Latest / The Follio Property Podcast / Australia's Property Downturn Just Accelerated? | Interest Rate Hike

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Australia's Property Downturn Just Accelerated? | Interest Rate Hike · The Follio Property Podcast

• 0:00
  We're being warned tonight Australia's housing market could be on track for its steepest decline since the Great Depression.
• 0:06
  Sydney's median house values have fallen by $112,000 since February.
• 0:11
  And if they fall further, tens of thousands of mortgage holders could slip into negative equity.
• 0:15
  Markets in freefall in September.
• 0:18
  If you annualise the performance of Brisbane and Sydney, they're looking at negative 15.5 to negative 16% price decline across the next 12 months.
• 0:26
  There's no doubt this is the biggest market freefall that Australia's ever experienced.
• 0:31
  I will stand down from this podcast, Rhys.
• 0:33
  If that's what the people want, you're more than happy to.
• 0:35
  And are we ever going to get this inflation under control?
• 0:37
  With this government that we have, Rhys, I've grave fears.
• 0:40
  And we've got to wait till 2028 to nationally sort out our government to tackle inflation because it's far too sticky, sticky than anyone imagines, Rhys.
• 0:49
  I'd be extremely careful investing in Darwin or any investment belt area where these groups are going to take you.
• 0:58
  You're listening to the Folio Property Podcast, number one property podcast.
• 1:01
  I'm Rhys Battle and I'm here each week with my co-host, Lachlan Dallahunty.
• 1:05
  Lachlan, I'm going to unpack last month's performance.
• 1:09
  Some big headline news, some big headline news that you've been speaking about for some time and people have been calling you out for as well.
• 1:16
  So I thought let's do a deep dive into the data across each market, get your commentary on where the market's going and touch on some core headline inflation figure data points and also looking at...
• 1:28
  interest rates as well, which I know is going to be a topical question amongst the comments.
• 1:32
  Yeah, September was a crazy month, wasn't it?
• 1:35
  And we did around the grounds race, went to Brisbane, Sydney, Melbourne.
• 1:39
  So as we talk through these markets, we can talk to quantitative data today in terms of
• 1:45
  the figures of each market, but then we can sort of reference point what we individually both saw on the ground, speaking to agents, valuers, and some economists on the ground.
• 1:54
  It's been a crazy time in September.
• 1:59
  The result, I feel, is some of the impacts that we saw early in the year are now coming out in the data, and the result of September rate rise is really going to cause, I think, further softening as we go into the rest of the year.
• 2:13
  All right, Lachlan, let's address the elephant in the room, right?
• 2:15
  Or the elephant amongst the YouTube comments for the last three weeks.
• 2:20
  Interest rate rise in September.
• 2:22
  Now, you've had that caveat in your back pocket that you did say there was not going to be a rate rise in November, but there was one in September.
• 2:30
  Talk us through that.
• 2:32
  comments there and do you actually still stand by your word with it not seeing a rate rise in November?
• 2:38
  Markets are now pricing in a November hike from a cash rate perspective and as of present recording, pricing in about 92% is going to happen.
• 2:47
  I couldn't disagree with that anymore and hopefully we can go back on this recording.
• 2:52
  So the markets have priced in a 91% increase in interest rates.
• 2:57
  I'll stand here.
• 2:58
  I'll retire off this podcast if that happens.
• 3:01
  Call it right here.
• 3:02
  I said November and we'll cut back to that announcement.
• 3:05
  So it wasn't September and there's reasons.
• 3:08
  Today we're talking about September and there's reasons why it's still firm that we won't see another November rate rise.
• 3:15
  If you listen to the RBA's commentary,
• 3:18
  and then the commentary around their commentary, it's almost certain that some have predicted a November rate rise.
• 3:24
  I do not believe that will happen.
• 3:25
  You just can look at the inflation data that we've got, and this is where we make these calls, Reese, on the data that we have today.
• 3:31
  That can change.
• 3:33
  The war has lasted a lot longer than anyone anticipated.
• 3:36
  We're going through an AI boom that no one forecasted or foreseen, and those two things alone are creating inflation
• 3:48
  well, our government's spending too much and that's in the data as well.
• 3:50
  So there's a few things that are out of our control.
• 3:53
  What the RBA will have to essentially always say is that, and their commentary was very much alluding to the fact that the rate rise was absolutely needed because of the war and because of this unforeseen AI boom and the fact we're still spending too much.
• 4:09
  And they alluded to the fact that,
• 4:12
  Most definitely, or in their comments, setting everyone up that there will be a November 8 riots.
• 4:18
  They have to do that because they need to change consumer behavior.
• 4:21
  If they come out and said, this is the one and done, and we're done for the year, enjoy the rest of 2026, what do you think people are going to do?
• 4:27
  They're back out spending money like drunken sailors.
• 4:29
  So they have a job to put fear into the consumer, which they've done, and they're
• 4:35
  There's no doubt that people are spending less.
• 4:37
  We're seeing that in the data, but on the ground.
• 4:40
  You talk to anyone in the hospitality industry, flights, holiday destination locations are the lowest they've ever seen.
• 4:47
  People are saving money, which is good to see, but we don't need to do more of it because unfortunately, we can't rely on the government to do that because they are spending way too much.
• 4:56
  So I do stand by the fact that I don't believe there's a rate rise in November.
• 4:59
  And if that's the case, Rhys, we'll put it to the polls.
• 5:02
  Fire it up, Lock and Delahunty there.
• 5:04
  I think you're right.
• 5:05
  It's been a big month last month, right?
• 5:07
  Like with the changes from an interest rate perspective as well and looking at around the ground.
• 5:13
  So from a national level, we saw a 1.1% drop across the board.
• 5:17
  So just to give people, viewers context on that.
• 5:20
  That's down 2.7 from the peak.
• 5:23
  So we're starting to see markets coming off.
• 5:25
  The big mover, and we've probably spoken about this on previous episodes, but areas you've had probably concerns for coming off from an affordability standpoint like Brisbane, now being the biggest movers across the board.
• 5:35
  So if I'm looking at the figures for last month, Sydney down 1.4%.
• 5:39
  Melbourne, 1%.
• 5:41
  The best performer out of the major capital city is still down by 0.7%, so less than a percent last month.
• 5:48
  Brisbane, 1.5%, so leading the charge with the biggest price decrease.
• 5:52
  Adelaide, 1.3%.
• 5:53
  Perth, 1.2%.
• 5:55
  Hobart, half a percent.
• 5:57
  Canberra, 1.1%.
• 5:59
  And the only market in Australia that hasn't seen any negative growth last month was Darwin at 0.4%.
• 6:04
  Now,
• 6:07
  There's some pretty big numbers across the board, especially across some of the maybe the two-speed economy that we've been talking about and Sydney leading the charge.
• 6:14
  The biggest one, like if you're looking at Brisbane leading the charge at 1.5% negative for the month, that annualizes to 16.6%.
• 6:20
  Yeah.
• 6:21
  So we're looking at between the markets that you referenced, anywhere from negative 10% to 16% growth, which we know would put us in the largest downturn that the country's ever experienced.
• 6:32
  So these are significant figures.
• 6:34
  The biggest...
• 6:36
  I guess, not surprises, but the biggest concerns, I think, is the free fall that we're seeing in Brisbane.
• 6:42
  We spoke about this earlier in the year, that it was really peaking and it was potentially overpriced.
• 6:49
  I think that market is in for probably...
• 6:52
  more hurt than the rest as we play out the rest of 2026.
• 6:57
  As you can see there, and if you look at the PropStack data, you can actually start to see the trends of movement.
• 7:02
  Melbourne is starting to soften in terms of that volatility of its, you know, the free falling that we saw through the middle parts of the year.
• 7:10
  But it looks like Brisbane...
• 7:13
  Adelaide and Perth is almost in free-fall mode.
• 7:18
  We have been saying the last three or four weeks, well actually the last four or five weeks now, that it has been the best performer out of the major capitals.
• 7:25
  But on the Melbourne graph, you can clearly see an incline heading back to a neutral position.
• 7:32
  So it peaked to look like around July, and then from August, September, we're now starting to see the declines.
• 7:39
  And we know that's coming from,
• 7:41
  you know, the first quartile or, you know, the more affordable price point.
• 7:45
  So being on the ground in Melbourne last week, you know, going to a few auctions recent and a couple of home opens, there was, you know, you'd be...
• 7:55
  You wouldn't expect that you're pretty much borderline in a recession or the most significant pricing downfall in Australia's history by going to the open sub a million dollars.
• 8:05
  There was 20 to 30 groups, multiple bidders.
• 8:09
  One of the auctions I went to, there was seven different bidders.
• 8:11
  And, you know, me being me went around and asked every sort of individual after the auction, were their investors or own occupiers?
• 8:19
  And there was about a 70-30 split, which is what you want to see.
• 8:21
  There was, you know, 70% of those bidders were own occupiers compared to investors.
• 8:25
  And then you're speaking to agents, they're dealing with a lot of investment groups.
• 8:28
  So that is starting to prop up that more affordable price point.
• 8:31
  We know Melbourne's going into an election in November, which could change the sentiment there.
• 8:35
  So that is, you know,
• 8:38
  The best performing capital city, albeit still in negative housing decline.
• 8:46
  If you look at Hobart and Darwin, certainly Darwin being in positive territory, no surprise there with the amount of investment activity that's going in there, but sort of on the opposite end of the spectrum, when you look at Melbourne, where there's a lot of owner occupier activity, Darwin is being propped up.
• 9:00
  by investor.
• 9:01
  We're talking 80, 90% of the transactions taking place there are investment transactions.
• 9:06
  Hobart's very similar.
• 9:07
  Everyone's saying, what's happening in Hobart?
• 9:09
  Understand that migration is still very negative.
• 9:11
  You've got vacancy rates on the rise.
• 9:15
  That has been propped up by investment groups because of the affordable price points.
• 9:19
  There isn't...
• 9:21
  A lot.
• 9:21
  You know, the likes of Davenport's gone on a move and that's not pent up by an occupier activity, speaking to agents.
• 9:27
  That's investor groups looking for cheap price points to throw their investors in.
• 9:31
  So, you know, they're regional sort of areas when you look at that sort of behaviour.
• 9:36
  Mm-hmm.
• 9:37
  Well, you've only got to look at the cotality data that comes out mid-month.
• 9:39
  So we don't have it at hand this month.
• 9:42
  But last month, it was pushing 80% for investor activity in Tasmania in terms of the lending split as well.
• 9:48
  So kind of outliers exactly what you're saying there for areas like those that have been driven by investor activity.
• 9:53
  Yeah, and they're the ones that we say be really cautious of because if there's only investors going in there, during this next period of time, we're going to see over the next three to six months, investors continue to dry up.
• 10:04
  Not because it's not the right time to invest.
• 10:06
  It's because their service abilities are going to be capped, right?
• 10:09
  We're seeing four rate rises this year.
• 10:11
  So your ability to buy and to borrow...
• 10:15
  is going to reduce.
• 10:16
  And if there was another rate rise, then all of a sudden your ability to borrow reduces again.
• 10:21
  And then throw on top of that sentiment, when rates are rising, sentiment's reducing, the amount of negativity in the marketplace at the moment also has an impact on sentiment.
• 10:31
  So investors are pulling out of the market because they don't have a direct need for shelter.
• 10:36
  So if you are participating with that sheep mentality with these investor groups, now's the time I think, well, you are getting found out because you've been investing in regional areas and now you can't sell those assets.
• 10:48
  We know that.
• 10:49
  We've seen that.
• 10:49
  We've spoken to the agents on the ground.
• 10:52
  But if you're following the trends at the moment, it's just a dangerous place to be investing because, A, you're not going to get the capital growth.
• 11:00
  0.4% isn't a return you're looking for in a very volatile market.
• 11:04
  What about the two-speed economy?
• 11:05
  So it's looking, you know, and just for those that haven't heard us talking about it for the last six, six, 12 months, two-speed economy, we've very much had Melbourne and Sydney running at one speed, Perth, Adelaide, Brisbane running at another speed.
• 11:18
  You're now starting to see that split up, like in terms of Melbourne very much looks like off the back of maybe –
• 11:24
  affordability, investor activity for the price point it started at is starting to come off from its sharp declines like it was with Sydney earlier.
• 11:32
  Sydney's starting to slow down, but nowhere near the level of what we've seen in Melbourne.
• 11:37
  And then you're also looking at Brisbane a bit more aggressively on the decline as opposed to, say, Perth and Adelaide.
• 11:42
  What's your opinion on it now?
• 11:44
  Is it a two-speed economy or are we in potentially like a five-speed economy at the moment from a price perspective?
• 11:49
  And you've got to add sub-markets on that.
• 11:51
  Like Melbourne's running at three different speeds in its own internal market.
• 11:55
  We're seeing Perth do the same, Brisbane not too dissimilar.
• 11:57
  So yes, correct.
• 12:00
  We've got multiple markets moving at different speeds, albeit coming off from those headlining figures.
• 12:08
  So you've got to look to see what the cushion is in these markets.
• 12:12
  And for me to do that, I just look where the job's going.
• 12:16
  where there's a lot of job activity, there's a lot of movement and pretty well publicised around defence.
• 12:21
  You spoke off air before, your concerns around Perth, the days on market have more than doubled, they've gone up, almost tripled.
• 12:31
  You've seen stock on market,
• 12:33
  you know, at levels we haven't seen, you know, since 2009 and 2020, eight and a half thousand, almost 9,000 listings on the market, which were running at about three and a half, not too long ago, you know, within six months.
• 12:47
  So there's, you know, there's markets,
• 12:50
  within markets, but those two areas we mentioned there, Brisbane and Perth, albeit going through significant price falls at the moment, they've got a cushion and the cushion is employment, high wages.
• 13:05
  So, albeit they're falling, it's not because the local market can't afford to pay more because rates are rising where these other markets are completely dictated by that, but
• 13:15
  It's because of sentiment.
• 13:17
  And they're both, if you look at the best performing markets over the last six years, it was Perth number one, Brisbane number two.
• 13:23
  So they're both coming off such high bases.
• 13:25
  And what goes up at that level has to come back to a relative norm.
• 13:30
  And we're seeing that take place now.
• 13:32
  If you have 105% growth over a five or six year period, coming off 10 to 15%, you're still 90% up.
• 13:38
  That's, you know, those markets are still very strong.
• 13:42
  And
• 13:43
  when sentiment returns because incomes in those areas are so strong.
• 13:46
  So when you look at Western Australia, you've got mining.
• 13:48
  The front page of the local paper today was job wars because you've got mining competing with military to try to get personnel.
• 13:56
  So they have to increase wages.
• 13:57
  So then you've got local trades getting offered huge dollars so then they can afford to service higher mortgages.
• 14:04
  Same in Brisbane.
• 14:04
  You've got an Olympics that's still in preparation that the state government is competing with private sector
• 14:12
  for trades and therefore wages increase, therefore they can afford more.
• 14:16
  So when sentiment does return to these markets and we know that every cycle is exactly that, it goes through periods of upswing and at the moment we're in the depths of winter.
• 14:28
  When we do go back into spring and the sentiment returns and that could be off the back of policy, interest rates, potentially a war coming to conclusion, we don't know what that is yet.
• 14:39
  But these markets that can afford to pay more will, and they're the ones that sort of will bounce back quicker.
• 14:45
  So I do think, albeit they're falling, arguably the most significant at the moment, they have the ability to rebound faster and will do so.
• 14:54
  And Darwin is no doubt placed in that position as well, albeit I don't support it from an investment point of view.
• 15:01
  You will see, because of the defence and some...
• 15:05
  larger scale projects there, they do have the ability to afford more and their rents are rising.
• 15:10
  So that could have some elasticity in terms of that rebound effect.
• 15:13
  So watch that.
• 15:15
  Let's just look at, before we go into a bit of a deep dive into each market, and you've touched on quite a bit of information there, especially with some of the major capitals as well.
• 15:22
  And vacancy rates as well, like looking at the data from there, relatively unchanged across the board.
• 15:27
  Canberra is probably the only one starting to see a bit of an uptick.
• 15:30
  And Darwin, so from July's performance, Canberra was at 1.8% from a vacancy rate.
• 15:36
  That's up to 2.1% now.
• 15:38
  Darwin was as low as 0.3% and that's crept up to 0.4%.
• 15:41
  Everywhere else is pretty well neutral.
• 15:44
  Hobart is at 0.6%.
• 15:45
  So all the majors, you know...
• 15:50
  The two-speed economy, the Sydney and Melbourne are under 1.8% vacancy and then the Perth, Adelaide, Brisbane still sitting below 0.9%.
• 15:58
  So vacancy rates are still extremely low across the board.
• 16:01
  So those three areas we just spoke about, Rhys, that's where the jobs, highest wages are.
• 16:04
  So that tracks that interstate migration and therefore you're seeing still very low vacancy
• 16:11
  vacancy rates.
• 16:12
  That, again, acts as a cushioning because where are people going to pay their money?
• 16:16
  We know that yield post-budget, trying to get a higher return on your money is attractive.
• 16:20
  So you can't really go to areas where there's low-yielding properties.
• 16:26
  You've got to target higher-yielding properties.
• 16:27
  Where are you going to do that?
• 16:28
  Well, that's going to happen in areas that are low vacancy rates and higher rental returns.
• 16:33
  So that, again, acts as a bit of a cushion for those three areas.
• 16:36
  So we had building approvals, like I was mentioning, we want to look at the commencements and completions data to really get an understanding on that supply.
• 16:43
  But it is the first indicator of new supply coming to the market.
• 16:47
  New South Wales and Queensland monthly change between 17% and 22% drop from the previous month.
• 16:52
  So it'd be good to get your commentary on that.
• 16:54
  Everywhere else relatively neutral except for South Australia has a 24% increase in building approvals from July's figures.
• 17:01
  Any sort of anything there surprise you from those details?
• 17:04
  South Australian, no, because we know they get exempt from stamp duty and that's creating a bit of a first-time buyers boom for new-built property in South Australia, which again doesn't help the cause in terms of price growth for that area because you've got more supply coming on, you've got low migration coming into South Australia, and we know we've got an affordability ceiling.
• 17:23
  So a few headwinds when you look at South Australia directly at that.
• 17:27
  New South Wales and Queensland seeing supply come off or new supply come off significantly, 20% is a lot in a month, but there's been some pretty big market shocks, right?
• 17:35
  So you look at the Bathurst Group.
• 17:37
  But also, when you're seeing markets increase in value month on month and there's really positive sentiment.
• 17:46
  that's when the builders and developers are licking their lips and trying to bring more stock on.
• 17:50
  We've now been in a period of decline since May and builders are probably getting nervous.
• 17:58
  They've built a lot of stock that may not be selling, that may be sitting there longer than they're expected.
• 18:02
  So it doesn't surprise me that this stat of lower commencements takes place.
• 18:09
  And, again, nationally we know we're in undersupply.
• 18:13
  We're still in undersupply, albeit markets are falling.
• 18:16
  So this isn't a good thing to solve that, but we know the cost of building is going up.
• 18:23
  And, fundamentally, that is probably the core reason that we will see less builds take place for the remainder of this year and likely next year because fuel prices, if you speak to any builder now, it's becoming a huge factor in where they select to take on their jobs
• 18:38
  you know, any level of proximity away from their base camp, well, they've got to put on fuel surcharges to account for that.
• 18:45
  Diesel's up, fuel's up.
• 18:47
  So cost of building is rising.
• 18:51
  And during that period, people get nervous because we don't want to see a repeat of what happened in COVID where builders go bust because, you know, of unforeseen inflationary events and fuel could be that.
• 19:01
  Let's go Sydney now.
• 19:02
  So 1.6 declining house price for the month.
• 19:06
  We were talking there like if that's annualized over a 12-month period, you're pushing nearly negative 16% declining house price.
• 19:13
  Now, I want to look at the figures here.
• 19:15
  And I mentioned earlier it has come off a little bit from its peak.
• 19:18
  So you're coming up with some bold calls a couple of weeks back with Sydney not seeing as drastic decline as we previously did.
• 19:26
  They were doing about 0.5%, 0.6% negative –
• 19:31
  house price declined for the week.
• 19:33
  They're now at about 0.33% for the rolling average.
• 19:36
  So it is starting to slow down, albeit, no, it's still doing nearly 1.5%.
• 19:43
  What's your thoughts on the Sydney market at the moment, having just spent some time over there recently as well?
• 19:47
  Yeah, I think everyone's putting up a brave face in hope that the Sydney market's improving.
• 19:52
  Reality is it's not.
• 19:53
  I think it's in for a really tough ride right up to Christmas.
• 19:57
  This rate rise is going to, you know, the green shoots that we heard on the ground with the majors trying to push that market, not push the market, but...
• 20:05
  probably push the confidence in the market.
• 20:07
  That's going to be completely removed from this rate rise.
• 20:11
  And then the commentary around another rate rise taking place.
• 20:15
  And I think in November, if they don't increase rates then, they'll allude to a December rate rise.
• 20:21
  They just want to keep confidence low.
• 20:22
  They want to keep spending down.
• 20:24
  So Sydney's going to get smashed for the rest of the year.
• 20:26
  In all honesty, on the ground, Sydney are putting up a brave face to push positivity.
• 20:33
  is in freefall and I think it's going to finish the year between that negative 0.3% to negative 0.5% market decline week by week for the remainder of the year.
• 20:44
  So you net that out, that puts Sydney at the worst historical fall ever in history.
• 20:51
  It's, yeah, I think the feedback is, from what we're hearing on the ground, is very much that.
• 20:57
  A lot of agents are telling us it's a home movers market, like it's a good chance to do an upgrade.
• 21:02
  But especially from investments, it seems like it's non-existent at the moment and also first-time buyers have seen pretty stagnant as well.
• 21:10
  Like I said, I think people are putting up facade because we know that Sydney is the epicentre of Australian property.
• 21:18
  Typically, people want to see that market do well.
• 21:20
  I'll just give it a really good reality check.
• 21:23
  And the people that say we paint a positive picture, here's the real information out of Sydney.
• 21:27
  That market is in tremendous trouble and will continue to fall for the rest of 2026.
• 21:33
  I don't see any green shoots there at this point in time.
• 21:35
  Looking at last month's data, Sydney's down 8.6% from its peak.
• 21:39
  So, you know, the way we're trending now, it's likely to do what we're seeing in the forecast.
• 21:43
  It'll be more than double digit.
• 21:44
  It's going to push well past 10%, likely land at that sort of 11%, 12% for the year of 2026.
• 21:51
  And we'll look back on this and, you know, it may be a moment in time for Sydney.
• 21:55
  All right, let's go to Melbourne, the other major capital that really gets a lot of the headlines.
• 21:58
  But albeit, you know, probably...
• 22:02
  Slower news recently off the back of the last few weeks or last month or so.
• 22:06
  September, as I mentioned earlier, negative 0.7 price decline.
• 22:12
  For the quarter, that's down 3.4%.
• 22:13
  So it really is starting to slow from a negative decline price perspective.
• 22:21
  The rolling four-week average is the best out of all the major capital cities as well.
• 22:24
  So it's only a 0.16% house decline for a week.
• 22:29
  So it is starting to slow.
• 22:30
  And as I get up the prop stack data here, and I mentioned earlier in the piece, but you can clearly see the four-week moving average is going on a nice linear line like that.
• 22:40
  So what's your feedback on that Melbourne market?
• 22:43
  Do you foresee...
• 22:45
  You know, it is the best performing major capital city, although in decline.
• 22:50
  Do you see that getting into positive territory or neutral territory by the end of the year?
• 22:54
  I don't think we'll see positive growth for 2026, but I think we'll see negative to neutral.
• 22:59
  We know that that market is being propped up at the bottom end.
• 23:03
  A lot of investment activity competing with first home buyer activity, sub a million dollars.
• 23:09
  We know the higher price points have come off the most significant.
• 23:14
  We've seen in some areas 25% falls, which is massive.
• 23:19
  But I'm now seeing, and speaking to agents when we're over there,
• 23:23
  Those that needed to sell have tried to sell and taken those losses.
• 23:26
  Those that don't need to sell won't.
• 23:29
  And, you know, we see the withdrawal.
• 23:31
  So those that have gone to market and then haven't got a price and taken off is rising.
• 23:35
  So it's getting to the point where people won't sell at a significant loss.
• 23:40
  And there's some, you know,
• 23:42
  really good inspections that took place.
• 23:46
  There's one I went through in a really blue chip suburb that they paid 1.4 for it in 2016 and we could have bought that property for 1.32.
• 23:57
  You're talking a decade of negative growth, factoring inflation in that, so that's your opportunity cost loss.
• 24:03
  You're talking negative 35% in that scenario when you're factoring inflation.
• 24:08
  So
• 24:10
  That market now has – there's only – talk about that floor in any market.
• 24:15
  I feel like Melbourne for the most part, you know, because it didn't get the COVID run, is now at that floor in some of those sub-markets but it's being propped up in terms of that entry level.
• 24:26
  So –
• 24:27
  When the sentiment consistently changes over there, and we keep talking about this November election, that can do a lot for a market.
• 24:33
  I think we'll see, you know, potentially the revitalisation of Melbourne, but don't expect that to come in the headline figures in terms of price growth in 2026.
• 24:43
  Well, I mean it would be interesting to watch Melbourne, right?
• 24:46
  Like an area like Perth when there was a big rate increase environment, Perth was still going gangbusters from the price growth.
• 24:52
  It was really not affected by it.
• 24:53
  Yeah, there's 13 rate rises we had.
• 24:56
  Pretty much had double-digit growth through that period.
• 24:57
  It would be fascinating to see how Melbourne performs in a potentially, not necessarily a rate increasing environment.
• 25:04
  The damage has already been done is what I'm saying.
• 25:06
  But it would be interesting to see whether, you know, with this positive sentiment, you know, some of the tax changes they're talking about to really incentivize investors and first-home buyers into the market, it would be interesting to see how Melbourne copes with that when it could be an environment similar to Perth where, you know, it goes gangbusters wherever else has gone pretty stagnant.
• 25:21
  But everything, I believe, and I say this very firmly, everything depends on this election.
• 25:27
  You know, if the Labor government was to, you know, come from the bleachers to win that election, that would cause a market shock and further falls.
• 25:36
  So the work still hasn't been done there, but we will be talking and speaking a lot about this in the lead up to that election.
• 25:44
  Yeah.
• 25:44
  Yep.
• 25:44
  For those that are listening, the data we're getting up here is through PropStack.
• 25:48
  We've gone live on PropStack now, Lachlan.
• 25:50
  So for those that do want to get access to the weekly data that we talk about, the monthly data that we're talking about today, that does get uploaded, A, by Economist every week from a weekly perspective with his thoughts and comments.
• 26:01
  And we will be launching some exclusive content through PropStack for some weekly data dives moving forward as well.
• 26:06
  So we've been in on data with inquiries over the last couple of months, but we are now live.
• 26:11
  So for those that do want to get access to this data...
• 26:14
  If you want to get it on a week-by-week basis, make sure you click the show notes to register for PropStack.
• 26:20
  Let's move on to Brisbane.
• 26:21
  So it'd be good to get your commentary there.
• 26:24
  So as we mentioned, actually the worst performing capital city in Australia last month, that negative 1.5% decline.
• 26:32
  We mentioned that earlier in the piece, you annualize that, some big scary numbers there, but it is at its start of its infant phase of decline house price.
• 26:43
  Now, looking at the four-week average, it's 0.35%, so actually higher than Sydney.
• 26:49
  So it's starting to move at a pace quicker than what Sydney is.
• 26:52
  Where do you see this market going?
• 26:54
  The price decline started later than Sydney, right?
• 26:56
  So if we look at...
• 26:58
  When Sydney was falling, Brisbane was still holding, very similar to that at Perth.
• 27:02
  Like I said, there is a cushion for Brisbane because of the job activity, but 2026, similar to Sydney, doesn't paint a very attractive image for Brisbane.
• 27:12
  We know the impacts of any market that is at its ceiling or above its ceiling for affordability are significantly impacted by rate rises.
• 27:21
  The only markets in the country that aren't at their ceiling are...
• 27:26
  Perth and Darwin and hence acts as a cushion.
• 27:31
  Brisbane –
• 27:33
  is at its ceiling.
• 27:34
  So those markets that are, are going to fall far more dramatically.
• 27:37
  So I think both Sydney and Brisbane are in for the worst or the hardest period between now and Christmas.
• 27:43
  All the commentary around rate rises and the fact that we've just had one not too long ago will put more pressure on the volatility and that house declines.
• 27:51
  So unfortunately, I think Brisbane will be pleased to see the back of 2026 because it's going to finish the year in a very similar tone as Sydney.
• 28:01
  I've just got up the graph now as you were speaking through PropStack, but you can see there the yellow slash green line.
• 28:10
  Let me just change that.
• 28:11
  The yellow slash green line for Brisbane, you can see it peaked from an affordability standpoint in 08 at 47.5% of the combined household salary.
• 28:21
  it succeeded that.
• 28:21
  So it's gone 47.5 and that's literally when it's starting to come off.
• 28:24
  So, you know, timing wise from an affordability standpoint, sentiment was obviously low as well with the rate rises, but it's actually, you know, pretty clear from where it's historically landed where it's starting to cap out and come off again.
• 28:36
  Yeah, that's what the affordability index is, Rhys.
• 28:38
  Things can push past its historical ceiling, but when sentiment changes or market trends change, they're the ones that come off the most significant because the market couldn't afford to pay what they were paying for property and that gets exaggerated through periods of negative sentiment.
• 28:54
  That's where we are today, hence why Brisbane...
• 28:57
  Pushed past its peak affordability, now it will come off significantly and it will have a reset event.
• 29:02
  But again, when you're 100% up over a seven, eight-year period, a 15%, 20% correction, which sounds dramatic, but it could be what it's in for, you're still well in front and you need it.
• 29:12
  These markets are going through a reset period, Rhys.
• 29:15
  And albeit it's doom and gloom and markets are falling,
• 29:18
  They're up.
• 29:18
  They've had a significant run, an unsustainable run for the last six years.
• 29:22
  This is a resetting event.
• 29:24
  It happens.
• 29:24
  That's what cycles are for, to produce norms.
• 29:28
  And no one likes negative news.
• 29:30
  No one likes going through a winter.
• 29:32
  But these things happen for a reason.
• 29:35
  And like every cycle, there is a period of time where we come out of it.
• 29:38
  Let's move on to Perth now and quickly go through the figures.
• 29:42
  So negative 1.2% decline for September.
• 29:46
  It is starting to move now to 0.33%.
• 29:49
  So very similar to the exact same four-week rolling averages as Brisbane and also Adelaide as well, which we'll touch on.
• 29:55
  The big one there you mentioned earlier in the piece, though, is from a listings perspective, pushing 9,000 now, which is the highest we've seen in the last five or six years.
• 30:03
  The big one as well is what we like to look at in the Perth market because there isn't the auction data.
• 30:08
  It's looking at the amount of listings versus sales.
• 30:10
  And at its peak and no longer ago as earlier in the year, Q1, they were converting at about 30% week on week.
• 30:18
  The absorption rate now is sitting around anywhere from week by week, but you're averaging around 7%, 7%, 8%.
• 30:23
  So you've clearly seen the heat in the market come off the Perth market.
• 30:27
  Yeah, and when I tracked that back, recently, the data to see correlating the absorption rate to positive market moving.
• 30:34
  When the absorption rate is north of 15%, you naturally see pretty significant market growth.
• 30:41
  When the absorption rate is below 10%, you see market decline.
• 30:45
  So in between 10% and 15%, the market's pretty choppy.
• 30:49
  Sometimes it goes up, sometimes it goes down.
• 30:50
  It makes sense, right?
• 30:51
  So when we had absorption rates in Perth at 30%, 33%, 34%, you're seeing that 2% growth on a month-to-month basis.
• 30:59
  That's not sustainable.
• 31:00
  We're now seeing properties go to market and not selling.
• 31:02
  So days on market are increasing.
• 31:04
  Absorption rate is low sales, which is a real demand indicator, is down.
• 31:09
  Can the local market afford to pay the prices that they were paying three to six months ago?
• 31:13
  They can't.
• 31:14
  Perth's still in audit.
• 31:15
  It's affordability ceiling.
• 31:17
  Albeit, they're not.
• 31:18
  Sentiment moves markets, we know that.
• 31:20
  Sentiment is low.
• 31:22
  And we could see that listing data hit 10,000 before the end of the year and likely will, which is a concerning statistic.
• 31:32
  But there is a natural flaw for the Perth market.
• 31:34
  When I talk about that, I'm talking about
• 31:37
  incomes and jobs when sentiment changes and that will have to come from either a state level or a federal level.
• 31:46
  We're seeing a lot of commentary around the military movement.
• 31:49
  You've got a multi, multi, multi-billion dollar project taking place with August.
• 31:56
  So that again creates more jobs.
• 31:58
  You've got mining through this AI boom that we're experiencing in high demand.
• 32:03
  So there is a natural cushion.
• 32:05
  So I'm not as concerned with Perth as I am other markets purely because the strength, A, of their economy.
• 32:13
  They've got a government that is producing –
• 32:17
  billions of dollars and that can then be invested into infrastructure and creates more jobs and the flow-on effect.
• 32:24
  So albeit, yeah, more stocks coming on the market, probably need a bit of a reset.
• 32:30
  Still, even at 10,000 listings when it hits that market is undersupplied, not significantly, starting to balance out.
• 32:36
  It's not oversupplied at 10,000, but it's got a natural cushion with the sheer job activity in Western Australia at the moment.
• 32:44
  The sentiment I'm hearing, the feedback, I caught with a licensee who owns a few offices in Perth out of fringe areas, right?
• 32:54
  And it wasn't just the one area.
• 32:55
  Like he had stuff up in north, he had stuff out east, he had stuff south.
• 32:58
  He's noticing those markets as an oversupply and that's coming off.
• 33:02
  And we're seeing that through some of the core logic data or the suburb data that we track here at PropStack as well, that those out of fringe areas are now...
• 33:08
  The investment belt areas, Reece, and we knew this was going to happen.
• 33:10
  So the areas where...
• 33:12
  The wave of those investment groups that we spoke about, and they were rife in Perth from about 2022 to 2024, the likes of Armadale, you go up to places like Alkamos, Butler, down to places like Secret Harbour, Mandurah, Rockingham,
• 33:29
  All those areas where investors were most active are the area where investors are now trying to sell and there's days on market have gone up from 12 days to some instances 40, 50, 60 days on market, stock on market is tripling every three to four months.
• 33:45
  They're the areas that are really struggling and that's creating this overall headline that the market is falling.
• 33:51
  But there's some very blue chip, well-located areas, you're still seeing good quality stock move and move at really good prices and move quickly.
• 34:00
  Let's go to Adelaide.
• 34:01
  So Adelaide, negative 1.3% house decline last month.
• 34:05
  So it's running at a similar pace to, say, Perth, I'd say, negative 0.34% from a rolling average.
• 34:12
  We've mentioned that there is some positivity around that market, especially when we've talked about some of the data from a first-home buyer's uptick as opposed to other states.
• 34:18
  Like other states...
• 34:19
  First-time buyers' applications are well down, whereas it seems like South Australia's got something right there with their applications.
• 34:25
  I don't think it's a positive, Rhys.
• 34:26
  I just think this is camouflage for how bad that market's actually performing.
• 34:30
  It's a little sugar hit, much like what our federal government did with the 5% deposit scheme, propped the market up, and now look at the impacts of that.
• 34:39
  South Australia's a great initiative, but if you took out that first-time buyer activity, Adelaide, by a long way, is falling at a far greater rate than any other capital city in the country.
• 34:49
  or B, this first-time buyer, no stamp duty, is propping up a subsection of that market
• 34:57
  gets to the point where that incentive reaches its limit in terms of the capacity of these first-owned buyers and now the interest rates are rising, their serviceability is coming down.
• 35:06
  So the lever that you're pulling to hold up that market is carrying less weight because serviceability is starting to tighten up.
• 35:15
  So again, like Adelaide, and I don't like to sound so negative, but you've got to say how it is, the data that we're seeing here and speaking to the agents on the ground, in reality, it's a lot worse.
• 35:25
  Well, I've got the affordability index up here for Adelaide and you can see its previous peak was back in 08 at about 47% and it reached that earlier in the year at 48% and now it's coming off.
• 35:36
  You can see it's starting to tick off.
• 35:37
  Yeah, because prices are falling.
• 35:40
  But prices are falling but interest rates are going up so that affordability is going to stay at its limit.
• 35:44
  So what has to give either interest rates come down, which we don't foresee that happening in the short term, or prices fall and fall significantly.
• 35:51
  So...
• 35:53
  We'll try to get the data if we took out the first home buyer, so the sub-million-dollar price point, to see the actual effects, the true value of falling in Adelaide.
• 36:01
  And we can do that to Melbourne to show you what's actually happening in Melbourne in the other quartiles.
• 36:05
  We do get the data mid-month, so yeah, let's touch on that in a couple of weeks.
• 36:09
  Linda, let's just go to the final three, which we have neglected in the past, but we definitely won't be with these monthly updates moving forward.
• 36:15
  Hobart, as we mentioned earlier in the piece, down half a percent for the month.
• 36:19
  If you're looking at over the quarter, it's 1.2 percent, so it's starting to move it a bit more from a decline perspective, starting to...
• 36:26
  go at a much faster clip.
• 36:29
  I'll bunch that in with Canberra as well.
• 36:31
  With Canberra, negative 1.1% house decline for September.
• 36:36
  Looking at the quarter, that's 3.2.
• 36:38
  So it's probably in line with what it's been doing for the last quarter.
• 36:42
  Those markets are, you know, it looks like Hobart's obviously starting to gain some momentum, but Canberra is pretty consistent downturn at the moment as well by looking at the headline data.
• 36:52
  Looking at those markets as well, the two worst performing from a days on market perspective.
• 36:56
  So Hobart's sitting at 18 and Canberra's the week's at 38 days on market as well.
• 37:01
  Yeah, and that's a real demand indicator, Rhys.
• 37:03
  So again, what's propping up Tasmania as a whole, particularly in their more affordable price point, is that investor wave.
• 37:10
  So we will start to see more investors pull out of the market with the cash rate where it is.
• 37:15
  Therefore, days on market, I expect across the board in Hobart,
• 37:21
  Launceston, Davenport will increase and you're going to see stock on market increase.
• 37:26
  You're going to see prices fall at a faster rate.
• 37:29
  Canberra is already experiencing that 38 days and that's coming from days on market.
• 37:34
  We're closer to 20 at the start of the year.
• 37:37
  Stock on market is increasing.
• 37:39
  You are seeing, you know,
• 37:42
  a more volatile fall in house prices.
• 37:45
  Again, and don't like to repeat myself, but there is a natural cushion again in Canberra.
• 37:53
  It employs a lot of people.
• 37:54
  We know the Labor government at the moment are employing and paying very high wages for government workers.
• 38:02
  A lot of that is housed out of Canberra, so there is, again, a natural...
• 38:05
  floor where that market can fall based on affordability index, but we know that Canberra hit its peak not too long ago as well.
• 38:12
  So its affordability ran out because it went through quite a significant run late 2018 through to sort of mid-2024.
• 38:20
  Let's talk through Darwin to wrap it up.
• 38:24
  The only capital city with positive price growth in September, and it's probably been the trend you've seen over the 2026s,
• 38:33
  Annual, it's up nearly 12% for the year.
• 38:37
  September was up 0.4%.
• 38:39
  But actually for the quarter, it's only up 0.5%.
• 38:41
  So it did see some stagnation off the back of the budget as well and actually some decline.
• 38:47
  Where do you see that market?
• 38:48
  You know, I've got the data.
• 38:49
  I've got a data set up here through PropStack where I'm showing days on market versus stock on market.
• 38:54
  And you're looking at the days on market and it's at, you know,
• 38:58
  The lowest it's been in the last 20 years, there's some dips, but it's very much still trending backwards.
• 39:03
  Then we're also looking at days on market at the lowest we've seen in the last 25 years as well.
• 39:08
  Stock is moving.
• 39:09
  Stock on market is low, days on market is low.
• 39:11
  If you go back to our start of the year forecast, Reece, we had Darwin in the top two.
• 39:16
  Albeit we talk negative from a volatility point of view.
• 39:21
  Arguably a glorified mining area.
• 39:24
  When I say mining, not mining in the sense of that's what it employs.
• 39:27
  It's got a lot of defence, right?
• 39:29
  But it's a lot of project-based work.
• 39:30
  So big projects come in, wages increase significantly, and then often those projects come to a conclusion.
• 39:38
  And like a mining town, people have to leave, and that creates a downfall in house prices.
• 39:43
  But our forecast was strong.
• 39:45
  And the fact that it's producing positive median house price growth
• 39:51
  national economy, a low sentiment environment shows that the elasticity of that market when sentiment does return is likely going on a pretty serious run.
• 40:01
  If you look at the rental growth in Darwin, higher sort of rental growth, which is because it's attracted higher paying jobs.
• 40:07
  People need to get paid those wages.
• 40:10
  They need to live in Darwin.
• 40:11
  So putting pressure on rents and one of the lowest vacancy rates in the country.
• 40:14
  So I think Darwin's well placed for this period, but like anything, once these projects get
• 40:20
  come to a conclusion.
• 40:22
  I have concerns for Darwin long term, but I think it will be the best performer.
• 40:26
  We'll be talking a lot about it over the next 12 months as the performing market in the country.
• 40:31
  And then I've just got up here the affordability index for Darwin as well, and it's still about 10%, 11% below where its historical affordability ceiling has been at for houses, and probably about 12%, 13% from a unit's perspective as well.
• 40:42
  So just to give some context, a unit from the average household income, there's about 15% of the salaries going on a mortgage as well, which is crazy considering when you look at some of those other markets.
• 40:51
  Yeah, exactly.
• 40:52
  So there's still runway there.
• 40:54
  It's been resilient through a period of time.
• 40:57
  But again, the volatility of that doesn't take much for that market to fall at the same rate as it's been rising.
• 41:03
  Okay, Lachlan, let's wrap it up.
• 41:04
  So overall feedback from September's performance is we are in a downturn across the board, right?
• 41:11
  There is some green shoots in particular areas or particular asset types.
• 41:13
  But gee, if we're looking at the core data across the board, we are in a negative decline across Australia right now.
• 41:19
  Without a doubt, race.
• 41:20
  There is markets within markets.
• 41:22
  So this is we're talking capital city by capital city and we're not diving into the micro markets in this episode.
• 41:30
  So for those that are like, well, that was a tremendously negative episode, it's just a reality check on where things are at.
• 41:36
  But like any market, Melbourne, for instance, there's five markets performing at different places.
• 41:42
  In Perth, there's at least three.
• 41:43
  In Brisbane, I know of probably four that are all moving at different speeds.
• 41:47
  And this is when it's a time to be really selective with what you sell, really selective of what you hold, and extremely selective with what you buy.
• 41:57
  Um, but not all markets are moving at the same pace.
• 41:59
  So we'll be it.
• 42:02
  Yep.
• 42:02
  Negative episode.
• 42:03
  I've got to call it how it is.
• 42:04
  Not going to sugarcoat the situation.
• 42:06
  We are in for a tough two to three months as we, we get through 2026.
• 42:12
  Um, but there is some light at the end of the tunnel.
• 42:16
  We are in winter at the moment.
• 42:17
  Cycles do come to a conclusion, um,
• 42:19
  And during the depths of winter, like I said before, that's when I personally will find and people do find some of the best opportunities.
• 42:28
  If you've made it this far, you obviously love your data.
• 42:30
  So for those people that are listening at this point, we will be doing weekly data dives through PropStack where we'll go into more high-level figures that could probably lose the audience on the podcast.
• 42:40
  So make sure you sign up for PropStack.
• 42:42
  Link's in the description.
• 42:44
  We'll be doing weekly updates.
• 42:45
  We're also going to get our economists on for monthly updates as well, which is going to be for the nerds out there that love their data and love their insights.
• 42:52
  Dr. Ryan Bright is going to really blow your world, I reckon, with some of the stuff he's going to come out with.
• 42:58
  make sure you download that.
• 42:59
  You've been listening to Follower Property Podcast.