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Property Markets Hit Historic Ceiling: Here's Exactly How Far Prices Must Drop · The Follio Property Podcast

0:00
It's the last seven days has been the worst week in Australian property market over the course of 2026.
0:06
Net that out.
0:07
That's negative two and a half percent a month.
0:10
That is significant.
0:11
That is in free fall.
0:12
That is falling like a rock.
0:14
If your property market's in free fall and you don't have a reason to sell, you shouldn't be selling.
0:18
Everyone's trying to predict how far are these house prices going to fall.
0:21
And they're using the wrong data sets.
0:23
They're not using any data to back it up other than just gut feel.
0:26
We can qualify exactly how far these markets need to fall.
0:29
When it hits that ceiling, house prices fall.
0:32
And that has been consistent throughout.
0:34
History repeats itself.
0:35
In the median house prices dropping by 0.3% a week.
0:37
Stats don't lie.
0:42
You're listening to the Folio Property Podcast.
0:45
I'm Rhys Bettle.
0:46
I'm here each week with my co-host, Lachlan Delahunty.
0:49
Lachlan, big episode today.
0:50
I want to talk through round the ground, weekly performance on all capital cities.
0:55
One of the biggest weeks we've probably seen all year from a price movement perspective.
1:00
want to touch through historical medium, medium house and unit trends, also looking at the affordability index to understand when a market tops out.
1:09
Yeah, exactly, Rhys.
1:09
And this is, love this episode because we're going to go back and look at historical data to give an idea or a forecast of where we see the Australian property landscape, you know, moving forward.
1:19
So really good, you know, the affordability index carries a lot of weight when we look at markets and how they move and their performance.
1:26
So we're going to dive into that.
1:28
Also,
1:29
On the ground, we want to hear more from agents.
1:32
So if you are interested in featuring on our podcast on a weekly basis, we speak to agents every week.
1:38
We're reaching out to those in your market that can give us high level what you saw over the last seven days.
1:45
So we can bring it to our listeners.
1:47
And we want three in each market.
1:49
So if you're in Sydney, Brisbane, Adelaide, Hobart or Darwin, I know we don't talk about it.
1:53
We want to know what's happening in these markets.
1:54
So please reach out in the show notes.
1:56
There's an email address to...
1:59
contact us and that gives us and the listeners not only the evidence behind the data what we're seeing reach but that anecdotal what is happening at home opens that live data that that is more quantitative and more qualitative than quantitative and gives us the insights that we need to inform you as a listener and the reason it's weekly race is because there's so much happening now we can't we can't report on a monthly set we can't report on a quarterly set because
2:26
it becomes irrelevant very, very quickly.
2:28
So we need to know what's happening on a rolling seven-day average.
2:34
And the last seven days has been the worst week in Australian property market over the course of 2026.
2:42
So to say that the worst was behind us, I stand very corrected after I've seen the data today.
2:47
And we'll talk through the reasons why to that.
2:50
Good.
2:51
I'm glad you addressed the elephant in the room straight away, Lachlan.
2:55
Let's just talk a little bit about that.
2:58
I copped some criticism, which I'm very open to.
3:00
I love the feedback.
3:01
It keeps us on our toes.
3:04
In terms of stating that the worst is behind us, the intention behind that statement was the macro environment in which impacts property prices in terms of rate rise, policy changes, global political events.
3:22
I firmly and still do believe the worst is behind us.
3:26
I don't think we'll ever go through a period of time, a three-month period where you see three rate rises, the worst budget in history, and a war essentially break out from nowhere in the Middle East.
3:38
So from that point of view, I'd be very surprised, and I will stand corrected, and I'll never say never say never,
3:43
But I don't think we'll ever go through a period of such significance in terms of global macro policy change than what we've gone through in the first two quarters, essentially, or the first half of 2026.
3:58
So from that point of view, the worst is behind us in terms of the free fall of the Australian property market.
4:04
No, there's a lot to play out and this week's data is really concerning.
4:08
And I think there's some reasons as to why it's playing out and that's our job is to talk through it, Rhys.
4:13
Yeah, just to follow up on that as well, I think from a sentiment perspective, although the figures aren't going to be reflective, I'd like to get your opinion on why you think we've seen a drop in prices as opposed to last week where it started to feel like it was going in the positive direction.
4:30
Look, the sentiment is starting to change out though.
4:32
We've seen that through the podcast, through our business.
4:35
And like we've mentioned on the last couple of episodes, banks and lenders now starting to be a bit more proactive in the lending space as well.
4:42
So I think from a macro perspective, you're completely right.
4:45
But it's going to be watch this space in terms of property prices.
4:48
Before I go through... And there's a lagging effect.
4:51
And this is...
4:53
The rate rise that we had in March, it takes six months often to hit people's pockets.
4:59
So we're still feeling the effects of the impacts of the first of the three rate rises.
5:05
So that does take a long time to come into effect.
5:09
So you're not going to...
5:10
Sentiment can change today.
5:12
And overnight, even if we had a good rate cut last week,
5:16
you know, would I expect prices to rebound?
5:18
No, it would take three to four months before you see that change in the data set that we're tracking today.
5:24
Because if someone goes out today and buys a property on the good news story that was portrayed last week, well, by the time that's potentially purchased and then settled and then hit the data that we report on a weekly basis, then, you know, you're two to three months down the track.
5:39
So,
5:40
regardless, even if the best news stories hit headline media today, we wouldn't see the macro median house price improve for another three to four months.
5:49
All right, let's kickstart with Sydney because I believe that's where the comments was.
5:53
I don't think you actually mentioned the whole market was the worst that we're going to see.
5:57
I think it was from memory a couple of weeks ago, it was Sydney that we were talking about.
6:01
Now, Sydney for the week has dropped 0.48%, so nearly half a percent in a week.
6:06
Now, you compare that to the rolling four-week average at 0.37.
6:10
So it's well above.
6:12
It's the worst week on record this year in terms of median house price movement.
6:17
So negative, call it 0.5%.
6:19
Net that out.
6:20
That's negative 2.5% a month.
6:23
That is significant.
6:25
That is in free fall.
6:26
That is falling like a rock.
6:29
Auction clearance rates, though, surprisingly a slight tick up from last week.
6:33
This is preliminary, of course, but we've got to be consistent with the data that I've been reading out over the last three or four weeks.
6:40
Last week, it was at 50%.
6:41
Auction clearance rates now at 53%.
6:45
What do you make of that, even though you're seeing, I guess, a sharp decline in price growth for the week?
6:52
It's, you know, there's a few stories playing out here.
6:55
If you look at the median house prices of the auction clearance rates, they're historically extremely low.
7:02
So although auction clearance rates are going up in Sydney, and we can look at the same in Melbourne...
7:08
And last week was the best performance at auctions for 11 weeks, right?
7:12
And it's increased from there.
7:14
So this is great for the market.
7:16
This is positive news.
7:17
However, the median house prices that are selling at auction is much lower.
7:22
You know, sub a million dollars is the median.
7:25
So that means we're seeing more activity at the lower price points.
7:28
So what's really hurting at the moment is the prestige markets in both Sydney and Melbourne, but specifically Sydney.
7:35
that eastern the eastern suburbs are hurting because a lot of the activity that's actually trading at auction or before auction is in the lower price points
7:44
We're also seeing in terms of auctions scheduled and auctions reported, it is starting to trend downwards as well, I guess, over the last couple of weeks as well.
7:54
So fewer properties, not crazy numbers here when I'm looking at them.
7:58
So from an auctions reported perspective, last week it was at 384 for Sydney, 340 this week.
8:03
Previously, four weeks ago, it was 409.
8:05
So it is trending downwards.
8:07
Yeah.
8:07
Has that got anything to do with the clearance rates?
8:09
Less properties on there, more of a demand?
8:12
Yeah, it's supply and demand, right?
8:13
When there's less availability, typically you're gonna see a higher rate.
8:16
But there's a reason that there's less coming to market because people shouldn't be selling at the moment.
8:23
If your property market's in free fall and you don't have a reason to sell,
8:27
real estate agents in Sydney will hate that, but you shouldn't be selling.
8:31
Same in Prestige Melbourne.
8:32
If you don't have a reason to, unless you're upgrading, because it's a really good time to upgrade in those markets, you shouldn't be selling.
8:38
So you will see less property sell in a falling market for obvious reasons.
8:44
The one I want to talk about, Lachlan, is the mean Melbourne auction price here.
8:49
And it's at $665,000.
8:50
Now, just to give you context, Sydney's mean is at 1.23 mil.
8:56
So, less than half of what Sydney is selling for at the moment at auction.
9:00
This is the mean, not the median for those that are listening.
9:02
Yes.
9:03
Now, talk me through those figures.
9:05
Why are we seeing that?
9:06
That's below the medium house price, well below the medium house price in Melbourne, which is just under 800K.
9:14
So showing a lot of that activity is in those lower price points.
9:17
Obviously, the mean is very different to the median because obviously the mean is the average, so therefore not as impacted by outliers as significant as the median.
9:25
So I like it as a measurement.
9:27
But it is interesting, Rich, because that means there's a lot of properties transacting at the entry price point.
9:33
And it's no surprising because you've got first-time buyers that have been out of the market but are participating.
9:39
And investors, we know a lot of the investment activity comes in under the median house price, under that 800,000.
9:45
But it goes against what the glamorous auction environment's meant to portray.
9:50
You think of the block, and that's what everyone thinks of when they think auctions, that these really expensive character homes in places like Alwood or Turack and those sorts of areas.
10:01
So it just means there's a lot of activity and it represents the data that we've checked.
10:05
The sub-a-million price point in Melbourne is one of the hottest property markets in Australia.
10:10
And people are like, well, that doesn't make any sense.
10:11
It's falling.
10:12
The median house price is dropping by 0.3% a week.
10:15
Stats don't lie.
10:17
We're seeing markets that have gone up by 10% in that price point over the last 12 months.
10:21
So you won't get a property market in Australia that is more two speed or even three speed when you look at the tiers of the first quarter, second and third, than the Melbourne market right now.
10:34
And all the activity we're seeing is in the earlier price points.
10:39
And for those that have been following the podcast for a while, we did a podcast on Melbourne suburbs maybe 12 months ago.
10:44
We're going to be doing a review of that in the coming weeks, where our predictions were where they're at and actually get your predictions on where you see, are these still the most value play suburbs in Melbourne or has the game changed slightly now post-budget?
10:57
So for those that are interested in that, make sure you stay tuned for the next couple of weeks.
11:02
Okay, let's talk through Brisbane, Adelaide and Perth.
11:04
Now, I want to do Brisbane alone and maybe a bunch Adelaide and Perth because the figures are slightly similar on those ones.
11:10
Brisbane 0.33% drop this week, which is well above its-
11:23
More than double its four-week rolling average, so 0.14% and 0.71% over the last four weeks as well.
11:30
So the interesting, and we're going to touch on this in a bit, but the interesting one about Brisbane is, although it's probably got a lack of supply still from some of the figures we've mentioned on the podcast previous.
11:41
It is building more.
11:42
And when we did that supply podcast a month ago, Reece, when you look at the new construction occurring across Australia...
11:49
Queensland is leading in terms of new build activity with house and land packages, but also now starting to lead the way in terms of that off the plan apartment space.
12:00
So we know Brisbane can oversupply a market very, very quickly.
12:06
It did that in the sort of 2017 period.
12:10
Obviously it's competing with an upcoming Olympics, so it's hard to get trades, et cetera, but the growth that Brisbane's had over the last decade could be the undoing in terms of developers get very confident in a market, they then try to capitalise by building more, but they might self-sabotage the market.
12:31
And seeing this data come through now shows that
12:35
centimeters off in Queensland probably for the first time in a decade and you net those figures out over a month and you're talking about a, again similar to Melbourne, negative 1.5% decline which is significant over a monthly period.
12:50
The other one we will touch on as well is the affordability index, which is the medium household income consumed by the medium household mortgage.
12:57
Brisbane's actually hit its ceiling.
12:59
So what it did back in 08 from memory, it's now exceeded that.
13:02
So showing there from an affordability standpoint that people in Brisbane are now starting to feel the heat a little bit.
13:09
Okay, let's touch on Adelaide and Perth because the results are very similar, so I thought we'll combine them together.
13:14
Week movement, Adelaide 0.29% drop, which is three times what the four-week average is.
13:21
Perth 0.2%, which is definitely the biggest we've seen in Perth in maybe four or five years, at 0.09% from a rolling average, so double what we've seen there.
13:29
So both markets over the last four weeks have been a little bit more than a year.
13:33
just under half a percent decline.
13:36
But this week being a bit of a telltale sign where both markets have done either two or three times more a decline than what their four-week average is.
13:45
It's the worst week from a macro point of view across all markets that's taken place in 2026.
13:51
And I think there's a reason behind that race and it's to do with obviously, you know, the self-managed super fund coming to an absolute conclusion.
13:59
So...
14:00
What I think might have propped up Adelaide, Brisbane and some of the Perth market, particularly at the lower price points, would have been people charging to the finish line to buy something before the regulation change around self-managed super funds.
14:13
So that could have been the propping mechanism and the data maybe suggests that.
14:18
Again, we know Perth is still very protected in terms of its supply and demand imbalance.
14:25
Adelaide...
14:27
That figure there doesn't surprise me as I've been talking for most of the year.
14:30
Adelaide's been well above its affordability index for pretty much all of 2026.
14:34
Perth's not there yet.
14:35
So albeit people in Perth probably feel like it is expensive in comparison to your incomes in Perth, it isn't.
14:44
You aren't at the ceiling, but you certainly are in Adelaide.
14:46
So no surprise in Adelaide's decline in house prices was more significant than Perth, but broadly speaking,
14:54
What a terrible week in real estate, Rhys.
14:58
That is the reality of where we are today.
15:00
And I do think it has to do with the conclusion of the Self-Managed Superfund.
15:06
Lachlan, let's get up PropStack actually.
15:08
So for those that aren't aware, give us a little bit of a breakdown on PropStack.
15:13
But what I wanted to show, we track a lot of data sets at Folio from a macro perspective and a micro perspective.
15:21
And I don't want to overload people with too much data because we'll lose the audience.
15:25
We'll lose the audience if we don't explain it correctly.
15:28
However, what I really want to do is just cover those markets we spoke about.
15:31
We will touch on Darwin as well.
15:32
So just for those that do ask us about Darwin, we don't get the weekly cutality data come through, so we can't give you a weekly update on Darwin.
15:39
However, we do have data sources that track it on a monthly basis.
15:42
So I will touch on Darwin today as well.
15:44
But I just want to look at house price and unit price over the last 25 years because we always want to look at
15:50
the long-term averages on these, and then talk through the affordability index today as well, and maybe just get your commentary on why you see markets move at certain paces.
16:00
Yeah, let's get into it.
16:01
Okay.
16:01
Props to act summary, guys.
16:02
This is, if you're not aware, this is the property...
16:07
warehouse a data source that we use within our business but now it's obviously open to the public so if you do want access to prop stack click the link in the show notes this is where you can sort of manage your portfolio but also get access to the same data that we track on a weekly basis
16:22
and really gives us the information we need to make informed decisions, A, for ourselves, but B, for our clients.
16:28
So let's jump into it.
16:30
Okay, beautiful.
16:30
So I've got Sydney up first up, Lachlan.
16:33
And what I'm getting up for those that are – I'll talk this out for those that don't have the ability to be watching us right now.
16:40
This shows us the last 25 years from a house price and a unit price perspective –
16:46
Now, Lachlan, talk us through these graphs so you can see them on your screen here.
16:49
But you can see, you know, for those that can't, Sydney, not the most consistent market in the country by all means, you know, has periods of stagnation.
16:57
But definitely since, you know, after the financial crisis in 2009, it has had some steady growth and some significant growth sort of post-COVID era as well.
17:07
Yeah, and this probably shows how old I am, Rhys, but when we were buying properties, when I was sort of first in the industry, I was at a firm that were buying three-bedders, two-bedders in Bondi for well under a million dollars, 700K, 800K, and I thought that was very expensive back then, and obviously since the...
17:29
really the born of the 2010s, that market's gone on tremendous growth.
17:34
We're talking double-digit growth, compounding year after year since about 2008.
17:39
So I guess what's interesting is that, that level of growth, particularly when you look from 2020, until more recently, call it the end of 2025,
17:52
That level of growth you can see on the screen isn't sustainable, and there's a reason for that.
17:56
So if you can overlay the affordability index here, Rhys, if you can go to the affordability index for Sydney.
18:04
what you'll see is that there is a limit to where Sydney becomes far too affordable for what the local market can afford.
18:12
And what the affordability index tracks is the average wage consumed by the average mortgage.
18:16
So, Rhys is playing around with the graph here, but the purple line there is the affordability index.
18:23
And if you just remove the meeting house process from your sec, Rhys, because there's a lot to take in, get rid of the orange bars, just leave the affordability index.
18:32
So as you can see here, if you go back and click there on 2007, where did it peak at there, Rhys?
18:39
53%.
18:40
53%.
18:40
So if you go back for the last 25 years, when 53% of your average wage, if you live in Sydney, goes to your mortgage, historically, that is when the market caps out.
18:52
And if you were to overload the median house price there, again, sorry to do that to you, Rhys, but what you're going to find is...
18:59
When it hits that ceiling, house prices fall.
19:02
And that has been consistent throughout.
19:04
So when it hit its previous ceiling back in 2007, what did you see in the median house price from 2007 to 2010?
19:11
You saw a dip, so you saw the median house price decline.
19:14
But what we know about history, history repeats itself.
19:17
So if we go back to its historical ceiling, when it hits its ceiling, it comes off.
19:21
The same's been true in this cycle.
19:23
So arguably I called it too early, but early to mid 2025, you can see there,
19:31
Sydney was well above its historical affordability index.
19:34
Where is it reading there?
19:35
62% it got to?
19:37
60, yeah.
19:38
Call it 62%.
19:39
It's almost 10% above its historical ceiling.
19:43
So when we started this pod race, I was out there calling that the Sydney market's overheated.
19:48
And when we went over to Sydney in that market, I was pretty much laughed at.
19:52
Like Sydney market doesn't go back in prices, it just continues to rise.
19:56
But when it's 63% and everyone's like, oh, in Sydney, there is no debt.
20:00
Everyone just buys with cash.
20:01
Well, that's not true because the figures tell us about a third of the properties are, in fact, under a mortgage.
20:06
So that isn't completely true.
20:08
So when we look at the data today and we start to see that the prices have come back and how far they can fall, well, the best way to determine this, what would it take for us to get below the historical affordability ceiling?
20:24
Yeah.
20:25
And for that to occur, median house prices based on today's interest rates and today's incomes would have to fall by 12% to get back to its historical ceiling.
20:37
And that's significant.
20:38
And that's probably where we're on track to get to.
20:40
That's why we're so pedantic when we look at the affordability index because it tells a story.
20:45
We can relate that to Melbourne too, if you like.
20:48
What I want to do, just before we move on to Melbourne, just get your commentary on this.
20:51
So looking at the... Units and houses.
20:55
Looking at units and houses here in Sydney, right?
20:57
You can see they've kind of followed... For those that can't see this graph, it's kind of followed a nice linear graph together where the gap between the house prices, medium house price, medium unit, is relatively similar.
21:09
It's been within sort of 10% to 15% pretty much until 2020.
21:15
And you can see, obviously, houses going on that massive run.
21:18
Units haven't really done that much.
21:19
And the disparity between house price and unit as it stands right now in 2026 has never been as great.
21:26
And, you know...
21:27
Without getting the actual figures out there, it looks like the gap is probably 2, 3x where it's ever been before.
21:33
Yeah, and that's why I do think nationally there's an opportunity with units because we've got a situation where it's very difficult to bring on supply.
21:40
We've spoken about that a lot in the fact that there isn't construction industry struggling, particularly for larger complexes.
21:47
It's more expensive than it's ever been to build units.
21:49
units and apartments.
21:51
And if you look at here, they're essentially the same price, not too dissimilar to what they were almost a decade ago.
21:58
So you've got a situation here where property prices are up 70% for houses, yet for units, they're 5% up from where they were in 2016.
22:08
So massive gap and that's why there is, I see an opportunity nationally, if you look at Sydney and Melbourne the same.
22:16
in that unit market, because history tells us, Rhys, when houses go up, so should units.
22:21
Or there is a little bit of a lag effect, but the gap has never been so significant as it is today.
22:25
Definitely one to watch.
22:26
Now let's move on to Melbourne there as well from a house and unit perspective.
22:31
Talk us through this graph, because it looks very different, for those that can't see, this looks very different to Sydney.
22:36
So Sydney had some long periods of stagnation, whereas if you look at Melbourne,
22:40
It's up until COVID, it was trending very nicely.
22:43
Well, it's the most consistent market in the country and has been pretty much since the 1990s.
22:49
Every year it gets 6% to 7% compounding growth right up until essentially you can see it right here.
22:55
2019 is the period where the market sort of puts the handbrake on.
22:59
Reasons for that, and this is where the opportunity is raised, is...
23:03
we know what happened to melbourne you got a government there that really just didn't handle cover too well and there was mass mass migration out of melbourne but what is interesting when you look at the long term melbourne is and has been the most consistent consistent performing market in the country so if you look at history and suggest that that may repeat itself then you look at this data set
23:26
Houses you're buying essentially at the same price that you were in 2018, 2019.
23:31
They've actually gone backwards, as we know.
23:34
But units, look, you track that unit activity, you're almost tracking that back to 2015, 2016 levels.
23:41
So again, the gap between houses and units in Melbourne is significant, not as dramatic as Sydney.
23:48
But look at the correlation between house and units from right back in the early 2000s right through to about 2016.
23:55
Very consistent.
23:56
It's almost a correlation of one.
23:58
So again, highlighting very similar points, but the difference between Sydney and Melbourne, if you go to the affordability index there for me, Reece.
24:05
So when you look at Melbourne here, so this is the Melbourne versus Sydney affordability index.
24:12
Melbourne's now well below its historical peak.
24:14
So if you go back to 2006, 2007, Reece, that's when it peaked.
24:18
And that was just before the GFC.
24:20
So that's Sydney.
24:22
If you go down to Melbourne, what's Melbourne there in the green?
24:26
43.
24:27
So Melbourne's sitting there, its historical peak was at 43 just before the GFC.
24:31
Once it's hit its peak, same, not too dissimilar to Melbourne.
24:33
It's not immune.
24:34
When it hits an affordability peak, we see a correction in house prices like we did in 2008, as you can see here.
24:41
Difference is the Sydney historical peak was 53, for Melbourne it was 43, so it does have a lower ceiling.
24:47
Where we are at today, Melbourne's at 36%.
24:51
So there's an opportunity, there's a runway there.
24:54
20% difference, right?
24:56
Differential.
24:56
So previously at both its peaks was about 10%.
25:00
Yeah, so now the gap.
25:01
So if you look at Sydney today, Sydney's still at 56%.
25:03
Melbourne's at 36.
25:06
Melbourne's at 36.
25:07
And house prices are continued to fall.
25:09
Wages are going up, house prices are falling, interest rates will likely stay where they are.
25:15
making that market significantly more affordable than it has been for at least the last five years.
25:22
But if you look historically, very affordable in comparison to its last ceiling, where clearly Sydney still, which will surprise a lot of people considering the market is contracting, it's still well above its long-term ceiling and will likely need to fall dramatically harder than Melbourne before there's a level of affordability.
25:39
And that's where we can track, everyone's trying to predict how far are these house prices going to fall.
25:44
and they're using the wrong data sets.
25:46
They're not using any data to back it up other than just gut feel, where we can qualify exactly how far these markets need to fall before they become affordable.
25:55
Sydney, 12 to 13%.
25:58
When you look at Melbourne,
25:59
Well, currently it is affordable.
26:01
What's the, why is it still going backwards?
26:05
Well, sentiment.
26:06
Sentiment is creating a story there that's still more negative than it is positive, particularly the higher price points.
26:12
And that's why I've seen the median still come off.
26:14
Yeah.
26:14
And if you look at Melbourne, it is the most affordable market.
26:17
So it's the lowest medium house price out of all the major capital cities in Australia.
26:21
And it has the lowest affordability index as well.
26:23
So most affordable from a affordability standpoint and also from a price perspective as well.
26:28
Correct.
26:29
Let's just quickly touch on Brisbane.
26:31
They were the two key mark.
26:32
Go throw in Brisbane, Adelaide, Perth affordability indexes just so we can hit those three as well.
26:38
For those that can't see, we've got, and this is actually fascinating how similar of these graphs actually look, but I've got the Brisbane affordability index, I've got the Perth affordability index, and I've got the Adelaide affordability index.
26:53
Now, talk us through that, Lachlan.
26:55
Well, important to go back in history.
26:57
Let's go through the three peaks.
26:58
So historically, Perth affordability, as you can see here, peaked at?
27:04
Perth peaked at 46%.
27:05
Yep.
27:06
Perth peaked at 49%.
27:10
Almost 50%.
27:11
Brisbane peaked at 47%.
27:13
And Adelaide peaked at 47% as well.
27:17
All of that sort of pre-GFC period.
27:19
So there's a bit of a story playing out here.
27:21
Now where we are today, Rhys.
27:23
Now highlight where we are today.
27:25
So now where we are today, you have Brisbane at its affordability ceiling.
27:30
So bang on where it was, 47%.
27:31
It's hit its ceiling.
27:33
Perth is at 40% and Adelaide's at 48%.
27:37
So it's gone past its affordability ceiling.
27:41
Exactly.
27:41
So there's no surprise that the weekly figures are identical to the historical data from the affordability ceiling.
27:49
So what markets,
27:51
are past its affordability ceiling.
27:55
Sydney, most significant, correlates, the most significant falls currently in the market.
27:59
Adelaide, past its affordability ceiling, significant falls, particularly in the last seven days as we just went through.
28:06
And then you've got the other markets, Brisbane,
28:08
at its affordability ceiling.
28:10
And Melbourne is the exception, obviously it's still got some runway and still the most affordable capital.
28:16
But there's another reason probably to support the Perth argument of why it's not hurting like every other market is in Australia.
28:21
Or to the same level.
28:23
It's because supply and demand imbalance, but also it is still a long way from its affordability ceiling, which I think will surprise a lot of people that live in Perth that are saying, Perth is tapped out to the top of the cycle.
28:37
It still hasn't hit its affordability ceiling, so I would have to disagree with that.
28:43
I just want to single out, compare Perth and Brisbane from a house price perspective, because the data looks fascinating.
28:50
I just want to get your opinion on that and where you see that going moving forward.
28:54
So if I change Brisbane to that...
29:00
Now, for those that can't see this, this is over the last 25 years.
29:04
This is the house price movement, and it's fascinating where...
29:08
They're basically neck and neck.
29:10
It is.
29:11
They're basically neck and neck.
29:12
Similar trajectory in terms of periods of stagnation.
29:16
You can see here, you know, Perth probably had the longest period of stagnation with the yellow line there back in, you know, 2012 area.
29:23
But Brisbane was roughly the same.
29:25
They had a really strong stagnation period right up until about 2018.
29:29
And that was because of the oversupply in the market.
29:31
And both these markets as well, sorry to cut you off before you get into it, Lachlan, both of these markets we spoke about on a podcast in the last two weeks are undersupplied.
29:39
I think Perth is undersupplied about 32,000 homes, Brisbane about 16,000 homes.
29:44
So similar and comparing all the other markets, they're oversupplied.
29:48
So the only two markets in Australia that are actually undersupplied and a similar trajectory as well.
29:54
Any reason why you think these markets, and I'm throwing a big question out here, are following a similar trend?
29:59
I know the only thing I'm thinking at the top of my head is both potentially mining states as well.
30:03
Maybe that has an up and down from a jobs perspective.
30:08
But why do you think these markets move very similar?
30:11
And can you compare them or are they uncomparable?
30:13
That's a very good question, Rhys.
30:15
There's so much to unpack that one answer ain't going to get anywhere near what the detail this needs.
30:22
Correlations can be drawn anywhere, right?
30:24
I don't think necessarily that there's an overarching principle as to why Perth and Brisbane are performing at similar rates.
30:32
You've got to understand they are the...
30:35
I guess the little brother to our big cities, both of them, right?
30:39
And that's Sydney and Melbourne.
30:41
So when you look at cycles historically, when you're early in the cycle, so if you read into the 20 years cycle, so to speak,
30:52
and you to qualify that, Melbourne and Sydney typically lead the charge early in any cycle.
30:57
And the two little brothers, and if you want to call Adelaide a little sister in that equation, get left behind.
31:03
And that's exactly what's taken place.
31:05
If you look at the data from 2007 up to about 2017, that was the charge of both Melbourne and Sydney and left everyone behind.
31:13
You're looking at this right now, Perth and Perth, and if you threw Adelaide in this mix, put Adelaide in there as well, just to, can you throw that into the median house price?
31:20
What you'll see is these markets did nothing pretty well from the GFC, that 2010 period, right through to essentially 2018.
31:31
All three of those markets had a really long stagnation period where overlay Sydney and Melbourne, sorry to throw a lot of data sets in there.
31:38
Once we throw there in, what you're going to see is they led the cycle.
31:41
They led the charge.
31:43
And then it gets to a point where those markets are so unaffordable
31:47
These other cities, if you look at that, Melbourne and Sydney, led the charge through that mid-2010 period from 2012 to 2015.
31:56
All the growth in Australia was coming from our two major capital cities, and that's in the orange and the grey there.
32:02
where Adelaide and Brisbane and Perth did essentially nothing.
32:05
Then it gets to the point where they're so unaffordable, Brisbane, Adelaide and Perth become extremely attractive.
32:10
They've got very good jobs, they have high paying wages, but from an affordability point of view, to rent and or to buy becomes affordable because people just can't afford to live in our two capital cities.
32:20
So then back into the cycle, and if the start of the cycle was post-GFC, so GFC hits...
32:26
It resets the playing field, right?
32:28
Those three years post-GFC are really interesting times.
32:32
There's not a lot of activity.
32:33
And then you could argue that is the beginning of the cycle.
32:37
And from that point in time, Sydney and Melbourne go on a charge.
32:40
Players out here.
32:42
Perth, Adelaide and Brisbane do very little for about a decade.
32:45
Then it gets to the point the affordability gap is so significant, all of a sudden these other, you know,
32:50
micro cities, albeit they're all well above two million people, become very attractive.
32:55
Because hey, there's some lifestyle parameters, there's mining, there's lots of jobs, people migrate.
33:00
They live in these cities.
33:01
And then typically, history will tell us, there is a resetting event.
33:05
So currently where we stand today, Rhys, is resetting the playing field.
33:08
It's not a GFC per se, but it's,
33:11
you know, large policy shift, a high interest rate environment, it's resetting the play.
33:19
It is resetting the playing field.
33:21
So what could the next cycle look like?
33:24
If this resetting takes 12, 18 months, two years,
33:28
I believe that it will be Melbourne leading the charge in the next cycle and not too far behind will be Sydney, no doubt.
33:36
It doesn't stay dormant for too long, but you may see less growth in Brisbane, Adelaide and Perth for the next decade in comparison to what you may see out of Melbourne and potentially Sydney.
33:47
I want to just round it off with Darwin, a place we never talk about.
33:52
And when we do, from a data perspective, we say why we're not massive fans of this from an investment standpoint.
33:58
But let's look at it.
33:59
We're going to talk to it and we'll do a Tasmanian update at another episode because I know a lot of people in Tasmania.
34:06
And Canberra too.
34:06
Canberra had positive growth this week, by the way.
34:10
Canberra actually was probably the best performing market in the last seven days across Australia.
34:13
But anyway, we'll talk to that in the next episode.
34:15
Let's talk through.
34:16
So the graph I've got for those that are just listening, this is the medium house price in Darwin and the medium unit price over the last 25 years.
34:25
And the big difference in this graph compared to all the other graphs is it is very choppy.
34:30
I've actually broken this down to frequency monthly just to kind of show how choppy it actually is compared to some of these other markets.
34:37
But yeah, talk us through, Lachlan.
34:38
It's had some periods of...
34:41
some sharp increase, some stagnation, some sharp declines as well.
34:44
I think that's probably the biggest difference about some of the other capital cities when they do go on a negative growth.
34:49
It's a stagnation period, not a housing decline.
34:51
Correct.
34:52
Where this is, it is extremely volatile, probably why we don't talk to it a lot.
34:56
A, because it is so volatile, any forecasting is very dangerous in these markets because we know it's a transient population.
35:02
The data tells us.
35:04
One of our... Another podcast is talking about the...
35:10
It's the highest...
35:11
I think the quote was...
35:12
It's got the highest incomes in any market in Australia, which is a complete lie.
35:16
It doesn't.
35:16
You know, we know Canberra does, and second to that's WA.
35:19
Then Darwin's in the conversation.
35:21
And he was saying it's very positive in terms of migration.
35:23
It's not.
35:24
Interstate migration is negative.
35:25
So...
35:27
It's just an interesting market full of volatility.
35:30
If you really time it right and you can get in and get out, you'll make some small returns.
35:35
But understand that this is the problem with property, right?
35:37
You've got stamp duty taxes, entry costs, exit costs.
35:42
you can't cheat the market.
35:43
You can't go in for 12 to 18 months, get in, get out, and expect to make any meaningful returns because you pay it all out in fees.
35:51
So that's why I just don't see Darwin as a good place to invest because, okay, if you get stuck holding a dud asset,
36:00
you similar to these regionals these macro regionals like your gladstone examples it's a bigger version of a mining town because when it falls it's not that you you'll sell it as at a loss you can't sell it and no one wants to catch a falling knife darwin does that essentially every three years so we're talking about melbourne and sydney going through a stagnation period first stagnation period for sydney in in what 15 years
36:25
Look at this.
36:27
That's halved in price.
36:29
So 2014 to 2020.
36:32
So in six years, if you put in 2014, you drop more than 50%.
36:40
Yeah, which means you need 100% growth to get back to square one.
36:43
So that's not a market that I want to invest with any level of confidence.
36:48
It is going well at the moment and we know why it's going well.
36:50
It's getting...
36:52
a lot of commentary from a lot of buyers agents because it's affordable and they're putting a really good story around why darwin's a good place to invest so if you're looking for a quick win darwin's may be a place for you but i would be very cautious and i wouldn't want it making up any more than 10 percent of your portfolio i think it's it's going to do well and probably be the best performing market over the next 12 months
37:16
But you are one major project from shutting down from this market to going through its next phase of its downturn.
37:23
So if you want a short-term sugar hit, Darwin's the place for you.
37:28
If you're looking for more meaningful capital growth, then I would avoid it.
37:32
Thanks for the analysis there, Lachlan.
37:34
So for those listening, viewing, we've got all this through our portal PropStack.
37:39
So there's a link in the show notes if you want to get access to PropStack.
37:44
Let us know what other data sets or other areas you want us to be talking about.
37:47
So this Monday episode where we're breaking down the week's figures, we want to start highlighting some data sets from a macro perspective like we've just done here from a house.
37:56
unit and affordability perspective, but we can also look at supply demand, sentiment, micro data, such as suburb data as well.
38:02
So yeah, looking forward to probably bringing this more to light over the coming months.
38:07
But yeah, please leave your feedback.
38:09
What do you want to hear us talk about?
38:10
You've been listening to the Folio Property Podcast.