Current Market Insights
The Current Market Insights Podcast is brought to you by Harris Partners Real Estate.
Understanding the property market can be a challenging thing, with highs and lows, twists and turns. The media and agents tend to spread the news they want you to hear, with the advice they want you to follow.
Current Market Insights is an unbiased look into what is happening, what tips you can use to buy, sell, or rent, and that you wont find anywhere else.
Current Market Insights
Episode 79: Flight to Quality in a Changing Market
Hosts Ciaran O'Brien and Peter O'Malley analyse the impact of the recent RBA interest rate cut on Sydney’s property market, where premium properties are attracting intense buyer interest while generic listings struggle.
We break down shifting stock levels, auction clearance rates, and the rental market’s renewed tightening. With investment properties moving to owner-occupiers and immigration consuming housing supply, we examine whether another rate cut in April or May will be enough to stimulate demand. Tune in for insights on how market conditions are evolving and what it means for buyers and sellers alike.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Speaker 2:Welcome to the Current Market Insights podcast brought to you by Harris Partners Real Estate. Each episode we chat with real estate author and industry leader, peter O'Malley, to discuss the current property market conditions and provide insights to assist you on your property journey.
Speaker 3:Hello and welcome to another edition of Current Market Insights. I'm your host, kieran O'Brien, and with me is my good friend and co-host, mr Peter O'Malley. Peter hello, hi, kieran, great to see you. Great to see you for another week, peter. I want to jump in today and just really attack the current market as we see it. It's been a week or so since we last really got into the detail and talked about what's actually happening in Sydney property, and it's been a couple of weeks since the RBA's announcement. So I think it's really a good chance for us to just have a look at what is happening on the ground and, if we can just spend some time tonight talking about the market, what is the current market situation and let's really give an update for our listeners.
Speaker 1:Yeah, thanks, kieran. Look how I describe the impact of the rate cut is it has created or exacerbated the flight to quality. So, say, two Saturdays ago I think, I had six open houses throughout the day, yep, and the most I saw at any of those open houses was five parties. It's pretty low, except for the final one which we had 33 parties through Right. So it just really magnified the right listing at the right price point in the right location and the market's all over it like a rash. But agents will always spruik to forthcoming vendors. Look what we've just achieved here. Look at what's just happened with this particular campaign. The market's raging and you can take that view, um, and and be telling the facts of the matter, because that's what happened on your property 33 parties came through on the first inspection. It was sold within the week, unsurprisingly, but yeah, when you do spread the numbers across all of the listings, there are pockets of strength and there's pockets of weakness in the market.
Speaker 3:there's no doubt that messaging is pretty consistent really with what you've been saying for quite a while, I think. Think in Sydney property. Do you think that the experience two weekends ago is fundamentally different from just the general kind of flight to quality, or do you think there is actually just a little bit more hunger perhaps, or some more motivation with the idea that rates should come down?
Speaker 1:What we've seen since the rate cut is buyers that were in negotiations or determined to purchase make a purchase are more confident or decisive in doing so. So the rate cut has helped. I don't think anybody can say the rate cut had no impact. It did have an impact and it was a positive impact for the property market. Is it a sugar hit that washes off over the next little while? Well, maybe. I think Trump's tariffs and the global ramifications there are starting to flood through the news cycle and overtake people's thought patterns and what that really means for Australia, now that we've officially been slapped with a tariff. That's only happened today, essentially on the day of recording, but as it stands, the rate cut has been a positive for the property market.
Speaker 3:I know we talked about a couple of weeks ago when the cut was announced. We, I guess, approached the topic of whether or not it would really have an impact on those vendors that were, or potential vendors that were, struggling a little bit. Do you think that it has been substantial enough to hold off any mortgage stress for people that have been struggling for a long time, or do you think it's the numbers?
Speaker 1:would suggest so, kieran. Great question, the numbers would suggest so because since the rates were cut, stock levels have actually gone down. Yep, so there was a real. Every agent, I think, came into the new year with a big bag of listings and it's like geez, I'm not used to having this many listings this early in the year. Some sold, some didn't, but it was a pretty good trading period leading into the rate cut. But there's no doubt that as we've hit march, weather's turned in sydney, as we know, a lot of rain about over the last few weeks, not as much as Queensland, of course, to our friends and family up there. We wish them well. That's been a horrific period to watch for those guys. But the weather has turned here in Sydney and, yes, the rate of listing flow has definitely slowed, which again is another factor that gives vendors just a little advantage I know it's only been a couple of weeks.
Speaker 3:Uh, you've talked about, though, those people that were in the process of trying to buy, or at least you know working with brokers, and in that kind of activity cycle they've been more confident and potentially have or, you know, may now purchase. Have you also seen a reflection in the strength of prices over the last couple of weeks, not just through your own agency but through others, and I? I asked that question, I guess, off the back of already? You know the media love to just spruik anything property related. That sounds over the top, and I've seen a couple of articles you know I'm going to be very non-pecific saying oh look, rate cut sees massive, above reserve, all the usual kind of hype. Is it a case that that's just the typical media hype around sales that don't necessarily deserve it, or is there some price confidence as well off the back of this?
Speaker 1:announcement. Media know that if you spruik failed campaigns, it doesn't create the positive reading matter that their audience wants. So they're always finding that listing or that sale that's outperformed the market and gone really, really well. And in all markets, even flat markets, which this one's not not but there is always properties that outperform and create a good story. So it's just the media is just an anecdote for what I described about our scenario.
Speaker 1:We had six open houses and five were pretty subdued, and then the sixth one, for whatever reason, was absolutely off the charts and sold inside nine days for a price that everyone was ecstatic with.
Speaker 1:Do we talk to the next vendor or prospective vendor about the five open houses that were more subdued than we would have liked, or do we talk about the one that had 33 parties through and sold for a really high price in under 10 days?
Speaker 1:So it all comes down to what the media chooses to look at. If you do look at the market in totality and you look for key performance indicators to give you an idea of how it's tracking, there is no doubt that the premium, the prestige end of the market, is outperforming all others still so. A couple of weeks ago I suggested that this will be interesting to see how these prestige properties trade in the market, because a lot came to market at once and most of them went on to sell and sell for pretty good prices. So there is real confidence and serious money. You know, above that four million up to 10, 15 million dollar mark around Sydney, that's where, when you do read about a really strong result at the moment that surprised everyone's expectations, I dare say it'll be in that $4 to $15 million bracket.
Speaker 3:Yeah, look not unsurprising. I don't think we, you know you have been one of the proponents of, you know, consistently talking about the upper end of the market and that unique and lifestyle properties being the stronger ones across Sydney, pretty consistently over the last couple of years. Before we get into some raw data on the last you know week or so, I guess my only other question really for you around what's happened over the last couple of weeks is we really have quite officially entered the election cycle. The messaging is coming on quite strong from both sides of parliament now. There's lots and lots of announcements across a whole range of areas of interest to not just our listeners but all Australians, I think. Do you believe in conversations you are having with your clients and others around the place that either side is having a real impact in their messaging around housing security, housing supply, affordability, etc.
Speaker 1:Etc no, I don't. I think most people are acutely aware that the rate of immigration that we've currently got happening here is going to absolutely consume any supply that a state or a federal government managed to push to market.
Speaker 3:Yeah.
Speaker 1:The numbers are extraordinary 1.4 million have come in over the last three years, I think it is I heard this morning. They're just phenomenal numbers and that has consumed the housing stock. Any reprieve in the rental market that has occurred will be short-lived. So the rental market, as we've discussed in the past, has taken a bit of a consolidation phase. It's not jumping at the double-digit percentage growth that it has been over the last few years at the moment, but I suspect that's likely to resume.
Speaker 3:Well interesting. You say that I only saw on on Reddit or social media the other day actually, a post from someone at a rental open in Sydney and the first post I've seen in quite a long time where there was hundreds and hundreds of people lined up, all look like international students. And it just reminded me of that, that kind of rental boom period when we last discussed this, really, where certain apartments around Ultima or Darling Square, like whatever it might be, would just see hundreds and hundreds of people overpaying to get into these spaces, and I couldn't help but think that actually now is the time of year where all the students are coming back. There's no restrictions at the moment, it's just open slather, and we really are potentially entering another period of rental crisis, uh, which has been waylaid slightly because of, you know, market conditions or whatever it may be, over the last month or so, but I can't help but feel we're headed back there I, I tend to agree, kieran.
Speaker 1:So just, uh, you know some anecdotal points here in the office. We haven't done any rental opens for the last two weeks on a saturday, right? Because there's no stock to show. So the book is full, um again. Uh, there's a massive trend, um of stock that is coming to market. It's investment properties that are being sold off, and when they're sold, they're purchased by owner occup. So the rental pool in that regard is shrinking and the properties that we are leasing are not actually making it to a Saturday, they're leasing midweek. Yeah, yeah. So all of that tells me that the rental market, as you've just said, is gearing up for another price spike in the next nine months.
Speaker 3:Yeah, certainly tough, tough space ahead, I think if you will. We always say that if you're renting in Sydney, it's a real tough market. On that note, then, pete, you have obviously mentioned anecdotally some of the experience you've had over the last couple of weeks, referring to the numbers and how we see it. Last time we spoke about this was one of the first times, if not the first in months, that we'd had an above 50% auction clearance rate, and things were looking a little bit healthy. What's the data telling us at the moment and where's the market sort of headed?
Speaker 1:Oh, look, it's sitting right on 50% really. So when you combine midweek auctions, the clearance rate comes in at 49.3%. On SQM researchers' numbers, the Saturday auction clearance rate was 50.3% and the midweek auction clearance rate was 46.5%. If I can go to another number that I do think is interesting, of the sales that were recorded in the last week by auction, 307 sold prior and 293 sold under the hammer. 31 of the 1,217 scheduled auctions were withdrawn from the marketplace and a whopping 388 were re-advertised for private treaty.
Speaker 3:So that's more re-advertised than sold prior and certainly more than sold under the hammer.
Speaker 1:Correct, that's right, yeah.
Speaker 3:That's a big amount and, interestingly, thinking about the last time we went over the auction numbers, that's also an increase in the total number of auctions, which again ties to what you said. The stock has been ramping up and we've reached a bit of a critical point but we're starting to see that clearance rate come back a slightly again.
Speaker 1:Yeah, that's right, and can I say we've I think we discussed this once last year in 2024. I look at the addresses. Like you can see here, I've got every auction result for the week here in front of me and when I look at the properties that have failed to sell at auction, I think to myself what were you doing? Putting that property to auction anyway? A generic apartment with strata issues in a high rise. It was never going to sell with spirited bidding.
Speaker 3:Now see, I just always assume that these are the people that read the paid ads in newscom. You know where this apartment's achieved an amazing. The ones I talk about have got to be, in my mind, paid for by agents to just advertise the virtue of this system, right?
Speaker 1:Yeah, we must keep in mind about the auction system is that it relies on competition, it relies on multiple bidders, and if you're selling something, it might be valuable, it might mean a lot to you emotionally.
Speaker 1:But if you're selling something, it might be valuable, it might mean a lot to you emotionally, but if you are selling something that doesn't have a deep pool of buyers and I'm referring here to a 30 million dollar house as well as a 350 000 apartment in the suburbs that you know won't have a deep pool of buyers running an auction for certain product is just completely incorrect because you're not going to have a deep pool of buyers. Running an auction for certain product is just completely incorrect because you're not going to have a multitude of buyers all trying to fight it out for that particular property on that day. And you'll notice, with the very, very top end of the market, it basically doesn't sell by auction because the buyer pool is too skinny. So the things that sell best at auction are the properties that have a deep buyer pool for them, and one way to get the auction clearance rate up is to stop putting so much stock to the auction market. That's never going to sell that way.
Speaker 3:Yeah, the only people that benefit from this really are the agencies that get paid fees to list auctions and then know they're not going to sell them. Yeah, and.
Speaker 1:I think half of them are all juiced up on the training they get, thinking they're on you know, million dollar listing or whatever it is that uh is, is is going at the moment and they think you know they're going to create this hyperbolic uh response to to all of their properties. And uh, alas, that's just not how real estate sales works. Uh, in some markets you'll have most of your listings that go really well. In some markets, you'll have most of your listings that are struggling and it's about picking the eyes out of it. And then markets like this are evenly balanced between buyers and sellers and it's up to the agent to bring them together. And trying to conjure hyper-competitive sales scenarios on generic stock that's flawed in a market where buyers do have choice, is going to end in tears for the vendor.
Speaker 3:Well, yeah, ultimately, the vendor was just paying to bid against themselves, are they not? You mentioned just a little bit earlier that one of the things you are seeing actually is investors selling out and then owner-occupiers purchasing, as we sort of move toward the end of the episode. I just want to get your thoughts on whether or not tying the two, going back to the rate cut, whether you think that's also been significant enough, especially with immigration and students returning, et cetera, for those investors that were on the fence about selling, holding whatever, pulling the trigger and deciding one way or the other that it may actually be beneficial to hold and if rates come down, it becomes whatever pulling the trigger and deciding one way or the other that it may actually be beneficial to hold and if rates come down, it becomes a you know, yield improves and it becomes a net positive investment. Or do you think it's still probably not enough for that space for the majority of investors?
Speaker 1:No, when you look at what the cash rate did, we'll keep it simple and talk about the cash rate. It simple and talk about the cash rate. It's gone from 0.1 percent to 4.35 percent and only pulled back now to to being um, what is it?
Speaker 1:4.1, 4.1 percent again.
Speaker 1:Um, to have even the rba said in their statement, even after this rate cut, that we're delivering on february 18.
Speaker 1:We still believe the interest rate setting of the day is restrictive for the economy and therefore we essentially paraphrasing, we essentially think it's safe to cut rates because it's not going to create any any bounce in the inflation, the economy and the property market.
Speaker 1:And and and I concur with that, whilst things have certainly got a bit of an improvement about them, we did discuss the point when they did cut rates, kieran, that if they left rates on hold, for many people that would have been just as devastating as a rate hike because their finances were under such duress. So it's supported the market, but it's by no means stimulated the market, that rate cut, and you would need to see the RBA slashing rates in order to create any sort of stimulus in the property market, which they're not going to do. I believe there's a rate cut coming sooner than a lot of people do. I just think the numbers are going to support another rate cut very soon, but that's that's. That's debatable at the moment. And but I do concede on one point the RBA will not be cutting rates to the degree that they stimulate inflation, the economy and the property market.
Speaker 3:No very fair assessment, peter. Final question for you, then. We did talk about this. You suggested one of the things that may indicate the likelihood of the election is when the next rate cut was. Given that, you think there is another rate cut potentially on the horizon. Listening to some commentary only this morning myself, peter Switzer was talking economics and market reactions to Trump and the tariffs, etc. His outlook was a little more pessimistic perhaps, which you know, maybe not outside the ordinary, but I wonder you initially had suggested you thought the next rate cut might be April or May. Based on how you've seen just the response to this cut and people's sentiment, do you think that we're still likely to see one that early?
Speaker 1:Yes.
Speaker 3:Okay.
Speaker 1:Yeah, I do yeah, and I think it formed, formed in my view, the decision to hold the election date in May. I know the cyclone precluded Anthony Albanese from calling it last Sunday, when basically every pundit in town had predicted him to do so on that day. But yes, I think there will be a rate cut in April or May and the election date will be after that and he will be looking to trade on it.
Speaker 3:Not a silly move, as we've suggested before.
Speaker 1:Oh look, he's copping enormous heat, anthony Albanese. The one thing Anthony Albanese is not is silly. He's a political warrior. Regardless of what side of politics one stands on, he's a political warrior and, um, let me say this, that the value last time I checked on sports bet, the value that labor are showing um in the betting to win this election, is value that should be looked at yeah, I think.
Speaker 3:I think the race is going to be closer than expected and I suspect, maybe more so now than ever. Trump and his action is going to heavily dictate how people think here because of the Liberal Party alliance or perceived alliance Conservative. Well, yeah, I think some of the messaging is aligning, and it's whether you support it or you don't. I think it's going to be an interesting period ahead, that's for sure. Yeah, yeah, I think some of the messaging is aligning, and it's whether you support it or you don't. I think it's going to be an interesting period ahead, that's for sure.
Speaker 1:Yeah, indeed, it'll be a tight election, there's no doubt. Anyone who thinks that Liberals are across the line is not following the playbook.
Speaker 3:Yeah, certainly Look, pete. Really great chat today. Good to get back into the numbers and have a bit of an analytical discussion, which you know I certainly enjoy. Thanks a lot for coming in and having a chat with us. Thanks, kieran, all the best. Thank you, and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 2:Thanks for joining us on the Current Market Insights podcast brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
