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Sydney's Best Buying Window in 15 Years Just Opened | Property Experts · The Follio Property Podcast

0:00
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1:00
Sydney's property market drops into buyer's territory. More affordable homes are starting to appear. Sydney property prices have hit a speed bump. Sydney house price is now at $1.6 million, down 0.3%.
1:13
Sydney is by far the most predictable housing market in Australia. 85% of the market today is selling at a loss in 2026 in Sydney. We've had three rate rises. We've had the government come out with their tax changes. And we've had a clampdown on investor lending in the last six months repeatedly. In the last quarter alone, Sydney house prices down 4%. The wealth impact of a trillion dollar wipeout, what we're in right now, is massive.
1:39
What's your thoughts about the current state of the economy post-budget? We're about to post a 1.2% negative decline period for the month of June. I'd be very surprised if it doesn't land somewhere. 8% plus for Sydney aggregate house prices, decline. If you're selling, it's a nasty time to be a seller out there. Clients are calling me, expected to get early twos. I've got an offer at 1.8 and they're trying to push me down to 1.75. We're about to feel the impact of this and we're living through it right now. The data will come up.
2:09
You're listening to the Folio Property Podcast. I'm Rhys Bettle and I'm here each week with my co-host, Lachlan Delahunty. Lachlan, we've been getting feedback from the guests about market deep dives. We had Josh Coleman doing a Brisbane update recently. We've been really wanting to touch on Sydney because the majority of our audience is now coming from Sydney. So we've got a special guest today, Reetham Saeed, who's the host of Australian Property Talk, co-founder of Flint Group.
2:35
and more importantly for data nerds like us, ex-economist for the Federal Treasury. Welcome to the podcast. Cheers, the pleasure is mine. Thanks for having me, gents. Thanks for joining us. I think we were having a chat about wanting people that we can go deep into data and get some good on the ground feedback and you were the first person I thought of, mate. So first things first, let's just talk about the current state of the economy post-budget. What's your thoughts post-budget?
3:00
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3:25
Yeah, in Sydney, we're feeling it. I would say uncertainty is really, really high at the moment. There's a little bit of tension out there. Some of the budget has created a bigger impact than the actual policy measures that they've gone out with. The policy measures itself, tweaks, changes, really impacts the longer term, the medium term of the makeup of the Australian economy and housing.
3:51
But the immediate impact on Sydneysiders, at least, I can speak to Sydney quite clearly, is uncertainty indexes are really, really high. And you can feel that in the conversations that we have every day with borrowers. They are a little bit more fearful. And when people are fearful, they act significantly differently, and that is impacting activity across the board. So I would say the impact on the broader economy may be unintended by the government. And I don't think they've expected that
4:20
And we'll see it in a few months once the data comes out. In terms of, you know, so there's a lot of doom and gloom. We say this on the podcast and Sydney and Melbourne do dominate the headlines naturally where, you know, majority of the population of the country is based. You know, a lot of the macro data is showing Sydney on a big decline. You mentioned that people are feeling it maybe from a sentiment perspective in the market as well. Is there any particular markets you're seeing in Sydney at the moment that,
4:47
that are hurting the most. We've mentioned on the podcast the prestige market coming off quite a bit, but especially in that first-time buy, I'd love to get your opinion in terms of what the markets are saying there as well.
4:57
Yeah, I think it's come off first, so it's quite noticeable when you break up the quartile data across the country, actually. This isn't a Sydney story. This is an Australia story. The Sydney story is more pronounced. But if you break up the quartiles of housing in terms of the most expensive and the lowest, the cheapest, the top quartile, the most expensive, is falling fairly fast. It fell 3.6% in the last quarter alone, and that is likely to accelerate this quarter because some of that quarter doesn't include the budget impact.
5:24
That's pretty strong, while the cheapest end of the market, that didn't fall at all. So it was pretty flat. The trajectory is downwards in terms of the change in price growth. But it's being felt in, I wouldn't call it the prestige market, because Sydney is a little bit of a strange market. The prestige market in Sydney is probably the $5-10 million plus range. There's a lot of really luxury trophy type homes in Sydney, and that shouldn't be impacted all that much by...
5:53
budget changes here. What the real impact is in the, you know, the 2 million to $5 million market range where there are a lot of Sydneysiders, a lot of Sydneysiders upgrading because that's just the pricing of the marketplace in Sydney. There's a lot of suburbs that meet that median price between two to five.
6:13
that market has really, really turned around quite rapidly and it is in decline fairly aggressively. So if you're buying in that market, you're probably happy about it. But if you're selling, it's a nasty time to be a seller out there. On the ground, I'm hearing that 85% of the market that's selling today is selling at a loss from 2021 onwards. So anyone that's bought a property from 2021 to 2026 in Sydney and now selling, they're selling at a loss. Are you seeing that on the ground?
6:42
Is that the entire of Sydney or is that the top end market? I believe that's wrapped into the areas that we've got interest, which would be sort of within a 20 to 30k radius of CBD. Yeah, look, 85% of properties are selling at a loss in a five-year trajectory. Wow, that's strong. Between 2021. Look, I...
7:02
Don't think so many people who purchased in 2021 are selling in 2026, because if you're in a lost position, you're unlikely to sell. If that's the case, it's not gonna be, that headline alone sounds really, really scary. It sounds like a disaster has happened and we're recovering from it. But if it is a loss, I would say the net impact of somebody purchasing in 2021 to 2026, you're not gonna have made much money in most Sydney suburbs with most property transactions that you've taken over that time period.
7:32
But if you dial it a little bit further forward and you purchased in 2022, because there was a year where property prices did fall quite materially in and around there. So if you purchased in 2022, you're likely to be at the back end of 2022. In spring, you're likely to be ahead a little bit. So it's going to be at the margins, but we're not feeling that statistic so much. But it's fair to say, Sydneysiders and Melbourneites, you can probably extend it there too, is
7:59
Anyone who's purchased in that range in that time period hasn't performed well, and you would have been significantly better off purchasing in Perth, where your boys are at, or Brisbane, Adelaide, many other markets, really, other than the big capitals. How does the Sydney market, you know, as someone...
8:15
I'm originally born in Sydney, so I've spent a lot of time in Sydney myself. But is the market split into sort of two or three speed economy? Like if you've got, is Western Sydney running on a different trajectory towards maybe the inner suburbs or North Sydney? How does the market sit with you?
8:30
Yeah, 100%. That is very much happening because the underlying housing shortage, where Perth, where it's most pronounced, it exists in Sydney too. So when you have that structural dynamic that exists where you have really high migration rates over that 2021 to 2026 period, we've had much higher migration levels, especially if you look at a five-year window only,
8:51
than before. You've created an imbalance dynamic. So that means that housing has pressure, has upward price pressure. It's just not being shown in the top end of the marketplace, but it's very present where people can afford to live. And in Sydney, that is in the sub $1.5 million market, that that market would have performed okay over this time period, noting
9:21
would have performed okay versus the top end of the market. So yes, it's very much a tale of two or three different cities inside the bigger Sydney for sure.
9:31
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10:28
When you said the macro market over the last five years in Sydney has been negative, in what context?
10:35
Yeah, it would just be the rates. The underlying correlation between Sydney and financing conditions is very strong. A little bit differentiated to Perth and some of the other markets, but Sydney and financing conditions in terms of what it's like to get a home loan and what your borrowing power looks like and your ability to get that loan and the cost of credit, they have much stronger correlations to Sydney house prices at an aggregate level.
11:01
And over the past five-year period, you're talking 2021, that was in and around the time where interest rates were zero, fixed rates were 1.9 something. And today, those same interest rates are at six. So borrowing powers have fallen dramatically over that time period as well. You're talking 30% to 40% borrowing power cuts over a five-year period, even after accounting for inflation in wages and nominal wage levels increasing.
11:28
And typically over a five year period, borrowing capacities, if you track it periodically over five year periods, they should rise roughly about 20%. But then the actual nominal value of borrowing capacities is lower than 2021.
11:44
today. So that impact Sydney significantly more because people need to borrow two million bucks to buy a house here. Well, you know, in Perth, at least five years ago, you can borrow significantly less and have a, you know, affordable home to live in. And Perth and other people across the country are not borrowing to their maximums. So house prices are not so contingent on how much you can borrow. Meanwhile, in Sydney, there's a lot of money that's going to be a lot of money
12:10
The answer to that question really does drive aggregate house price potential. And over five years, that story has been quite negative.
12:17
Yeah, because if you look at the correlation in the capital cities, and to summarise that, it's essentially when interest rates rise in places like Sydney and Melbourne, typically we see house prices fall or stagnate. When interest rates fall, we see Melbourne and Sydney go on a run, where Perth almost contradicts that. We've seen significant price growth in Perth and Brisbane in a rising interest rate environment.
12:42
I've been sort of speaking about Sydney for the last three years and calling it on the podcast for the last couple that it's certainly well and truly overpriced. And we look at the affordability index and that tracks the average wage consumed by the average mortgage. And, you know, peak last year was at, what was it, Rhys? You got the numbers there? I think it was about 62, I think.
13:02
It got up as high as 62%, 63%. So the average mortgage in Sydney to meet in-house price was 63% of the total wage. And that's certainly not sustainable. It doesn't leave a lot left for school fees and holidays and those sorts of things, right? So...
13:17
But on the ground when I was speaking about this with Sydney scientists, so to speak, there was almost an unshamed optimism about that doesn't apply to Sydney because there's so much caste, there's intergenerational wealth. There's almost an awe of arrogance that it wouldn't fall, but here we are now, what, 12 months later, and we've seen materially a hearing on the ground from agents that it's 10% to potentially 15% falls in the market. Is that...
13:42
what you were predicting when you looked at what could come for the Sydney market being on the ground? Yeah, 100%. You know, what I love about your podcast and the attitude and frameworks that I think we have this in common about how we view housing is when you stick to a data-centric sort of approach, you are a little bit less fixated on an end result.
14:04
You look at what the data is telling you and you've just picked a really good example. You're looking at affordability and looked at Sydney and being like, hey, over long term historical context in the year 2021, Sydney is looking incredibly unaffordable, which caps the ability for prices to grow. Now, there's no biases associated with Sydney so much there. It's just you're looking at data and making an assessment. I would say that's a very, very fair summary of Sydney.
14:29
It's five years. What I've noticed in Sydney as well, and I'm probably a little bit too young to speak to this at length, but what we have had is a much more turbulent market. In five years, we've had two periods of pretty material declines that have happened. One we're in right now, it's starting to come through in the data set.
14:52
One post-2021, I think it was October 2021 to around October 2022. I'm not too sure exact dates, but we had a pretty material decline, nearly double digits in and around there. And another one now that we've entered. In 2018, we had another one. So in the space of, what, eight years, we've had three events where property prices have declined fairly materially.
15:19
You have puncturing all of that. You've had a 2019 to 2021 period where property prices rose a lot. 2022 to 2024, 2025, property prices began to rise again. So you've got a yo-yo happening in Sydney.
15:33
which I think is a fairly new thing. Usually you've got prices not falling as much. You've got a period where property prices rise in a cycle and then stabilise and then rise in a cycle again, which is really the macro story across many markets. But Sydney, inside a short time period, has had multiple periods of price declines and that's why you have an end result like that where you pick two periods in time, 2021, 2026, and say, hey, people have moved backwards over this time period. Yeah.
16:03
the nuance of the very time-specific period you pick is going to change the answer to that question. And Sydneysiders are experiencing that. And it might ultimately change the sentiment of how people view property because it's been a pretty long period of time. It's eight years and I've picked three different decline cycles so everyone can remember these and it impacts behaviour.
16:20
I pulled up the data, as you were saying, the affordability index there, Lachlan, and it peaked in, according to our data, read them. So it peaked in June 2024 at 61.5%, so pretty close to 62%. And the historical ceiling prior to that would have been in about 2008,000?
16:38
Correct, at 53. So it went past the historical ceiling. By about 10% to 11%. Like that's significant. We're not talking about 1% to 2% or 4% like we're seeing in Adelaide now. 10% above its historical high. So very much uncharted territory.
16:55
Exactly. And now, looking at the most recent data, it's in the low 50s. So it's come off quite a bit from the previous high, but still slightly ahead of the 2008 highs. Which may suggest that there's still some... What impacts the affordability index is the cost of money, incomes and obviously median house prices. We've seen interest rates rise, which obviously affects your borrowing capacity, and we've also seen now median house prices come down. So that's why it's making it arguably more affordable.
17:25
Where do you see the market going from here? Are we at the bottom or do you think there's still more pain to come? No, you've actually picked the metric to look at as well. Sydney is, in my opinion, by far the most predictable housing market in Australia. It is not very hard to work out what's going to happen in Sydney because you look at a metric just like you looked at and you can get an understanding of where the short-term direction of property prices will go in Sydney.
17:49
It doesn't take a genius to say, hey, property prices will move backwards in Sydney in and around now. We've had three rate rises. We've had the government come out with their tax changes. And we've had a clampdown on investor lending in the last six months repeatedly. One through trust lendings. And then the second component is through the negative gearing borrowing changes that are associated with the budget that reduce an investor's ability to borrow.
18:12
40% of activity in New South Wales is made up of investors, and that's going to come back quite materially. Owner-occupiers are going to spend, borrow less. Across all markets, you have a pretty material pullback. So Sydney will pull back. The number I've quoted, I actually think will have a double-digit pullback
18:30
in aggregate price growth, which will probably be dominated by the top end falling a little bit more than that. And we are in the middle of that right now. In the last quarter alone, Sydney house prices down 4%. We're about to post a 1.2% negative decline period for the month of June. You extrapolate that out for another six months or so. I think we're going to be in that period. You have a pretty nasty... Huge numbers. We're talking the biggest fall in house prices in the last 30 years for Sydney.
19:00
Sydney's had a 15% price decline. I think it had a 14.9% price decline in the year 2018. I think we're going to have a pretty material decline. I'd be very surprised if it doesn't land somewhere, 8% plus for Sydney aggregate house prices decline. I'm not talking about the national index. The national index is going to have Perth, Brisbane, and some of the other cities that
19:23
will slow down. For sure, we'll slow down, but it's not going to move into this sort of negative decline type territory. That's a Sydney story right now. And it's happening. I'd go so far, it's already happened on the ground. If you're at an auction and you're buying and selling, like my phone's going off yesterday, clients are calling me being like, hey, I expected to get early twos. I've got an offer at 1.8 and they're trying to push me down to 1.75. Should I take it?
19:53
you know, where they were six months ago, where it was pretty positive. Now it's adapting really, really fast. The data will catch up soon enough. And we've seen this multiple times before, so it makes it far more predictable.
20:05
And what's interesting about that and probably concerning, if people got a lot of their wealth locked up in Sydney real estate and it's to fall 15%, say over a three year period, in a high inflationary environment, that's almost a 30% loss on your money, right? Because typically real estate's a hedge against inflation. You're locked away in an environment where prices are going backwards, yet the cost of money with inflation.
20:30
It's gone up. So we're talking, you're talking massive falls. Like the headline numbers is 10 to 15%. In reality, the worth of your wealth tied up in Sydney real estate, you're falling 20 to 30%.
20:43
It's a scary thought. It's a lot of Australia's capital, a lot of Australia's wealth, that $13 trillion headline of Australian real estate. A lot of that's in Sydney. And the impact on that is massive. I think you've just touched on something really important there, Lachlan. And this is the thesis that I have, again, using a little bit of predictability over the last eight years as to what happens every single one of these cycles. They have a turning point.
21:08
And the turning point in 2018 was, if you go back to 2018, that's the best example because in 2018, you had the government coming out with the very tax changes that they actually implemented in May, they were predicted to win the election in a landslide in 2018, and the uncertainty of negative gearing changes was impacting the market because they were expected to win the election in 2018. There was an election in 2019 and the Labor government were miles ahead at the time. You had lending policy clampdowns with ASIC on lending policy changes.
21:36
similar sort of clampdowns now. And you had the prediction of interest rate rises and fixed rates rising in 2018 as well because the market predicted interest rate rises were coming for the first time in an extended period of time in the year 2018. So similar-ish conditions, except today it's worse because all of these have actually happened. We've had three rate rises, the government tax policies have actually happened. And back then you had prices fall pretty materially and pretty nasty-ass conditions. But what happened was...
22:04
And this is what I think is going to happen again here nationally and to the broader economy. I don't think anyone's realised that we've gone and had a small problem in the year 2025 where inflation started trending up from 2.8% to 3.3% in the back half of 2025, a small inflationary problem. The economy was just going a little bit too fast on the back of the three rate cuts in the first half of 2025. And we needed to water it down a little bit. You know, imagine you're out gardening and you get a little...
22:33
canter and then you go put it out spray the garden with a little bit of water instead what we've gone and done right now in may 2025 is go with an absolute freaking fire hose when it doesn't need that and the economy will slow down dramatically more than expected because the wealth impact of a trillion dollar wipeout which is what we're in right now is massive car sales will fall furniture sales will fall clothing sales will fall all of this will be an impact off house prices changing
23:02
That's what history tells us, and we're living through that right now. So I expect the data on the Australian economy over the next six months that comes out to continually post negative, like below-expectation changes.
23:14
Yeah, definitely. And your consumer confidence is probably a really good indication. And that's the lowest it's arguably ever been. Obviously, it's been a slight uptick from May because it was such a crazy month. But I agree. And I'm sure you're going to tell us what happens when the economy is so ill affected, you start to see inflation come back, which may force the RBA hand to potentially look at declining. I know the
23:39
The story at the moment, post the meeting, RBA, recent meeting, is that there's likely more rate rises, and I know you don't agree with that. And do you want to talk to us a little bit about that? I think we're sort of leaning into that with this conversation. Yeah.
23:51
Yeah, I'd just go so far. It's just a policy error. They're just a little bit behind the eight ball here. They're not reading what's happening on the economy on the ground right now. They're reading data and an expectation that, hey, things are OK. Our initial signals are saying inflation is going to come back down. It's on track. But recent data, like very recent data, GDP growth data came out. We're in a per capita negative posting again, negative 0.1%.
24:14
On the way to a recession? Yeah, on the way, at least a per capita recession, yeah. Again, we've had that a couple of times in the last five or six years as well. The data's not positive on the economy. Unemployment went up to 4.5% when the RBA was expecting it to hit 4.4% in December this year. It's already at 4.5%. GDP growth levels, if you annualise the first quarter, are half what they were in 2025. And that doesn't include any of the three rate rises, because the first rate rise was in February, impacted borrowers in around mid-March.
24:41
you're measuring a period that didn't even have any rate rises and the period that we're in now, it's not measured. Once these measurements come through, I think everyone's going to backflip on the rate story dance and then you're going to be like, okay, cool. What does this mean? The economy slowed down a bit more, the RBA will change their tune and we'll have rate cuts that trigger that
25:01
The Sydney down will go back up and the roller coaster just starts again that we've been playing on. It's becoming predictable. If this is what happens, then the roller coaster will start again. Sydney will flip and turn positive again.
25:13
And if we were to net that out, obviously, the problem is data is typically lagged. And often the data that the RBI are relying on is at least 30 to 60 days old. So they're a little reactive to what's actually happening on the ground. Sentiment tells us that the economy is quite dire and people are starting to spend less because, you know...
25:34
They're fearful of the economic environment that we're currently in. So if we had to net this out over the course of the year, when do we think that pendulum will shift from the view of potentially rates going up to then of, okay, the economy is really struggling here. We need to decline rates to sort of put a bit of a fire under the economy. When do you think that will change? Because that's probably the turning point for the Sydney market, right? Right.
25:56
Exactly, you nailed it. This is what will drive the Sydney market. This is the one thing, the one variable that will change the Sydney market and the whole tune of it. And I'm completely a contrarian here with everyone else. And obviously, I'm a property guy, I run a big mortgage-breaking business. Obviously, you have to take my opinion with the context of where I'm from, but I'm just putting my ex-treasury hat on and I'm looking at it from
26:17
Being in a chair that gets to read the Australian people and the Australian economy with live frequency data en masse, my business writes over a billion dollars in home loans, I get real intel on live behaviours of Australians through lending flows across all of our business lines. So that's telling me that the Australian economy is pulling back quicker, credit growth will come down. And unlike different periods, this government cannot turn on...
26:44
I presume they can't politically, they cannot turn on the population taps. In the past, we've had periods where the Australian economy slowed down. 2018, really good example using that. If you looked at population growth taps, population level levers are pulled upwards at times like this to get Australia into per capita recessions, but not actual recessions. Right now, the Australian government does not have the liberty or the luxury or the political capital, and the Australian people will not accept us to just dial up population levels. Still waiting in line?
27:14
again?
27:42
Well, it's already at all-time highs, right? Half a million people a year is record levels. Yeah, it would be political suicide for them to let in another half a million.
27:51
Yeah, exactly. And you need to grow it, if that makes sense. You need a delta change to increase the number of people. So I suspect that isn't there as well in these conditions. So I think, this is the call that I've said on my channel, on Australian Property Talk, I think there's going to be six to eight rate cuts between now and the end of 2027. And I think the first- Six to eight rate cuts? I think there'll be six to eight rate cuts, yes. Massive call. In the year, what, from end of 2026-
28:17
By the end of 2027, yes. And that will begin, the first of these will begin late this year or early next year. If I had to explain that to your viewers, the reason is the neutral interest rate setting in Australia from the RBA and from most experts, it's somewhere between three, three and a half percent. We need four rate cuts to just bring the Australian interest rate setting to what our neutral rate is. So that is a level where we're not slowing the economy down and we're not pushing it forward.
28:46
So if we need four rate cuts to do that, then those will be the first four. But the answer won't be, let's just get the economy into neutral. We need to get the economy going again because we threw a bazooka at it and it didn't need it. We need to rectify our error that we've made right now. And that rectification means that you're gonna have to bring interest rates to 2.85, 2.5 to 3% in that range. And that's why I think there'll be fairly aggressive rate cuts because the data will turn on the Australian economy between now and the next six months.
29:12
That's the call that I'm making. I might look like an absolute idiot. I have done that in the past, but that is what I think, and that's how I've explained it. I like it like people bold and say it how it is. Only thing I'd add to that to counter the seven or eight rate cuts, I'll certainly share your view, there will be some cutting because I think the economy is going to go in a sharp decline as the data comes through. The long-term growth,
29:36
average, you might be able to correct me for mortgage rate in Australia sits at 4.92%. We're currently at what, say 6 to 6.2% interest rate. So I do think that would allow for four to potentially five interest rate cuts to get back to our long-term average. But what you're saying there, I believe is that because the economy will be in such distress, they'll have to go well below the long-term average just to stimulate some activity.
30:03
Yeah, that sums it up. I don't think neutral interest rate settings make sense. We've got to remember, inflation is at 3.3% headline right now, and we are worried. The government, in their statement last week, no, no, it was on Tuesday, they said the word fuel six times. They are really worried about the fuel impulse on energy prices pushing that 3.3% a little bit higher. And look, I don't think they're going to be wrong on that. They're obviously measuring inflation like hawks.
30:29
But we're at 3.3%. It's not 6% or 7% anymore. We're at 3.3%. We are a little bit above band, and we have some potential inflation pulses that are a bit stronger. But this is not the difference in what I'm saying is that demand is going to come off far more than the RBA expect. And because of that, that's going to drive inflation down. And the wealth impact,
30:50
of the trillion dollar wealth wipeout that we're in right now is going to flow through to the broader Australian economy. That's going to drive inflation levels below the RBA's expectation. And once that's there and unemployment continues to trend up closer to five or we get a few more poor employment readings, the RBA is going to backflip really quickly because they can.
31:08
Inflation is at 3.3. It's not at 6. It's not at 5. It's a little bit above band, and smaller demand tweaks will actually bring inflation close or into the band without that much, because it's sitting 0.3% above it.
31:21
Yeah, well, okay. It's an interesting read. And that for Sydney side is probably some hope, I guess, in terms of what the outlook could look like for Sydney and the broader Australian market over the next sort of three to five years. But for the most of 2026, it does sound like it's going to be more doom and gloom. It's going to be more negative results. Do you want to sort of dive into some of the data there, Rhys, of what we're seeing on the ground with the Sydney data sets?
31:47
Yeah, I think what we were saying earlier in terms of where the affordability index is now, so we've obviously reached the cap. Auction clearance rates was probably the big one. So the data we tracked from last week as opposed to 12 months ago was down between 15% and 20%.
32:04
So it's probably no secret. We're hearing record low auction clearance rates, but in a 12-month period, we've seen a 15% to 20% drop. So that sort of stamps out the idea that it's seasonally adjusted, right? Because everyone says property, real estate, it's seasonal. Typically, summer and spring are high sales months, but that's the same time in middle of June last year, we're 20% to 25% below auction clearance rates to where we were this time last year. That is significant. And for the first time, we're seeing auction clearance rates in Sydney below 50%, which is a scary thought.
32:34
Yeah, clearance rates. I think last weekend, final clearance rates. I like to look at the final figure because the correlation sits there. Not the one that comes out on Saturday evenings. That one's sitting around 52%, I think, last week, and it is trending down. That is...
32:49
probably pushing to around 0.5% to 1% negative price growth when clearance rates, final clearance rates sit around there. And if it falls into the 40s, you will get that negative 1% price growth that we're experiencing every month. There's a very close correlation between clearance rates and price growth in the short term. So that's there. I think the message though, if I'm right with what I'm saying though, is the Sydney story, it is a bit of a yo-yo. And if you're a long-term property investor, maybe you don't want to be part of that yo-yo because you need to look at
33:19
But if you're a short-term property investor or you're a Sydney side artist buying an owner-occupier, if this story is right, you are operating and buying in beautiful buying conditions. Just like it was in 2018 and 2022, anyone who bought in these little windows would be like, hey, it's pretty good for me to be a buyer because there's no competition out there. It's horrible selling conditions.
33:42
People are very fearful right now. And if the interest rate story changes, then Sydney is obviously going to benefit from it. Because, again, the predictability of Sydney, so obvious, it's just financing and rate conditions. So if I'm wrong and interest rates go up from here and continue to stay higher and inflation is higher, then Sydney's in for a bigger decline than anyone's predicting. It's going to be really nasty.
34:05
Yeah, so on that, I would agree that it's a good time to potentially look at upgrading if you're in Sydney because you're going to get a disproportionate discount on your upgraded property than you are in your current residence. Probably not a great time to be downsizing. And that's, you know, typically you'll be selling your, you know…
34:22
higher end or more expensive property at a larger discount than what you're buying into. So I definitely would echo that. It's just an interesting thought that hard to breathe confidence in a market that it is a good time to buy when we could be midway through a pretty significant downturn if there is another 5% to 6% fall in house prices.
34:40
we're never going to pick the bottom of the market. I'm sure you'd agree with that. No one will. It's trying to get that balance right of when the bottom's actually going to hit Sydney and it can change very quickly. We know sentiment can change your market overnight. We've seen that in the last sort of eight weeks, but it can also turn very quickly for positive reasons and that's the dialogue around interest rates.
34:59
Yeah, that's true. And the fearfulness will exist in the marketplace. No one likes catching a falling knife. That exists a little bit in the Sydney marketplace. If I can provide some expertise to anyone listening to this is don't worry about the data. If you're actually participating in the market, you need to make your decision there as to whether it makes sense, what you believe the Sydney market will look like. Look at the data frameworks there. But I wouldn't worry so much about the short-term data because the Sydney house price data will lag a little bit as well. I think we're going to be in good buying conditions.
35:28
From now, I think spring's gonna be really, really positive for buyers in Sydney and really negative for sellers. We may need a little bit of period for expectations of sellers to adjust because they might be using comparables from 90 days ago. Might need a little bit more time, but you can flex your arm a little bit, negotiate a little bit harder, and expectations are already quickly changing and real estate agents are doing a good job with their clients in recasting expectations just by showing them clearance rates and whatnot.
35:56
Radim, I'd love to get your opinion on some of the other markets outside Sydney. You've kind of touched on earlier with the Western Sydney inner city, eastern suburbs sort of ring. What about markets like Central Coast and Newcastle, which Lachlan, we'd call these metropolitan regionals. We know with the accessibility to Sydney, especially Central Coast. I know my brother lives on Central Coast, about an hour on the train to the city. So it's a very easy commute.
36:21
How have those markets been performing over the last sort of 6-12 months when Sydney's maybe struggled a little bit with declining price growth? Yeah, look, the current, the six month story current is quite...
36:34
negative all around Australia, the price growth trajectory month on month has fallen from March, April, May. Even Perth has had a pretty material drop off in the pace of price growth. Newcastle has felt that too. So Central Coast markets, the sub markets around Sydney have felt that.
36:54
I actually like these markets medium to longer term. Again, throwing my crystal ball out there and being like, how does the state of the Australian economy change? How are people's livelihoods evolving over a period of time? I think the lifestyle markets, especially the coastal ones up and down around Sydney, have really good long-term growth.
37:13
bones about them, particularly as individuals in society may have a little bit more time as Australia gets older. There's frameworks there that make Sydney accessible because it's only an hour or two away, but you get the lifestyle component of being in some of the most beautiful markets in the world, really. Newcastle and the surrounds of Newcastle are beautiful. You get the benefits of that while being close to Sydney. I think the long-term frameworks are pretty good. So if you're a long-term property investor...
37:42
There's a lot to like, and then it would be about looking at the shorter term supply demand frameworks there. But if you're going to throw a percentage here, how much do you think these lifestyle markets have come off? Newcastle and Central Coast.
37:55
If I had to just crystal ball that, probably half the Sydney fall. Okay, so you don't think they're going to be as significant. Is it just because of the affordability play there? Exactly. Isn't it dramatic? Is it Sydney? Exactly. The price point. And Sydney is the wrong word to use as well. I think Sydney apartments won't do that poorly at all. Well, they haven't done anything in terms of growth over pretty much the last decade. So they've been quite stagnant.
38:21
Yeah, exactly. That's exactly why I think in the short run, even in these contexts, there's a lot of Sydneysiders out there that need a home. A lot of people coming into this country and we have a structural supply shortage. If they can't borrow the money to go buy what they want, they will buy what they can get or they will rent what they can get. And that is the apartment market, which has increased in value and affordability, if that makes sense, like, you know, 10 years of no price growth. It means the numbers look a little bit more attractive. So these marketplaces,
38:49
The western parts of Sydney, the more affordable parts, the unit market, these markets, I don't necessarily think they're going to fall materially. I think they will fall because the macro is quite nasty at the moment. So they will fall a little bit and they'll definitely come off. But the level of price growth is going to be very, very minimal. Price change is going to be much smaller than, you know, the $1.5 million plus market all across Sydney, which drags the index down.
39:16
It's interesting to talk about these lifestyle markets and we look at say a Byron Bay or a Morning Peninsula in Victoria. Budget has really hampered that strategy for a lot of people, right? Getting no negative gearing benefit on some of these high land value type assets in these lifestyle areas has probably removed a significant buyer pool and we're seeing that on the ground across the country. These lifestyle markets, the buyers have dried up.
39:44
Because you think about some of these properties where you might land bank something for a few years while you get plans, approvals to build, you know, a substantial home. Well, that that that gearing benefit, do you see that playing out in New South Wales? Yes, for sure. The negative gearing changes that impacts, I mean, property all around Australia today, it's very hard to find positively geared properties when you leverage, you know, that if you have the cost of debt included in there properly.
40:12
It's very hard to find positively geared assets nowadays across Australia. But in Sydney, specifically, rental yields are the lowest. And the markets you just mentioned there are all the lowest rental yield markets in Australia. Those markets should naturally feel most impacted from the negative gearing changes because investors are less likely to go and purchase there.
40:34
Well, it's not even investors, right? That's people that are looking to sort of land bank and you could argue that's an investment, but they're doing it for lifestyle purposes. So that second home market was struggling in the lead up to the budget as it was. This is probably the nail in the coffin for that market, certainly in the short term.
40:51
Yeah, in the short term, bumpy, bumpy. There's a whole range of markets there. And yes, the rate rises are big, are bigger. And if I had to break it down as well, the rate rises should be a much bigger impact on the marketplace in Sydney and trajectory than the budget itself. The budget, the policy measures announced in the budget, you know, removing negative gearing into the future and the CGT indexation, those on its own shouldn't necessarily create massive,
41:19
price changes on its own. It's the combination of all three of these things happening, lending, three rate rises, and a budget, all in the space of months. That is enormous. It completely changes. It's the perfect storm. Exactly. It's the perfect storm, if I had to describe it. There's actually... I won't use that word because I think the perfect storm in Australia, and we've never experienced this before, and I hope we never do. My backstory is my parents lost their job, and I do what I do because...
41:47
I absolutely hate the concept of Australians losing their job and not being able to find one because of the impact it has on families. But the perfect storm is if Australians start losing their job with this economy change that's there and with AI changes and whatnot, that could actually trigger a bigger, bigger, a very different conversation. That would be the perfect storm. But we're pretty close to it. This is self-harm as well. It's the Australian government.
42:16
It's regulators, government, policy makers. It's all self-driven. We have done this. We have done this to the policy settings in Australia inside the last decade.
42:27
three, four months. And did we necessarily need to do all of this back-to-back inside a short time period? And why? Why was there not consideration around, you know, is the timing of this quite right? Like, we've just had three rate rises, the market's slowing. Do we need to throw this right now? You know, it was just done in isolation and three moves done in isolation with each other. It's just...
42:49
That impact is not, in my opinion, has not been fully considered. And we're about to feel the impact of this. And we're living through it right now and the data will come out. That's the underlying message I've got here. Hey, it's Ryan Reynolds here for Mint Mobile. Now, I was looking for fun ways to tell you that Mint's offer of unlimited premium wireless for $15 a month is back. So I thought it would be fun if we made $15 bills. But it turns out...
43:13
That's very illegal. So there goes my big idea for the commercial. Give it a try at mintmobile.com slash switch. Upfront payment of $45 for three months, $90 for six months, or $180 for 12-month plan required. $15 per month equivalent. Taxes and fees extra. Initial plan term only. Greater than 50 gigabytes may slow when network is busy. See terms. It's a trillion-dollar decision, right? It's cost the Australians a trillion dollars. And that's the story that needs to be put on the paper. That's what our government's done.
43:38
Before we get you out, Radim, I'd love to get your opinion with your investor hat. You're a current investor. With Flint, you mentioned there, you're doing over a billion dollars of transactions. He's seeing a lot of investors on your books. I want to throw an interesting stat at you before I get your opinion, but 70% of our clients from Sydney have more than two properties. And-
43:59
Early days, I was on the phone to a lot of these people and you got everyday mum and dad with three or four property portfolios which people in Perth thought it was very out of the norm and had years of equity positions to leverage. What I found with a lot of the clients in Sydney was they were very open to borderless investing. They realized markets moved in different cycles. They were looking to leverage what they'd made in Sydney and they'd bought in Brisbane, Adelaide, Perth. Now wherever the new cycle is, they're looking to go.
44:27
with being based in Sydney, being an avid investor yourself, probably seeing a lot of these clients yourself, where do you see the best opportunity to invest in the country right now? Firstly, I absolutely love that. We've said on this podcast, 2021 to 2026, poor Sydney outcomes, and you've just said a lot of Sydneysiders have decided to go invest somewhere else in other capitals that have done really well over that time period. So that's statistic. I actually give you boys a little shout out to that.
44:53
The change in the way people consume information has allowed Sydneysiders to absorb different mindsets and different perspectives, and they're making better money decisions as a result. I think the buyer's agent industry has done incredibly well there in total in terms of wealth creation for everyday strains. So quick little shout out there to you boys for actually being part of that change. It makes me so happy that Sydneysiders are doing well because they're investing outside of Sydney. That's cool if their finances are improving.
45:20
The markets right now that I actually think are doing well and the ones that we talk about, we talk a little bit about apartments. And I've specifically used Melbourne apartments as an example to do well. That's because in this – Units or apartments. Yeah. I mean like walk up, you know, blocks of 10, 20 sort of – Yeah.
45:37
I think that's an apartment or unit, whatever the terminology is. I think those will do particularly well because you're buying below build cost. Yields are sitting at 6%-ish right now in Melbourne. And really, it's just a defensive play. You're buying a $300,000 to $400,000 asset. It's cheap. You get a 6% yield and you're buying below build cost and you get some land associated with not many dwellings on it.
45:59
I think in this marketplace, buying a little bit defensive makes a bit of sense. And advanced investors, myself personally as well, I'm looking at blocks of units because you get the land component there as well. And I like the long-term frameworks of owning land a few kilometers from Melbourne CBD and a big pocket there with a 7% yield. I think advanced investors are quite enjoying that product at the moment.
46:23
But it's really born from what are the alternatives. And when you narrow it down, these ones look pretty good. And then there's a number of location-based ones where like, hey, the data metrics are good here. The economic fundamentals are pretty good here. And the sectors that drive these economies are pretty strong. So, you know, parts of Tasmania look pretty good at the moment, for example. Geelong as well looks pretty good. There's some markets across Australia that look pretty decent.
46:53
that are smaller, that makes sense as well. So those are probably the three main opportunities. And for Sydneysiders, given this is a Sydney-based podcast, I am licking my lips. Just the investor in me is like licking my lips at the moment as a Sydneysider, as a property investor. I would also be looking at blocks of units in Sydney and in the Western areas, you'll get a five-ish yield or five to 6% yield there. And
47:16
There's been major zoning changes all across Sydney, and it's created a lot of planning opportunities and development opportunities for those that have serious cash and the ability to navigate the changing Sydney landscape. There is a golden window of opportunity at the moment to buy sites, really, that will turn into apartments, and approvals are coming in thick and fast over the next 12 to 18 months. The data will change there.
47:43
because of the LMR zoning changes and a series of zoning changes that Sydney and New South Wales planning has had. I can pretty much agree with everything you said there, with the exception of Tasmania. It's losing more people than it's gaining. So the interstate migration numbers are pretty significantly, sorry, they're a serious concern, I think, for Tasmania. I think they've seen a bit of a bump through COVID where a lot of people exited Melbourne, went to Tasmania.
48:06
There's always markets within markets, so you can't just label a state and say it's going to fall on house prices, but it needs to retain more people. If it continues to lose the amount of people, similar to that of other states, Darwin's another example of that, very hard to see price growth movement in a positive direction when you're losing more people than you're getting.
48:28
Yeah, I love that summary, Lachlan. We did a little video, I did a little individual video, I think it was on a location, Davenport maybe? It was probably six, seven months ago. And we went through all of the frameworks and the one framework that was there being like, hey, this is an orange, I just kind of green, red, orange traffic lighted, what I like, what I don't like. There was some positive messages there, but the big orange one was, hey, if population doesn't turn around over the next little period of time, then this doesn't have the hallmarks of anything that is structurally sound.
48:55
So there is a little bit of risk there. And the nature of Tasmania, that's a very fair comment to look at. And preference is Geelong there, because I think the population indexes in Geelong are quite positive over a period of time.
49:09
They definitely are. And Geelong people typically, a fair portion, work in Melbourne. So they're on Melbourne wages in a market that you don't have to pay Melbourne prices. So 100% agree. Mate, that was a ripper. Thanks for coming on. It was good to have a good deep data dive. You had some bold predictions there as well. So I like someone who puts their name on the line like that. Similar sentiment that we have, but obviously a lot more aggressive. So yeah, really, really enjoyed the chat. We'll have to do round two in studio in a couple of months' time.
49:39
Thanks for having me, gents. It's a pleasure being here. You've been listening to Folio Property Podcast.
49:52
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