Latest / The Front / Could the property freakout tip us into recession?

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Could the property freakout tip us into recession? · The Front

• 0:03
  Speaker 1: From The Australian. Here's what's on the front. I'm Claire Harvey.
• 0:06
  Speaker 2: It's Friday, August fourteen, twenty twenty six, three months after
• 0:13
  Speaker 2: the budget that blew up the property sector. Anthony Albanese
• 0:17
  Speaker 2: is claiming triumph for first home buyers. But if that's
• 0:20
  Speaker 2: the case, why are new mortgage applications crashing and auctions
• 0:24
  Speaker 2: falling silent? And what about fresh predictions of fourteen point
• 0:28
  Speaker 2: five percent price slumps crushing confidence so.
• 0:32
  Speaker 1: Hard we end up in recession.
• 0:34
  Speaker 2: We've brought in our property writer Mackenzie Scott to make
• 0:38
  Speaker 2: it all make sense.
• 0:39
  Speaker 1: Mackenzie's here in just a moment.
• 0:53
  Speaker 3: Australia has experienced its sharpest monthly fall and house prices
• 0:57
  Speaker 3: in nearly four years, as interest rates and tax changes
• 1:01
  Speaker 3: take a combined toll. Those rents are at record highs
• 1:05
  Speaker 3: in all capital cities, driven by demand for houses.
• 1:09
  Speaker 1: Auction clearance rates.
• 1:10
  Speaker 3: Remain low since the labor budget was announced back in May.
• 1:14
  Speaker 3: Data from real estate dot com dou so it's fresh Monday.
• 1:18
  Speaker 2: Everywhere you look at the moment, there's a piece of
• 1:19
  Speaker 2: news about the property sector that seems more confusing than
• 1:22
  Speaker 2: the last. What is really going on in the market
• 1:25
  Speaker 2: out there right now as Australians try to buy homes
• 1:27
  Speaker 2: or maybe try to sell them. I've brought in one
• 1:29
  Speaker 2: of the Australians property experts, Mackenzie Scott, to run us
• 1:33
  Speaker 2: through it.
• 1:33
  Speaker 1: Macca, can you give me the big picture.
• 1:35
  Speaker 2: We've heard a lot since the Federal budget in May
• 1:38
  Speaker 2: about where the property market is going.
• 1:40
  Speaker 1: What's your sense of it as you cover it each week?
• 1:43
  Speaker 1: So we do know property price to falling. It's not
• 1:47
  Speaker 1: a secret.
• 1:47
  Speaker 4: Everyone's really across it. What we are seeing is national
• 1:53
  Speaker 4: falls about one point eight percent if you're looking at
• 1:55
  Speaker 4: the prop track figures. But it's not as linear as
• 1:58
  Speaker 4: it was during COVID when prices we're moving in the
• 2:01
  Speaker 4: same direction, really uniformly.
• 2:03
  Speaker 1: Blood math is on the horizon. That's the dire prediction.
• 2:06
  Speaker 1: This morning we property prices in.
• 2:08
  Speaker 2: Two states facing significant falls in the coming months.
• 2:12
  Speaker 4: So across Australia property markets are wildly different. There is
• 2:15
  Speaker 4: no one market that is exactly the same. We are
• 2:18
  Speaker 4: seeing Sydney and Melbourne have far greater fall than the
• 2:21
  Speaker 4: mid sized capitals, which have been quite resilient over the
• 2:25
  Speaker 4: last few years. So Brisbane, Perth and Adelaide have only
• 2:28
  Speaker 4: just started falling and then Darwin is an outlier. Darwin's
• 2:33
  Speaker 4: really strong at the moment. So it's really hard to
• 2:37
  Speaker 4: make generalizations in this market at what is happening. It's
• 2:41
  Speaker 4: all very dependent on where you are, and Australians are
• 2:43
  Speaker 4: having to wade through all the noise to find out
• 2:46
  Speaker 4: what's happening where they are. We also then have the
• 2:50
  Speaker 4: selling market, but then also the rental market as well,
• 2:52
  Speaker 4: which is still incredibly tight. Vacancy rates are still sitting
• 2:56
  Speaker 4: below the three percent that keeps the market healthy point
• 3:00
  Speaker 4: three nationally and the five smaller capital cities they're still
• 3:05
  Speaker 4: seeing vacancies of around zero point three to zero point
• 3:09
  Speaker 4: seven percent. So it's really tough out there if you're
• 3:12
  Speaker 4: a renter.
• 3:15
  Speaker 1: Let's talk about rents first.
• 3:17
  Speaker 2: That sounds to me like landlords holding on tight because
• 3:20
  Speaker 2: they're not sure about where to go. The federal government
• 3:23
  Speaker 2: made a couple of big changes to the property tax
• 3:25
  Speaker 2: regime that was kind of designed to discourage investors buying
• 3:30
  Speaker 2: new builds.
• 3:30
  Speaker 1: At least will.
• 3:32
  Speaker 5: Limit negative gearing for residential property to new builds from
• 3:35
  Speaker 5: July next year, and we're replacing the fifty percent capital
• 3:39
  Speaker 5: gains tax discount with inflation adjusted indexation to restore the
• 3:44
  Speaker 5: taxation of real gains.
• 3:47
  Speaker 1: What do you think about that?
• 3:48
  Speaker 2: Is that what's happening investors are hanging on and don't
• 3:50
  Speaker 2: want to put properties on the market.
• 3:52
  Speaker 4: What was seeing everyone do that at the moment. So
• 3:54
  Speaker 4: all the big banks this week revealed that they've seen
• 3:57
  Speaker 4: their loan books take a dive. People aren't taking out
• 4:00
  Speaker 4: new loans because just generally, people don't know what's going on.
• 4:04
  Speaker 4: People are nervous, and that's everyone, that's investors, that's first
• 4:07
  Speaker 4: home buyers. And we haven't yet seen a massive sell
• 4:12
  Speaker 4: up of investment properties, and that's probably because the policy
• 4:15
  Speaker 4: does grandfarther in existing properties that were purchased before May twelve.
• 4:20
  Speaker 4: But there are people who are nervous out there. Landlords
• 4:23
  Speaker 4: who are nervous because they've seen three interest rate rises
• 4:27
  Speaker 4: at the start of the year, their costs have gone up.
• 4:30
  Speaker 4: And most states have rental protections that stop rents going
• 4:34
  Speaker 4: up more than once per year. So we're unlikely to
• 4:37
  Speaker 4: see massive increases of rent straight away like the immediate
• 4:40
  Speaker 4: reaction we've had in the selling market, because it will
• 4:42
  Speaker 4: take time for those rental changes to flow through. And
• 4:46
  Speaker 4: I think it's just a matter of weight and see.
• 4:52
  Speaker 2: Let's talk about why home loan applications are down. If
• 4:57
  Speaker 2: the intention of the government's budget was to get young
• 4:59
  Speaker 2: p people into their first homes, and if we're seeing
• 5:02
  Speaker 2: property values fall, at least we're seeing house price growth full,
• 5:07
  Speaker 2: why would we not be seeing a flood of young
• 5:10
  Speaker 2: couples rushing to the bank to apply.
• 5:12
  Speaker 1: For a loan.
• 5:13
  Speaker 4: I think it's just the uncertainty that we're seeing right now.
• 5:16
  Speaker 4: People have been using the analogy if no one wants
• 5:18
  Speaker 4: to catch a falling knife. You never want to buy
• 5:20
  Speaker 4: if your price is going to fall, particularly if you're
• 5:22
  Speaker 4: a first home buyer who is increasingly looking towards state
• 5:26
  Speaker 4: and federal government schemes like the First Home Guarantee, which
• 5:29
  Speaker 4: allows you to buy with a five percent deposit. You
• 5:32
  Speaker 4: don't want to be the first home buyer couple that
• 5:34
  Speaker 4: falls into negative equity. Most experts are expecting the market
• 5:38
  Speaker 4: will have to stabilize before we see a big rush
• 5:41
  Speaker 4: in of interest from not just first home buyers, but
• 5:44
  Speaker 4: other groups as well.
• 5:46
  Speaker 2: There's this adage that you buy and sell in the
• 5:48
  Speaker 2: same market, so it's a comforting thing I think people
• 5:51
  Speaker 2: say to you when you're getting worried about your house
• 5:53
  Speaker 2: price one way or the other. But you hear some
• 5:56
  Speaker 2: stories that really suggest there is huge panic distress going on,
• 6:01
  Speaker 2: both among buyers and sellers. Someone was telling me the
• 6:04
  Speaker 2: other day they ended up buying a property for five
• 6:06
  Speaker 2: hundred thousand dollars less than it was marketed for after
• 6:11
  Speaker 2: a panicking vendor who had already committed to buy another property,
• 6:16
  Speaker 2: just could not handle the uncertainty anymore, dramatically drop the price.
• 6:19
  Speaker 1: Are you hearing stories like that?
• 6:21
  Speaker 4: Those stories are out there for sure, And all the
• 6:23
  Speaker 4: experts I've spoken to are saying that if you're an
• 6:25
  Speaker 4: upgrade and now is a great time because even though
• 6:29
  Speaker 4: your property price is falling, the price of what you're
• 6:33
  Speaker 4: looking to buy and upgrade into is probably falling a
• 6:35
  Speaker 4: bit faster, because the top of the market does fall
• 6:38
  Speaker 4: on average faster than the cheapest stock. I've got a
• 6:42
  Speaker 4: friend of mine who was lucky enough to sell their
• 6:44
  Speaker 4: unit the day before the budget. Well, and yes, and
• 6:48
  Speaker 4: they got more than what they wanted, which was great.
• 6:52
  Speaker 4: And then the property they ended up buying, they were
• 6:54
  Speaker 4: able to negotiate two hundred thousand dollars off the price
• 6:57
  Speaker 4: that the sellers were seeking and then those sellers themselves
• 7:02
  Speaker 4: were then able to negotiate a cheap a price on
• 7:05
  Speaker 4: the property that.
• 7:05
  Speaker 1: They were buying.
• 7:07
  Speaker 4: For some part portions of the market, there is great
• 7:09
  Speaker 4: opportunity in a falling market, but for a downsize or
• 7:13
  Speaker 4: a first home buyer, there's a lot more risk on
• 7:16
  Speaker 4: the downside.
• 7:18
  Speaker 2: One of the big fears that I think would keep
• 7:20
  Speaker 2: all of us awake at night is the idea of
• 7:22
  Speaker 2: negative equity, where your property is worth less than the
• 7:25
  Speaker 2: amount of money you owe the bank for it. And
• 7:28
  Speaker 2: that's a situation that I think many Australians might find
• 7:32
  Speaker 2: themselves in in coming years. It's certainly one of the
• 7:34
  Speaker 2: things that some experts are warning about right now.
• 7:37
  Speaker 1: What are we seeing so far on that.
• 7:39
  Speaker 4: The people most at risk of negative equity in this
• 7:42
  Speaker 4: market are likely to be the first home buyers the
• 7:44
  Speaker 4: purchase with a five percent deposit. That being said, prices
• 7:47
  Speaker 4: have only been falling since March, so we haven't had
• 7:50
  Speaker 4: that much of a pullback. Could that change in the next
• 7:53
  Speaker 4: few months, absolutely, but we have to remember that broadly speaking,
• 7:58
  Speaker 4: prices have been going up quite considerably over the last
• 8:01
  Speaker 4: five years, so a lot of people if you've purchased
• 8:04
  Speaker 4: before then or even through the upswing have had a
• 8:08
  Speaker 4: lot of equity built into their homes, so even if
• 8:11
  Speaker 4: prices do come back ten percent or so, they probably
• 8:14
  Speaker 4: will come ahead.
• 8:19
  Speaker 2: Mac. If you've been to an auction, you know it's
• 8:20
  Speaker 2: a horrendously stressful experience.
• 8:23
  Speaker 1: Whether you're the seller or the buyer, it's it's.
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  Speaker 2: Absolutely awful, whether you end up with the property or not.
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  Speaker 2: And I think most of us would have had an
• 8:32
  Speaker 2: experience of bidding way past the money that you actually
• 8:34
  Speaker 2: have because you can't get carried away in the pressure
• 8:36
  Speaker 2: of the day. One of the first signs of panic
• 8:43
  Speaker 2: after the budget was that auction clearance rates started to
• 8:46
  Speaker 2: crash and they have not recovered. The property market is
• 8:50
  Speaker 2: recording its worst auction clearance rates in nearly a decade,
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  Speaker 2: dropping below fifty percent this weekend.
• 8:56
  Speaker 1: Why do you think that is?
• 8:58
  Speaker 4: I think it comes back to that whole sentiment argument.
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  Speaker 4: People are nervous and they don't want to be spending
• 9:03
  Speaker 4: big money when they don't know what the future will
• 9:06
  Speaker 4: look like. For most Australians, housing is their biggest investment,
• 9:11
  Speaker 4: so auctions are considered quite good for getting competition and
• 9:15
  Speaker 4: getting people excited to spend more money. But if people
• 9:18
  Speaker 4: an't going to do that, they aren't.
• 9:19
  Speaker 1: Going to bid.
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  Speaker 4: I'm hearing that the agents are having success after auction
• 9:24
  Speaker 4: in post negotiations.
• 9:26
  Speaker 1: But then it's also the flip side.
• 9:29
  Speaker 4: So what the opposite is You list a private treaty
• 9:31
  Speaker 4: and you just have to hope that people are looking
• 9:33
  Speaker 4: at your property on real estate dot com.
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  Speaker 1: So it's much of a muchness.
• 9:37
  Speaker 4: I think you know auction clearance rates, they're sexy there
• 9:40
  Speaker 4: every week we can track them. But otherwise you're listing
• 9:43
  Speaker 4: on private treaty hoping for the best.
• 9:51
  Speaker 1: Coming up.
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  Speaker 2: There is a solution staring us in the face. But
• 9:54
  Speaker 2: why do duplexes and townhouses make homeowners so cranky? You
• 10:15
  Speaker 2: mentioned how much Australians love the family home, and one
• 10:18
  Speaker 2: of the reasons for that is that it's something that
• 10:20
  Speaker 2: nobody can take away with you. It's not going to
• 10:22
  Speaker 2: disappear if you forget your Bitcoin password, for example. But
• 10:25
  Speaker 2: there are still many, many Australians who are having to rent.
• 10:28
  Speaker 1: What's happening in the rental market.
• 10:30
  Speaker 4: There's a lot of discussion around what the future of
• 10:32
  Speaker 4: rents will look like. So obviously the Albanizi government introduced
• 10:36
  Speaker 4: some quite far reaching and fundamental changes to the way
• 10:40
  Speaker 4: that Australians view property as an investment. That includes the
• 10:44
  Speaker 4: removal of negative gearing for established properties and a rejig
• 10:48
  Speaker 4: of how capital games tax is calculated, which is making
• 10:52
  Speaker 4: a lot of investors sort of rethink their place in
• 10:54
  Speaker 4: the Australian property landscape. Some economists say that rents are
• 10:59
  Speaker 4: likely to stay pretty steady. We've seen that so far,
• 11:04
  Speaker 4: just because renters are at the absolute peak of what
• 11:07
  Speaker 4: they can afford to pay out of their pay packets.
• 11:09
  Speaker 4: But the flip side is other experts are suggesting we
• 11:13
  Speaker 4: might even see a ten to fifteen percent increase in
• 11:15
  Speaker 4: rents because even though there is this argument that one
• 11:21
  Speaker 4: home sold by an investor is one home spot by
• 11:24
  Speaker 4: a renter, which is potentially true, I'm not going to
• 11:27
  Speaker 4: argue against that. We have to remember what rental stock
• 11:30
  Speaker 4: is for, and it's for our most vulnerable who and
• 11:34
  Speaker 4: our low income earners who probably aren't in a position
• 11:36
  Speaker 4: to be able to buy a home. It's also needed
• 11:39
  Speaker 4: for people to be able to have flexibility, think about
• 11:42
  Speaker 4: separations and divorces, think about people taking new jobs in
• 11:45
  Speaker 4: new cities. We do need to have homes so people
• 11:49
  Speaker 4: can flow around, and if we are seeing that rental
• 11:52
  Speaker 4: pool shrink and investors are typically gun shy of new
• 11:56
  Speaker 4: stock because it doesn't have the same appreciation as established,
• 12:00
  Speaker 4: we may see that availability become tighter and tighter, and
• 12:05
  Speaker 4: therefore rents go higher and higher.
• 12:12
  Speaker 2: The Coalition has explicitly linked the lack of new housing
• 12:16
  Speaker 2: stock to the concern that Australians are feeling about immigration.
• 12:20
  Speaker 5: We just want more investment from everyone, because we know
• 12:23
  Speaker 5: that more investment gets you more houses, more affordability.
• 12:28
  Speaker 2: The Federal government's trying to get the net and overseas
• 12:30
  Speaker 2: migration number down, but is struggling because of unpredictable things
• 12:34
  Speaker 2: like student visas. What do you think about the connection
• 12:37
  Speaker 2: between immigration and housing and the fact that the Federal government,
• 12:41
  Speaker 2: for example, has not delivered on the promises it made
• 12:44
  Speaker 2: to dramatically increase the housing stock available.
• 12:47
  Speaker 4: I don't think it's unfair to say immigration does put
• 12:49
  Speaker 4: pressure on the rental market, absolutely, but we also have
• 12:52
  Speaker 4: to remember that new stock is key. We know we
• 12:55
  Speaker 4: are in a supply crisis, and Treasury's own figures say
• 12:59
  Speaker 4: that the change to negative gear and capital gains tax
• 13:01
  Speaker 4: will reduce the amount of new homes being built by
• 13:05
  Speaker 4: thirty five thousand.
• 13:07
  Speaker 1: So one of the reasons why we are.
• 13:08
  Speaker 4: In a supply crisis is because it is just really
• 13:11
  Speaker 4: difficult for developers to build new stock. If you're a developer,
• 13:15
  Speaker 4: you're not doing this just to give back to humanity.
• 13:18
  Speaker 4: You are trying to make a profit. So you buy
• 13:20
  Speaker 4: a piece of land and then you get the capital
• 13:22
  Speaker 4: to stack up the project. And to get that you
• 13:25
  Speaker 4: need to achieve a certain amount of presales. And in
• 13:29
  Speaker 4: a market where sentiment is pretty low and people are nervous,
• 13:32
  Speaker 4: they just starn't getting those And once you account for
• 13:36
  Speaker 4: land costs and construction and marketing of the project, it
• 13:39
  Speaker 4: just becomes too hard, and we're going to see fewer
• 13:43
  Speaker 4: and fewer projects be able to stack up financially.
• 13:49
  Speaker 2: The federal government talks about this a lot, but it's
• 13:52
  Speaker 2: state and local government where the rubber actually meets the road,
• 13:55
  Speaker 2: where developers actually need to get these projects through. Do
• 13:58
  Speaker 2: you sense the same kind of version see at those
• 14:01
  Speaker 2: levels of government.
• 14:02
  Speaker 4: I think it all depends on jurisdiction. I think state
• 14:04
  Speaker 4: governments do want to deliver more supply, but it's really
• 14:07
  Speaker 4: hard when you've got local governments who are listening to
• 14:10
  Speaker 4: their constituents who have concerns around parking and very minute,
• 14:16
  Speaker 4: sort of not in my backyard type arguments, which just
• 14:20
  Speaker 4: makes it harder and harder for developers to stack things up.
• 14:23
  Speaker 2: Yeah, even people who theoretically you think that there should
• 14:27
  Speaker 2: be more housing stock and they really want their own
• 14:29
  Speaker 2: children to be able to buy a home. You know,
• 14:31
  Speaker 2: when you say, Okay, no worries, we're going to lift
• 14:33
  Speaker 2: the ceiling in your suburb to eight stories and we're
• 14:35
  Speaker 2: going to approve a whole lot of duplexes and terraces,
• 14:38
  Speaker 2: that's where the problems start right.
• 14:39
  Speaker 4: Oh and for some reason, Australians have this real bigger
• 14:42
  Speaker 4: version to townhouses and duplexes. We don't want to see
• 14:47
  Speaker 4: them on our streets. We don't want to have an
• 14:48
  Speaker 4: extra car park in front of your house. But this
• 14:51
  Speaker 4: is what is really needed. Like, it doesn't have to
• 14:53
  Speaker 4: be high rises, It can be simply adding an extra
• 14:56
  Speaker 4: house to one block. If we've just built more townhouses
• 15:00
  Speaker 4: and duplex complexes, we could double the amount of housing
• 15:04
  Speaker 4: stock available and we'd be able to solve this crisis
• 15:06
  Speaker 4: a lot faster than just building and focusing on unit towers.
• 15:11
  Speaker 2: And so if all that wasn't complex enough. Now we're
• 15:13
  Speaker 2: hearing talk of a rebound. What does that mean?
• 15:16
  Speaker 4: So prices are expected to fall about ten percent nationally,
• 15:21
  Speaker 4: are probably larger closer to fifteen in Sydney and Melbourne,
• 15:25
  Speaker 4: but at least two of the major banks and KPMG
• 15:28
  Speaker 4: are anticipating.
• 15:30
  Speaker 1: That to actually start to reverse.
• 15:31
  Speaker 4: So in twenty twenty eight they're expecting prices to rise
• 15:34
  Speaker 4: potentially between three to five percent, which will put a
• 15:37
  Speaker 4: big spanner in the works and pressure on Anthony Auberneasy
• 15:40
  Speaker 4: who has been championing these price falls as the only
• 15:43
  Speaker 4: way the first home buyers will be able to ever
• 15:45
  Speaker 4: access the market.
• 15:47
  Speaker 1: It just gets more and more complex. Thanks Mecca, Thank you.
• 16:00
  Speaker 2: Mackenzie Scott is a journalist with The Australian. You can
• 16:03
  Speaker 2: check out our unrivaled coverage of property from mansions to
• 16:06
  Speaker 2: mortgages right now at The Australian dot com dot a
• 16:10
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