Latest / The Follio Property Podcast / How to Invest After The 2026 Budget in Australian Property | Property Experts

Transcript

How to Invest After The 2026 Budget in Australian Property | Property Experts · The Follio Property Podcast

• 0:00
  This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.
• 0:31
  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+.
• 0:56
  More than 50,000 first home buyers are at risk of losing money after house prices tumble in some capital cities. New data from Domain shows house prices are falling in Sydney and Melbourne.
• 1:10
  May, the most tumultuous month we've seen potentially in a decade. The biggest drop out of any of the capital cities in the country. Heavy sentiment, negative sentiment on markets like Melbourne and Sydney, those Brisbane and Adelaide and Perth lead the charge still from a positive standpoint. Strongest market in the country, one we know too well is...
• 1:28
  Over 10% decline in median house prices in Sydney, which the largest correction for the last 40 years has only been 8%. The budget's only going to arguably pull more investors out of that Sydney market. We've already seen a 6.3% drop in investor lending.
• 1:43
  Sydney, it could see 5-6% negative growth for 2026, which would be massive. That's our biggest market in Australia. Anyone that's purchased since 2021 are now selling for a discounted price. And these are people that have potentially geared their property 80%, 90%, 100% will now be in negative equity territory. Are we at the bottom? No, it's not at the bottom. There's still more pain. I don't think the worst has come yet. Yeah.
• 2:10
  You're listening to the Folio Property Podcast. I'm Rhys Bettle, here each week with my co-host, Lachlan De La Hunty. Lachlan, today's episode, full market, deep dive across the board. It's been a June market update off the back of what I said was the most tumultuous month we've seen potentially in a decade, Rhys, with May facing obviously the news of the budget, an interest rate rise, and conflict in the Middle East. So let's dive into the data.
• 2:38
  Very much, and we spoke about this in the pod for the last couple of months.
• 3:06
  That's the two-speed economy that we're seeing at the moment. So heavy sentiment, negative sentiment on markets like Melbourne and Sydney, and the data will prove that once we go through it as well. But still, you know, those Brisbane, Adelaide and Perth leading the charge still from a positive standpoint.
• 3:20
  Yeah, that two-speed market, that gap is getting greater, which is interesting. And I think the data that we're about to run through probably highlights this might be the theme of 2026, the gap between the two-speed economy in Sydney and Melbourne compared to Adelaide, Brisbane and Perth. That gap only getting greater as the year sort of plays out.
• 3:40
  Let's kick off with Sydney. So auction clearance rates had some really low points. So an average over the month was 52%, but that was dropping off the back of the budget as well. So the last week of the recorded data was below 50. So the clearance rates are dropping significantly. And for context for listeners-
• 3:56
  A balanced market for auction clearance rates is typically in the 60s to 70. A strong market is 70% plus. So off the back of that, you will see a correlation of negative market conditions in terms of negative house price growth.
• 4:13
  And we've already seen that. You're looking at the May performance, just under 1% negative growth, 0.9 for the month, the biggest drop out of any of the capital cities in the country. So for context, that's double digit. This plays out over 12 months. That is over 10% decline in median house prices, which the largest correction for the last 40 years has only been 8%. So it's concerning numbers there for Sydney.
• 4:38
  And I guess the big one that we're starting to track through the data, which those that are listening, this is a visual episode, so make sure you get the visuals on to see the data sets that we're talking about. The latest update from Our Economist in terms of the investor lending data shows Sydney down 6.3%. So investors typically, this is before the budget announcement, by the way, so it'll be interesting to track this over the next quarter worth of data, but we've already seen a 6.3% drop in investor lending, probably off the back of some of the changes last year that we had.
• 5:05
  Yeah, we're going to see that play out, right? The budget's only going to arguably pull more investors out of that Sydney market. So predicting that there's certainly more pain to come over the coming months. So I guess from your standpoint, the Sydney market, we've spoken about this recently on another podcast, but are we at the bottom? Is there more pain to go in Sydney or do you think there might be some levers the government will pull over the coming months that may sort of stabilize the decline?
• 5:31
  No, it's not at the bottom. There's still more pain. I don't think the worst has come yet. The only saving grace for the Sydney market will be a flat line in interest rates and potentially some positive sentiment around that. But no, I think the budget will hurt Sydney harder than most other markets. The commentary around interest rates hurts the Sydney market more than most other states.
• 5:53
  So I do think there's more pain to come. Saving grace will be if we don't see another interest rate rise this year, but it could see 5%, 6% negative growth for 2026, which would be massive. That's our biggest market in Australia. That's anecdotally on the ground, anyone that's purchased pretty well, speaking agents, anyone that's purchased since 2021 are now selling for a discounted price. So that's, you had to give your context, that's real.
• 6:23
  will now be in negative equity territory. And that cycle plays out. It's like the opposite when you have positive market conditions. Equity starts to breathe confidence, and that's how cycles typically go on a run. The opposite is true when you're seeing falling prices. It becomes very difficult. Consumer confidence is down, and it continues to drive downward pressure on housing.
• 6:44
  Let's move over to Melbourne. We're in a similar market with some of the negative trends, but from a starting point, a little bit different to Sydney. We'll talk to the auction clearance rates. The average over the month was 55% in Melbourne, so slightly ahead of Sydney, but as you said, still below what's needed for a balanced market. In terms of the price growth, they saw a negative about 0.7% last month, so not as severe as Sydney, but still a sharp drop off.
• 7:12
  Medium house price is at $805K, right? And you're comparing that to Sydney in the $1.25 mils. It's a clear disparity, I guess, there between the medium house price. What's your overall feed on the Melbourne market from a macro level? I know we've got boots on the ground from a micro level that can move in different directions. But from a macro level, what's your opinion on those latest results?
• 7:32
  Yeah, and comparing that statement to Sydney house prices, the gap between Melbourne and Sydney has never been so great, right? So you've got one that's falling off a very high base and one that's falling off a very low base. So Sydney obviously falling off a very high base, Melbourne falling off a low. Being on the ground, boots on the ground, Reese, there's markets within markets. We're seeing the top end of Melbourne real estate come off significantly.
• 7:52
  particularly, and this gets drawn into the median house price, particularly the lifestyle markets, it's still classified as metropolitan Melbourne, but these are secondary homes, they're holiday homes. And we know the tax environment in Melbourne doesn't support that style. So we're seeing those particular assets discounted up to 50% race from their previous peaks. So although the median house price for Melbourne across the board is declining, there's sub-markets
• 8:22
  contradictive to what the data is telling us. And it's because these other markets, holiday type properties and or land banking assets that now get heavily land taxed and prestige, you know, bayside properties getting heavily discounted, that's really impacting the median house price.
• 8:40
  Those lower, more affordable price points sort of sub one and a half and sub that first home by a $900,000 median mark, you're seeing competitive auctions, you're seeing multiple offers and you're seeing positive uplift in those sub markets. So it's a two speed economy locally in Melbourne and that's really important to understand.
• 8:59
  We're recording this out of our Melbourne studio and I was actually coming up with a Melbourne developer yesterday and they were saying some of the hardest conditions they've seen. And actually from a buyer pool, there's certain investment groups that are similar stories we've said on the podcast before in other areas. 70, 80% of those estates are going to sort of investor pools. They're struggling from an owner-occupier standpoint to get people into the market in those outer fringe areas.
• 9:23
  Yeah, and they typically target the house and land areas. So obviously there's a lot of investment groups targeting those and off the plan sort of higher volume and high rise apartments. There isn't a lot of unoccupied activity in those sorts of areas. And that's for people to be really cautious where not to invest if it's skewed too much toward investors. It's normally red flags. But yeah, definitely a different feel on the ground here compared to what we're seeing in Sydney.
• 9:48
  And just to wrap it up from an investment standpoint as well, we've probably been echoing this the last couple of months, but the rental yields average in Melbourne at the moment are 4.47, which is the highest out of all the capital cities. And looking at the latest investor lending data, which will be on the screen here, there was no drop off. So Sydney's sort of 6.5%, but Melbourne's pretty consistent. Once again, similar to the Sydney data, I'd be interested to see what that looks like the next quarter update where...
• 10:11
  You know, feedback on the ground here is off the back of the budget from a price point and affordability standpoint. There are a lot of investor groups starting to enter the Melbourne market, not just the outer fringes, like I mentioned, but also in some of those established areas too. Yeah, I think it's from that affordability point. Melbourne now is the most affordable capital city with the exception of Darwin. So there's no doubt that you're going to see more invested activity here than you are in potentially the other states.
• 10:35
  But the change in sentiment on the ground from own occupier is going to have to come from a significant shift. And we know there's a November election that's coming and that may have a different landscape. Brisbane up next, one of the most stable markets over the last five, six years in the country. We had Josh Coleman on kind of give us a bit of an on-the-ground sentiment update recently. So if you haven't listened to that, make sure when you're from Brisbane and you want more information, make sure you go check out that episode we had with Josh. Yeah.
• 11:02
  Looking at the, from last month's perspective, they saw a, you know, still a stable increase, but it had slowed. So it was 1.5% the previous month, and it's slowed now to almost half at 0.75%. Are we at the top of the cycle? Is it starting to come off in Brisbane now?
• 11:20
  I think we've hit that affordability ceiling, but we know on the affordability index we're part of the ceiling for Brisbane. Speaking with agents on the ground, speaking with Josh, there is a feeling, particularly markets like Gold Coast could fall harder than say Brisbane itself, but the feeling is that it certainly has peaked and it looks like it might have peaked potentially in March pre-budget months. We'll know in hindsight as the year takes off.
• 11:47
  Certainly on the ground, speaking to agents, speaking to participants, developers, buyers, buyers, agents, you're getting better value for money than you were two months ago. Although that hasn't showed up in the meeting house data, it's on the ground. You are buying at a slight discount than you were at the start of the year. So it tells me that potentially the peak of the Brisbane market and that of Gold Coast and Sunshine might have been sort of early 2026s.
• 12:13
  When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs.
• 12:43
  Shipping, billing, admin, payroll, marketing. You're managing all the things. So why waste time sending important documents the old-fashioned way? Mail and ship when you want, how you want with Stamps.com. Print postage on demand 24-7 and schedule pickups from your office or home. Save up to 90% with automated rate shopping. That's why over 1 million small businesses trust Stamps.com. Go to Stamps.com and use code PODCAST to try Stamps.com risk-free for 60 days.
• 13:13
  Medium house price, over $1.1 million at the moment in Brisbane. It's closing in on Sydney, right? And this is what people will or won't understand is COVID sort of put that market in the spotlight. We see a lot of Sydney money went up the coast and really propped up.
• 13:28
  Queensland as a whole, but that sort of Southeast Queensland, specifically Gold Coast, all those off-the-plan apartments are getting really big prices. That's filtered into Brisbane as well. That money now won't be as confident as what it was even as early as six months ago, right? When Sydney tightens up, people lose confidence. Their equity position is reduced if they do have additional assets or lifestyle assets up the coast.
• 13:50
  now may be the time that they're looking to sell it to try to de-risk and de-leverage their portfolio so i think we're going to see a lot of that sydney money come back to sydney and out of queensland so you could see a once it's a correction in brisbane but certainly on the gold coast and sunshine coast you may see that take out for the remaining of 2026
• 14:08
  Just to wrap up with Brisbane as well, it is still one of the tightest markets. Vacancy rates are below 1% there. But the interesting one I found with Brisbane was from the investor lending activity standpoint, a slight decline, albeit maybe call it neutral, but no growth. So investors maybe are starting to slow down in that market.
• 14:25
  Yeah, so the cushion for that market is it's still undersupplied. So it's very difficult to see significant price falls when you've got an unsupplied market. You almost could say that it won't decline in value, but in terms of the peak, it may stagnate. And history tells us when Brisbane stagnates, it can stagnate up for a decade. Not saying that's the case there, but certainly a low vacancy rate, a low stock on market, albeit higher than it was 12 months ago, it's still relatively low in comparison to the last decade.
• 14:52
  So there is some cushioning there in terms of where that market could potentially fall to. Strongest market in the country, one we know too well is Perth. Looking at from a 12-month period, it's had 26% growth in the most recent 12 months. It's still going strong. So last month did 1.5%.
• 15:09
  You could say it's slightly slowed from the 2% a month, which is probably a bit unrealistic to have that momentum going earlier in the year. Where do you see this market? Are we starting to see a slowdown? We have seen an increased listings over the last month in Perth from some really historic lows, I should say. Still nowhere near what all the experts out there are saying is a balanced market. Where do you see the Perth market right now?
• 15:31
  2% growth is unsustainable, Rhys. Net that out, it's 25% growth a year. If it was to get down to 1%, even that over the long term is almost unrealistic growth. You're talking 12% growth a year on year. I think it will return now back to its long term compounding growth rate of around 7%.
• 15:49
  and that's and work that out it's going to be between 2.5 and 0.7 growth per month which is a bit more balanced a bit more consistent because there is more stock than there was you know three months ago it's still very much an undersupply significantly undersupplied market second most population growth in the country so that market's still going to perform if interest rates are to stagnate which we're forecasting throughout the year that's going to continue to you know play out 2026 quite strong but certainly not expecting the growth that we've seen in the first quarter of 2026
• 16:18
  We predicted that it was going to start the year very strong. We have predicted that all markets were going to start with a fiery start. It'd be good to go back and probably replay that podcast in this update, just as reference where we are at this point, because predictions at the start of the year, Reece, which...
• 16:35
  replay that now. The leave it was the first quarter is going to be really strong and then it will sort of continue to rise at a better slower rate for the rest of the year. I think that's clearly more relevant now as it's becoming a little bit more balanced than it was, but still significantly undersupplied. Just from an investment standpoint in Perth, the yields have decreased from those...
• 16:54
  5%, 6% sort of unicorn assets that there probably was a few years ago, just on the low 4s now. So 4.08%. They're seeing a decrease from investor lending by 4.6% for the last quarter data. So it is showing, you know, we see it on the ground where most of our investors in Perth are local and there's probably an alternative reason for the investment. A, they don't want to invest outside the backyard. B, it might be for the kids or something like that. But we've noticed a lot of those East Coast investment groups leaving Perth. From your perspective, do you see there, you know, from an investment standpoint, there's still value in the market there in Perth?
• 17:24
  There is. It's like the reason the yields have decreased is because prices have now increased at a greater rate than rents. But we are seeing rents still rise. So that story of where there is good investment options in Perth still carries true. And we speak about it on the podcast from a data perspective.
• 17:42
  analytical point of view with no recency bias, Perth still is the strongest market to invest in the country, albeit now the affordability issue will start to come into effect as the median house price is over a million dollars at $1.50 million.
• 17:57
  Let's wrap it up with Adelaide. So Adelaide is slowing. You've been calling it for the last couple of months. It's hit its affordability ceiling. It's gone from doing over 1% a month, so 1.3% previous months, to 0.5% this month and is from a week by week data that our economist tracks as well, which you can see on this report, it's trending downward week by week, not just over the month. What's your thoughts on the Adelaide market? Is it at a complete halt now or do you think there will still be some little bit of growth left in the market over the coming months?
• 18:26
  It's hit its affordability ceiling. It will stagnate and likely stagnate for the most part of 2026. Do I see serious decline? No, because it's another market that is still heavily undersupplied, low vacancy rates. But I do think you will not see the growth that you've seen in Adelaide that you've seen over the last few years. I do think we may
• 18:44
  see zero and potentially slight negative growth in terms of marginal for the remaining 2026. If interest rates were to rise, you may see that decline increase, but our forecast is we may not see another increase in interest rates this year, so we would see a stagnation in the Adelaide market
• 19:00
  That's a deep dive onto each market. We've said this on previous podcasts. We're keen to do more in-depth analysis onto each market. So we've had the one with Brisbane. We'll be doing one on Sydney. We'll do one on Perth and Melbourne coming up. So put your comments on which markets you want us to do a deep dive in for next month. And you've been listening to the Follower Property Podcast.