June 21, 2025 • 35 mins
Australia's best property analyst, SQM Research's Louis Christopher joined us to discuss the Sydney property market.
In this chat, we discuss the the market response to the two interest rate cuts, what the RBA are likely to do in July and the rise of the rental market when compared with wage growth. All of this is covered in Louis' market breakdown and much more...
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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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 2 (00:05):
Welcome to Talking Property.
Today, I'm joined byAustralia's best property
analyst, louis Christopher, aswe dissect the state of the
Sydney property market.
Louis, thanks always forjoining us.
Good to be with you once again,louis.
We last caught up in Decemberand much has happened since then
, locally and globally.
So let's recap with our firstslide some of the things that
(00:25):
have happened before we get yourtake on the first six months of
2025.
So we had the Trumpinauguration, which we knew was
coming.
That wasn't a shock event inDecember, because he was already
president elect.
We knew his tariffs were coming, but it really rattled stock
markets there for a short period, didn't it?
That's right.
Speaker 1 (00:43):
Yes, markets were rattled and then they stabilised
, especially when Trump startedto soften up on his rhetoric on
tariffs.
I must say, as an observer,it's been challenging to follow
his latest moves on tariffs.
It seems to change week by weekand I think that's created a
(01:05):
fair degree of confusion outthere, but nevertheless, equity
markets at least have havesettled as a result of trump's
less aggressive stance ontariffs.
Nevertheless, there are tariffsthat are there that we did not
have this time last year.
Speaker 2 (01:20):
Do you have a view when it comes to Donald Trump?
Does he have a true north thathe's playing to, or is he as
flippant privately with histariff policy as what he is
publicly?
Speaker 1 (01:33):
Oh gee.
I think only those close toTrump will know this in terms of
what is the fundamental truth.
I think, from the pureconservative, libertarian point
of view, trump's been adisappointment.
Libertarians centre-right typeof folk, generally view the
(01:56):
world that we should have freetrade and that is the best way
to solve the world's povertyproblems.
Solve the world's povertyproblems and tariffs generally
create an environment which isnot conducive to economic growth
over the long term.
So I think there are certainlylarge elements that were, and
(02:17):
probably still are, part of hisbase which are disappointed by
this move.
Speaker 2 (02:23):
Then we move towards rate cuts in February.
Now I'm not sure what your datashowed.
What we felt on the ground isthe February rate cut was
received very well and then itwas washed off very quickly by
the breakout in tariffs in earlyto mid-March.
I'm not sure if that correlateswith what your data was telling
you.
Speaker 1 (02:41):
Our data reveals that the period post the rate cut
was one where the market wasstill patchy, still kind of soft
.
I put it in part down to the upand coming election as well as
the uncertainty surrounding thetariffs.
But I think it was more thefact that the federal election
(03:01):
was coming, and we've notedhistorically that when federal
elections are called you see adegree of uncertainty in the
market in the lead up to theelection day.
Speaker 2 (03:11):
Yeah, this election campaign coincided with school
holidays.
Clashed with was run over theEaster and Anzac Day long
weekends, that's right.
So, more than any other that Ican remember, that election
campaign really put thehandbrake on the economy, and I
was speaking to car salespeople,people in a range of businesses
that were experiencing the samething through April.
Speaker 1 (03:33):
Yes.
Speaker 2 (03:33):
And it really pulled up hard.
Speaker 1 (03:35):
That's right and I think that came through on the
March quarter GDP numbers whichhave been recently released and
that showed quite a weak economyfor the first quarter of the
calendar year and I think forthe June quarter we'll still see
some patchiness of the overalleconomy following that.
Well, as a result of thefederal election.
Speaker 2 (03:53):
I reread your boom and bust report before today and
I noticed with interest.
And just to show you howsavagely the political fortunes
turned against Peter Dutton, inyour boom and bust report you
essentially had the Liberals ontrack for victory, such was the
polling at the time.
That's right, and it couldn'thave turned into a more decisive
defeat for him.
Speaker 1 (04:14):
Well, just as well.
I'm a housing analyst, peter,and not an election expert.
Yeah, look, at the time it didappear as though Dutton was
going to win.
He was ahead on the polls and,as you rightly state, that all
turned around essentially on theannouncement of the election.
You know it seemed to turn fromthat point onwards and of
course we can deliberate whythat occurred.
(04:37):
I put it down to a bad campaignrun by the Libs from what I
could see, but yeah, certainly,whatever the reason behind it.
Yeah, the Libs from what Icould see, but yeah, certainly,
whatever the reason behind it.
Yeah, the Libs certainly didn'tget up.
It was one of their worstelection results they've ever
experienced.
Speaker 2 (04:52):
Indeed.
Look, we can speculate on whyit was such a bad campaign.
I think the interest rate cutin February played very well for
Albo.
Inflation being contained gavehim a good talking point that he
hadn't had for the previous sixmonths.
Inflation fell within thetarget range, both underlying
inflation and headline inflation, which was good.
(05:12):
As we record today, the MiddleEast is on the brink of all-out
war, so we won't try and pretendto know where that issue goes.
Hopefully it settles down, butit looks like it's in escalation
mode.
Sadly that could do anything tomarkets, but it is something
that's been brewing all year.
Speaker 1 (05:33):
It's interesting that equity markets at least have
been relatively stable, despitethe escalations which have
occurred and the conflict that'sthere and the conflict that's
there.
So, yeah, the equity marketsappear to be relatively bullish.
That this will all play outfairly reasonably or fairly
peacefully in the end.
I'm not so sure.
(05:54):
I have the same view, but it isinteresting how markets are
like.
Yeah, you know, let's move on.
It's remarkable isn't it?
Speaker 2 (06:02):
Yeah, it certainly is , because, in theory, 12 months
ago, if you said that Israel andIran were going to go at it in
a full on manner, you would havethought that would be the
catalyst for a stock marketcrash.
No doubt, yeah, absolutely yeah.
So it must be pointed out thatduring the first six months of
2025, it looks like all effortsto bring peace in the
(06:24):
Ukraine-Russia war have failedas well.
So there's issues raging there.
Housing approvals fell, yet theimmigration numbers are still
strong, too strong relative tothe number of houses they are
still too strong.
So that's a tailwind forproperty prices, isn't it?
These are not all negativefactors.
Speaker 1 (06:44):
Yes yes.
These are competing factors,purely looking at it, whether
you're someone that's a believerin strong immigration or
someone that's not a believer instrong immigration.
Just purely looking at it, acombination of very strong
population growth, which is whatwe're still experiencing, plus
cuts in interest rates aregenerally pretty positive for
(07:06):
housing prices.
Speaker 2 (07:07):
That's right, and it's playing through.
Speaker 1 (07:08):
It doesn't take me to tell you that it's pretty
obvious, and I think our mostleading indicators are
suggesting that the market isactually starting to pick up.
Speaker 2 (07:18):
And the auction clearance rate has been hovering
around 50% since last August.
I noticed, leading into theFebruary rate cut, that it
actually went through 50% a fewtimes.
So we were starting to seeincreased confidence and numbers
, there weren't we?
Speaker 1 (07:35):
We were and then in the weeks leading up to the
election it softened up again onour numbers.
Post the election clearancerates steadied in Sydney.
And then we note before theJune long weekend we recorded
one of the highest results inSydney so far this year where it
did crack 50% once more andyeah, it was suggesting to us
(08:00):
that there were more buyers outthere and I think post the May
rate cut there has been moreinterest in the market and also
keeping in mind a lot ofspeculation that we'll see
another rate cut in July, yeah,certainly after the May rate cut
.
Speaker 2 (08:16):
What we saw is there was always been strong
inspection numbers in the innerwest.
But when you sort of do yourfollow-ups midweek, if you like
a lot of that buyer interestfalls away when you're trying to
push, you know, or encouragebuyers to take the next step.
But post the May rate cut wesaw a higher preparedness from
buyers to turn their positiveinspection into making an offer,
(08:39):
just to you know, see where itwould go with the vendor.
And we started having biddingwars.
Yep, you know, pretty toughbidding wars, multiple buyers
trying to buy one property.
That we haven't seen for sortof nine, 12 months on, you know,
as a trend line, like we havein the last few weeks.
Speaker 1 (08:58):
And I think on the next rate cut we have, we're
going to see more of that.
Speaker 2 (09:02):
When we talk about the Sydney property market from
the 1st of January to the end ofJune.
When we put all of thosefactors into the mix, what did
the numbers tell us about pricegrowth?
Speaker 1 (09:14):
Louis, our numbers tell us that for the first half
of 2025, Sydney housing priceshave risen modestly.
They're up by about 2% thus farthis year.
Speaker 2 (09:24):
Okay, so that's annualised at 4%, so they're
just in front of the rate ofinflation.
Speaker 1 (09:29):
Yes, that is correct.
The expectation, though, goingforward, is that we will see an
acceleration in the second halfof 2025.
Speaker 2 (09:38):
I'll bring up our next slide here, which is your
scenarios for 2025.
Yes, and I noticed that youmade a change in your base
scenario after the second ratecut.
Do you want to walk us throughthat?
Speaker 1 (09:51):
Yes.
So those familiar with ourforecast know that we release
about four scenarios each yearfor the year ahead and we put
our hat on a base case in termsof what we think is most likely
outcome For this year.
Our scenario three had anassumption that there would be a
rate cut in the March quarter,which did materialise.
(10:12):
So once that happened, we wentout there to our subscribers and
to the wider public and statedthat, ok, there's actually only
one scenario left on ourforecast, which is scenario
three that we're holding our haton and at this point in time
we're still holding our hat onthat.
We're quite confident that thenumbers we had in scenario three
(10:35):
are going to play out for mostcities and with that second
bullet point.
Speaker 2 (10:39):
There, population growth is above 500,000.
Again, was that thegovernment's projection or have
they broken their own promise onthat point?
Speaker 1 (10:53):
They've broken their promise once more Well, promise
is probably not the right wordfor it.
Position they had a target orbasically treasury, federal
treasury had a target numberwhich basically feeds through as
a key assumption in theirbudget outlook, and that number
was lower than 500 000 in termsof total absolute growth.
(11:14):
I think the number was like 360370 000, but when you look at
the monthly uh overseas arrivalnumbers and the migration
numbers we've got to date, I Ijust the numbers are looking a
lot more stronger than that, andso we're quite confident that
we will see yet another year ofpopulation growth over and above
(11:36):
500,000 people.
Speaker 2 (11:38):
So I think this is a really big point for assessing
the strength of the economy vwhat people are going through
household to household.
These numbers really cook thegovernment's books, don't they?
Because 500,000 extra peoplecoming into the economy create
all of this economic activity.
That's right.
But we keep hearing from marketanalysts about a per capita
(12:00):
recession.
So do you want to talk to usabout that, where the
government's numbers suggestingeverything is looking good
because they're bringing in500,000 plus a year, but from
household to household, they'rereally battling the scenario?
Well, that's exactly right.
Speaker 1 (12:16):
On paper, the government can still say
Australia is having realeconomic growth.
The reality, though, is thatwhen we look on a per person
basis, we've been seeing fallingliving standards now since,
really, the start of 2023, if Irecall the numbers.
So this is why it feels formost people that everybody's
(12:40):
been going backwards a bit, butyet the economy still moves
forwards.
The economy still movesforwards and that that is
because, in terms of total uhgdp, it's been expanding, in
part due to the strong flow ofmigration numbers.
When you bring more people in,they demand food, they demand
tvs, they demand a place to live.
(13:03):
That does create economicactivity, but in terms of
economic activity per person,we've been going backwards, and
that is in part as a result of anumber of factors.
Productivity has been fallingaway per person.
Number one.
Number two I'm a strongbeliever that when we went
through the COVID period, thatactually really knocked out our
(13:26):
maximum capacity, economiccapacity, so what I call
aggregated supply.
Our output actually contracted.
That was, in part, working fromhome, in other parts, a
situation where a lot of theemployment growth activity was
driven by government, which isnot exactly the most productive
activity you can see in theeconomy as opposed from the
(13:49):
private sector, and so that hascontributed to this, this
reality that, on a per personbasis, we've been going
backwards.
Speaker 2 (13:59):
Louis let's get into the rental market.
You put a forecast forwardthere as well.
Yes, how do you think themarket's performing relative to
your forecast?
The sydney rental market it'sbeen.
Speaker 1 (14:11):
The reality has been, for the first half of this year
, that rents have steadied, sothey've been no longer
accelerating at the rate ofgrowth that we had in 2021 22 23
rents remain elevated, ofcourse, so so they certainly
haven't returned back to wherewe were pre-COVID, and that is
in part because we've beenhaving very strong population
(14:32):
growth and the supply on thebuilding side has not been
keeping up with that.
In fact, we're well down onlonger term averages in terms of
dwellings completed completed,so that has kept rents elevated.
But the reality has also beento that a lot of the rental
crisis has now been priced in tothe rental market, so we
(14:55):
definitely seen a big rise inrents.
Has the situation deterioratedfurther?
No, and going back to thisnotion of living standards going
backwards, the ability for aperson to take out a property on
a higher rate has reduced, andhow the population's been
responding is by basicallygrouping together more.
Speaker 2 (15:18):
Share households.
Speaker 1 (15:19):
Share households, younger people staying with
their parents for longer.
This is how the market's beenresponding, and that's freed up
a little bit of stock out there,which has essentially put a cap
on further rises in rents.
Speaker 2 (15:34):
I must say, on the ground, and obviously we only
work mainly in one geographicalregion, but I do do the odd
rental open inspection because Ijust like to see it and feel it
for myself.
And each winter we find days onmarket for rentals is longer
than in the warmer months, butnot so this year, and one of the
(15:56):
rentals that I did in Rosellelast Saturday or the Saturday
before had 16 genuine partiesturn up and many of those were,
as you just described, sharedhousehold arrangements, young
people clubbing together butit's very rare and it's very
rare for us to see 16 partiesturn up to one rental open
(16:16):
inspection in winter.
Speaker 1 (16:17):
Well, the numbers don't lie.
What they show is that it'sstill a very tight rental market
in Sydney, with the rentalvacancy rate well below two
percent.
So it is still a landlord'smarket in Sydney, arguably not
as much as where it was back in2023, but still there are more
tenants than what there arerental properties as we speak.
Speaker 2 (16:37):
I want to go to this graph here Louis weekly asking
property prices.
What's this one telling us?
Speaker 1 (16:44):
So we measure where vendors set their asking price
and I've generally found overthe long term it's been a good,
actual leading indicator interms of where the market is
heading.
And what we generally find isthat vendors are actually quite
overall, as a market, quiteresponsive to market changes.
Of course you will always havevendors certain vendors who will
(17:06):
stick to their asking price nomatter what the market's doing,
but overall vendors as a groupare reasonably responsive to the
market and what this is showingfundamentally is that in Sydney
, A houses have beenoutperforming units for quite
some time.
B the rate of growth has slowedfrom where we were, say, in 21
(17:27):
through to 22,.
But we're still seeing risingasking prices and that's feeding
through into rising actualprices.
Speaker 2 (17:34):
And would it be fair to say these rate cuts are
making vendors more bullish?
It may or may not be ajustified position, but is the
data showing that as they cutrates, there's a higher
propensity from vendors to puttheir asking prices up?
Speaker 1 (17:49):
I think there is an element of that.
What's also occurring in Sydneyis that old listings have been
rising and rising and rising.
So there is a higher proportionof vendors out there who cannot
move their property, in partbecause they have expectations
which are well above the market.
And so in this market it'sneither not too hot nor too cold
(18:13):
.
Speaker 2 (18:19):
It is still a market if you misprice your property
expected to be on the market fora long time.
Yeah, indeed, so there's notthat upward growth in prices
where vendors can name theirprice and someone will come
along.
Speaker 1 (18:25):
We're not at that fear of missing out stage yet in
the market.
It's not to say we won't get tothat point with interest rate
cuts.
I think we may.
But at this point in time ifyou misprice your property,
you're not going to sell inSydney.
Speaker 2 (18:37):
We are cautioning our clients as they come to market.
Is there's two types oflistings in this, in this
environment, those that sell inthree weeks and those that take
more than three months?
Speaker 1 (18:45):
Yeah, that's right and, as our data shows, you can
find it on our website.
You look up Sydney totallistings.
You can just see this risingand rising trend of stock that's
been on the market for over 180days in Sydney.
Speaker 2 (18:57):
Louis.
I want to look at our nextslide here From a societal
perspective.
Is a city that's running with a$2 million house price and a $1
million unit price?
Is that healthy?
Should we look at this and weshould say this is great news?
Look what property prices aredoing in Sydney.
Or should we look at this andsay this is strangling our
(19:21):
youth's future?
Speaker 1 (19:22):
Oh well, I'm very much in the latter camp.
I don't think it's a greatpositive to have a situation
like this where housing pricesare just so unaffordable for
those who are on an averageincome.
Let's keep in mind here thatthese prices are just out of the
realms of affordability foressential service workers in
(19:44):
Sydney.
You're not going to find theaverage nurse being able to live
in, say, the middle ring ofSydney now, unless they're
living in, say, a one-bedroombelow average unit.
That's where we're at with itall, and that's not healthy,
that's not good for the city?
Speaker 2 (20:02):
Definitely not.
Speaker 1 (20:03):
No, it's not.
It is problematic, and the wayto resolve this is to increase
supply relative to demand.
So a situation where, okay, Idon't advocate necessarily we
need a housing price crash, butwe need a period where housing
prices do no more than say thegrowth rate of GDP over the long
(20:27):
term and the reality is realhousing prices, after we take
into account inflation in Sydney, have been rising and rising
and rising for a long, long timenow.
Speaker 2 (20:36):
Yeah, so Stephen Kikoulis, on social media, made
a great point the other week.
He said no one has everexplained to me what a fair
house price is, you know,relative to income, et cetera.
Because people will go back andsay in the 70s it took five
times the average income, orwhatever it was, to purchase a
property.
And now that equation's blownwell out in favour of vendors to
(20:59):
the detriment of the buyers.
If Sydney's running at a $2million house price and a $1
million unit price and we'resaying that this is unhealthy
and it's run too hard and it'sabove itself, what would you
speculate it should be at?
Speaker 1 (21:15):
Good question, I think as a multiple of household
earnings, I think anythingthat's really above eight or
nine times that is relativelyunhealthy if it happens over the
long term.
Speaker 2 (21:32):
And what are we running at at the moment?
Speaker 1 (21:34):
I think we're running at close to 10, if I recall the
number.
Speaker 2 (21:37):
It's right up there.
Speaker 1 (21:38):
As mentioned, we need a period where housing prices
in Sydney run at no more thanthe standard economic growth
rate.
If we were to achieve that,we'd see long-term affordability
improvements.
Look, I think Sydney willalways be expensive.
It always has been expensive toan extent.
But looking back at history,yeah, it's probably at its most
(22:02):
expensive point relative toincomes than what we've ever
seen.
And yeah, that is an issue forsocial cohesion and for the
social fabric of Sydney in thelong term.
No, indeed, you can see it.
Speaker 2 (22:16):
You touched on vacancy rates.
Here's your May 2025 vacancyrates.
How does this compare with?
Speaker 1 (22:22):
history.
The historical vacancy ratesthat we're seeing across
Australia, where we're runningat essentially about 1.2%, is
well below average.
Speaker 2 (22:32):
Yeah, and that's what's causing rents to rise,
because it's just stuck below.
That's right Now.
Speaker 1 (22:36):
It's been stuck below that really since 2021.
So we've been in this rentalcrisis now for some years and
we're not really seeing anythingon the ground to suggest it's
about to relieve itself.
As mentioned earlier, a lot ofthe rental pricing has now been
taken into account with thisrental crisis, in other words,
(22:59):
the rental crisis has beenpriced in, so we're seeing
steadier rental growth, asopposed to what we had in 21, 22
and 23, where in some cities,we were recording rental
increases year on year of over20%.
That's no longer happening,fortunately.
Speaker 2 (23:13):
There was a lot of catch up in that, as we've
discussed in the past, thoughwasn't there coming from the
COVID crash of rents?
Speaker 1 (23:20):
Yes, that's right, but in real terms, we're well
and truly above those COVIDlevels.
Oh, now we are.
Yes, yeah, yeah, indeed.
Speaker 2 (23:28):
I think our next slide highlights this really,
really well.
This is probably, I think, thebest slide that we've got for
our audience today.
Everything you've just said isencapsulated here, isn't it?
Speaker 1 (23:39):
Yeah, what it shows is essentially rental.
Affordability has beendeteriorating for a considerable
period of time and there isnothing in the leading data to
suggest that it's improved.
Speaker 2 (23:52):
No, that's right.
It's amazing that this was nota bigger issue during the
election campaign.
Speaker 1 (23:57):
It certainly could have been, but I think the
problem that the Liberal Partyhad with this is that they
flip-flopped a bit on migration,which we all know is one of the
major causes behind this issueright now.
Relative to supply, and I don'tthink their policies were
stronger enough in terms oftrying to address the supply
(24:19):
side, because it appeared to mefrom an objective analysis of
what their their solutions wereto stimulate demand.
Speaker 2 (24:26):
Oh, both sides.
Yeah, I was watching the policycoming out saying this is mad.
They're talking about fuelingthe demand.
It's like where's the supply?
You're only pushing prices upon the people here further,
peter as I've said repeatedly,there are two issues.
Speaker 1 (24:42):
There is a demand side, driven by migration.
There is a supply sideconstrained supply side, which
has been driven by a combinationof factors, including very high
taxes, militant councils, bankswho are even more cautious to
lend to developers, and acommunity overall which has
(25:02):
experienced bad quality when itcomes to off-the-plan
developments in our major citiesfor a number of years now, and
that combination has beenconstraining supply for some
time.
Speaker 2 (25:15):
Throwing an extra thing over the top of all of
that.
What we're seeing is developersdon't want to develop.
They're saying the feasibilityon all of this doesn't unless
there's a dramatic drop in landprices.
These projects are not stackingup.
We're staying on the sideline.
We'd rather have cash in thebank and get our 5% than take
this sort of risk.
Speaker 1 (25:34):
Well, I'm not so sure we'll see a fall on land prices
.
But if developers were to lookon their book and say, okay,
great, the government has nowworked to cut our taxes on each
dwelling by half, then we cannow build again.
Speaker 2 (25:48):
So that's where, you see, the leverage point is is
government coming to the table?
Speaker 1 (25:52):
The truth is, for every dwelling that goes up,
about 20 to 40% of that price.
Speaker 2 (25:59):
That cost are taxes, whether they be local, state or
federal and do you think thegovernment is going to try and
build these 1.2 milliondwellings themselves and oversee
it and be heavily involved, orthey will push it towards the
private sector?
Speaker 1 (26:14):
Oh well, to be clear, they've stated that the 1.2
million target is for alldwellings, whether it's social
development or development doneunder private means.
And, yeah, look, there's beendwellings that have been
completed, as they would havebeen anyway, from the start of
the time frame, which, if yourecall, was July 2024.
(26:37):
But they are behind, seriouslybehind, the run rate required at
this point in time, and I putthe probabilities of the
government hitting their 1.2million target which is meant to
happen by mid-2029, at next tozero at this stage.
Speaker 2 (26:54):
Chris Minns is having a harrowing time finding sites,
isn't he that offer scale interms of dwellings?
Speaker 1 (27:01):
This is the problem with Sydney.
It's easier Melbourne there,because there's a lot more land
to basically sprawl out on, butin Sydney it's it's definitely
more difficult, and so you know,part of the solution is you
build more high densitydwellings in the inner and
middle rings of Sydney, whichyou know has been part of the
(27:21):
plan.
But the issue you have is youhave a lot of NIMBYs in those
areas who are on council boardsand they're resisting as much as
they possibly can.
Speaker 2 (27:34):
Look to outline everything you've just said in
encapsulated in one building.
Chris Minns took a bow onsocial media recently because
the Tigers Leagues Club's beenapproved and it's underway and I
think they're taking theirfirst deposits in the next week
or so.
Yeah, after having a prettyintense marketing campaign, I
sat with someone yesterday thatput a $10,000, you know
(27:56):
registration fee down for one ofthese apartments.
This is in June 2025 andexpects to take hold of the
apartment in some time in 2028.
Right, so we've got a housingcrisis today.
Speaker 1 (28:08):
Well, that's a good news story, and then I'll refer
you to what was meant to happenat the Rainery Racecourse.
Yes, there was meant to be alot of development activity
there, which was blocked by themembers.
Speaker 2 (28:18):
Yeah, the Rose Hill Racecourse.
Speaker 1 (28:20):
Sorry, yes, Rose Hill .
Speaker 2 (28:21):
Yeah, the point being , though, we've got a housing
crisis today in terms of a largescale new development coming
online in the inner west ofSydney.
It will actually only createnew supply in 2028.
What do we do for the nextthree years?
Speaker 1 (28:35):
Yeah, that's right, that's right.
In the meantime, the populationwill keep expanding.
Yes, so it's barely going tomake a dent into the problem.
Speaker 2 (28:45):
Oh, indeed, louis.
We'll finish on this pointtoday.
You were in the newsunintentionally.
In the last few months, youreceived a phone call or an
email, was it?
Speaker 1 (29:03):
I was just getting into my day's work a couple of
months ago and I received anemail which I first thought was
spam, a very threatening emailfrom supposedly my bank, the
Commonwealth Bank, threateningto freeze my accounts unless I
address and answer some verypersonal questions.
I phoned up the bank to makesure whether this was genuine or
not and they definitelyconfirmed it was genuine.
(29:26):
They gave me the opportunity toanswer their questions over the
phone, which I I took, and thequestions went well beyond just
double checking my ID and can we, before we get to that, then we
discuss the level of thethreats, as you put it, that
they were putting across.
(29:47):
Yeah, so they were threateningto freeze all my personal
accounts I have with the CBA,including my superannuation
account.
They threatened that I wouldnot be able to use the ATM.
They threatened I would not beable to use my card for anything
at all.
And yeah, in this cashlesssociety, that's a that's in this
cashless society.
(30:07):
That's a serious threat.
Speaker 2 (30:08):
Indeed, and do you?
Obviously CBA were carryingthis message, but they weren't
doing it as a company policy.
Do you hold the bank to accounton this, or do you blame the
government department that areimposing this on the banks?
Did the CBA run too deep ininterpreting what they thought
(30:31):
their obligations were?
I'm not sure why you would havebeen flagged as a suspicious
customer.
Or is this what the governmentare doing to the people through
the banks.
Speaker 1 (30:40):
I think it's more the latter than the former.
So AUSTRAC made a publicstatement at the time saying we
do not require the banks tofreeze customer accounts on the
data that they seek.
But the reality is on theground that if the banks don't
take action against what AUSTRACperceives as being high-risk
(31:02):
customers, then the banks can besued by AUSTRAC, and that has
actually happened.
Speaker 2 (31:07):
And is there any reason, without asking you to
divulge your affairs, why youwould be flagged as a high risk
customer?
Speaker 1 (31:14):
Well, good question.
I have a successful business,sqm Research, and that's turned
into a sizeable business.
So I guess occasionally some ofmy transactions can be sizable.
But it was just a line ofquestioning which I just found
extremely intrusive.
(31:34):
So we got to the point with thequestioning where CBA wanted to
know whether I had cash at homeand why do I have cash at home?
That's extraordinary and it'slike that's none of their
business.
Speaker 2 (31:47):
Absolutely not.
Speaker 1 (31:48):
You know and when you think about it, potentially a
security risk for myself and myfamily if that information were
to get out, and we all are awarethat the banks have had data
breaches.
Speaker 2 (32:01):
Oh, indeed, I remember when we purchased our
home I went through the thingwhere you hold the phone and you
self-ID yourself, answered alot of personal questions and
then, 15 minutes later, I got aphone call from, I don't mind
saying, an Indian gentleman whosounded like he was phoning from
Mars.
The line was horrendous, whichwas the flag.
(32:22):
This is dodgy, but he knew Ihad just finished a phone call
with ANZ and he was phoning toreconfirm some information.
Speaker 1 (32:32):
Unbelievable.
Speaker 2 (32:33):
And clearly what had happened is someone in ANZ has
leaked it to his friend out theside and said now, if you call
these people and so I just needto reconfirm a few data points,
and there's your leak and yourhack.
Speaker 1 (32:44):
right there there is your leak, right there, you need
your guard up.
Speaker 2 (32:48):
I rang.
I rang the personal banker andsaid look, mate, this is what's
happened.
And he rolled my eyes and hesaid well, what do you want me
to do about it?
You're right, it's, it'sclearly a leak.
It's not.
Speaker 1 (32:58):
You're not the first person that's told us and
thankfully, you're wise to ityet, at the same time, the bank
under threat of freezing youraccounts and demanding very,
very personal information.
Speaker 2 (33:09):
Yes, and that can go anywhere.
Speaker 1 (33:11):
It can go anywhere.
Finally, with that call, theyactually demanded, as part of
this and if I didn't agree to it, that they would once again
freeze my accounts, that theycould share the information that
I just gave them to governmentdepartments but also to other
third-party credit providers, sothat information about whether
I had cash at home and why wasgoing to be shared around.
(33:34):
Outrageous.
It's not acceptable, and theissue which I'm trying to push
but I feel like I'm taking on aglide from doing this is we need
to see a change in the privacylaws.
We need to see a situationwhere the banks cannot freeze
people's accounts unless it's bya court order or a specific
(33:55):
government directive.
Speaker 2 (33:57):
So we are on the verge there of a social credit
system.
We are yeah.
Speaker 1 (34:01):
I agree with you.
We are, we've been, you know,these things just move by inches
, by inches, by inches, andpeople just are not aware.
So there was never a mass TVstory that the government now
requires you to tell a bankwhether you've got cash at home
or not.
But yet here we are.
Maybe it's not happening toeveryone, but it's happening to
(34:23):
quite a large number of us wherethey're now asking this very
question.
Speaker 2 (34:26):
That's a great point you raise.
We're losing our freedomsincrementally.
Speaker 1 (34:29):
Incrementally and there's no grand media release
about it.
It's just happening behind thescenes.
Speaker 2 (34:33):
Yeah, it's like boiling the frog.
You put him in cold water andyou slowly dial the temperature
of the water up and it doesn'tknow when to get out.
It stays there and boils.
Speaker 1 (34:41):
That's right, that's so what we're fundamentally
talking about is the decline ofcivil liberties happening in the
Western world.
It's not just happening here inAustralia, it's happening
elsewhere as well, and that'snot on.
And this is not a left versusright issue.
Speaker 2 (34:59):
This is an issue that affects all of us, oh great, I
think everybody should bealarmed about what you've
outlined here today.
And you know you put this onsocial media, and then the media
, the mainstream media, camelooking for you on it and you
were gracious enough to putyourself forward and good on you
for highlighting it.
Speaker 1 (35:15):
But it's gone quiet again.
And this is a problem we're insociety now is that these
outrageous things which happen,since there's so many of them,
society forgets what's happenedfive minutes ago.
Until it happens to them, untilit happens to them, until it
happens to them.
But the problem is, when ithappens to them, it's too late.
Speaker 2 (35:30):
Yeah, Louis, thanks for sharing that story with us,
as alarming as it is, and thatwas an outstanding wrap on the
first half of the 2025 Sydneyproperty market.
You're welcome, peter, nice, tobe with you.
Once again, thanks, louis, andthank you for joining us today
on Talking Property.
Speaker 1 (35:48):
We look forward to speaking with you next time.
Welcome to Talking Property.
Today, I'm joined byAustralia's best property
analyst, louis Christopher, aswe dissect the state of the
Sydney property market.
Louis, thanks always forjoining us.
Good to be with you once again,louis.
We last caught up in Decemberand much has happened since then
, locally and globally.
So let's recap with our firstslide some of the things that
(00:25):
have happened before we get yourtake on the first six months of
2025.
So we had the Trumpinauguration, which we knew was
coming.
That wasn't a shock event inDecember, because he was already
president elect.
We knew his tariffs were coming, but it really rattled stock
markets there for a short period, didn't it?
That's right.
Speaker 1 (00:43):
Yes, markets were rattled and then they stabilised
, especially when Trump startedto soften up on his rhetoric on
tariffs.
I must say, as an observer,it's been challenging to follow
his latest moves on tariffs.
It seems to change week by weekand I think that's created a
(01:05):
fair degree of confusion outthere, but nevertheless, equity
markets at least have havesettled as a result of trump's
less aggressive stance ontariffs.
Nevertheless, there are tariffsthat are there that we did not
have this time last year.
Speaker 2 (01:20):
Do you have a view when it comes to Donald Trump?
Does he have a true north thathe's playing to, or is he as
flippant privately with histariff policy as what he is
publicly?
Speaker 1 (01:33):
Oh gee.
I think only those close toTrump will know this in terms of
what is the fundamental truth.
I think, from the pureconservative, libertarian point
of view, trump's been adisappointment.
Libertarians centre-right typeof folk, generally view the
(01:56):
world that we should have freetrade and that is the best way
to solve the world's povertyproblems.
Solve the world's povertyproblems and tariffs generally
create an environment which isnot conducive to economic growth
over the long term.
So I think there are certainlylarge elements that were, and
(02:17):
probably still are, part of hisbase which are disappointed by
this move.
Speaker 2 (02:23):
Then we move towards rate cuts in February.
Now I'm not sure what your datashowed.
What we felt on the ground isthe February rate cut was
received very well and then itwas washed off very quickly by
the breakout in tariffs in earlyto mid-March.
I'm not sure if that correlateswith what your data was telling
you.
Speaker 1 (02:41):
Our data reveals that the period post the rate cut
was one where the market wasstill patchy, still kind of soft
.
I put it in part down to the upand coming election as well as
the uncertainty surrounding thetariffs.
But I think it was more thefact that the federal election
(03:01):
was coming, and we've notedhistorically that when federal
elections are called you see adegree of uncertainty in the
market in the lead up to theelection day.
Speaker 2 (03:11):
Yeah, this election campaign coincided with school
holidays.
Clashed with was run over theEaster and Anzac Day long
weekends, that's right.
So, more than any other that Ican remember, that election
campaign really put thehandbrake on the economy, and I
was speaking to car salespeople,people in a range of businesses
that were experiencing the samething through April.
Speaker 1 (03:33):
Yes.
Speaker 2 (03:33):
And it really pulled up hard.
Speaker 1 (03:35):
That's right and I think that came through on the
March quarter GDP numbers whichhave been recently released and
that showed quite a weak economyfor the first quarter of the
calendar year and I think forthe June quarter we'll still see
some patchiness of the overalleconomy following that.
Well, as a result of thefederal election.
Speaker 2 (03:53):
I reread your boom and bust report before today and
I noticed with interest.
And just to show you howsavagely the political fortunes
turned against Peter Dutton, inyour boom and bust report you
essentially had the Liberals ontrack for victory, such was the
polling at the time.
That's right, and it couldn'thave turned into a more decisive
defeat for him.
Speaker 1 (04:14):
Well, just as well.
I'm a housing analyst, peter,and not an election expert.
Yeah, look, at the time it didappear as though Dutton was
going to win.
He was ahead on the polls and,as you rightly state, that all
turned around essentially on theannouncement of the election.
You know it seemed to turn fromthat point onwards and of
course we can deliberate whythat occurred.
(04:37):
I put it down to a bad campaignrun by the Libs from what I
could see, but yeah, certainly,whatever the reason behind it.
Yeah, the Libs from what Icould see, but yeah, certainly,
whatever the reason behind it.
Yeah, the Libs certainly didn'tget up.
It was one of their worstelection results they've ever
experienced.
Speaker 2 (04:52):
Indeed.
Look, we can speculate on whyit was such a bad campaign.
I think the interest rate cutin February played very well for
Albo.
Inflation being contained gavehim a good talking point that he
hadn't had for the previous sixmonths.
Inflation fell within thetarget range, both underlying
inflation and headline inflation, which was good.
(05:12):
As we record today, the MiddleEast is on the brink of all-out
war, so we won't try and pretendto know where that issue goes.
Hopefully it settles down, butit looks like it's in escalation
mode.
Sadly that could do anything tomarkets, but it is something
that's been brewing all year.
Speaker 1 (05:33):
It's interesting that equity markets at least have
been relatively stable, despitethe escalations which have
occurred and the conflict that'sthere and the conflict that's
there.
So, yeah, the equity marketsappear to be relatively bullish.
That this will all play outfairly reasonably or fairly
peacefully in the end.
I'm not so sure.
(05:54):
I have the same view, but it isinteresting how markets are
like.
Yeah, you know, let's move on.
It's remarkable isn't it?
Speaker 2 (06:02):
Yeah, it certainly is , because, in theory, 12 months
ago, if you said that Israel andIran were going to go at it in
a full on manner, you would havethought that would be the
catalyst for a stock marketcrash.
No doubt, yeah, absolutely yeah.
So it must be pointed out thatduring the first six months of
2025, it looks like all effortsto bring peace in the
(06:24):
Ukraine-Russia war have failedas well.
So there's issues raging there.
Housing approvals fell, yet theimmigration numbers are still
strong, too strong relative tothe number of houses they are
still too strong.
So that's a tailwind forproperty prices, isn't it?
These are not all negativefactors.
Speaker 1 (06:44):
Yes yes.
These are competing factors,purely looking at it, whether
you're someone that's a believerin strong immigration or
someone that's not a believer instrong immigration.
Just purely looking at it, acombination of very strong
population growth, which is whatwe're still experiencing, plus
cuts in interest rates aregenerally pretty positive for
(07:06):
housing prices.
Speaker 2 (07:07):
That's right, and it's playing through.
Speaker 1 (07:08):
It doesn't take me to tell you that it's pretty
obvious, and I think our mostleading indicators are
suggesting that the market isactually starting to pick up.
Speaker 2 (07:18):
And the auction clearance rate has been hovering
around 50% since last August.
I noticed, leading into theFebruary rate cut, that it
actually went through 50% a fewtimes.
So we were starting to seeincreased confidence and numbers
, there weren't we?
Speaker 1 (07:35):
We were and then in the weeks leading up to the
election it softened up again onour numbers.
Post the election clearancerates steadied in Sydney.
And then we note before theJune long weekend we recorded
one of the highest results inSydney so far this year where it
did crack 50% once more andyeah, it was suggesting to us
(08:00):
that there were more buyers outthere and I think post the May
rate cut there has been moreinterest in the market and also
keeping in mind a lot ofspeculation that we'll see
another rate cut in July, yeah,certainly after the May rate cut
.
Speaker 2 (08:16):
What we saw is there was always been strong
inspection numbers in the innerwest.
But when you sort of do yourfollow-ups midweek, if you like
a lot of that buyer interestfalls away when you're trying to
push, you know, or encouragebuyers to take the next step.
But post the May rate cut wesaw a higher preparedness from
buyers to turn their positiveinspection into making an offer,
(08:39):
just to you know, see where itwould go with the vendor.
And we started having biddingwars.
Yep, you know, pretty toughbidding wars, multiple buyers
trying to buy one property.
That we haven't seen for sortof nine, 12 months on, you know,
as a trend line, like we havein the last few weeks.
Speaker 1 (08:58):
And I think on the next rate cut we have, we're
going to see more of that.
Speaker 2 (09:02):
When we talk about the Sydney property market from
the 1st of January to the end ofJune.
When we put all of thosefactors into the mix, what did
the numbers tell us about pricegrowth?
Speaker 1 (09:14):
Louis, our numbers tell us that for the first half
of 2025, Sydney housing priceshave risen modestly.
They're up by about 2% thus farthis year.
Speaker 2 (09:24):
Okay, so that's annualised at 4%, so they're
just in front of the rate ofinflation.
Speaker 1 (09:29):
Yes, that is correct.
The expectation, though, goingforward, is that we will see an
acceleration in the second halfof 2025.
Speaker 2 (09:38):
I'll bring up our next slide here, which is your
scenarios for 2025.
Yes, and I noticed that youmade a change in your base
scenario after the second ratecut.
Do you want to walk us throughthat?
Speaker 1 (09:51):
Yes.
So those familiar with ourforecast know that we release
about four scenarios each yearfor the year ahead and we put
our hat on a base case in termsof what we think is most likely
outcome For this year.
Our scenario three had anassumption that there would be a
rate cut in the March quarter,which did materialise.
(10:12):
So once that happened, we wentout there to our subscribers and
to the wider public and statedthat, ok, there's actually only
one scenario left on ourforecast, which is scenario
three that we're holding our haton and at this point in time
we're still holding our hat onthat.
We're quite confident that thenumbers we had in scenario three
(10:35):
are going to play out for mostcities and with that second
bullet point.
Speaker 2 (10:39):
There, population growth is above 500,000.
Again, was that thegovernment's projection or have
they broken their own promise onthat point?
Speaker 1 (10:53):
They've broken their promise once more Well, promise
is probably not the right wordfor it.
Position they had a target orbasically treasury, federal
treasury had a target numberwhich basically feeds through as
a key assumption in theirbudget outlook, and that number
was lower than 500 000 in termsof total absolute growth.
(11:14):
I think the number was like 360370 000, but when you look at
the monthly uh overseas arrivalnumbers and the migration
numbers we've got to date, I Ijust the numbers are looking a
lot more stronger than that, andso we're quite confident that
we will see yet another year ofpopulation growth over and above
(11:36):
500,000 people.
Speaker 2 (11:38):
So I think this is a really big point for assessing
the strength of the economy vwhat people are going through
household to household.
These numbers really cook thegovernment's books, don't they?
Because 500,000 extra peoplecoming into the economy create
all of this economic activity.
That's right.
But we keep hearing from marketanalysts about a per capita
(12:00):
recession.
So do you want to talk to usabout that, where the
government's numbers suggestingeverything is looking good
because they're bringing in500,000 plus a year, but from
household to household, they'rereally battling the scenario?
Well, that's exactly right.
Speaker 1 (12:16):
On paper, the government can still say
Australia is having realeconomic growth.
The reality, though, is thatwhen we look on a per person
basis, we've been seeing fallingliving standards now since,
really, the start of 2023, if Irecall the numbers.
So this is why it feels formost people that everybody's
(12:40):
been going backwards a bit, butyet the economy still moves
forwards.
The economy still movesforwards and that that is
because, in terms of total uhgdp, it's been expanding, in
part due to the strong flow ofmigration numbers.
When you bring more people in,they demand food, they demand
tvs, they demand a place to live.
(13:03):
That does create economicactivity, but in terms of
economic activity per person,we've been going backwards, and
that is in part as a result of anumber of factors.
Productivity has been fallingaway per person.
Number one.
Number two I'm a strongbeliever that when we went
through the COVID period, thatactually really knocked out our
(13:26):
maximum capacity, economiccapacity, so what I call
aggregated supply.
Our output actually contracted.
That was, in part, working fromhome, in other parts, a
situation where a lot of theemployment growth activity was
driven by government, which isnot exactly the most productive
activity you can see in theeconomy as opposed from the
(13:49):
private sector, and so that hascontributed to this, this
reality that, on a per personbasis, we've been going
backwards.
Speaker 2 (13:59):
Louis let's get into the rental market.
You put a forecast forwardthere as well.
Yes, how do you think themarket's performing relative to
your forecast?
The sydney rental market it'sbeen.
Speaker 1 (14:11):
The reality has been, for the first half of this year
, that rents have steadied, sothey've been no longer
accelerating at the rate ofgrowth that we had in 2021 22 23
rents remain elevated, ofcourse, so so they certainly
haven't returned back to wherewe were pre-COVID, and that is
in part because we've beenhaving very strong population
(14:32):
growth and the supply on thebuilding side has not been
keeping up with that.
In fact, we're well down onlonger term averages in terms of
dwellings completed completed,so that has kept rents elevated.
But the reality has also beento that a lot of the rental
crisis has now been priced in tothe rental market, so we
(14:55):
definitely seen a big rise inrents.
Has the situation deterioratedfurther?
No, and going back to thisnotion of living standards going
backwards, the ability for aperson to take out a property on
a higher rate has reduced, andhow the population's been
responding is by basicallygrouping together more.
Speaker 2 (15:18):
Share households.
Speaker 1 (15:19):
Share households, younger people staying with
their parents for longer.
This is how the market's beenresponding, and that's freed up
a little bit of stock out there,which has essentially put a cap
on further rises in rents.
Speaker 2 (15:34):
I must say, on the ground, and obviously we only
work mainly in one geographicalregion, but I do do the odd
rental open inspection because Ijust like to see it and feel it
for myself.
And each winter we find days onmarket for rentals is longer
than in the warmer months, butnot so this year, and one of the
(15:56):
rentals that I did in Rosellelast Saturday or the Saturday
before had 16 genuine partiesturn up and many of those were,
as you just described, sharedhousehold arrangements, young
people clubbing together butit's very rare and it's very
rare for us to see 16 partiesturn up to one rental open
(16:16):
inspection in winter.
Speaker 1 (16:17):
Well, the numbers don't lie.
What they show is that it'sstill a very tight rental market
in Sydney, with the rentalvacancy rate well below two
percent.
So it is still a landlord'smarket in Sydney, arguably not
as much as where it was back in2023, but still there are more
tenants than what there arerental properties as we speak.
Speaker 2 (16:37):
I want to go to this graph here Louis weekly asking
property prices.
What's this one telling us?
Speaker 1 (16:44):
So we measure where vendors set their asking price
and I've generally found overthe long term it's been a good,
actual leading indicator interms of where the market is
heading.
And what we generally find isthat vendors are actually quite
overall, as a market, quiteresponsive to market changes.
Of course you will always havevendors certain vendors who will
(17:06):
stick to their asking price nomatter what the market's doing,
but overall vendors as a groupare reasonably responsive to the
market and what this is showingfundamentally is that in Sydney
, A houses have beenoutperforming units for quite
some time.
B the rate of growth has slowedfrom where we were, say, in 21
(17:27):
through to 22,.
But we're still seeing risingasking prices and that's feeding
through into rising actualprices.
Speaker 2 (17:34):
And would it be fair to say these rate cuts are
making vendors more bullish?
It may or may not be ajustified position, but is the
data showing that as they cutrates, there's a higher
propensity from vendors to puttheir asking prices up?
Speaker 1 (17:49):
I think there is an element of that.
What's also occurring in Sydneyis that old listings have been
rising and rising and rising.
So there is a higher proportionof vendors out there who cannot
move their property, in partbecause they have expectations
which are well above the market.
And so in this market it'sneither not too hot nor too cold
(18:13):
.
Speaker 2 (18:19):
It is still a market if you misprice your property
expected to be on the market fora long time.
Yeah, indeed, so there's notthat upward growth in prices
where vendors can name theirprice and someone will come
along.
Speaker 1 (18:25):
We're not at that fear of missing out stage yet in
the market.
It's not to say we won't get tothat point with interest rate
cuts.
I think we may.
But at this point in time ifyou misprice your property,
you're not going to sell inSydney.
Speaker 2 (18:37):
We are cautioning our clients as they come to market.
Is there's two types oflistings in this, in this
environment, those that sell inthree weeks and those that take
more than three months?
Speaker 1 (18:45):
Yeah, that's right and, as our data shows, you can
find it on our website.
You look up Sydney totallistings.
You can just see this risingand rising trend of stock that's
been on the market for over 180days in Sydney.
Speaker 2 (18:57):
Louis.
I want to look at our nextslide here From a societal
perspective.
Is a city that's running with a$2 million house price and a $1
million unit price?
Is that healthy?
Should we look at this and weshould say this is great news?
Look what property prices aredoing in Sydney.
Or should we look at this andsay this is strangling our
(19:21):
youth's future?
Speaker 1 (19:22):
Oh well, I'm very much in the latter camp.
I don't think it's a greatpositive to have a situation
like this where housing pricesare just so unaffordable for
those who are on an averageincome.
Let's keep in mind here thatthese prices are just out of the
realms of affordability foressential service workers in
(19:44):
Sydney.
You're not going to find theaverage nurse being able to live
in, say, the middle ring ofSydney now, unless they're
living in, say, a one-bedroombelow average unit.
That's where we're at with itall, and that's not healthy,
that's not good for the city?
Speaker 2 (20:02):
Definitely not.
Speaker 1 (20:03):
No, it's not.
It is problematic, and the wayto resolve this is to increase
supply relative to demand.
So a situation where, okay, Idon't advocate necessarily we
need a housing price crash, butwe need a period where housing
prices do no more than say thegrowth rate of GDP over the long
(20:27):
term and the reality is realhousing prices, after we take
into account inflation in Sydney, have been rising and rising
and rising for a long, long timenow.
Speaker 2 (20:36):
Yeah, so Stephen Kikoulis, on social media, made
a great point the other week.
He said no one has everexplained to me what a fair
house price is, you know,relative to income, et cetera.
Because people will go back andsay in the 70s it took five
times the average income, orwhatever it was, to purchase a
property.
And now that equation's blownwell out in favour of vendors to
(20:59):
the detriment of the buyers.
If Sydney's running at a $2million house price and a $1
million unit price and we'resaying that this is unhealthy
and it's run too hard and it'sabove itself, what would you
speculate it should be at?
Speaker 1 (21:15):
Good question, I think as a multiple of household
earnings, I think anythingthat's really above eight or
nine times that is relativelyunhealthy if it happens over the
long term.
Speaker 2 (21:32):
And what are we running at at the moment?
Speaker 1 (21:34):
I think we're running at close to 10, if I recall the
number.
Speaker 2 (21:37):
It's right up there.
Speaker 1 (21:38):
As mentioned, we need a period where housing prices
in Sydney run at no more thanthe standard economic growth
rate.
If we were to achieve that,we'd see long-term affordability
improvements.
Look, I think Sydney willalways be expensive.
It always has been expensive toan extent.
But looking back at history,yeah, it's probably at its most
(22:02):
expensive point relative toincomes than what we've ever
seen.
And yeah, that is an issue forsocial cohesion and for the
social fabric of Sydney in thelong term.
No, indeed, you can see it.
Speaker 2 (22:16):
You touched on vacancy rates.
Here's your May 2025 vacancyrates.
How does this compare with?
Speaker 1 (22:22):
history.
The historical vacancy ratesthat we're seeing across
Australia, where we're runningat essentially about 1.2%, is
well below average.
Speaker 2 (22:32):
Yeah, and that's what's causing rents to rise,
because it's just stuck below.
That's right Now.
Speaker 1 (22:36):
It's been stuck below that really since 2021.
So we've been in this rentalcrisis now for some years and
we're not really seeing anythingon the ground to suggest it's
about to relieve itself.
As mentioned earlier, a lot ofthe rental pricing has now been
taken into account with thisrental crisis, in other words,
(22:59):
the rental crisis has beenpriced in, so we're seeing
steadier rental growth, asopposed to what we had in 21, 22
and 23, where in some cities,we were recording rental
increases year on year of over20%.
That's no longer happening,fortunately.
Speaker 2 (23:13):
There was a lot of catch up in that, as we've
discussed in the past, thoughwasn't there coming from the
COVID crash of rents?
Speaker 1 (23:20):
Yes, that's right, but in real terms, we're well
and truly above those COVIDlevels.
Oh, now we are.
Yes, yeah, yeah, indeed.
Speaker 2 (23:28):
I think our next slide highlights this really,
really well.
This is probably, I think, thebest slide that we've got for
our audience today.
Everything you've just said isencapsulated here, isn't it?
Speaker 1 (23:39):
Yeah, what it shows is essentially rental.
Affordability has beendeteriorating for a considerable
period of time and there isnothing in the leading data to
suggest that it's improved.
Speaker 2 (23:52):
No, that's right.
It's amazing that this was nota bigger issue during the
election campaign.
Speaker 1 (23:57):
It certainly could have been, but I think the
problem that the Liberal Partyhad with this is that they
flip-flopped a bit on migration,which we all know is one of the
major causes behind this issueright now.
Relative to supply, and I don'tthink their policies were
stronger enough in terms oftrying to address the supply
(24:19):
side, because it appeared to mefrom an objective analysis of
what their their solutions wereto stimulate demand.
Speaker 2 (24:26):
Oh, both sides.
Yeah, I was watching the policycoming out saying this is mad.
They're talking about fuelingthe demand.
It's like where's the supply?
You're only pushing prices upon the people here further,
peter as I've said repeatedly,there are two issues.
Speaker 1 (24:42):
There is a demand side, driven by migration.
There is a supply sideconstrained supply side, which
has been driven by a combinationof factors, including very high
taxes, militant councils, bankswho are even more cautious to
lend to developers, and acommunity overall which has
(25:02):
experienced bad quality when itcomes to off-the-plan
developments in our major citiesfor a number of years now, and
that combination has beenconstraining supply for some
time.
Speaker 2 (25:15):
Throwing an extra thing over the top of all of
that.
What we're seeing is developersdon't want to develop.
They're saying the feasibilityon all of this doesn't unless
there's a dramatic drop in landprices.
These projects are not stackingup.
We're staying on the sideline.
We'd rather have cash in thebank and get our 5% than take
this sort of risk.
Speaker 1 (25:34):
Well, I'm not so sure we'll see a fall on land prices
.
But if developers were to lookon their book and say, okay,
great, the government has nowworked to cut our taxes on each
dwelling by half, then we cannow build again.
Speaker 2 (25:48):
So that's where, you see, the leverage point is is
government coming to the table?
Speaker 1 (25:52):
The truth is, for every dwelling that goes up,
about 20 to 40% of that price.
Speaker 2 (25:59):
That cost are taxes, whether they be local, state or
federal and do you think thegovernment is going to try and
build these 1.2 milliondwellings themselves and oversee
it and be heavily involved, orthey will push it towards the
private sector?
Speaker 1 (26:14):
Oh well, to be clear, they've stated that the 1.2
million target is for alldwellings, whether it's social
development or development doneunder private means.
And, yeah, look, there's beendwellings that have been
completed, as they would havebeen anyway, from the start of
the time frame, which, if yourecall, was July 2024.
(26:37):
But they are behind, seriouslybehind, the run rate required at
this point in time, and I putthe probabilities of the
government hitting their 1.2million target which is meant to
happen by mid-2029, at next tozero at this stage.
Speaker 2 (26:54):
Chris Minns is having a harrowing time finding sites,
isn't he that offer scale interms of dwellings?
Speaker 1 (27:01):
This is the problem with Sydney.
It's easier Melbourne there,because there's a lot more land
to basically sprawl out on, butin Sydney it's it's definitely
more difficult, and so you know,part of the solution is you
build more high densitydwellings in the inner and
middle rings of Sydney, whichyou know has been part of the
(27:21):
plan.
But the issue you have is youhave a lot of NIMBYs in those
areas who are on council boardsand they're resisting as much as
they possibly can.
Speaker 2 (27:34):
Look to outline everything you've just said in
encapsulated in one building.
Chris Minns took a bow onsocial media recently because
the Tigers Leagues Club's beenapproved and it's underway and I
think they're taking theirfirst deposits in the next week
or so.
Yeah, after having a prettyintense marketing campaign, I
sat with someone yesterday thatput a $10,000, you know
(27:56):
registration fee down for one ofthese apartments.
This is in June 2025 andexpects to take hold of the
apartment in some time in 2028.
Right, so we've got a housingcrisis today.
Speaker 1 (28:08):
Well, that's a good news story, and then I'll refer
you to what was meant to happenat the Rainery Racecourse.
Yes, there was meant to be alot of development activity
there, which was blocked by themembers.
Speaker 2 (28:18):
Yeah, the Rose Hill Racecourse.
Speaker 1 (28:20):
Sorry, yes, Rose Hill .
Speaker 2 (28:21):
Yeah, the point being , though, we've got a housing
crisis today in terms of a largescale new development coming
online in the inner west ofSydney.
It will actually only createnew supply in 2028.
What do we do for the nextthree years?
Speaker 1 (28:35):
Yeah, that's right, that's right.
In the meantime, the populationwill keep expanding.
Yes, so it's barely going tomake a dent into the problem.
Speaker 2 (28:45):
Oh, indeed, louis.
We'll finish on this pointtoday.
You were in the newsunintentionally.
In the last few months, youreceived a phone call or an
email, was it?
Speaker 1 (29:03):
I was just getting into my day's work a couple of
months ago and I received anemail which I first thought was
spam, a very threatening emailfrom supposedly my bank, the
Commonwealth Bank, threateningto freeze my accounts unless I
address and answer some verypersonal questions.
I phoned up the bank to makesure whether this was genuine or
not and they definitelyconfirmed it was genuine.
(29:26):
They gave me the opportunity toanswer their questions over the
phone, which I I took, and thequestions went well beyond just
double checking my ID and can we, before we get to that, then we
discuss the level of thethreats, as you put it, that
they were putting across.
(29:47):
Yeah, so they were threateningto freeze all my personal
accounts I have with the CBA,including my superannuation
account.
They threatened that I wouldnot be able to use the ATM.
They threatened I would not beable to use my card for anything
at all.
And yeah, in this cashlesssociety, that's a that's in this
cashless society.
(30:07):
That's a serious threat.
Speaker 2 (30:08):
Indeed, and do you?
Obviously CBA were carryingthis message, but they weren't
doing it as a company policy.
Do you hold the bank to accounton this, or do you blame the
government department that areimposing this on the banks?
Did the CBA run too deep ininterpreting what they thought
(30:31):
their obligations were?
I'm not sure why you would havebeen flagged as a suspicious
customer.
Or is this what the governmentare doing to the people through
the banks.
Speaker 1 (30:40):
I think it's more the latter than the former.
So AUSTRAC made a publicstatement at the time saying we
do not require the banks tofreeze customer accounts on the
data that they seek.
But the reality is on theground that if the banks don't
take action against what AUSTRACperceives as being high-risk
(31:02):
customers, then the banks can besued by AUSTRAC, and that has
actually happened.
Speaker 2 (31:07):
And is there any reason, without asking you to
divulge your affairs, why youwould be flagged as a high risk
customer?
Speaker 1 (31:14):
Well, good question.
I have a successful business,sqm Research, and that's turned
into a sizeable business.
So I guess occasionally some ofmy transactions can be sizable.
But it was just a line ofquestioning which I just found
extremely intrusive.
(31:34):
So we got to the point with thequestioning where CBA wanted to
know whether I had cash at homeand why do I have cash at home?
That's extraordinary and it'slike that's none of their
business.
Speaker 2 (31:47):
Absolutely not.
Speaker 1 (31:48):
You know and when you think about it, potentially a
security risk for myself and myfamily if that information were
to get out, and we all are awarethat the banks have had data
breaches.
Speaker 2 (32:01):
Oh, indeed, I remember when we purchased our
home I went through the thingwhere you hold the phone and you
self-ID yourself, answered alot of personal questions and
then, 15 minutes later, I got aphone call from, I don't mind
saying, an Indian gentleman whosounded like he was phoning from
Mars.
The line was horrendous, whichwas the flag.
(32:22):
This is dodgy, but he knew Ihad just finished a phone call
with ANZ and he was phoning toreconfirm some information.
Speaker 1 (32:32):
Unbelievable.
Speaker 2 (32:33):
And clearly what had happened is someone in ANZ has
leaked it to his friend out theside and said now, if you call
these people and so I just needto reconfirm a few data points,
and there's your leak and yourhack.
Speaker 1 (32:44):
right there there is your leak, right there, you need
your guard up.
Speaker 2 (32:48):
I rang.
I rang the personal banker andsaid look, mate, this is what's
happened.
And he rolled my eyes and hesaid well, what do you want me
to do about it?
You're right, it's, it'sclearly a leak.
It's not.
Speaker 1 (32:58):
You're not the first person that's told us and
thankfully, you're wise to ityet, at the same time, the bank
under threat of freezing youraccounts and demanding very,
very personal information.
Speaker 2 (33:09):
Yes, and that can go anywhere.
Speaker 1 (33:11):
It can go anywhere.
Finally, with that call, theyactually demanded, as part of
this and if I didn't agree to it, that they would once again
freeze my accounts, that theycould share the information that
I just gave them to governmentdepartments but also to other
third-party credit providers, sothat information about whether
I had cash at home and why wasgoing to be shared around.
(33:34):
Outrageous.
It's not acceptable, and theissue which I'm trying to push
but I feel like I'm taking on aglide from doing this is we need
to see a change in the privacylaws.
We need to see a situationwhere the banks cannot freeze
people's accounts unless it's bya court order or a specific
(33:55):
government directive.
Speaker 2 (33:57):
So we are on the verge there of a social credit
system.
We are yeah.
Speaker 1 (34:01):
I agree with you.
We are, we've been, you know,these things just move by inches
, by inches, by inches, andpeople just are not aware.
So there was never a mass TVstory that the government now
requires you to tell a bankwhether you've got cash at home
or not.
But yet here we are.
Maybe it's not happening toeveryone, but it's happening to
(34:23):
quite a large number of us wherethey're now asking this very
question.
Speaker 2 (34:26):
That's a great point you raise.
We're losing our freedomsincrementally.
Speaker 1 (34:29):
Incrementally and there's no grand media release
about it.
It's just happening behind thescenes.
Speaker 2 (34:33):
Yeah, it's like boiling the frog.
You put him in cold water andyou slowly dial the temperature
of the water up and it doesn'tknow when to get out.
It stays there and boils.
Speaker 1 (34:41):
That's right, that's so what we're fundamentally
talking about is the decline ofcivil liberties happening in the
Western world.
It's not just happening here inAustralia, it's happening
elsewhere as well, and that'snot on.
And this is not a left versusright issue.
Speaker 2 (34:59):
This is an issue that affects all of us, oh great, I
think everybody should bealarmed about what you've
outlined here today.
And you know you put this onsocial media, and then the media
, the mainstream media, camelooking for you on it and you
were gracious enough to putyourself forward and good on you
for highlighting it.
Speaker 1 (35:15):
But it's gone quiet again.
And this is a problem we're insociety now is that these
outrageous things which happen,since there's so many of them,
society forgets what's happenedfive minutes ago.
Until it happens to them, untilit happens to them, until it
happens to them.
But the problem is, when ithappens to them, it's too late.
Speaker 2 (35:30):
Yeah, Louis, thanks for sharing that story with us,
as alarming as it is, and thatwas an outstanding wrap on the
first half of the 2025 Sydneyproperty market.
You're welcome, peter, nice, tobe with you.
Once again, thanks, louis, andthank you for joining us today
on Talking Property.
Speaker 1 (35:48):
We look forward to speaking with you next time.
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