going to givethat up for Chris Minns to put
some apartments up, to be honest.
(14:47):
So I'll certainly be keeping myeyes on this one as we move
forward.
Then I would love to get somedata.
I know the Australian HomeValue Index was released this
week, and then we've also gotsome market details to cover off
before we move on to a topic, amajor topic I want to talk
about.
So, if you can, it's been alittle while since we spoke
(15:09):
about the home value index, soyou're able to just give a bit
of a I guess, a recap for ourlisteners as to what the index
is, yes, a cotality, which isthe old core logic.
Speaker 1 (15:18):
According the Sydney median house price as of June 1,
for $1.486 million, kieran.
Speaker 2 (15:26):
Yep.
Speaker 1 (15:26):
And the next most expensive capital city as far as
median house price goes isactually Brisbane.
$1 million neat and $422 is themedian house price in Brisbane.
Melbourne's got a median houseprice of $939 and Canber's got a
median house price of $939 andCanberra has a median house
price of $975.
(15:47):
So you're seeing there thatwith the next most expensive
capital city in Australia afterSydney, the Sydneysiders are
having to pay 50% more to livehere.
Speaker 3 (15:59):
Yeah, and for many people it's probably a shock, I
think, to hear that it'sbrisbane, because we just, you
know, obviously we've talked alot about how brisbane's seen a
boom over the last few years,particularly through covid.
There was a lot of peoplemoving there, but I I suspect
most people who don't pay closeattention just naturally assume
that melbourne is going to bethe next most expensive because
it's the next most popular city,right?
Speaker 1 (16:21):
it's the next most popular city.
Right, it's the next mostpopulous city.
It's definitely not the nextmost popular city.
Speaker 3 (16:28):
Oh, I think it's declining in popularity, to be
honest.
Speaker 1 (16:32):
Yeah, so the way that place is being run at the
moment, there's a massive leakthere and has been since COVID
and the way it was managed.
So I think that's the big onethere out of those numbers.
When it comes to apartments,that's a little bit more of a
closer field there where itlooks like Sydney's running at a
median house price forapartments over $800,000.
(16:55):
But there's so much variance inthe apartment sector, both in
location, standard, build ageand offering that it's a little
bit harder to get a nuanced feelthere.
So I think discussing the medianhouse prices is the one.
In the last quarter, sydneyhouse prices rose 1.3%.
(17:15):
So if you annualise that that's5.2%.
That's back over the rate ofinflation.
So it wasn't hovering at thoselevels in recent times and that
might just be a nice segue.
To go straight into today's GDPnumbers, which, reading the
(17:35):
forecast yesterday, I saw thatCBA forecasts the Australian
economy will have expanded by0.3% in the March quarter when
the numbers are released, andWestpac have downgraded their
GDP forecast to 0.1% for thequarter.
So they were at differing odds.
(17:57):
And then, lo and behold, thenumber did come out today.
Australia's economy grew 0.2%percentage points in the March
quarter, an absolute shocker,according to one finance
journalist who said that GDP percapita is minus 0.4 in the year
to March.
Speaker 3 (18:15):
Yeah right.
Speaker 1 (18:17):
So productivity has gone backwards as well.
So what we're seeing there isthat inflation is still in the
mid-twos, but the economy isgrowing at a rate of 0.8
percentage points.
So what is happening is thegovernment can stand up and say
we've got inflation undercontrol.
The economy is slowly butsurely growing, but not greatly.
(18:39):
But where the inflation rate is, and what the rate of growth is
, the average household is goingbackwards, which is no surprise
to most people listening.
Speaker 3 (18:47):
Yeah, I suspect most people feel that Certainly they
don't need the numbers to tellthem.
Did the GDP figures talk aboutwhat the primary driver was or
what groups of you know productor activity has helped boost GDP
in this quarter?
Speaker 1 (19:04):
No, I didn't go that deep into it, I was just looking
at the headline numbers.
What it does do is probablycause a rate cut in July,
basically a lock, subject to anymore rogue data.
Interestingly, kieran, becauseI know you've been caught up in
some other things, the rbaminutes were released this week
(19:29):
from their may meeting and quoteunquote the rba considered a
0.5 interest rate cut to reachthe terminal cash rate sooner to
provide greater insuranceagainst more adverse scenarios.
Speaker 3 (19:43):
Interesting, which is in line with what you said was
possible.
But you know, when theyreleased the statement they did
make the point that whilst itwas on the table it wasn't quite
, you know, the conditionsweren't quite right that
employment number probably tookit back away as well as the
creep up in the underlyinginflation from 2.7 to 2.8.
Speaker 1 (20:04):
But yeah, when we said on that podcast, look, 0.5
can't be ruled out.
Here it's in the zone a lot ofpeople said to me there that
they absolutely saw absolutelyno chance that that could
possibly happen.
But here it is.
It's come out in the Mayminutes.
Speaker 3 (20:20):
It's on the record.
Speaker 1 (20:22):
It was on the table yeah, the uh.
Speaker 3 (20:24):
Just before we move on, then I the only comment I
want to make on the, the averagehouse price.
I find interesting that you,you know annualized growth of
shade over five percent for theyear, uh, but at a time of
restrictive you know interestrate settings, still, you know
we've had very little relief, uh, but we still had a five
percent growth in the market,which you know interest rate
settings still, you know we'vehad very little relief, but we
(20:45):
still had a 5% growth in themarket which you know just shows
the resilience of the city.
Speaker 1 (20:47):
Oh, we haven't had a 5% growth.
Sorry If the current rate ofgrowth was annualised.
Speaker 3 (20:50):
Oh, if it was maintained, right, okay.
Speaker 1 (20:52):
Yeah, so it was 1.3% for the quarter Annualised.
That would work out.
Speaker 3 (20:57):
Yeah, okay right, oh Okay right.
That makes more sense.
Well, given that we've had a1.3% growth for the quarter and
every week we talk about whatthe auction numbers are and what
the clearance rate is doing,can you run us through the
clearance data for this week,keeping in mind for our
listeners that may have missedour last one?
It was one of, if not the firstweek that we've reported a
(21:18):
clearance rate over 50% for avery long time.
Yeah, since February, sinceFebruary so week that we've
reported a clearance rate over50% for a very long time, and
certainly Since February.
Speaker 1 (21:23):
Since February, so the first few auctions of the
year when they cut rates andstock.
You know New Year stock wascoming on.
It cracked 50% twice inFebruary and then reverted to
where it's been running sincelast August, which is in the mid
to high 40s.
Speaker 3 (21:37):
Yeah, well, I think we hit a low of 44 somewhere in
April, possibly mid to earlyApril.
So last week we hit a low of 44somewhere in April, possibly
mid to early April.
So last week we had a bit of abounce.
How has this week gone for theSydney market?
Speaker 1 (21:46):
Look line ball interesting number 49.5%.
Speaker 3 (21:50):
Overall.
Speaker 1 (21:51):
Overall midweek and Saturday auctions, but on heavy
volumes, so not a bad result.
I saw Louis Christopher of SQMResearch, who owns these results
, say that yes, it was below 50only just, but given the volumes
it was a pretty decent result,and I've seen locally some
properties that didn't sellunder the hammer last weekend
(22:12):
have since been marked up assold, so it probably did trickle
past 50 percent.
Um, you know if you considerthe sold after yeah, those ones
by the end of the week.
So a decent result.
And on the ground we're feelingthe same thing.
We're seeing some good results.
Buyers are more prepared to act.
They know there's more ratecuts coming.
(22:33):
How I would describe it?
You know, you look at that asyou say.
Annualized, the market isrunning on trend at about five
percent if this rate of growthkeeps up, which is which is
pretty healthy.
So what that's telling us isthat the sydney property market
probably doesn't need any morerate cuts at the moment, but the
broader economy does.
Yeah, so the broader economy.
(22:54):
This is really interesting.
This is a nuanced point the rbaflagged a few weeks ago house
prices are not our issue.
Yeah, we're not here to runmonetary policy for the broader
economy based on what houseprices are doing.
So basically they're saying ifhouse prices are too high and
are rising at a time when theyshould be falling, it's because
(23:17):
the government are piling up toomuch demand and haven't done
their job on bringing supply tomarket.
Don't try and make that theproblem of Martin Place to deal
with.
Speaker 2 (23:28):
Yeah.
Speaker 1 (23:29):
Our job's to manage inflation and job stability and
price stability in the economy,and they're doing a good job of
that.
But it was just good that theyreally set those guidelines that
, as we cut interest rates tosupport the broader economy, if
house prices pop, don't startthrowing rocks at us, because
(23:50):
we're not the ones that haveinvited a million people into
the country in the last fewyears and we're not the ones
that have got a structure and abureaucracy that's choking on
itself and you can barely put upa tent, never mind build 1.2
million houses that they'vepromised.
Speaker 3 (24:09):
Oh, absolutely.
I mean Sydney house prices haveconsistently performed well for
decades and, as we've talkedabout, the RBA can't base
economic policy on the value ofa four-bedroom house in the
Sydney suburbs.
I mean that's absurd.
They have to look at jobs,employment, you know, business
viability, economic growth,exports, you know it's a much
(24:32):
larger equation.
The side effect, of course, ishouse prices typically, do you
know, move as we talk about.
They're up and down pattern,based on seasons and interest
rates et cetera.
But you know, as we often talkabout, I can't help but think
you know one of the unfortunateside effects, of course,
increased numbers of peoplecoming in house prices going is,
you know the rental markettends to spike and that of
(24:55):
course then contributes to CPIand inflation and you know the
cycle just kind of continues.
It's an unfortunate side effect.
But, as you say, it's not theRBA's problem to fix housing or
to support it or to back it orto whatever they're looking
after the cash rate.
Speaker 1 (25:08):
It was really good that they came out and were
really really clear is thathouse prices are not under our
remit.
Speaker 3 (25:13):
Yeah.
Speaker 1 (25:14):
So if this pops, real estate agents will like it and
people will throw rocks at theRBA and they're saying, not our
problem, not our remit.
Speaker 3 (25:22):
Yeah, it's good for jobs because all these people,
when there's a boom, you knowthey'll come and join the
industry to try and capitalise.
Speaker 1 (25:29):
Yes, that's what Sydney needs more real estate.
Speaker 3 (25:30):
That's what they need .
That's what they need.
All right, as we move on then,pete, I want to finish up
tonight's episode.
Often we talk about your realestate report, which is a
newsletter you put out throughyour agency in Balmain, harris
Partners, and, at the risk of,you know, inflating your ego a
little, you usually write prettyinsightful articles, I find,
(25:54):
and you've written a great onein this this month's episode, or
this month's edition, I shouldsay, which is the six unreported
trends in the current market.
And given that our podcast isliterally the current market
insights, I thought it might bea good idea to run our listeners
through this article and, Iguess, give an audio
(26:15):
representation of what those sixunreported trends are and how
they influence the market inSydney.
Speaker 1 (26:22):
Thanks, Kieran.
Well, look the first of thesesort of unreported trends are
and how they influence themarket in Sydney.
Thanks, Kieran.
Well, look, the first of thesesort of unreported trends that
are playing a big role in themarket is apartment buyers are
hypersensitive to strata issues,and well-run stratas and
disciplined stratas sell well,sell quicker and sell for more
(26:42):
than buildings with defects,obviously.
But buildings and this isprobably the tragedy and why I
touched on this topic there's anumber of buildings around town
where, at their core, they'regood buildings.
Speaker 3 (26:56):
Yep.
Speaker 1 (26:57):
But they're poorly managed because every grievance
that an occupant has, whetherit's a tenant or an owner there,
gets captured in the minutes.
And as a real estate agent, yougive the prospective purchaser a
strata report before they maketheir offer.
They read the minutes and seethat the building's full of
conflict because Johnny had themusic up too loud last week and
(27:22):
Sue's worried about the airconditioning running at night,
and everyone's grievances arecaptured in the minutes and then
make their way into the Stratareport and scare buyers off.
So there's things that need tobe in a Strata report that are
not optional.
A buyer's entitled to knowabout them the finances, the
expenditure, the special levies,the, the budget, where it's all
(27:42):
going.
But I think and you're seeingthis in another way with the
criticism and the strata managerwho was struck off recently for
mismanagement there's a realarea of opportunity to clean up
strata management and get theseapartment buildings running
better for the ultimate benefitof the occupants whilst they
(28:05):
live there and the owners asthey decide to sell because of
all of the press with mascottowers um, what was the one in
homebush?
the opal, opal tower, um buyersare hypersensitive to strata
issues and they're nowoverreacting, if I can say, in
some instances not every, but insome instances they're
(28:26):
overreacting on nothing, burgers, such as the damage that's been
done to that sector of theproperty market yeah, look, I'm
not surprised as someone whoowns in strata.
Speaker 3 (28:37):
I just, yeah, it absolutely baffles me the, the
content and the things that goto the strata managers to be
resolved and the things that,yeah, you know, everyone's got
their grievances in life, but,as you say, had I.
Uh, you know, if some of thethings that come through our
strata, for example, were madeaware to me when I bought some
years ago, I would have walkedaway, that's for sure it needs a
(28:59):
strong chairman that sendspeople with nonsense issues away
.
Yeah, absolutely.
Which is hard to find right,Send them packing Hard to find a
volunteer In this.
Speaker 1 (29:08):
PC world we're in.
I guess it is, but you knowit's not doing anyone any
favours.
You know documenting all ofyour minor grievances in a
strata report and then the nexttime someone decides to sell
they get 50 grand wiped offtheir value.
Because it's a whingy wine,peter doesn't like yellow
flowers in the garden.
Speaker 3 (29:29):
Yeah, no, exactly.
The next topic you mentioned inyour trends is rental
regulation.
Now you, I think, correct me ifI'm wrong, but you're
referencing regulations designedto protect tenants and, you
know, give them some certaintyand security in their housing.
How, I mean, given that thatsounds, you know, broadly, like
(29:55):
a great initiative, how is thatsomething that's actually
impacting market conditions?
Speaker 1 (29:59):
What we say in the report here is that the
government has inadvertently yetdecisively tipped the scales
against landlords.
So no grounds, evictions, theimposition of a re-letting
restriction period, a new petpolicy, an inability to enable a
proper competitive biddingprocess for in-demand properties
(30:20):
are all in the new regulationsimposed on landlords in recent
times.
So say the no rental bidding,for example.
Agents were abusing that and itneeded to be tidied up.
Don't get me wrong.
But here we have here where thegovernment have effectively
capped, in an open marketoperation, a landlord's ability
(30:42):
to get full and fair you knowrent for their property in an
environment where rentalproperties are in demand and
therefore the price is going up.
Now, if the price is going upbecause the government has, let
me repeat it again, invited toomany people into the country and
not built enough houses, it'snot up to the individual
(31:07):
property investor to startcompensating tenants for that.
Speaker 3 (31:09):
Yeah.
Speaker 1 (31:10):
And that's where we've got to, where the
government hasn't done its joband they're now pushing the pain
of fixing or putting Band-Aidsolutions onto the private
sector because they haven't donetheir job, they haven't met
their own brief, their ownmandate, which is to manage
migration levels at asustainable level, which they
(31:31):
haven't done.
It's very clear Just go for adrive peak hour in Sydney and
you can't move and clearlynowhere near creating housing
for these people that have comein.
And it's not playing out in thesales market.
We just discussed the salesmarket 1.3% growth for the last
quarter, which was the bestquarter in some time.
(31:51):
So the lack of dwelling supplyand the excess people in town is
not playing out in propertyprices, it's playing out in the
rental market.
Speaker 3 (32:00):
Yeah, and it has to be said too that even removing
rental bidding, you know, theargument was obviously that it's
fair out in the rental market.
Yeah, and it has to be said toothat even removing rental
bidding, you know, the argumentwas obviously that it's fair on
tenants et cetera, and you knowit's.
But it doesn't change the factthat people come and overbid
silently anyway.
I mean, when you get to arental and there's 150 people
lined up to get it, and let'ssay it's $500, there is always
(32:21):
going to be someone there saying, well, there's so many people
here, I just want to lock it in,I'm going to pay more anyway.
So even though bidding is notopen and transparent, it's not
making it cheaper for tenantsanyway.
It's just restricting theamount of rentals out there,
which is part of the broaderproblem, as you say.
Speaker 1 (32:38):
Well, look, if it was just that one change in and of
itself, as it was originallywhen MINS first came to
government, people would say,well, I don't like it, but
combined with everything else,I'll take the good with the bad.
What this point in the articleis highlighting, kieran, is that
no grounds eviction.
So if you do want to take yourproperty back or you do want a
(33:02):
different tenant in yourproperty, you don't necessarily
get a say on that anymore.
Yeah, so to give you an idea ofsome of the things that are
going on out there, we listed aproperty last week that's listed
with another agent.
Yeah, right, Under the newregulations and I had to double
check this was correct and thatthe other agent wasn't being a
smarty I had to send a copy ofmy agency agreement to a
(33:25):
competitor to show that, yes,the owners had indeed listed the
property on the market andthat's why we were politely
giving the tenants notice toleave so we could tidy it up and
sell it.
Yeah, so that's the sort ofknock-on effect from this
regulation, where I've never in25 years sent a copy of my
(33:50):
agency agreement to a competitor.
Here I am last week, inresponse to these new laws,
having to do that.
There's restrictions on howlandlords can and can't act with
their own property, even ifthey're acting with decency.
They're falling outside theselaws.
And what I'm saying is, whenyou put these, when you stitch
(34:10):
these laws together, this newlegislation together that's been
introduced over the last twoyears, do you know what the
investor says?
I'm not interested.
I'm not interested.
Speaker 3 (34:20):
How much?
Speaker 1 (34:20):
equity is in it.
What's it worth?
Yeah, I know exactly what I cando with that money.
So they're selling out.
And who do they sell?
To An owner-occupier.
Right, we barely sell toinvestors anymore.
We barely sell to investorsanymore.
Every time we sell somethingoff our rent roll, it sells to
an owner-occupier, and that'snot just in this office, that's
across the industry.
(34:40):
I'm hearing it.
Speaker 3 (34:41):
Yeah.
Speaker 1 (34:42):
So the rental pool across Sydney is shrinking at a
time that the governmentdesperately need more investors
in the market to create moresupply for the people that
they've brought into town.
Speaker 3 (34:57):
Yeah, that ties in perfectly to your next point in
the article, which is that oneof the other things that is
prohibitive in the investmentspace is land tax.
Now, land tax has been one ofthose things that's been
contentious for a very long time, I think, but if you can give
our listeners some insight intowhat kind of impact land tax
actually has on the investmentmarket itself, look it says.
Speaker 1 (35:18):
The article says, quote unquote land tax is
driving landlords out of themarket.
Many landlords receive a landtax bill in the first quarter of
the calendar year, a bill thatabsorbs 100 of their rental
income for the first three tofour months of that year yeah
that's like a huge amount.
So the landlord needs to paytheir remaining costs, such as
(35:39):
water, council rates, agentsfees, maintenance repairs and
mortgage repayments from eightor nine months rental income and
again they're severelynegatively geared.
They're having to prop up themoney, prop up the, the mortgage
and the you know keep to keepthe investment going each month.
And then they've got a bigchunk of equity in there and
(36:01):
they say just sell it, put theequity against my home mortgage
where it's non-tax deductible.
I've got other investments Iwant to play with.
I don't.
I don't need this in my life.
Speaker 3 (36:13):
Yeah, especially when you couple it with all the
other rental changes, the stressof tenants, the fees, the
ongoing costs, etc.
Moving forward then, the nextcouple of points talk a little
bit more about the sales side ofthe market.
So underquoting is a topic thatyou talk about here which we
have spoken about to death, andI'm sure we have spoken about to
(36:34):
death and I'm sure we will comeback to many, many times in the
future because it is such ascourge.
On real estate.
You say here that underquotingbites vendors when bidding wars
fails to materialise, which isreally the crux of what we've
talked about in the past.
So I guess we have spoken aboutthe impact that underquoting
(36:55):
has, but how is it?
I mean, you talk about this asa kind of unreported measure in
the market, but I feel like thisis a topic that's pretty out
there and he's talked aboutquite often uh, what we under
quote it's usually, it's usuallydiscussed, kieran is
underquoting hurts or inputnegatively impacts the buyers
right.
Speaker 1 (37:14):
what the article's saying is underquoting hurts or
negatively impacts the buyersRight.
What the article is saying isunderquoting bites vendors Right
.
So what I'm saying is that instronger markets sometimes
agents will say to the vendor Iknow you want 2.1, let me quote
1.75 and a bidding war willerupt and it will probably go
through 2.1.
(37:34):
And what has happened withnumerous examples that I've seen
recently is the bidding wardoesn't materialise.
And it's not necessarily notmaterialising because the market
conditions are not strongenough.
Buyers are fed up.
Speaker 3 (37:51):
Yeah.
Speaker 1 (37:52):
They're fed up with going to auctions and having it
go wildly past theirexpectations, so they're
refusing to partake.
And then the bidding war thatthe vendor was promised, even
though they're under-quoted by10% to 20%, doesn't happen and
their auction passes in for alow price, which damages any
chance of them achieving adecent price, which damages any
(38:14):
chance of them achieving adecent price.
I spoke to a governmentemployee yesterday that is
charged with selling a number ofgovernment properties and he
was telling me how they went toauction on one of their
properties and there were nobidders.
Speaker 3 (38:32):
Right.
Speaker 1 (38:33):
No bidders on this property and he said if there
was a bidder at X on thatproperty on that day they would
have bought it for that.
After the auction on the Mondaythey put it on the market at an
asking price higher than whathe would have accepted on the
day.
Four bidders came in at thatasking price and then the price
(38:54):
went up higher yeah, well and hesaid that's just was evidence
there that people weren'tprepared to partake in the
process.
But when they had certaintyabout where the vendors
expectations were that thisthing will sell, they all rushed
in and that has.
That's what's happened to themarketplace with this.
Systemic underquoting isincreasingly.
(39:17):
Buyers are sick of turning upto auctions and being cannon
fodder.
Speaker 3 (39:22):
Yeah, which you know.
You can't blame them.
I certainly don't.
The Bank of Mum and Dad hasbeen heavily in the media
recently as it pertains to thesales market, but you make the
point in your article that theBank of mum and dad is also
playing a role in the rentalmarket.
Now, the only time I've everseen mums and dads at a rental
inspection is, you know, if thekids are out of town or overseas
or whatever.
(39:42):
So what, what's your take on?
Uh, parents getting involved inrental inspections, in sydney
in particular?
Speaker 1 (39:48):
well, if you've got a um adult child who's studying
at university first time out ofhome, they don't have a rental
history, you know, and you wantthem to live independently as a
parent and get started and youknow, move out of your space.
Yeah, do all those sorts ofthings.
You know how hard it is to toto gain credibility, um, on a
(40:10):
rental application, when you'vegot no history.
Speaker 3 (40:12):
Yeah.
Speaker 1 (40:13):
So increasingly, parents are backing up the kids'
rental application because themarket is so fierce as we've
described.
Yeah, and it's not going tochange.
Speaker 3 (40:22):
So is this a case of parents making the application
and then letting the child livethere?
Speaker 1 (40:27):
or just coming in as supporters and saying look,
paying the rent sometime, beingguarantor for the rent going on
the lease Paying up front thatkind of thing Paying the rent
sometime, being guarantor forthe rent going on the lease,
paying up front, that kind ofthing, all sorts of things.
Speaker 3 (40:35):
That's right yeah okay, which again just makes it
even more competitive in amarket where it's already tight.
Speaker 1 (40:40):
Yeah, that's right.
Well, it's very, very common.
We lease a lot of propertiesaround Camperdown to
international students.
Very common for Chinesestudents' parents to pay 12
months rent on the first day.
Speaker 3 (40:54):
Yeah, yeah, oh look, I've experienced that myself,
you know, especially around theUniversity of Sydney.
Speaker 1 (40:59):
Yeah, of course you know it's the Chinese bank of
mum and dad.
But if you've got a Chineseparent in China paying 12 months
rent straight up front I hearit quite often as they're
reviewing an application in therental department here and
they'll say to the landlord look, there's no risk, you won't get
paid because you get.
Speaker 3 (41:19):
You're getting it all on day one.
Yeah and exactly.
And how does anyone elsecompete?
Right, I've been to so many, Ihave shown so many rentals over
the years where I have, you know, like, say, two young guys or
two young girls or whatever,coming up to me afterwards just
saying what do we need to do?
Because we've been trying formonths, we did.
And I would say to them put inan application like everyone
else.
But this is kind of what you'recompeting against, these people
that are dropped six months upfront.
In some cases we might betalking like $20,000 or $30,000
(41:42):
up front.
Speaker 1 (41:43):
I think it's $40,000, $45,000.
You're talking $900 a week for12 months.
Speaker 3 (41:49):
For 12 months.
Yeah, some of these six to 12months is a huge drop of cash.
Speaker 1 (41:54):
For 12 months, yeah, but yeah, some of these, you
know six to 12 months is a hugedrop of cash, so it's not a
massive trend, but it is outthere.
Because the media made a very,very big issue, of course, when
the bank of mum and dad were outthere helping kids buy at
auctions, and you'll see anarticle every second week where
dad buys daughter and mum helpsson and all that sort of thing.
But most people can't relate tothat.
But more and more people canrelate to.
(42:17):
We've come down from thecountry to attend the rental
open house with our kids who aregoing to university or just got
their first job here and wejust want the real estate agent
to know we're good people andall we want is a good property
for our kids and we'll we'llstand behind the application.
We just need them them to getstarted and get going and it's
(42:37):
just sad really that that'swhere the city's at at the
moment.
We have good people that arecoming from the bush, kids that
are moving from the suburbs tomove close to the inner city to
kick off their new job as anintern or whatever Can't get
basic housing.
Speaker 3 (42:50):
Yeah, yeah, as we've talked about, there's so many
factors that have made this timeparticularly tough, and that's
why you know there's not manylandlords that are going to turn
down six or 12 months rent paidup front at a time of cost of
living pressure, right?
The final point in your articlethen ties everything really
together.
You know you talk about thefact that developers aren't
interested in taking on newprojects.
(43:12):
We have said in this episodealone, but also in many others,
that approvals are at anall-time low, housing supplies
are at an all-time low,immigrations that are high, cost
of production, labour materialset cetera is at an all-time
high, and now all of thosefactors are coming together and
developers aren't interested inplaying the game.
Given that, again, you knowChris Minns and his government
(43:33):
has a mandate and a promise todeliver for the people of New
South Wales.
How much is this having aneffect and how serious is this
going to be over the you knowthe coming years?
Do you think?
Speaker 1 (43:45):
Oh look, it's a perfect storm.
I think that's what they callit, isn't it really?
Yeah, so you know, we've hadunrenovated terraces and
big-time apartment developerscome through and say, yeah, this
might just tie us over for alittle while.
It's like why do you want this?
And he's like I don't.
He said, peter, I don't mindbuying this, renovating it and
(44:05):
reselling, and as long as I atleast break even, that's good
enough, as long as I can justkeep my tradies going until this
whole scenario breaks in ourfavour.
But no feasibility on certainsize projects is stacking up at
the moment.
Speaker 3 (44:22):
Do you think?
The pessimist in me says thatthis scenario may never break?
Speaker 1 (44:28):
You know, I wonder.
No, it's all cycles.
No, it'll always break.
Speaker 3 (44:32):
I mean, I wonder, obviously there'll be easing of
cost of living, there'll beeasing of supply costs, et
cetera.
But I wonder truly, you know,do things ever really go back In
a supply and demand scenario?
Do they ever truly go back totheir baseline?
Because I feel like costs arealways going to be slightly
inflated.
Speaker 1 (44:48):
Oh, this is what Japan have had, not China Japan.
There's disinflation, which isthe rate of inflation is falling
.
That's what we've got inAustralia disinflation, and then
there's deflation where thecost of things are going
backwards, but that's one way itcan correct is deflation, where
(45:10):
suddenly we just have aneconomic event where the whole
deck of cards comes down andwe've got to rebuild it.
Not, but that's one way.
The other way is that I've saidhere tonight that the the whole
equation of too many peoplecoming into the city and not
enough dwellings is playing outin the rental market and the
growth in the property market issomewhat contained at 1.3.
(45:32):
Another way that it can break,or the bubble can pop at a
different perspective, is thatsuddenly property prices go on a
tremendous tear.
And I just said to a clienttonight who asked for a
valuation on his one-bedroomunit is, I said, the reality.
I gave him a valuation that wasa little bit above what he
expected and I said well, here'sthe direct comparable to your
(45:55):
property.
So you can see why I'm sayingwhat I'm saying.
And the reality is, as interestrates come down and the rental
market keeps going up, firsthome buyers are saying now's
probably the time to go all inon buying a property and that's
why the bottom end of theproperty market has probably got
more life in it at the momentthan it has for some time oh,
(46:16):
and couple it with the federalgovernment's, you know, stimulus
and and home equity schemes andall that kind of thing.
Speaker 3 (46:22):
I mean it really is.
It's a perfect storm and I, Iso property prices do pop, tying
it off.
Speaker 1 (46:29):
If property prices do pop, then that puts a different
shade of light on thefeasibility yeah, of course,
because then you know themargins get bigger again, and
yeah of course correct, so thecycle will go around.
But this is a really awkwardpoint in in in the cycle at the
moment and it's driven by thecost of materials and the cost
of labor and the shortage ofboth oh, and just decades of
(46:54):
government mismanagement aroundhousing and allocations, et
cetera.
Speaker 3 (46:57):
Look, really great chat tonight, peter.
It's been a long one for ourlisteners, but I think it's
important we cover it off on,obviously, what's happening in
the market at the moment, andyou know particularly what's
happening with the Minskgovernment, but also I'm glad we
crossed over on the sixunreported trends, because I do
know I value the articles youwrite and I know they are well
informed and insightful, andthere are certainly some of our
(47:19):
listeners who may not be awareof the newsletter itself.
So, for our listeners, I willmake sure I put a copy of that
article up with the podcast soyou can have a read if you like.
As always, though, peter,really great chat and I thank
you for coming in.
Good on you.
Thanks, kieran, all the best.
Thank you, really great chat,and I thank you for coming in.
Good on you.
Thanks, Kieran, all the best.
Thank you, and thanks toeveryone for listening to
Current Market Insights.
Speaker 2 (47:37):
We look forward to speaking with you next time
thanks for joining us on theCurrent 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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