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The Property Data Every Australian Investor Has Been Asking Us For Is Here · The Follio Property Podcast

0:00
Apparently in the midst of arguably Australia's biggest residential downturn.
0:04
What should someone be looking at as far as like the availability of liquidity?
0:08
If markets continue to fall and interest rates continue to rise, interest rates are into the sixes.
0:12
By the time the year's out, we could be closer to seven.
0:14
The bank is coming for your debt.
0:16
You can see up to 50% discounts.
0:17
A lot of these clients have portfolios and a lot of regional assets, things that we would deem as speculative.
0:23
They're overexposed to the wrong markets.
0:25
You don't want to be the last to invest.
0:26
Rule number one, do not lose a dollar.
0:28
This is where you should start to scenario plan your worst case scenarios.
0:32
What sort of mentality does someone need to have?
0:34
For those that want a quick fix in their portfolio, tune off right now.
0:36
Because mark is where there's no buyers and you have to sell.
0:41
You're listening to the Folio Property Podcast, number one property podcast.
0:45
I'm Rhys Beddle and I'm joined each week by my co-host, Lachlan De La Hunty.
0:50
Lachlan, in these uncertain times, it's more important than ever to know your numbers.
0:56
It is.
0:56
That's the sole reason, Rhys, that I came up with the concept of PropStack so I could know my numbers, right?
1:03
It's taken us 18 months, almost two years to build what is, you know, the first and final edition of version one of PropStack.
1:12
It's now completely live for all of our listeners to register.
1:15
Yeah, and I think what we want to go through today is do a bit of around the ground on the markets and why – what should you be looking at?
1:23
Because there is a lot of data here in PropStack, right?
1:25
And we have been telling that with a lot of our pilot users.
1:27
You can get lost in it.
1:28
People love it, right?
1:29
People love the – the data nerds out there love it, but it is –
1:33
There's one thing looking at the data and there's one thing understanding the data as well.
1:36
So I thought today we'd go through a bit of a market update on where certain markets are, a bit of around the grounds, get your opinion and give people a bit of a heads up on what are some of the data sets they should be looking at to understand are they in the right market or are they looking at the right market from an investment standpoint in 2026 and 2027?
1:55
We're currently in the midst of arguably Australia's biggest residential downturn.
2:03
which is significant and we can't shy away from that or sugarcoat that in any form.
2:10
So that's why it is more important than ever before you do anything, whether that's sell a property, hold a property, buy a property, refinance a property, you need to understand the full picture and that's what Propstack has done for me because previous to that, Rhys, it's all in spreadsheets.
2:26
Once you've got good oversight over your portfolio through the scenario feature, which you might be able to get up on your portfolio,
2:33
computer now, you might be able to show the users, this is where I spend a lot of my time spitballing various scenarios.
2:39
And yes, you can absolutely do that with one of our advisors, but you can do this yourself.
2:43
It's designed for self-use, for you to play around it and get a really firm understanding of what changes in your portfolio.
2:51
if interest rates increase by another percent?
2:54
I get asked that all the time.
2:55
Well, don't ask me.
2:56
Go and have a look yourself and stress test and change the variables to interest rates going up to 7%, 7.5%.
3:03
Have a look at the cash burn at that point to see if you can continue to hold portfolios.
3:07
This is where you should start to scenario plan your worst case scenarios.
3:12
Because preparation is everything in a downturn race.
3:15
And if you don't understand your cash buffers, if you don't understand your cash runway, and what I mean is over the next three to six months, if markets continue to fall and interest rates continue to rise, how much runway, how much cash reserves do you have?
3:29
to withstand this storm.
3:31
And there's no sugar goat in that.
3:33
We are in for a tough ride.
3:35
So knowing your data, your portfolio and having oversight and checking in on that every month.
3:41
It's not an annual event anymore.
3:43
In the new year, I'm going to check my numbers.
3:44
You are doing this on a month by month because this is where people get unstuck.
3:49
And when you get unstuck, it gets you in a situation where you get financially uncomfortable or distressed and you make really
3:57
That's not a sexy episode, Rhys, where we're going to give you the best insight to where a buyer in Australia.
4:02
This is common sense back to the basics, know your numbers.
4:05
For those that want a quick fix in their portfolio, tune off right now because what we're talking about today is what markets are going to get smacked the most or have the biggest room for falls in terms of median house price drops that I believe based on the affordability ceilings that these markets have exceeded and how to protect your downside risk.
4:25
Liquidity is key, right?
4:26
You mentioned there from you're very much looking at your protecting your risk, right?
4:32
So I think liquidity is key in that factor but also from an opportunity.
4:35
Like I said, this isn't a podcast to be talking about where's the best opportunities but liquidity in a market where opportunities do present themselves is going to be key as well to be able to action.
4:43
It is but first, let's not lose a dollar and yet absolutely for the optimistic investor which I definitely...
4:50
fall into that camp in the depths of a downturn are the best opportunities.
4:54
But we're not here to talk about that today, Rayce.
4:56
Let's get into what you need to be doing to protect your position.
5:01
Because as an investor, rule number one, do not lose a dollar.
5:06
So wealth protection is the most important thing in building out a sustainable portfolio.
5:12
And that's the difference between sophisticated investors and these boom and bust cycle investors.
5:20
Anyone can build a portfolio over a three-, five-year period.
5:23
Those that can do it decade after decade and survive downturns are the ones that build generational wealth, not just a portfolio to get them through, but it helps their kids and so on and so forth.
5:35
You mentioned there a lot, know your numbers.
5:36
You've thrown out a few things there to the listeners or the viewers as well regarding cash buffers, debt to income ratios.
5:44
If I'm just going to ping it back to some core basics or core fundamentals of a property portfolio, what should someone be looking at as far as a debt to income position look like and what should someone be looking at as far as like the availability of liquidity?
5:57
What's their cash to debt?
5:58
First, come back to modeling out your monthly expenses and I'm going right back to basic trees.
6:06
So, everyone's probably modeled their debt or if they've used a buyer's agent in the last three years, they've done their interest rate numbers on likely 4.5%, 5%.
6:15
As we sit here today, interest rates are into the sixes, likely.
6:20
By the time the year's out, we could be closer to seven than we are six.
6:23
No one's done their modeling on that.
6:24
So first thing, do your modeling on that.
6:26
What's it going to cost to service my mortgages, plural, across the portfolio if it gets to that level?
6:32
And then what's my cash burn per month?
6:35
Then work back in terms of your lifestyle costs.
6:38
What are you spending per month to live?
6:40
Groceries, school fees, whatever it is, plus this now inflated number, which is what it costs to service your portfolio.
6:47
Okay.
6:48
And I'm sure there's going to be a reality check for a lot of people.
6:51
It's going to cost you a lot more than you anticipated to run your portfolio.
6:54
Now, you have to work back.
6:56
Do I have the cash flow from my job surplus income to cover that cost?
7:00
If I don't, how much cash do I have in the bank for how many months before things are going to get tight?
7:06
And if it looks like that runway is shorter, if it looks like I don't have a six-month cash buffer in terms of if I lost my job tomorrow and I don't have six months, I don't
7:15
tucked away in an offset account or in a bank account, then I need to be having a serious conversation with my accountant, potentially financial planner, property advisor, and broker to start putting things into place to not get put into a forced situation where you need to sell.
7:31
Because that is the worst outcome in these dire straits.
7:34
When you're in a market where there is no buyers and you're a forced seller, where
7:39
We're not talking about 5%, 10%, 15% discounting.
7:42
This is where 50%, 60%, 70% discounting sounds significant, but in markets where there's no buyers and you have to sell because the bank is going to come for your debt, you can see up to 50% discounts.
7:52
We do not want any listeners that listen to this podcast, and I want to be proud to say in 12 months' time, those that listen to this podcast that spoke to their friends and family who endorsed us to listen to us as a trusted source of information when it comes to property,
8:06
We got them through a period of time because we got them really prepared.
8:09
And no one's talking about this.
8:10
Everyone's talking about commercial property.
8:12
Everyone's talking about high-yielding assets.
8:14
Everyone's talking about regional assets.
8:17
Don't buy if you have not done your numbers.
8:21
And yes, that's counterintuitive.
8:22
Two people that run a buyer's agent business race.
8:24
Yes, it does.
8:25
It's counterintuitive.
8:27
But you shouldn't be buying if you don't have a forecast on your cash flow.
8:31
This is where I get really scared because people are going to get undone because it is about to get really tight for a lot of people.
8:36
And I don't want to sound negative.
8:38
But the reality is...
8:41
we are in for a tough period of time and people need to be prepared for that.
8:43
Look, keeping this very general in nature, I think we've had a pilot running on PropStack for the last month or the last six or seven weeks.
8:52
I've mentioned on the podcast, and I've chatted to you quite a bit on it, like I love doing onboarding sessions.
8:57
Like I do try to do at least four or five a week just to pick people's brains on their mentality and what they like about the portal to really understand what value they get.
9:07
What's been really noticeable across the board
9:10
A lot of these clients have portfolios.
9:12
A lot of assets, you know, you and me probably spoke about in the podcast the last 12, 18 months, things we're not proactively sourcing or things that we would deem as speculative.
9:20
A lot of these people do have high, five, six properties, not a lot of equity in those properties and a lot of regional assets.
9:27
Very general in nature, you know, during a downturn, I know you've got some concerns for areas like that.
9:33
How to, what sort of mentality does someone need to have to know to hold that asset or potentially look to offload it?
9:39
This is where it gets really challenging because I'm in those reviews as well, Rhys, and I had a portfolio with 12, 13 properties of which there's equity.
9:45
There might be 700 or 800,000 equity, but across those portfolios, it's not what we want to see.
9:51
And the question, I guess, which ones should we sell?
9:53
Yeah.
9:55
And I can't often answer that with absolute clarity until we get on the ground and speak to the agents and we've got a team that assists with that, a sales advisory business that try to get on the ground and get the right agents, not those just looking for listings to get a real sense check of is there any buyers in that market.
10:11
And the case might be tested with three or four assets in different regional locations if we're talking about that.
10:16
Test the waters.
10:19
you might just get a buyer for one of them.
10:22
So you might have to test three and put it out to the marketplace to test three to be able to sell one to de-expose yourself from a high volatile, high risk of market.
10:32
And that's the reality because we don't want our clients to be selling at significant discount and certainly don't want our clients to be selling it at a loss.
10:39
So we have to test and trial race.
10:42
It's like A, B split testing.
10:43
We need to go out there, test the market.
10:46
And hopefully, there's an unsophisticated buyer that's getting spruced through another buyer's agent firm that picks it up on the yield.
10:54
And that's who we're selling to.
10:55
We're selling to another buyer's agency that's willing to pay a premium to get a deal done in this soft market.
11:01
So there is no blanket rule.
11:03
Every portfolio that I'm seeing is vastly different, but they're all coming into the same problems where they're overexposed to the wrong markets.
11:10
They're starting to get concerned because cash is getting very tight, and now they're looking to offload.
11:17
they're trying to offload with the masses and therefore there's no liquidity event.
11:23
There's no buyers in the market, it's hard to sell.
11:24
So we are A-B testing a lot of these different properties to see which one will sell.
11:30
And it's not even just the sell there or the potentially looking to restructure the portfolio.
11:35
There are a lot of groups still pushing some of these speculative properties.
11:38
stock in a market where we do see it, you know, it's plain sight from macro data, right?
11:43
We're in a downturn.
11:43
And one of the ones I've just got, for those that are listening, I'm just showing a feature of PropStack, which is the suburb data.
11:49
And the one I've seen a couple of times in the last week is some agencies are putting people in Albury-Wodonga at the moment.
11:55
That seems to be a big investment push.
11:57
They're getting it.
11:58
You can look at the graph I've got on here, Lachlan.
11:59
You don't have the pleasure at what our viewers and listeners will have right now.
12:04
But you can clearly see if you got into Albury Dogger in 2020, 2021, you've doubled your money.
12:09
It's gone on a serious growth.
12:10
But what concerns me is people are now jumping in after the market's already done double.
12:17
It's already done 14% in the last 12 months when we look at our compounding annual growth rates.
12:22
It's averaged over 13 for the last five years, and now investment groups are still sending people into these areas.
12:27
That's another thing people need to know their numbers.
12:29
If they are looking at getting into regional assets, look through the suburb data and understand what has that particular suburb done in the last 12 months, last five years, last 10 years, to understand where that market's at as well.
12:40
Yeah.
12:40
So if you are using a group to buy a property, before you get Solve the Dream, do your numbers, do your own research.
12:46
And this is why the suburb data, it's free for users for October, October only, and then Rhys is going to get in your selfish way and charge you guys.
12:55
But free for users.
12:57
Locker, it's free for those that sign up for the rest of the year.
12:59
So Locker really wants to push it.
13:01
It's free.
13:02
It's obviously a very costly exercise running this platform.
13:04
There's a lot of value there, right?
13:05
But we really do want to get those that support the podcast, get you into the system.
13:10
So if you sign up this month, you won't get charged for the rest of the year.
13:12
There'll be no paywall either.
13:14
It's purely to get you using it, see what you like, give us your feedback.
13:17
Enough of a plug.
13:18
I enjoyed it.
13:19
But this is what it's here for.
13:20
So you can cross-check your assets in the portfolio to see if –
13:26
That is going to be the right investment.
13:27
And yes, do I want to buy it?
13:29
No.
13:29
Do I want to buy a market that's already doubled and I'm getting pushed in there, top end of the cycle, paying a premium?
13:35
And Rhys, do you know where Aubrey Brodunga is?
13:37
I actually do.
13:37
You do?
13:38
I'm surprised because no one does.
13:40
It's like a border.
13:42
It is.
13:42
It's in the middle of nowhere.
13:44
It's not close to Adelaide.
13:45
It's not close to Melbourne.
13:47
It's not one of these regional metropolitan or commutable regionals.
13:51
Yes, it has its own infrastructure.
13:53
It's got a farming district.
13:55
I know it well from country Vic.
13:57
And there's absolutely no way.
13:59
People in Ormrida Donga aren't investing in Ormrida Donga, so why would you, situated in Queensland, Melbourne, Perth?
14:04
So don't go where the masses are because these are the portfolios that you just don't have a buyer once the investors pull out.
14:10
Yeah.
14:10
And look, this is just an example that I've seen recently in my last couple of meetings, but there's a load of different- Shepparton, Darwin.
14:18
Aubrey, Wodonga, Mowi.
14:22
No one knows where Mowi is.
14:23
It's like a – it's a small district.
14:26
Caution.
14:27
It's where I'm from.
14:27
It's where I lost all my money.
14:29
These are areas that people are pushing.
14:31
Davenport.
14:32
I will do a podcast just on areas where don't buy it, and all those are going to feature in there.
14:38
Yeah.
14:38
The scary thing was a chap had a conversation with.
14:41
He listens every week, so he's probably going to know who I'm talking about when I spoke to him.
14:44
But he's only just gone on his investment journey in the last 18 months.
14:48
And the first two assets were probably not assets we would buy, but locations we would buy.
14:53
So it wasn't the worst.
14:54
He did ask me my brutal feedback on what we would buy and what we wouldn't buy, what we like, what we don't.
14:59
But then he's now five assets deep, leveraging against his principal place, which he owned in Sydney outright for about five mil.
15:05
And the last three, Aubrey Wodonga,
15:08
somewhere in Tasmania as well, and then somewhere in region New South Wales I've never even heard of as well.
15:12
So it's starting to get to the point where they're now just starting to push even further on some of these regional players.
15:17
So that's the thing we need.
15:18
And they'll be pushing yield.
15:19
They're going to be pushing 6%, 7%, 8% yields because that's all the thing you can buy.
15:23
Let's not continue to go down this rant because it's a whole different podcast, but these are the warning signs.
15:28
And this is the whole purpose of this podcast is to bring attention to this stuff because it's all well and good when the tide's rising and everyone's making money in these regional areas are getting pushed up by investor groups and the party's over.
15:42
And that's why we come back to the data and that's the purpose of PropStack.
15:44
So you can do your own information so you can know who's full of shit and who isn't because the data doesn't lie.
15:49
And I spend all my time in here, fact check every market, go through all these suburbs that I've, you know, some I haven't heard of in some of these areas and then I go in there and see that they've done, you know, 15% growth in the last 12 months and 30% growth in the last 33 years.
16:04
What does that tell me?
16:07
A large property group have gone in there, flooded the market with their own investors.
16:12
Those founders would have got in early, made their money, and now they're trying to put a story around it to get other investing groups in.
16:18
You don't want to be on the – it's like a pyramid scheme.
16:20
You don't want to be the last to invest.
16:22
And in some instances, these clients are unfortunately on the back end of that.
16:28
Let's go to the macro suburb data and I want to really unpack where you see markets at, right?
16:34
You mentioned earlier in the podcast a big lever that you'll look at to understand how markets are going to perform and how they have historically is the affordability index.
16:44
It's a huge indicator for which markets are going to fall harder.
16:49
And that's what I want to touch on today.
16:50
Those that got to their historical ceilings or above –
16:54
will fall harder than those that didn't quite reach their affordability ceiling.
16:58
So if you want a bit of a forecast on ... And everyone asks me, what's going to happen over the next six months, 12 months?
17:04
I'm not your guru.
17:05
I use data to make decisions.
17:07
History tells me those markets that are more unaffordable will fall significantly harder than those that are less unaffordable.
17:13
It's pretty simple science.
17:15
But let's go in and have a look around the grounds, all of our capital cities.
17:20
So with PropStack, you can overlay any variable, any macro variable you like.
17:24
And what I mean is you can go into DYI charts in PropStack and start to play around with long-term trends.
17:30
So today with Reece driving this beast, I would want you to overlay affordability index ceiling, wish the cash rate historically,
17:41
And the median house price to show, firstly, starting with a market like Sydney, and then we'll go through all the other markets, which markets hit their ceiling, which markets exceeded their ceiling, and correlate that which one I believe is going to probably fall and fall the hardest.
17:55
Lachlan, I've got up.
17:57
the New South Wales or Sydney affordability index.
18:00
We've got that overlaid by the medium house price.
18:02
For those that are listening, I'm going to explain this as best I can because Lachlan can't see this graph over.
18:06
So I'm explaining this to Lachlan like he can't see this screen.
18:08
He knows this data out of the back of his head though.
18:09
I've seen this.
18:10
Nice, folks.
18:11
And I've also got the cash rate there because I think that's super important, especially in an increasing environment that we are currently in at the moment.
18:18
So the one I want to bring everyone's attention to is the pink line, and that is where the affordability index has capped out.
18:25
So previously, before the run it's been on, the Sydney affordability index capped out at about 57%.
18:34
What year was that?
18:35
That was back in 08.
18:37
So similar to like a lot of markets, that was the peak.
18:38
I would have thought 08, that was the peak.
18:40
That was the previous GFC.
18:41
Now, if we look at the peak for the affordability index, it was – and it ranged.
18:45
It kind of was a bit bumpy between mid-24 and beginning of 2025.
18:50
But let's call between that period Q3, Q4 of 2024, Q1 of 2025, it peaked at 62%.
18:58
So significantly above and by far the biggest increase out of all cities in Australia.
19:11
61% of their wage was consumed by their mortgage, leaving 39% for the duties of life.
19:21
when we were calling that the city market was likely going to correct itself, it was overheated.
19:25
Clearly, in hindsight, it's very easy to identify that 61% is very unsustainable.
19:31
And everyone's trying to work out why Sydney's falling like a brick and why it's falling harder than every other market.
19:36
It was because it's by far the most unaffordable market and was well above its affordability ceiling.
19:44
And when 61% of your wage is going to pay off your mortgage...
19:50
A lot of people there are in a financial stress.
19:52
And this is when I was speaking about my rant earlier on the podcast about knowing your numbers.
19:56
This is why.
19:56
Because people in Sydney are now, they're having to sell.
20:00
They cannot afford to hold their properties.
20:03
So they have to sell at a significant discount because it's not a, I need to sell.
20:07
It's, I have to sell.
20:08
I have to sell.
20:09
and they've got themselves in a situation where they can't afford to hold it, and therefore it's not a 10%, 15% discount, it's a 30% discount.
20:16
They need to get rid of it, they need to cash out, get rid of their debt because the bank is coming for them.
20:22
That's why that market will fall harder and significantly harder than I believe any other market in the country.
20:28
Looking at the data there that you can see, so we've got the pink bar graph, which is...
20:32
Sorry, the pink line graph, which is the affordability index, and the green line graph is the cash rate.
20:38
Now, you can clearly see that period, the COVID period where the cash rate was...
20:45
was less than 1%.
20:47
You can see that that's where we've seen some significant price growth.
20:50
Now that has obviously crept up and the price has still gone up because it's coming at a very low base.
20:54
But as you can see where the cash rate has started to hold back in 2023, 2024,
21:00
the momentum started to come out of the Sydney market as well.
21:04
So it's starting to feel a bit more of an affordability crunch.
21:07
And then as we've seen the rate rises this year, you've seen the market go backwards.
21:11
We spoke about it on a podcast last week.
21:13
You know, they're averaging some of the way the growth, the way the negative decline was in September.
21:18
They're averaging nearly 15%, 16% negative growth for the next 12 months.
21:21
This is a runway data and...
21:23
This is where we look at where markets get to if they hit their ceiling.
21:27
So on an interest rate at 6.3 prior to the previous interest rate rise, here you can see for Sydney houses, just to get back to their ceiling.
21:36
So this is not in a level where there's affordability.
21:39
This is just get back to their previous affordability high.
21:44
The market has to correct by more than 10%.
21:47
So here it's 10.44% correction from today.
21:51
So that's factoring in already the 8% that's occurred.
21:53
We need to see another 10% decline, pre-rate rise, before that market is arguably in stagnation.
22:01
We've had another rate rise.
22:03
So let's factor that in.
22:04
Let's go 6.5% interest rate you're paying.
22:07
6.52%, the market has to fall by 13% to hit its affordability ceiling.
22:12
Okay.
22:13
And if you are a pessimist or a realist, some might say, not an optimist like I, unless you say worse comes to worse, we see a couple of rate rises and we're paying 7%.
22:26
And that's a stark reality.
22:28
That's not uncharacterized if you look at any modern media station today.
22:33
The market in Sydney would have to fall by almost 20%.
22:37
So 19.12% to get to that stagnation phase of its previous affordability ceiling on top of its 8%.
22:45
So we're talking close to a 30% decline if interest rates were to get to 7%.
22:49
So when I get asked how far the
22:52
I don't use my gut.
22:53
I don't use my instinct.
22:54
I go to this and be like, based on its historical ceilings, this is where we can see.
22:59
Those optimists are like, I don't believe our rates will get to 7%.
23:03
Let's even say at 6.7 was where they landed at the end of the year or the start of the next year.
23:09
Sydney would fall 15%.
23:11
Brisbane would fall another 10%.
23:13
Adelaide would fall 13%.
23:17
Perth, Melbourne would increase between 8% and 9%.
23:22
You can say, okay, well, that's interesting.
23:23
You talk fondly about Melbourne and Perth.
23:25
It's just because they don't have the same affordability constraints because Perth has higher wages and Melbourne is coming off such a low base.
23:33
Interesting to note that, but that just paints a pretty stark picture, and I think it's important to note that as we go.
23:40
You can get on here.
23:40
You can make your own forecasts.
23:42
You can change the variable rate.
23:43
You can compare that against units.
23:45
The whole point of this app, guys, is to do it yourself because you learn by doing and understanding and then teach others.
23:51
That's just the reality of how you retain and understand this information.
23:54
Lachlan, from what I'm hearing, what you're showing there from a forecast perspective as well, the data is pretty clear.
24:00
We've done the overlay over a 30-year period, 25-year period, I should say, and you can clearly see from a trends perspective that the Sydney market is going to fall the hardest out of all markets in Australia.
24:11
Without a doubt.
24:12
We'll walk away from this cycle, this downturn, this winter, and Sydney will be the one that stands out in history.
24:20
Hindsight's easy, right?
24:21
So in a few years' times, we can look at the data now and say, it was obvious.
24:25
In the moment, it's never obvious.
24:27
But looking at this data, it's very obvious to me that Sydney's going to fall the hardest.
24:31
That was brilliant, Lachlan.
24:32
I think we're not going to go through every market here.
24:34
If there's a market people want us to do on another episode, please put your comments in YouTube and on Spotify as well.
24:42
But I think what would be good is you've talked through one extreme like Sydney and the other major capital, Melbourne, is on a slightly different path.
24:49
So I thought let's just touch on Melbourne as well and just get your commentary on where you see that market and what's history told us.
24:55
Yeah, because we get asked a lot, how can Sydney be falling Melbourne?
24:58
Not in terms of, or not as significant.
25:01
And why I don't believe people think we're quite bullish and optimistic on Melbourne.
25:06
I think people think we live in Melbourne, Rhys, which we don't.
25:09
But it's just the data.
25:10
When you look at the runway left in the market from an affordability point of view, when sentiment changes, there is scope for growth in that market, even in a high interest rate environment, which I just touched on in that runway data before.
25:22
Yeah, looking at Melbourne, right, so their peak was a similar time period to what Sydney was previously.
25:28
So May 08 peaked at about 40%, let's call it 45% of the combined household income.
25:35
Now, we're currently at 36%, so we're not near its historical ceiling.
25:39
From a price perspective as well, Melbourne is the most affordable capital city from a medium house price perspective as well.
25:45
So is that a key factor on why you don't see a market like that?
25:49
And actually, when you showed the forecast there earlier,
25:52
You actually said there's some growth to be had in that market over the next cycle.
25:56
Anyone can comment and think I've got biases.
25:59
I absolutely don't.
26:01
Most of what I've said over the last month certainly doesn't help us as a business.
26:07
If you think we're full of shit and you've commented that, you're completely entitled to your opinion, use this.
26:12
Come in here and make your own assessment based on your own inputs and your own...
26:17
I guess biases that you want to self-fulfill and see what you come up with.
26:21
But this is how I see the market.
26:23
So now we've got the interest rate, cash rate as we stand today.
26:26
So the interest rate, it's going to be somewhere between 6.4 and 6.6, depending on who you bank with.
26:33
So I'm just going to plug it in here at 6.6.
26:37
And if this is where interest rates are, this shows what markets still have runway.
26:41
And we know that Darwin does.
26:43
We know that – and that's why I think Darwin has, without a doubt, the opportunity to be the best performing market.
26:48
Do I want to be in that market long term?
26:50
I'm not in there personally.
26:51
I've got no biases towards it.
26:52
It's just a very volatile, like a big mining town.
26:55
Once projects finishes, we could see that market correct very quickly.
26:59
But at the moment, it's showing at 6.5% interest rate.
27:02
There's 24% left in that market for houses.
27:06
But why we've also, and sorry, to your point there about Melbourne, even in a really high interest rate environment, it's still showing 13% there for houses.
27:15
So why all these other markets like Adelaide, Brisbane and Sydney all have negative runways, Melbourne, Perth and Darwin show a positive.
27:23
So that for me protects the downside risk of Melbourne because there's not an affordability crunch, albeit it probably feels like it, albeit the cost of living higher.
27:32
Wages there can support higher interest rates.
27:35
So it's going to be more tolerant during this period of time.
27:39
But people have also questioned our conversation around units.
27:43
And as you can see, the forecast for units here on the right, for those that are listening and can't see the visuals, I'll just run high-level forecast for units at an interest rate of 6.5% how much runway is left in each market.
27:56
Okay.
27:57
Canberra, 41%.
27:58
Sydney, 25%.
28:00
Darwin, 65% for units.
28:03
Brisbane, 7.4% for units.
28:06
Adelaide, 0.3%.
28:07
So even for units, Adelaide's is at ceiling.
28:10
Hobart, 13%.
28:12
Melbourne, 45%.
28:14
Perth, 41%.
28:16
And this is not to say that things hit their historical ceiling, right?
28:20
When do markets...
28:21
When sentiment's high...
28:23
and there's confidence and there's demand out of supply, you will see markets run to their affordability ceilings like we saw in 2008, like we saw in 2004, 2005.
28:35
When sentiment's out of the market, then they typically trend the other direction.
28:41
So then we want to have a look at the byproduct of that.
28:43
How far can they actually fall, particularly when they're at their affordability highs?
28:48
Yeah.
28:48
So this just shows this.
28:49
That's why I think there's depth and strength and resilience in the unit market.
28:53
That's why I don't think Sydney units will fall nearly as hard as Sydney houses.
28:58
And that's why I think Melbourne units will outperform Melbourne houses.
29:03
this is another one, Ryan.
29:04
This is where you can really get stuck in the data and force your own opinions like you said there.
29:10
But one of the ones we were having to play around with our economists the other day was looking at the RBA cash rate versus the Melbourne units to see what happened in that actual environment when we start seeing a rate cutting environment.
29:23
This obviously could be 12 months away, we start getting that rate cutting environment.
29:29
or if there's anything positive off the back of the upcoming election as well, you can actually see here the green line for those who can't see is the RBA cash rates.
29:36
You can see once it started to go on a decreasing environment.
29:39
When was that?
29:40
What years?
29:40
This was in 2000 and back end of 2008.
29:45
Till when?
29:46
Till July, February 2009.
29:49
Yep.
29:49
Yep.
29:50
April 2009, you can actually see there from a medium property price perspective, Melbourne units did over 20% in 12 months.
29:57
So straight away off the back of that rate declining environment, you start to see it go on a bit of a run.
30:03
Now, I'm not saying this is going to happen off the back of a declining cash rate in 2027, but it is good data that you can have a look just to see what has happened in these previous cycles as well.
30:13
And that's what we encourage you to do.
30:15
For those who are listening, reach out to us and do some of your own mapping and forecasting and do your own research and have a play with the DYI charts.
30:23
Come to us.
30:24
Say, hey, guys, have you checked out X, Y, and Z variables and see the correlation between rents and stock on market in Brisbane?
30:31
I'd love for you to come to us with, you know, because data can be interpreted a million different ways and in times of uncertainty,
30:40
remove all opinion, look at the facts.
30:42
And the data is what we like to use to understand how to make decisions because that is the science.
30:50
Yes, property is both art and a science.
30:53
I absolutely agree with that.
30:54
But 70% is hardcore data, hardcore science.
30:57
So come to us.
30:58
We'd love to hear your thoughts.
30:59
Those that have stayed on the podcast this long, clearly you're as interested in property as I am.
31:05
So I'd love to have a play around with us and comment in the comment notes for YouTube and Spotify some of these scenarios that are interesting.
31:11
Absolutely.
31:12
I think- And we'll talk about them on the podcast.
31:14
Love to.
31:14
Yeah, enjoyed that one.
31:15
Look, as we said, PropStacks Live, sign up this this month.
31:18
You'll get it for free for the remainder of 2026.
31:22
We've been so invested with this platform for the last 18 months, but it's really come leaps and bounds during the pilot phase.
31:28
So thank you to all those that supported the platform and gave us a lot of feedback.
31:32
It's a really, really good tool right now to understand your numbers.
31:35
And like you said earlier, pretty passionately, it's not about buying right now.
31:38
It's about knowing your numbers and understanding numbers.
31:41
what your current position is before you make any moves.
31:43
So if you want to hear us go through any, you know, conscious we only went through a couple of data sets there.
31:47
We've got over 45 on the macro and we've got a lot of suburb data.
31:51
If anyone wants us to go through, like you said, put in some comments.
31:53
We'd love to do more of these moving forward.
31:55
You've been listening to the Folio Property Podcast.