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
2GB Property with Phil O'Neil
On this week's Current Market Insights - Harris Partners' Peter O'Malley joined 'Ugly Phil' O'Neil on 2GB Nights to discuss all things property. In this insightful chat, they discuss market trends over this Easter/ANZAC Day holiday period, the role of the Bank of Mum & Dad in the housing market and the risks in friends pooling together to purchase a property. You can listen to the full chat here
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
We have Peter O'Malley on the phone from Harris Partners. Good evening, good to talk to you. So the drama caused by Donald Trump and his tariffs this has got some economists predicting a four-rate cut this year. Four-rate cuts Would that do much to the property prices, peter?
Speaker 2:Look, I think you've seen a slowdown in the prestige market since the share market took a hit.
Speaker 2:So the prestige property market has been the strongest by far in Sydney and Melbourne over the last two years, phil, and that is not driven by higher wages or more confidence in that sector. That's largely driven by people enjoying stock market gains and locking those in in the residential property market. So I think the immediate effect of Trump's tariffs on the Sydney property market probably have been just taking the edge off the prestige market. Across town agents are reporting that the same energy was not there. This has also happened at a time that the federal government have banned overseas buyers. So you've probably seen a double-pointed attack on the prestige market in the last two months that slowed it down. The Reserve Bank in their last statement, did highlight the fact that, even though they weren't going to cut interest rates in April, they were standing ready to support the Australian economy. In their words, if there is a macro geopolitical event on markets. So the RBA are ready to cut rates if there is damage from Trump's tariffs.
Speaker 1:So is this a good time for a bargain then, Peter.
Speaker 2:You don't often get bargains in Sydney. I think the weakest sector in Sydney at the moment, phil, is the apartment sector. Any apartments that have got strata issues, elevated strata rates, impending costs buyers are avoiding like the plague and they're overreacting to that segment of the market and those issues there. So I wouldn't say bargains are on offer. But there is a bit of value in apartments if you're in the right suburb looking at the right thing.
Speaker 1:Right when you say the right suburb. Where should somebody be looking at?
Speaker 2:Well, look, there are suburbs where, particularly around the harbour, where you wouldn't say there's any weakness in the apartment market. So lifestyle apartments that baby boomers are downsizing into are still doing okay. But when you get into some of the suburbs where the strata blocks do have some issues whether it's they're replacing the flammable cladding or they might be replacing the elevator at great cost, or there's a couple of special levees in place in the strata books that sort of stuff is really scaring buyers off at the moment and it shouldn't. It should actually create an opportunity for those buyers to come in at an entry price that they wouldn't be able to otherwise get in at.
Speaker 1:And are they easy to find, these bargains?
Speaker 2:um, well, look. Unfortunately for all of us in sydney, apartment blocks with issues are all too readily available. How you find out about the health of a strata block, phil is by reading the strata report. And um, whilst I don't think it's uh ideal to go and hunt um vendors in distress who've got strata issues in their building, I'm going the other way on this. I'm saying that buyers are overreacting. So you might find a building, for example, that has $25,000 in special levies scheduled over the next 12 months. Well, the market at the moment, because it's running from a fear perspective, is discounting that apartment by $50,000 or $100,000. So all of the negative press that has centred on the apartment construction sector in Sydney and some of it is justified is actually impacting on prices in the apartment sector, there's no doubt, and I think it creates buying opportunities.
Speaker 1:Fantastic. Well, it's not often you hear those words. Is it likely to bounce back though?
Speaker 2:If Chris Minns gets up on his agenda, which is to build tens of thousands of more apartments, that's additional supply that will even out the demand that's coming in. I think what you will see with apartments and continue to see, first and foremost, phil, is a rising rental market. So in the last few months I've done a few rental open inspections just to get a feel for things on the ground, and I'll turn up to the inspection 15 minutes early and there's already a crowd waiting for me to get through the open house, whether it's a house or an apartment. So if you are a first home buyer and you buy an apartment and you think that in time you will grow out of that apartment, rest assured there'll always be a queue of tenants ready to lease it from you and that's a good story for the longevity and viability of the investment.
Speaker 1:Of course, let's talk about how a lot of younger Australians are pooling their funds with a friend and instead of buying a unit together, they can buy a house. I can see the pros and the cons of this. Let's walk our way through the pros first.
Speaker 2:It obviously gets you into a house where you might otherwise end up in an apartment, and you're doing it with a friend. But will that friend be a close friend and a business friend and a co-property owner with you in five, 10 years time? That's the question you both need to decide at the point of entry. If I can be honest, I'm not a fan of this one, Phil, buying with friends to get a higher valued property. I think people are better off investing interstate at a price point that works for them, building up equity that way and then using that equity at a later date to come back into the Sydney market independently. Because let's face facts is that who your friends are when you're 25 is not always who your friends are when you're 35. It's not that you're not friends anymore, but you do drift in different directions and I have seen this quite a lot over the years that friends when they were younger go halves in a property and, I must say, rarely does it work out well.
Speaker 1:No, well, that was the cons that I was talking about as well. Sorry to jump the gun. Well it's best to get in it and be honest yeah. So what kind of situations, then, do people find themselves in legally?
Speaker 2:Well, look, if they're 50-50 tenants in common, they've got half the expenses and half the equity at the other end. If one of the co-property owner's earnings go through the roof because their career takes off and the other goes into a failed venture, for example, you've got one half of the relationship that's flying and the other half that's really struggling. And these are the sorts of practical issues that do pop up and and, as I say, I think a better way to build equity in the property market if you can't afford to buy a house in sydney is to buy interstate. There are some still some good value cities around the country and I think the best value capital city that's value in Australia at the moment is Melbourne. Due to the local taxation rules down there, they have forced property prices down and I think that if you do take a 10 to 20 year perspective on the Melbourne market, you'll do very well at the moment.
Speaker 1:Of course, the important thing here, too is if you're buying a house with your friend, keep all of the receipts. Right is if you're buying a house with your friend, keep all of the receipts, right?
Speaker 2:Oh, that's right indeed. Have a deed written up and drawn up up front with your friends so that everybody knows the rules, and it's kind of like the constitution of the relationship, so that if there is a discrepancy down the track, you've both got a document to refer back to.
Speaker 1:All right, let's wrap it up with this thing. I think this is fantastic. The English town of Uppingham have got a nuclear bunker on the market and it's 1.3 million Australian dollars and you can renovate it if you want. I just like the idea of having a bunker.
Speaker 2:Well, in these day and age yes, so do I Is this a good value?
Speaker 1:Do you think people can go out and buy this? Is it worth it?
Speaker 2:Look, I don't pretend to know the up-income market the way I know the inner west of Sydney, but let me say this that how you would assess this site and any others is that it is a nuclear bunker. It's not a nuclear site, so it's not stigmatized. It's just got a dramatic title to us and what you do, it's got a price of 1.3 million Australians, so probably 650,000 pounds or thereabouts. What you ask yourself is, once you build the DA approved house that's slated for that site, what's it worth and how much will it cost to build that property? And that will bring you back to what should be about the true land cost.
Speaker 1:Fantastic though. It's beautiful property and it's out of the middle of nowhere, so you've got plenty of room. But what I really like about it for me, if I moved in is I wouldn't want to change anything because it's got some fantastic brutalist culture and architecture about it too.
Speaker 2:Oh, that's it. It's a property of discussion, but there's plenty of those in Australia, for example down the Southern Highlands and down the South Coast, and the owners, when it comes time to sell them, can't give them away Really. Oh yeah, absolutely. What's a romantic and interesting property, what's a smart buy is completely different.
Speaker 1:Are they nuclear bunkers? Though, they're not nuclear bunkers. Therein lies the rub. That's what I'm looking for. That's what I want the market for. So if anything comes across your desk, give me a ring. I'll start Googling right away. Phil, what's the website? If people want more info, yeah, harrispartnerscomau. Nice to talk to you, my friend. Thank you so much for that, peter O'Malley. There with Harris Partners and the state of the property for the weekend.
