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 82: Tariffs, Turbulence & the Property Market Reset
Hosts Ciaran O'Brien and Peter O'Malley unpack the global trade tensions rattling the Australian economy as Trump-era tariffs hit allies like Australia with a 10% sting—and China even harder. We explore how this “generational reset” in trade is stirring uncertainty across the property market and why the RBA may be forced into multiple emergency rate cuts.
From volatility in the prestige sector to weak auction results and market patchiness, we assess the current landscape and the smarter strategies agents and vendors should consider as economic pressures mount.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
All down, all silent, going, going, going, go on son Congratulations.
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, as always, is my good friend and co-host, mr Peter O'Malley. Hi, kieran, great to see you, great to see you, peter. It's been two weeks since we spoke and, apologies to our listeners, I was unable to make last week, so we're going to get through a fair bit on this episode, I think, and do a little bit of catch up, but also, you know, try and in some ways recap what's been a pretty wild couple of weeks, I think.
Speaker 3:Where I'd like to start, though, pete, is, I think in the last episode we touched on a little bit what was happening in the US and some of the flow on of the election and Trump's policies in particular. But since we spoke, there has been a definitive position taken by the United States, particularly on tariffs and Australia, unfortunately not immune to the tariff situation, you know, much like the poor penguins of the Turks and Caicos. There are some tariffs being sent our way, and I wanted to open up tonight's chat by, I guess, getting a sense from you of what those tariffs really are in a general sense, and then what their likely impact is actually going to be for us down under.
Speaker 1:Thanks, kieran. Look, yeah, I don't pretend to be an expert on the whole tariff situation and I've listened to a lot of commentary that are both pro-tariffs US tariffs and against Trump's policies. But from there, by listening to both sides of the argument, you get a much more nuanced and better understanding of what's going on, whereas if you tend to take a position that this is good or bad on an issue such as tariffs early in the equation, you can then suffer from confirmation bias as you try to assess what's happening. So there's been some terrific material put out to the general which helps them follow fairly complicated matters. I think probably the best one was from Australia's perspective was Christopher Joy's discussion with Mark Burris on the Straight Talk podcast. Christopher Joy really broke the issues down well and that was actually recorded before Liberation Day, when Trump announced what his tariffs were for all of the countries that he imposed them on Very quickly.
Speaker 1:What has become evident is the tariffs that America has put on what it would deem its allies and its friends is about getting them to bend the knee and kiss the ring.
Speaker 1:It's just about getting a better deal um, to be your mate and to be your backstop and to be your protector. So it's really the bully on the playground saying if you want me to look after you, you got to pay me a bit of money to do so. That's what I take out of it. Um, but the real purpose of the tariffs is America taking China on? Yeah, and America currently has the biggest consumer market in the world on the globe, and China is headed for that mantle, and America is trying to break China. China are no certainty to become the biggest consumer market in the world because demographically, their population is shrinking and predicted to shrink quite sharply in the next 30 to 50 years. So this is not about and you'll pick this up from the comments that are being made by the US administration this is not about what the markets do in 2025. This is an attempt at a generational reset. You can agree or disagree with it, but it's fascinating if you understand what they're trying to engineer here and what is at stake it's a.
Speaker 3:It's certainly an interesting topic and I know, following the discourse, as you say, there are certainly some you know well-respected economists making rational arguments around why, or why not, the tariffs are a good idea. And certainly since they were introduced since liberation day, as you say, until the day we're recording the china and us uh escalation point is continuing. You know, that's a, that's a battle of ping pong that's continuing to kind of uh bubble up and who knows exactly where that will end. I have to wonder, though, the I get the sense, just kind of reading between the economists, you know, listening to the general public's consensus, not that it's all that reliable, necessarily. Most people don't understand the tariffs and they just view this as a tax on themselves or tax on their country, or tax on whatever they, and it's certainly confusing to people and, I guess, for our listeners who aren't interested in listening to a.
Speaker 1:Congress. It's confusing to markets, because markets can't agree how to price this. It's confusing to everyone at the moment.
Speaker 3:Oh, and it's so volatile. I don't know. I can't confirm the veracity of this, but I became aware recently, in the last couple of days, of a tweet that went out from from someone who had the surname Bloomberg, and it triggered a whole range of basically automatic ticker feeds you know RSS feeds to feed out. The Bloomberg was tweeting about tariffs getting a pause and there was a market correction off the back of that is my understanding, seven minutes of mayhem yeah, which you know.
Speaker 3:To me that's insane, like the market, you say, is so confused about what's going on that even a tweet from someone with a similar name can trigger a global financial response, which is pretty wild. So the question has to be, I guess, for us here, regardless of the fight with China or the greater, you know, generational reset or whatever the larger purpose is, what is the impact actually going to be for us in property in Australia when you know we do face a little bit of financial uncertainty in the markets? Certainly don't know what they're doing right now.
Speaker 1:Yeah, look, my early take on it is this, Kieran, that if the stock market it's down 14% at the time of recording from its February highs, the Australian stock market I've always formed the view in my 25 years in real estate is the prestige end of the Australian property market performs best in unison with the share market, performs best in unison with the share market.
Speaker 1:So the last time I saw Prestige Property having the sustained run that it's enjoyed in the last two to three years was back in 2006, 2007, on the back of a very, very strong share market.
Speaker 1:And what you see happening is people retail investors that have done really, really well in the share market, take those gains out, lock in the profits and put it into residential property. There's clearly coming out of COVID. We've seen numerous examples where properties that were selling for $3 million to $4 million now suddenly go for $6 million to $8 million post-COVID. That is not people getting a pay rise and investing that back into residential real estate. That is people taking monumental share market gains and locking it into residential property and then it's created a momentum of its own. So if the share market in Australia was to take a knock of 20% plus on a sustained basis due to the global trade war, tariff war, I think you'd see, prestige property would seriously come off and there will be examples, if that happens, of people that purchased a property at the height of the market for $8, $9, $10 million and resell it for $5 or $6.
Speaker 3:Yeah.
Speaker 1:I can see those headlines already. When it comes to interest rates, this will probably be an accelerator for interest rate cuts, if the story is to be believed, and that will protect the middle to lower end of the property market and actually could be quite good for a lot of households who don't have an international view or an international portfolio or a big share portfolio, and it will help. It will help some people, provided they can stay gainfully employed.
Speaker 3:So we we will touch on in a minute the RBA's most recent decision around the cash rate and what that likely means. But on your point about accelerating interest rates, there's been quite a bit of discussion in the last week or two about the situation and whether or not the RBA will be proactive here, and a lot of commentators I've seen have suggested that we might now see up to four rate cuts before the end of the year to try and get ahead of this. I mean as a mortgage holder in Sydney, to me that sounds outstanding. But with your experience do you think that that is a likely scenario and I know it's a little bit hard to predict. But given what we've seen in terms of the kind of pragmatism and messaging from Michelle Bullock you know as head of the RBA, do you think she's likely to drive that message and try and drive that, I guess, that financial productivity forward to protect that middle and lower income brackets?
Speaker 1:If it's deemed in the best interest of the country to do so. Yes, yep, and that's not my opinion. That's what Michelle Bullock said in her statement last Tuesday on April Fool's Day, when she announced that rates were on hold. She said the RBA stand ready to protect the Australian economy from global events if necessary. So why didn't they cut on April 1? In short, they kept their powder dry. They kept their powder dry because they wanted to see what actually happened from trump's position on tariffs and clearly didn't want to unnecessarily insert themselves into the federal election that we're currently going through at the moment, and they would have preferred to have stayed on the sidelines until May 17,. I think May 17 or 18, the next meeting is.
Speaker 1:There's many reasoned, pragmatic economists that say if this trade war keeps up, there could be a Reserve Bank meeting where they call an emergency meeting and cut before then. That is an option that is open to the RBA, and Michelle Bullock herself was called into an emergency meeting with Jim Chalmers today. I think it was being Wednesday as we record this. So there's much at play. If Trump pushes on with these tariffs on China, he is clearly trying to cause his allies to, as I say, give him and America a better deal. But the full attack with this trade war is directed at China, and if it is reciprocal tariffs, where he puts one on them at a higher rate and they hit back with him and do so in return, it will be a very wild period for markets, very wild.
Speaker 3:Oh, look, certainly To put that into context. I think the reciprocal tariffs on Australia is 10. Is 10 percent right? And uh, I read today that china's beef yeah, uh, but I read today china's was now 104 percent uh, across the board.
Speaker 1:I'm fairly on everything.
Speaker 3:Yeah which is crazy to think about, uh, and it certainly will be interesting to see what happens.
Speaker 3:And I know, uh, you mentioned the prestige end and we have certainly spoken before about you know that that end of the market faring quite well and, as you rightly say, there's a lot of realised share market gain in there.
Speaker 3:But we've also talked about the strength of foreign currency against the Australian dollar and the buying power of expats or foreign internationals coming into the market. That's obviously now been put off the table for a period of time anyway, but we've also got global collapse in or, you know, temporary or otherwise, we have a global loss across the financial markets. So there is a likelihood really that Prestige Gen may take a hit for a little while, because there's also no real benefit necessarily to exchanging currency into the AUD at the moment anyway, as we're falling. So are they. My question for you, then in the last two weeks or so, since the tariffs and the kind of fluctuation in the markets, have you had conversations or noticed a shift with people that you're talking to at properties or open homes or vendors expressing concern or excitement one end or the other about what's happening and what that kind of means for them now as people looking to exchange. In short, no.
Speaker 1:Okay, and the reason being is the people that are knocked out of the market due to what's going on at the moment. Don't turn up the open house to tell you they're not interested in the market anymore.
Speaker 3:Yep.
Speaker 1:So we've got some really good listings at the moment that are drawing really really good numbers and good bids per property. And then we've got some other good, great listings too that no one's kind of biting on them and it's like where's the buyers on this? This is well priced, it's a great property. So, um, hearing right across the board from most agents that it's patchy market, you've got a listing that, for whatever reason, is really really hot. Or um, you've got a listing that you know the owners are not unreasonable in their price expectations but the buyers are just not turning up to play balls. It's a very difficult environment for agents to guide their clients on because it is so patchy at the moment. That's the word.
Speaker 3:Yeah, it's a real shame. I feel like we've, you know, kind of weathered some pretty uncertain times and we've come through some difficult interest rate settings and we've not that we're out of the woods there, but we've certainly, you know, started to just ease off the tension on the ratchet and then now we've got some global calamities occurring which are just causing a bit of instability, you know, across the market, as you know broadly, and it really is a bit of a wild time, I think, for property. You touched on the fact that we are coming or we're in the election cycle well and truly now. We're actually not that far away from the election and we have spoken previously about the different policies that either side of current or future government, potential future government have. Do you think, based on what's happening at the moment, do you think there's been much shift in where you think the election's likely heading and, as a result, you know how that's going to play out for property?
Speaker 1:Look, I think Australians are pretty disengaged with this election.
Speaker 3:I have virtually heard nothing since the kind of announcement and a few little you know soundbites.
Speaker 1:Really, it's been pretty quiet across the front, in my opinion. I think this is an election that Australians are largely disengaged with to date. Maybe as the decision gets closer, they'll take a deeper look at it, but I don't think either candidate has captured the imagination of the electorate at the moment. And then whenever a campaign is run that way, that's always when both candidates major candidatesluster. That will always favor the incumbent. Yeah, and that's what's happening if you believe betting markets.
Speaker 1:I think the last time we did catch up. Well, maybe the time before that, I said that at $2.60 Albo was screaming value and he should not be discounted from this race. And he's now into $1.33 the last time I checked. So so that's nearly saying that Albo is an unbackable favourite to hold on to the Prime Ministership. Whether that's as a majority government or minority government remains to be seen. But look, elections can turn and turn decisively late and there's still a slight chance. That could happen for Dutton and the Liberals. And the reason that it could happen is that people have not engaged and not taken a serious look at the issues. And if there is an event you know, you go back to John Howard and the Tampa crisis all those years ago that broke very, very late in Howard's favour when it looked like he was on the rack. So look it does. Look like it's heading to a Labor Party victory.
Speaker 3:But maybe it breaks late, maybe it doesn't, but it will take a major event to break it the other way yeah, look, who knows, the, uh, the, the fallout from the, the tariff or the trade war could be a catalyst for a change. Who knows? We'll certainly find out in a few weeks time. Uh, as we kind of wrap up on this week's episode, pete, uh, you mentioned that the market is experiencing some difficult times and, across the board, with others you've spoken to, uh, it is challenging in all sectors. So why don't we have a bit of a look through, or chat through the numbers on our market wrap and get a sense of what's actually happening out there on the ground?
Speaker 1:Yeah, so for the week just gone, on SQM researchers numbers, which is our preferred data supplier, there were 1,403 auctions scheduled for the week with a clearance rate of 48.3%.
Speaker 1:347 sold prior, 331 sold that auction, 33 were withdrawn, 473 were re-advertised as private treaty and 178 were rescheduled, so pushed down, kept as auction campaigns but pushed out to a later date. So not a massive deterioration in the trend line. But after breaking above 50% early in the year, after sort of a lack of stock over the summer, the market has gone right back to that point that it traded in from August to Christmas 2024, which it's basically sitting in the high 40% as a clearance rate. So what that tells you certain product is is performing well, as you'll see on a sunday, sunday morning when you open the paper and you'll always hear about the two or three auctions that have done really well. And there are always properties, even in a flat market or a patchy market, as we've described it, that outperform the market trend. But at the end of the day, more people fail to sell at auction last sat, saturday, than sold under the auction hammer.
Speaker 3:Yeah, not overly surprising, and certainly, I think, since we've been talking heavily about the auction clearance rate. From August. I think it's only come above 50% maybe once, possibly two weeks, and certainly holding consistently. I know we have spoken at length in the past about the belief that if the market sits below 50% consistently we are facing a downturn in the property market. But, as you said, we've been propped up by that prestige end for quite some time and the Sydney market's held strong, so it's going to be I think it'll certainly be an interesting couple of months ahead.
Speaker 1:Yeah, and look agents, as we've discussed last time, so we won't labour the point, but they're putting too much stock to the auction market that shouldn't go to auction. Yeah, if the product that you're putting to auction is not going to naturally draw two or three genuine bidders if not, you know, three to five you've got to question whether doing a public auction is in the vendor's best interest.
Speaker 2:Yeah.
Speaker 3:Yeah, chasing the headlines instead of being practical. Look, really great discussion today, Peter. I think we are certainly getting into some pretty heavy topics at the moment, as you know, necessitated by the market conditions. I personally am really interested to see what happens over the coming weeks and I know next time we talk, no doubt something pretty wild will have happened, because that seems to be par for the course at the moment. So thank you for coming in, Pete, and thank you for chatting with us this evening.
Speaker 1:All the best, thanks, kieran.
Speaker 3: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.
