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This Is the Exact Pattern That Preceded Every Major Housing Crash | Property Experts · The Follio Property Podcast

• 0:00
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• 0:56
  Property values falling in the nation's two biggest cities. Sydney and Melbourne. Sydney and Melbourne. Sydney and Melbourne. Sydney and Melbourne will likely slow right down this year. House prices could drop by as much as 20%. We're talking 20, 25% falls in the Sydney market. First time in a long time, Sydney is starting to come off.
• 1:14
  March 2026 is the lowest growth we've seen nationally in the last two years. Sentiment has a huge influence. You don't get a market that's more volatile than we're seeing right now. You're in a war and you've now got lots of commentary around rising interest rates. People are sitting back. By pushing rates up, we could push Australia into a recession. That's a reality. It might be the recession we need to have. Sydney's I think is where we're going to see a lot of the blood.
• 1:35
  Okay, Lachlan, ANZ have just come out with their forecast for 2026 and 2027. You can clearly see a two-speed economy. Yeah, there is a massive divide. Sydney and Melbourne now falling away from Adelaide, Brisbane and Perth. We've also got a two-speed residential market between the top end and the bottom end.
• 1:53
  You're listening to the Folio Property Podcast. I'm Rhys Bettle and I'm here each week with my co-host Lachlan Delahunty. Okay, Lachlan, we want to talk today about a two-speed economy, but we've actually spoken off-air. There is two different two-speed economies going on. Do you want to just explain what that is?
• 2:09
  Yeah, there is. It's the two key drivers that's dividing our nation at the moment, and that's the two-speed economy with the major markets in Sydney and Melbourne now falling away from Brisbane, Sydney and Perth. That's a real headline at the moment, and we'll unpack that a lot today. And the second two-speed economy is looking at the price points. You've got three quartiles, the more affordable price points, mid and top end, and we're seeing the gap between
• 2:33
  the top and the bottom you know that divide I suppose that gap start to really shrink and we're seeing a lot of buyer activity in the lower end and we're starting to see the top end come off for the first time really in the last sort of five or six years since COVID so there's two directions with that two-speed economy and we'll unpack that today Rhys.
• 2:51
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• 3:17
  Yep. And additional to that as well, we're going to be touching on Capital City predictions. So ANZ have just come out with their forecast for 2026 and 2027. So looking forward to hearing your feedback on that. Touch slightly on some affordability plays and some regional plays as well. And then I think we'd round it out with getting your predictions on where you see the market and is in line with ANZ's forecast.
• 3:37
  It's a big episode. Let's unpack it. All right, let's kick start. Quarterly update from Cotality is fresh off the press with Perth leading the way, 7.3% growth. Brisbane, 5.1% and Adelaide, 3.6%. So this is the leaders in the pack of the two-speed economy that we're talking about. Sydney and Melbourne, both doing negative growth in the last three months.
• 3:58
  Well, that echoes our first podcast this year, Rhys, when we had to do our forward predictions, right? We thought both Perth and Darwin were the frontrunners. Where's Darwin sitting on that? Do we have the figures on Darwin? Yeah, Darwin is second.
• 4:09
  Yeah, so no surprise. As we predicted, Perth and Darwin are going to shoot the lights out, particularly for the first two quarters, which is what we've seen. We did say Adelaide and Brisbane are going to have really strong growth this year, so it has echoed that. And I still think we'll see, you know, for the short term, in the next three months, I still think we'll see some positive growth come through. Yeah.
• 4:29
  It's not too surprising that we're finally seeing Sydney come off. And I know I've been talking about this market has been overinflated in terms of the affordability index, as a lot of our listeners would realise we track the average wage consumed by an average mortgage in any particular market.
• 4:44
  And for the last 18 months, I've been calling that Sydney will come to a point where it has to fall because that local market, the local economy, the local market, anyone taking on debt can't afford what they're paying. And we're finally seeing that play out. We've got some examples to talk through today where there's been some, you know, we're talking 20, 25% falls in the Sydney market.
• 5:06
  you know, first time in a long time. I think there's a lot of people out there that, you know, pretty well think that Sydney's recession proof and it's a market that just only goes one way. And we're seeing for the first time this year that it is starting to come off and it could come off more aggressive than others predict. And as we've spoken about Melbourne, it's going to be a choppy year where markets, some markets are performing, particularly in the affordable price points. And the higher end in Melbourne is really struggling, which again, you know, both Sydney and Melbourne, very sensitive to interest rates.
• 5:33
  Looking at the suburb data, 70% are still rising, but it's mostly in those affordable areas. 70% nationally? Correct. 70% nationally. There's graphs here for those that are watching this on YouTube or Spotify. There'll be two graphs you'll see here. And apologies, Darwin is actually behind Brisbane and Adelaide from a growth perspective for the quarter. So they had that month, I think, not last month, in February where they had no growth, which was surprising. So Darwin's actually fourth on the list. So Perth, Brisbane, Adelaide are leading the charge.
• 6:03
  Now, there's a graph that we're gonna show, which our chief economist has kindly provided, which is showing Sydney and Melbourne versus Perth. Perth is obviously the highest performer over the last 12 months. And Sydney and Melbourne's starting to come off, and it's fascinating. Lachlan, you can't see this graph right now, so I'll try to explain it to you, just like those that they can't view. You can clearly see from December, the metrics change in terms of Sydney and Melbourne starting to drop in terms of their monthly price growth.
• 6:31
  And Perth actually remaining very consistent with the back end of what they saw last year. And actually looking at the most recent figures, it has had a sharp increase. You can clearly see the two-speed economy, which we're talking about.
• 6:43
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• 7:28
  And there's been a lot of media around this, right? We've got the two powerhouse cities in Sydney and Melbourne. And if you look at history, Reece, and we've spoken about property cycles and how it works, and there's a lot of people out there talking that we're in the back end of what is an 18-year cycle. And if you look at that, typically the leader of the pack is the
• 7:50
  What's the first that goes up if you look post-GFC as the start of this particular cycle? The best performing markets were both Melbourne and Sydney and it took a long time and it's really only happened in the last seven years where Adelaide, Brisbane and now Perth have caught up to these two powerhouses. You know, those that believe in the cycles would suggest that, again, those two major cities will be the first to lead us in that potential stagnation phase and they're coming off.
• 8:14
  Where do we see value? We've spoken very openly on the podcast that I do believe Sydney and Melbourne are at completely different ends of the spectrum in terms of where they're at on their cycle. I do think and I believe Sydney will come off significantly harder than Melbourne. And we're seeing that on the ground looking at different price points. Melbourne in certain areas is still performing. We're seeing positive growth in areas where there's opportunity. But certainly the top end in both markets are suffering.
• 8:38
  And you're looking at from a national perspective as well, certain data warehouses are showing we are tracking some of the lowest figures we've seen in the last 18 months. That is predominantly coming from Sydney and Melbourne. When you say lowest figures? Lowest figures, so from a growth perspective from March, PropTracker tracking at 0.3%, which is the lowest since 2024. In what, Melbourne or Sydney? National. National 0.3% growth in March? Correct. Which is the lowest monthly growth we've seen since when?
• 9:08
  2024. Okay. Yep. So two years. March 2026 is the lowest growth we've seen nationally in the last two years. Interesting. Which is not surprising. What drives markets? Sentiment has a huge influence. You don't get a market that's more volatile in terms of sentiment volatility than we're seeing right now. You've got a war. You've got a president. Every single day there's a different news article in terms of what he's doing.
• 9:31
  and you've now got lots of commentary around rising interest rates. What does that mean? It means people are sitting back, and we're seeing that across the country. Sales numbers over the last sort of four to six weeks have come down, and that's going to continue why there's an element of uncertainty, which being on the buyer side of most transactions is exciting for us, Rhys.
• 9:50
  It is interesting because, look, referring to our business, we definitely saw from our first-time investor inquiries drop 60% last month. However, our overall, I guess, lead volume didn't drop by 60%. So we actually saw more experienced investors come into the market with folio, and we saw...
• 10:08
  a bunch of those 60%, I guess, down from a first-time investor space. We have seen it pick up in the last couple of weeks. I don't know if there's that. Back to the sentiment again. We've seen it within the last week with the fuel cap being announced from the Prime Minister, somewhat positive talks depending on which day you're listening to the news in terms of the Iran war. But we are starting to see maybe that sentiment, you know, it's a bit up and down at the moment.
• 10:29
  Like you said, the smart money or the sophisticated investor has seen the last two months as a real opportunity. Those first-time investors that are going to be more subject to sentiment and volatility are nervous. And we're seeing those patterns play out. But I completely agree.
• 10:45
  So it's going to be that, I think, for the most part of the year in terms of that choppiness, in terms of sentiment. And those that are more sophisticated, been through a couple of cycles, are going to see the situation as potentially a good opportunity to buy. Those that are less seasoned, which is fair enough, you only know what you know.
• 11:01
  And if you haven't been through these sorts of environments, it's easy to get sucked into the media and the doom and gloom of how bad 2026 and 2027 may or may not be. But that's why for those that are listening, I echo this. It's never as bad as what it's made out to be and it's never as good as what it's made out to be. Try to take a balanced view and we are buying property or investing in property for the medium to long term. So these subtleties and those that bought
• 11:26
  two weeks ago and there's all of a sudden there's a negative 0.3% growth one month and it goes up to 0.2% another month. Just remove yourself from that sort of volatility of noise. And if you've bought well in the right market, then you're going to do well.
• 11:40
  It's interesting you say that in terms of those forecasting and predictions. So ANZ have recently come out with an updated forecast for 2026. I'll read some of the headlines and it's very conservative. So take this with a pinch of salt, I think. This is a bank that also come out and said when COVID hit, the prices were going to fall by not 20%, not 30%. Prices were going to fall, Reece, by 43%. They were 74% wrong in their prediction. So let's have a listen to the great bank of ANZ.
• 12:10
  They should really be, you know, we should call some of these ones out and see where they land. So for updated forecast for 2026, bearing in mind most of these areas have already seen a lot of this growth. Perth, they're predicting 12.3% growth for 2026. And where we're at? What, about 6% or 7% I think off the top of my head. Brisbane, 9.7%. Adelaide, 5.7%. Sydney and Melbourne. Sydney to be declined, 0.7%. Melbourne to be declined, 1.7%.
• 12:38
  Now, what's your thoughts on that? Do you think, you know, is this them just putting figures out there for the sake of it? You mentioned that they horribly got it wrong in COVID. Can we take any credibility out of this forecast? There's no one that gets it further wrong.
• 12:53
  than the major banks. I have not seen a prediction that's come close to reality in the last five years in terms of price growth or interest rate forecasts. And these are the people that are meant to sort of predict this exact space, right, when they're doing their futures in terms of...
• 13:09
  three, four, five fixed year interest rates, they should know or have some level of accountability to what they predict, how far they've corrected, right? Because Fast Track, as little as four months ago, the landscape was reducing interest rates, it was blue skies, it was tailwinds.
• 13:27
  I don't know if it was ANZ, but I do know one of the majors predicted 15% to 16% growth in Perth, 6% to 7% growth in Melbourne. I think it was similar to a 3% to 5% growth in Sydney in both Adelaide and Brisbane were double digits. So it's interesting that it's a little of three months that our major banks are as reactive as the news articles that they're reading.
• 13:50
  Well, this is the fascinating thing, right, with the ANZ prediction. So I read out those figures there, what they're predicting the rest of 2026 to be. Melbourne and Sydney both having negative growth, and actually Melbourne having the most, 1.7% negative growth. However, they've also released updated 2027 forecasts. Melbourne and Sydney have the top growth potential out of those. So Melbourne at 2.9%, and Sydney at 2.6%. Hot markets like Perth, they're only predicting 1.5%.
• 14:18
  So I don't understand where they think, is it just going to come off a cliff? Are they predicting here an area like Melbourne and Sydney or Melbourne's bordering out at the end of the year, there's going to be some growth potential at the back end of next year? I just don't, never read into these predictions recently. This is a problem too many people do. So they're saying that Perth's going to do 12% growth in 2026. Correct. And then overnight, Christmas is going to hit. We're going to have New Year celebrations and then the market's just going to hit a wall. And then for the next 12 months after that, literally overnight, it's going to do how much?
• 14:46
  1.5%. Like what? How ridiculous is that? No market will have that ability to fluctuate so significantly. And I'll never say never, but I almost guarantee that will not happen. And it's...
• 15:01
  It may not be as good as they predicted this year or it may not be as bad as what they predicted next year. Like I said, it's probably gonna sit somewhere in the middle where it might balance out a little bit less optimistic this year. And then it might be a little bit more positive in what they predicted next year, say in Perth. And the same too with that of Melbourne and Sydney. I just think that's a, you know, who are the people making these assumptions or predictions? It's very much the two-speed economy, right? Because their predictions here in 2027
• 15:29
  Melbourne and Sydney, the two laggers this year, they think are going to be the leaders next year. I can't wait to sit back and do a podcast in 12 months' time and dissect this exact report and how wrong Ainset are. And those that are listening, there's a graph up there. So if you are on Spotify, go back and have a look. You can see a graph in terms of the predictions from a capital city perspective. Let's talk about the prestige market, right? So we've spoken about this and we gave some examples on a couple of podcasts ago with Melbourne,
• 15:58
  where I think, you know, 60%, actually, when we looked at inflation, some of them were 20%, 30% down from the resale sort of 10 years earlier. I thought it'd be good to touch on some other areas outside Melbourne, especially on that prestige market, just to show you some examples of where we are.
• 16:13
  Sorry to jump in there, Rhys, to give listeners context. If something's done negative 10% growth over a course of, say, five years, we would look at that as potentially negative 20% growth because what property is, it's a bet against inflation.
• 16:29
  So you want to get X amount above inflation because obviously that's the cost of money. So when you say, when we're looking at these numbers and some of these property prices have gone down, inclusive inflation, negative 20%, it's factoring in that opportunity cost if you had done nothing but to put in your bank and take interest on it. So that's a bit of an overview of why you're talking through that.
• 16:50
  Very good. Let's look at Brisbane. So New Farm in Brisbane actually had a 9% decrease in the last quarter. Just to give people some perspective, the estimated equity loss on the medium house price there, $325,000 in the last three months alone. So it's one of the hardest hit suburbs in Queensland. So that's important. So New Farm, what, medium house price above 3 mil, Rhys? Correct. Yep, 3.2 mil.
• 17:15
  3.2. So the high quartile of median house prices within the Brisbane market has taken a 9% hit in a quarter based on the median. And you've got to understand that typically these more premium suburbs have lower transactions, so it can fluctuate on the median. But we're seeing evidence of things that have sold last year and then reselling that are beyond that are all in sort of the negative double digit areas. So it's interesting to watch this play out.
• 17:39
  Absolutely. The other big one in Brisbane as well was a suburb called Gumdale. That's down 6% in the last quarter. Medium house price here is about 2 mil as well. So even, I guess, probably the lower bracket from the Prestige area. Gold Coast, though, we've spoken about Gold Coast on a previous episode, but Surfers Paradise, that's down 6%.
• 17:57
  Doesn't surprise me. And I think those that have been listening to this podcast for a while will know that two areas that I think will get hurt during this credit crunch where interest rates are rising and all the uncertainty, it's going to be your investor-dominated regionals and your lifestyle markets. And I do see, you know, surface paradise, although it's far more established, we've seen a lot of people migrate up to the Gold Coast.
• 18:18
  throughout COVID and post-COVID. Again, it is still a lifestyle market. And when money gets tight and when there is uncertainty, they're the markets that can get absolutely smashed, particularly in a crisis. And there's talks of potential recession and it looks like we're heading that direction. Your surplus spend and the things that you may not need is typically a holiday home. And I know for a lot of people, it's not a holiday home in the Gold Coast now. It's where they call home. So those more...
• 18:45
  And occupier markets, I think, will be safeguarded, but certainly we've seen a huge run in off the planned sales, some big developers breaking records. It's the kind of market we saw in the 2000s that got absolutely smashed, and I won't be surprised if we see that market continue to come off. Let's touch on Sydney. Now, you've mentioned that it's an area you see some significant stabilisation or actually some negative growth.
• 19:10
  The higher end, there was recently an article posted that we actually had a look over the last couple of days where there's some significant, significant losses. 20%? 20%. On 45 mil. The one that those that are viewing will be able to see is an example in Rose Bay where they lost $10 million. So Bort just has this for some figures. Bort for $54.6 million.
• 19:33
  in February last year and sold for $45 million in March this year. Fair haircut. So once with the cost, that's it. Yeah, we take out there would have been a buyer's agent fee and that a selling agent fee. Yeah. There would have been, obviously, substantial stamp duty. You're looking at a $14 million to $15 million loss in reality.
• 19:51
  Correct. And the second example we got there is, I guess, more on from the unit space, Barangaroo Crown Residence, $4.5 million loss. The example we got here, bought off the plan in 2021 for 40 mil and comparable at the moment that they're trying to sell it around the 35 mil at the minute.
• 20:11
  And I think that's where you're going to see most of the pain, Rhys. And it's in that off-the-plan space because people that have bought in the last 18 months off the plan in what has been some of the most positive market conditions that I've certainly ever witnessed, when there's so much positivity and tailwinds, when you look at what was happening in the back end of 2025, interest rates are coming off. 2026, it's going to be a lot of rate cuts. Money's going to get cheap.
• 20:36
  We're seeing a national boom. We're seeing a crunch on supply. So markets are really tightened. So many tailwinds. So everyone gets excited, puts down big deposits on this off-the-plan stuff. And that's speculation. And we talk about it. We've got a series coming up talking about the winner's curse phase and those sorts of things. Speculation is betting on what things will be worth when they're finished construction. I'll pay what I perceive as over-market failure for something that's going to be finished in two years. Yeah.
• 21:05
  because that's where the market's going to get to. And that's a prime example. And those that have done that in the last 12 months, that's where the concern comes in, because they would have done their figures six to 12 months ago, most likely on interest rates well into the fives. Some have probably forecasted it even lower than that. And now in reality, when the project's finished, interest rates are going to be well into the sixes. You could argue that could be closer to a seven,
• 21:30
  For a lot of people, that would be the difference, being able to buy that property and getting bank funding to secure it and having to default on the deposit. And this is the problem. If that happens once or twice, it becomes a problem for a developer. If that happens to 20 or 30% of the purchases, then all of a sudden you're in a situation where
• 21:47
  development may not go ahead or even worse they start construction run out of money so i just think that off the plan space is probably what's going to get hurt over the next 12 months when you look at what they've paid off the plan and when they reval on completion i think there could be some some haircuts being taken across the board hopefully not as significant as you know your 15 million dollar example in rose bay
• 22:08
  probably loose change for the people that are buying these properties, but do you see, you know, we've set some good examples here in the prestige market in Brisbane, Gold Coast, Sydney, previous episode, Melbourne as well. Is that an opportunity or do you think because of the environment we're in at the moment with the rate rising environment,
• 22:25
  We're still maybe 12, 18 months away before we see this body in the air. At the top end? Correct. Like I said, we are in the definition of a two-speed economy where you've got massive divide between our capital cities or international cities in Sydney and Melbourne and then the rest of the country, Adelaide, Brisbane and Perth. But you've also got a two-speed residential market between the top end, the middle end
• 22:46
  and the bottom end and we're really seeing a lot of strength in the lower middle end and it's got it it's it's market to market if you look at Perth in Western Australia at the moment Reece the top ends still flying like they're getting multiple offices there's one that just sold a marine parade in Cottesloe for twenty million dollars that's big money big money's getting thrown around and not just one offer multiple offers at that level so you've got the likes of Western Australia where the economy is super strong performing really well
• 23:12
  But then you've got examples of Rose Bay in Melbourne and areas such as Brighton and Turak where they're taking serious haircuts. And I think that will be the theme that will play out this year. I think the top end probably still in Melbourne and Sydney and the likes of those lifestyle markets will continue to come off this year as money becomes more expensive.
• 23:31
  Do I see that an opportunity? I don't foresee an opportunity. For me, I'm not buying in that market at this point in the time, because I think there's more pain in the top end to still come where I see opportunity. As I said, for the last few episodes, and certainly for most part of this year, I see the real opportunity in the market is just above the first home buyer gap, just above the first home buyer threshold. So across the country, that sits, with the exception of Sydney, between sort of 900 and 1.4.
• 23:59
  because there's now far better value in that area because we're seeing such a surge in prices in that first-time buyer section that what you get for you know 1.1 million dollars in Melbourne compared to what you get for 900,000 drastically different and I see that as a real opportunity in the unoccupied areas we're seeing you know really good activity in the likes of Melbourne, Perth and and even that's still in Adelaide and pockets of Brisbane.
• 24:24
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• 24:53
  What about looking at 2026, on that investor play you just mentioned there, where you see the most value? Is it a capital growth market at the moment or is there still yield plays out there in 2026?
• 25:04
  obviously, Reece, it's interest rates are going up so things are becoming more expensive so it's so important. One of the questions we get asked all the time is what's the biggest challenge when it's trying to build a portfolio? It's cash flow. So you've got to be thinking how can I increase my yield on properties when I'm buying as an investment because the likelihood it's going to be more expensive to hold in
• 25:24
  six months than it is now, what can I do to actively improve my rental returns? And that's value add through renovation, reconfiguration, those sorts of things, or ancillary improvements to maximise your cash flow. Cash flow becomes king in this sort of economy. All right, Lachlan, what happens next, 2026 to 2027? We've touched on the ANZ,
• 25:44
  predictions, which are kind of laughable from what they've previously said, and even looking at what they're predicted for 2026 versus the vast difference in 2027. What's the Lock and Delahunty prediction in this two-speed market? Will this remain for the rest of the year? And do you follow the trend that ANZ have predicted, where you start to see some of the majors, like your Sydneys and Melbournes, actually capitalise in 2027?
• 26:07
  2026 is going to be the year of uncertainty. We've spoken about that. It's going to be choppy. We're going to see rates rise, likely two, potentially three. I don't think we'll get the third. As quickly as we see rates go up, we're going to see the economy nationally start to stall. And that's the biggest fear, right? By pushing rates up, we could push Australia into a recession. That's a reality. It might be the recession we need to have. But as quickly as rates go up and as quickly as we can tackle inflation, rates will come off.
• 26:35
  And I think that's when you'll see the second wind in a lot of these markets. Inclusive of Perth, Adelaide and Brisbane, I think I've expressed my concerns around Adelaide just being now well above their affordability ceiling. And they're going to push well above that throughout that rate rise environment. But you're going to see a second wind. And I think that will likely come in 2027 when rates start to come off.
• 26:55
  and you'll see a surge. So I don't think the forecast there that you're looking at sort of 1% to 2% growth between Adelaide, Brisbane and Perth, I think that's rubbish. I think they'll get well and truly north of that and likely above or close to their long-term average of 7%. And I think the predictions on Melbourne this year across the board are definitely too conservative and too negative. Equally, I don't think they'll shoot the lights out in comparison to the other markets
• 27:24
  Next year, I think it's going to be more of a balanced market in Sydney. Sydney, I think, is where we're going to see a lot of the blood. I think it's going to really come off this year, and we've seen evidence of that already, particularly at the high end, and I think that's going to be the headline that a lot of Australia will be reading.
• 27:39
  Lachlan, before we get you out of here today, I want to end it on an I call bullshit segment. And the question I'm going to propose to you is the sub 800k markets across the board are the best value play for an investor in 2026. Fact or fiction, do you call bullshit?
• 27:56
  I call it bullshit. And I've spoken about this a lot, that I think that's the over inflated market now across the board in Australia. We've seen an artificial inflation due to our fantastic government that we have, Rees, that have driven so much demand into that first home buy section, that looking at not only in Perth and Melbourne where we spent a fair bit of our time, but now looking at markets like Adelaide, Brisbane,
• 28:21
  and even pockets of Sydney, it's now, I believe, overinflated. And that's where I think where capacity allows a step above that in own-occupier-driven areas, you're getting so much better value for money at sort of 900 to 1.2 than you are that sub-800. And again, it's markets within markets, and there's certainly some metropolitan regionals that we talk about that that still applies, but for the general consensus...
• 28:47
  I think to go out there and say that there's better value sub 800 in Australia, I think that's bullshit. You've been listening to the Folio Property Podcast.