Current Market Insights
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Current Market Insights
Episode 84: Missed Opportunity? RBA Holds as Markets Flounder
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Hosts Ciaran O'Brien and Peter O'Malley dissect the RBA’s controversial decision to hold rates during the federal election—despite inflation now sitting comfortably within target bands and business conditions described as “putrid” across multiple sectors.
With Sydney auction clearance rates collapsing to 44%, high vendor withdrawals, and predictions of a 0.5% cut in May, we explore whether the RBA’s delay will cost households and the broader property market. We also analyse how the Labor government’s decisive win and immigration policy will affect housing supply and rental pressure moving forward.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Welcome and Introduction
Speaker 1All down. All silent, going, going, going, go on son Congratulations.
Speaker 3Welcome 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 4Hello and welcome to another edition of Current Market Insights. I'm your host, kieran O'Brien, and with me, as always, is Mr Peter O'Malley. Peter, hello, hi, kieran, great to see you. Great to see you again, peter.
Speaker 4It's been a couple of weeks and we've taken some time off, notably because we've had the election just recently in Australia and we both kind of felt that there was enough going on that people didn't really need to listen to us drone on about things in property and policy. So let's spend tonight's episode just getting a bit of a recap on some of the things that have happened over the last fortnight. Recap on some of the things that have happened over the last fortnight. And, if you would be so kind, I'd really like to start tonight's episode by chatting about the quarterly CPI numbers and the headline inflation.
CPI Figures and RBA Rate Cut Predictions
Speaker 4As our listeners would know, the RBA uses, obviously, cpi and inflation as one of its key metrics for how it adjusts the cash rate and what it actually does with monetary policy. And we often talk about the quarterly rate and what it actually does with monetary policy, and we often talk about the quarterly figures and what they mean and how they're tracking in the trend and what it actually does indicate is likely going on in the economy. So, given that about a week ago now the CPI figures were released for the quarter, if you don't mind, why don't you run us through what those figures look like, what the RBA's response to that was and what that likely means for rate cuts and rate movements in the very near future?
Speaker 1Thanks, kieran. Look, the headline inflation number is down to 2.4% and the underlying inflation number is 2.9%, moving what they call the trimmed mean inflation to within the target band, the RBA's target band of 2% to 3%. Most people are pretty fairly aware of that. Now I think the big story because that side of it is a little bit of an old story now the big story that's potentially brewing is there's an increasing chance that when the RBA do meet on May 20 that they may go for a 0.5% interest rate cut and NAB, even after the election results, have maintained their view that the RBA will cut by half a percentage point in May. If the RBA do cut by half a percentage point in May, that would essentially be an admission without being an admission from the RBA that they should have cut rates in April.
Speaker 4Yeah, I know that most commentators are pretty confident that a 25 basis point cut is certainly on the cards for the meeting in May.
Speaker 1That's 100% priced in by the money markets.
Speaker 4Correct. That's been priced in and there was certainly some suggestion. I read myself that, yeah, a 0.5 or a 50 basis point cut was potentially on the cards. I guess the question I have for you is given that we'll talk about the election in detail shortly, but given that we've just had an election, there's plenty of promises and things been thrown out and all of the things that are happening globally in terms of their impact on the financial markets at the moment Do you think that there's any risk that if the RBA was to work on a 50 basis point cut and be confident that the interest or the inflation is within the target band and they can go a little bit more aggressive, do you think there's any risk that they may actually overshoot in the current climate economically?
Speaker 4but also in the political climate.
Speaker 1No, there was 12, 15 months ago. So when commentators were screaming they should be cutting in May 2024, the RBA probably got it right to hold then cutting in May 2024. The RBA probably got it right to hold then. I don't know who you, how many people you may have or haven't spoken to about business conditions through April into early May, but every business person from a range of industries that I have spoken to has spoken about what a putrid month April was. Yeah.
Speaker 1Admittedly, April had immense distractions. It had the Easter weekend, of course, the Anzac Day, long weekend. School holidays overlapped that, combined with a federal election. In my 27 years in real estate sales I've worked during many federal elections but I've never had one as dead as what the one that's just gone was. And I don't think that was because of policy. I think it was just because it was combined with school holidays and a couple of long weekends back to back in.
Speaker 1The interest rate setting of the day, as the RBA have admitted themselves, is restrictive. So just tonight, as we're recording this, China has again eased its monetary policy. Today Central banks, as we know, around the world have been cutting interest rates. The RBA did go in February. We were of the view at the time they should have cut in April. They didn't because we're in the middle of a federal election and we are now running toward May 20 with a property market in Sydney. For example, it had a clearance rate of 44% last weekend, a property market that has been struggling for confidence on very low stock levels. So I think the environment is absolutely right for the RBA to get serious about easing conditions for households.
Speaker 4I think you've certainly highlighted some important points. I mean, I know, even just you know, existing through April was challenging. With all of the different breaks and the reals, it felt like a very staccato month, right, it was very hard to get rhythm. But even just you know, observing anecdotally where I live, I've certainly seen more businesses put up, you know, for lease signs or close up in the past, say month or two, than I have in the past, you know six months prior to that which or close up in the past, say month or two, than I have in the past, you know six months prior to that, which certainly aligns with what you're saying in your discussions with other business owners, one of the things that has been mentioned as a driver of you know, a bit of an inflationary rise in the last month.
Speaker 4So even though we had, you know, headline inflation at 2.4 and underlying or trimmed mean at 2.9, there was a 0.9% increase in March alone and one of the suggestions has been that that in many ways was due to easing of some of the electricity subsidies. So I guess my question was a little bit loaded in the sense that you know this election was full of a lot of promises about, you know, cutting this and offering that and stimulus for this and tax breaks and hex breaks and all kinds of things. They all have to be paid for. As we know, and given that you know something is as seemingly minimal as the electricity rebate or subsidy scheme had a pretty major impact on inflation, do you think there's any chance that you know Labor's spend first, worry later kind of approach could actually result in a bit of an inflationary uptick?
Speaker 1No, I don't, because I think the business conditions and the consumer confidence has now turned sufficiently for that not to happen. If there were even oil, let's go to oil. Oil price has been crashing yeah.
Speaker 1Oil per barrel has been crashing. Did it get below $60 a barrel? Yeah, yeah, so that's immensely deflationary. So we've clearly got disinflation in the economy at the moment, disinflation being the inflation rate pulling back. Deflation is where it drops below zero. I'm not here to say that we're heading for a deflationary environment, but just as we saw with inflation, where it can pop really quickly to points that you never imagined would happen in your lifetime yeah, if the rba leave the cash rate too restrictive for too long, they can create an episode to the downside, just as their easy conditions through 2021 created an overreaction to the upside on the inflation number. It is time to throw serious relief at households and I believe they should have cut in April, except that in the end, they weren't going to cut because of the federal election and their messaging. But I think you've got to keep an eye on the fact that they might go by half a percent, because everything that we're talking about here today, if we're talking about it, the RBA knew about it two weeks ago, trust me.
Speaker 1Yeah of course.
Speaker 4And I guess, as a reference for our listeners, current cash rate is 4.1. If we get the 25 basis basis points, we'll end up at 385. Uh, but you're suggesting we could actually get down to 3.6, which there's plenty of people would be pretty happy with that outcome.
Speaker 1I think, and the last time interest the cash rate was at a cash rate of 3.6 was march 2023.
Speaker 4Yeah, feels like a long time ago.
Speaker 1That's for sure it does feel like it was a long time ago, but nobody felt that interest rates were low when they were at 3.6 in March 2023, right.
Speaker 1Well considering where we were before that. So the two or three rate hikes that came after that really did feel like they were bringing the mallet down on the economy, and the RBA have been proud and unrelenting in saying that we've got interest rates that are a restrictive setting for the economy and it's now time to to loosen it all well by myself, like many others, I'm sure hoping that the RBA do go 50 points and make it just a little bit more palatable out there oh, look, let's go back to it.
Speaker 1I think, um, the liberal party did a good enough job, good enough job themselves of um losing the election, um, the rba giving the economy a much needed rate cut in april was not going to have an impact on the election. Yeah, and, and I think the I just really think the rba should have cut in april. There will be jobs lost and businesses gone to the wall because the RBA didn't cut in April, and all of the data, all of the reasoning was there. The only reason they didn't cut in April was because we're in a federal election. And if you're trying to be apolitical, well, you don't achieve that by staying on hold when every skerrick of evidence says you should cut. You are being political when you do that, right.
Speaker 4Of course You're favouring the instructions of the incumbent, right? Yeah, look, I'm sure someone will. When they write about Michelle Bullock's time at the RBA, they'll, you know. Let's hope this is not her legacy, the fact that she sent business to the wall by, you know, through inaction, we. This is not her legacy, the fact that she sent business to the wall through inaction. We'll certainly see what the future holds, but I think you're exactly right. The inflationary projections and picture is so much more promising than when we first really started focusing on this 12 months ago, and I think we're entering a really positive phase for homeowners, but also for just consumers in Australia in general.
Speaker 1Yeah, look, it was pretty brave by the RBA to stare the market down 12 months ago and say no, if we start cutting rates now, everything's going to pop again. So I understand that they've got really difficult decisions to make and I was actually even accepting personally that they didn't cut at any stage in 2024, even very late in the year. They obviously went in February this year, but to have not gone in April I just think was a real lousy decision. And the reason I think it's a really poor decision is that it takes six weeks from the time they cut rates for it to be really impacted by households. So let's say they cut rates on May 20. Households are not going to notice any sort of relief until mid-July. Yeah.
Speaker 1Where, if they had a cut in April, that relief would be hitting. Now, at a time where, whether it's a car dealership or someone who's in the fitness industry, or someone in retail or another real estate agent, I haven't heard from anybody tell me that they've had a good april in business yeah, no, look, neither, neither.
Speaker 4And you know, wrapping up this point, but even thinking back, you know, four to six weeks ago, I read quite a lot from plenty of lenders that were already pricing in the april cut when it didn't come, uh it, you know, from a mortgage perspective, which really reiterates that they were expecting that everything was lining up for the RBA to make that decision. And you know, you and I spoke about this and you were reasonably confident that they would go and may even get pressure from, you know, from Labor, to actually make the cut before the election itself. And you know, here we are now a couple of days after the election and it still hasn't happened. It will happen in a couple of weeks, but, as you say, it may be a few weeks too late. Let's move forward then.
Federal Election Results and Housing Implications
Speaker 4The election is mostly I'm going to say it with a caveat mostly over now. The result is certainly penciled in, but there are still a couple of seats that are on the fringe. There's still some counting in, but there are still a couple of seats that are, you know, on the fringe. There's still some counting. There may be some recounts, who knows, but I'd love to get a bit of a sense from you just what the impact is going to be of this election result.
Speaker 4We've talked a little bit about the policies on both sides, how they're not completely dissimilar. You know how there is not a huge amount in there for housing but there is quite a bit for Australians in general. But what I'm really really want to hear a little bit from your perspective and your experience is given, the result was quite resounding and ended with a mandate for Labor. Do you think it's going to have a more substantial effect on housing and on the economy than it may have done if they had to form a minority? Or do you think it's going to be business as usual and it won't really make?
Speaker 1much difference. Look, I think the big losers and they're yet to see it because they're some of Labor's biggest supporters, but the biggest losers out of this will be tenants. Yep, Because the immigration policy will persist. Labor feels like it has a mandate to go for it and it essentially does, and high immigration numbers are clearly part of its strategy, and we're not even close to building enough dwellings. So I think the upshot of that is the queues at rental open houses will only get longer.
Speaker 4Yeah, which is possibly, I mean, not surprising. We talk about how it's cyclical and driven by season. But yeah, I must admit that was one of the first things I thought about, and I think even you know, in Albanese's speech you know his victory speech at the end he talked a lot about just Labor's focus on people and renters and you know housing security and all this kind of thing, and I kept thinking to myself well, you know they're talking big but they're building slow and they're not going to deliver anywhere near enough to support the incoming.
Speaker 1He won the campaign, hands down. Why do we say that? Well, going into the campaign, dutton was in front in the polls. At the end of the campaign on election night, albanese and the Labor Party had absolutely thumped the daylights out of them. Yeah, so it absolutely thumped the daylights out of them. So clearly Labor won the campaign. You're absolutely right. They spoke to those people, they connected with those people, they promised to those people. But when you look at the policy in action, they're going to clobber those people with a mallet.
Speaker 4Yeah well, exactly right. It really is an interesting time. I'd love to get your thoughts, and it's not directly related to housing, but the Greens Party over the last couple of years has been incredibly vocal. Who the Greens? Who Exactly? Are they still around?
Speaker 1They're still one of the primary colours. I'm looking at the election sheet here and it says they're on zero.
Speaker 4Well, we can't ignore the fact that there are three primary colours right in our spectrum red, green and blue. The Greens Party were and have been incredibly vocal on housing security, tenants' rights. You know they love the idea of the great economic reset and everyone effectively losing everything to make it fairer for everyone. You know the socialist kind of utopia, given that they've had such a resounding thump also in this election and lost seats in some cases to Liberal candidates, which you know is the kind of antithesis of the Greens' outlook, I guess.
Speaker 1Do you think that Till's lost to the Liberal candidates? Did any Greens lose to a Liberal candidate?
Speaker 4Oh look, I could be wrong there. I thought there was one, maybe in Brisbane or Queensland that went to a Lib, but I might actually be wrong.
Speaker 1There's two lost in Brisbane. Might have both gone to Labor. That could be my error. Yeah, so all three went to Labor, yeah.
Speaker 4So I mean even that, though, says you know, do you think that that's a reflection of people accepting the fact thatopian ideology is fantastic to think about and read about, but in reality you have to govern with some kind of sense and it shows a bit of a shift. If you look at the traditional spectrum of politics, I guess going from green to red indicates that they're moving a little bit more to the centre. Do you think that, given the Greens have had such a thumping this time around, that Labor may even feel a bit of pressure off them to focus on housing and rental and tenant security, given that they don't have to worry so much about the Greens?
Speaker 1Look if Albo can pull this off where he can keep rents low by somehow creating housing supply and keep rents.
Speaker 4But rents aren't low now, Peter.
Speaker 1Yeah, we'll keep rents at current levels without rising. I should say I actually don't think rents are high. You might say they're not low. Let me tell you where rents can go.
Speaker 4Oh look, we certainly talked about where they could go.
Speaker 1They are not high. So we'll agree that if Albo can stop rents from rising and still bring mass immigration numbers into the country to break the labour supply shortages that he's trying to deal with, he'll comfortably win another term comfortably. Albo's campaign, as we just said about the Liberals, was so effective that he went, as we said here, when he was $2.65 in the betting he's a good bet, yeah. And by the time of election night he was $1.04.
Speaker 4Oh yeah, I think he had so many zeros in front of the final number he was basically even money, right?
Speaker 1Yeah. So they ran a highly effective campaign. Whether you were a Labor voter or a Greens voter or a Liberal voter, it doesn't matter. You have to accept that Labor ran a highly effective campaign and they did it by making a lot of promises, and I think a lot of the Greens vote in those seats were were people that weren't happy with where Labor was going at the time in Melbourne and the two Brisbane seats. And they've just returned home to something more pragmatic because Labor ran such a good campaign and the Greens have always strongly appealed to a certain part of the electorate and then tried to bring themselves along a little bit more mainstream, but they were like the Liberal Party They'll run over by the elbow bus.
Speaker 4Yeah, which is a pretty dangerous bus to get hit by. Final question I guess then for you on the election is all the policies, all the campaigns people will pick apart from both sides, what's happened here given it's fairly monumental in the last 20-, in the last 20 odd years, it's a pretty significant election. Do you think that any of the policy on the liberal side specifically related to housing, or, you know, finance, monetary policy, etc. Any of that has had any impact on this result? And if so, do you think that the libs may start to take a more aggressive housing you know tenant uh immigration stance as we move toward the next three years?
Speaker 1oh look if, if you get granular with it, but their policies were sort of so poorly communicated, lacked conviction, it was very, very hard to take any of them seriously. Um, what? What I would say is that take note of the commentary that the liberal party has completely lost young adults. Yep, so anyone between 18 and 26, say? The representation in that age group that voted Labor was sky high. Yeah.
Speaker 1And they're primarily tenants and they feel like the deck is stacked against them. This wealth inequality that we're seeing across Australian society since COVID yes, there's no doubt that certain factions of the left have made them feel like victims and aggrieved at. You know, baby boomers are the um, are the cause of your inability to buy a house and they've enjoyed these, uh, tax-free gains and I just don't think, whether it be through incompetence or or being blind to the facts, the liberal party didn't see any of this coming. Um, you you as well as I do the impact of the HECS had on the young people, Myself included. I don't know why the Liberal Party thinks it's beneath them to talk to tenants, but they didn't seem to have offered tenants any assistance anyway to get by.
Speaker 1The Labor Party did. And then they had their HECS policy, which was highly appealing to people in that age bracket, and you know what the Liberal Party were offering for people between 18 and 26 wasn't much. They played to their what you might call their traditional base, which is the older, wealthier person in society, and, yeah, I suppose those people stuck with them. But the reality is that, demographically I love demographics, it's such a great topic demographically the younger people are beginning to outnumber. You know the older age groups now.
Speaker 4Yeah, look, I'm glad you mentioned that I also love demographics and we should. You know, maybe we should try and look, I'm glad you mentioned that I also love demographics and we should. You know, maybe we should try and get bernard salt on here for an episode one night. But uh, you know, it was heavily reported in the week before the election that this is the first time that the younger cohorts uh, you know, the, the gen, whatever's they are, the z's and the y's and the millennials, etc. Outnumber the boomers for a federal election. And you could argue, the result, you know, reflected that perfectly. But I, I personally don't think it's quite that simplistic. Uh, I agree with you, I think the liberals targeted their base, but they also completely either avoided or ignored a whole section thinking. Well, I'm not sure what they were thinking and I'm sure you know people within the party will figure that out. But personally I'm very interested to see because this could be a pivotal turning point in our political kind of path as a nation, if the Libs don't rediscover themselves, that's for sure.
Speaker 1The Libs will rediscover themselves. There's no doubt about that, I think in the short term. For me, the bigger determinant of where we go politically is does Albo and his government move and manage the country in the centre, move closer towards the centre, or do they have vested interests that pull them to the hard left and then give the Liberal Party a greater opportunity to rise? So what was interesting about this is, as we know, at the 2022 election, the Teals did tremendous damage to the Liberal Party, but those seats, even in the Liberal Party's darkest hours, the Teal seats were already beginning to return home to some of the Liberals, and we haven't got the final result in Bradfield. But that was a Teal well-financed, running a phenomenal campaign against the Liberal, and it looks like the Liberal held on.
Speaker 4I think he's already claimed victory. I believe.
Speaker 1She in Bradfield, two ladies.
Speaker 4Oh, okay, there's one I certainly want. The Liberal claimed victory, but the Teals refused to concede. It was one of the last headlines I read, oh that would be Tim Wilson and Zoe Daniels down in Melbourne.
Speaker 1Yeah, that's probably right. So that was one of the tail seats that Tim Wilson lost at last time to the tails of the.
Speaker 4Daniels, correct, yeah, that's the one.
Speaker 1And it's officially come back to Tim Wilson. So there's a pathway back for the Liberal Party. But they have to get this housing and this young adult vote and demographic rights. I was in a meeting today and a young lady she must be 23, 24 years of age she said I just felt that Peter Dutton was the bad cop in the good cop, bad cop routine. I didn't connect with him, I just got bad vibes about him. There was no way, even if I was right-wing minded, that I could bring myself to vote for him, and apparently the strategists were trying to tell Peter Dutton this throughout the campaign. He wasn't listening. I don't know if that's true or not, but what I'm saying here is the Labor Party must acknowledge. But what I'm saying here is the Labor Party must acknowledge they won't have a salesperson as bad as Peter Dutton in 2028 when we go to the polls again.
Speaker 4They were given a gift. Certainly, I'm not going to take up any more podcast time asking for your predictions on whether we're going to see the return of Frydenberg or whether we're going to find someone else taking the helm. But look, I think it's certainly an interesting time ahead and I personally, too, am going to see the return of Frydenberg or whether we're going to find someone else taking the helm. But look, I think it's certainly an interesting time ahead. And you know, I personally too, am interested to see what Albanese does, because I have a feeling Labor is going to shift more centrist. But time will tell. You know they've got they really have a mandate to do what they want.
Speaker 1If he manages in the centre, say political leaders like Gladys coming back the other way, right wing but managed in the centre. She was unassailable until an unfortunate event brought her down. But in the polls and the way people felt about her New South Wales premiership she was unassailable. And if Albo does move to the centre and gets this whole housing crisis thing makes good progress on it in the next three years, just as he did with inflation in the last three years, he'll get another term. Simple as that.
Current Property Market Conditions
Speaker 4Well, we'll certainly see when we're talking about this in three years, peter, as we move forward then with the rest of the episode, I'd love to just catch up on what's actually happening. So you in property that is, you have spoken about how the auction clearance rate's a little bit low and we'll get into the numbers in a minute on low stock volume as it is and you've also talked about just how it is tough economic conditions and it's been a really, really tumultuous month just in terms of timing and people's activity levels, et cetera. So if you can give us a this is a bit of a recap or a bit of insight into what you're actually seeing on the ground at the moment, at open homes, what kind of things are you talking about with your vendors that are concerning, or, or you know, possible highlights for them? And then, I guess, as a final point, what kind of buyers you're seeing, what's's the common profile, if you could even say there are buyers out there at the moment.
Speaker 1Oh, there's definitely buyers out there and we're getting offers on a lot of properties. Some of those offers meet or exceed the vendor's expectations. But there's a lot of examples where we bring the vendor offers and you know the offer's not working for them and they've then got to make a decision whether they take the property off the market. So across the market there's a high withdrawal rate much higher, by the way, much higher than is being reported and that's unsurprising because when you've got an auction clearance rate systemically stuck below 50%, it's unsurprising that as night follows day you're going to get a high withdrawal rate.
Speaker 1So we are running into a lot of people in the community that don't understand the importance of risk-free selling when going on the market. They think you know what harm can there be in? We're really serious about selling our house. All our friends tell us it's a nice house. We'll just pay for the advertising campaign up front. I'm sure it'll work out fine.
Speaker 1They invest $10,000 or $15,000 in the campaign. They get a bid on auction day, then work out what they could have done with that $10,000 or $15,000 and they're just absolutely gobsmacked at how they've been played off a break and fallen down a hole. And that's very common in the marketplace at the moment failed vendors that have got a big advertising bill or a big advertising deficit and no sale. In terms of open houses, there's a mixture of all sorts of buyers in the marketplace, but when it gets to the negotiation table're tough and we constantly keep hearing from buyers that the banks are being very restrictive around lending. There's no easy money policy from the banks at the moment. They're really working people over before giving them a loan approval do you think?
Speaker 4just a couple of points I just want to touch on there.
Speaker 4One you talk about the fact that failed vendors there's quite a few that have paid money up front, and I know you've spoken before about how traditionally that's the type of client that you often will work with. Are you finding, or are you having any conversations with, vendors that have failed that are just so disappointed with the process that they're stepping away from it altogether? Or are you finding that people that are on the market at the moment are reasonably motivated to be there and they're willing to entertain you know an alternative, risk-free solution, as opposed to, you know, having already spent money or not? Or are you finding that people are, you know, testing the waters a little bit with their sales? Or do you you know what's the kind of, I guess, what's the motivation level of your vendors at the moment? Do you think that most people are selling out of necessity? Or, you know, is it a bit of a blend of people who are just kind of testing the water and saying, hey, it's low stock, let's see if we can capitalize?
Speaker 1look. I think you've got to look at each individual situation in and of its own merit. So when a property doesn't sell, we like to sit down with the client and say well you know, did it sell because of the price, the presentation or the person selling it, ie the agent and we try to get an understanding. Well, what happened during the campaign to you know? Deliver this non-result and just understand what the root cause is. Now there's lots of agents, as there always is. There's lots of agents that will overquote to win the listing. And any agent out there at the moment who is overquoting to win the listing will know that there are absolutely no chance of getting that property sold. And the reason I say that is even when you're making evidence-based valuations at the moment, in many instances the market's undershooting, undershooting you and making offers below what the evidence suggests yeah so it's not an easy environment for agents or vendors out there at the moment and it's really.
Speaker 1you know, it takes a lot for the agent to get it up into the back to the reasonable category. So what you don't want to do, there are vendors. Unfortunately the fall for the agent that's quoted too much or the market slipped below them between the time they sign to go on the market, the time they get to market and they've just got to ask themselves am I prepared to meet the market if I go back out there? So that meeting I was in today with the lady who said I didn't get good vibes from Peter Dutton. She's selling her family property and the agent overquoted somewhere to the tune of 20% on her property so, unsurprisingly, it hasn't sold and it's been on the market for several months. The opportunity costs of not having sold six months ago and having cash in the bank has resulted in her losing possibly $15,000 a month in term deposit income. Yeah.
Speaker 1The ramifications are significant because the property hasn't been sold. So in that meeting I was saying unless you're prepared to accept that you were overquoted and you can't go back to the market looking for the same price point, you have to seriously reassess your price expectations to sell this. And if you don't want to do that, that's okay. Just don't come to market.
Speaker 4Yeah, I mean that's perfectly reasonable advice, right. But there are always going to be scenarios where a vendor has to sell regardless. And then you know, unfortunately there's going to be scenarios where people still succumb to the sunk cost fallacy, right that they've put money into an advertising campaign and they've been on the market and the opportunity cost is gone. So what the hell? They're just going to keep going.
Speaker 4You know, unfortunately that does happen. But what I'm getting from you is that really at the moment there's not a lot of stress selling going on, so people aren't just desperately trying to hang on to get out. But there are definitely difficult times and people need to be a little bit pragmatic with their asset and accept that, unfortunately, what they were told potentially three months ago is definitely not what they're going to see today, or most likely not what they're going to see today, or most likely not what they're going to see today.
Auction Clearance Rates and Market Recap
Speaker 1Well, as we've discussed earlier tonight, conditions were really really awkward through April. So nobody really knows where the market is at, given it sort of had a unofficial shutdown for the last month. So things will become clearer in in the next four weeks as we get a rate cut and, you know, maybe the market will come charging back and buyers will suddenly be a game on, particularly if it's a 0.5 rate cut here in in sydney. Um, sometimes the agent just doesn't give the property the focus it deserves.
Speaker 1Um, so the the circumstance that I was telling you about, for example, um, earlier today, the agent did actually have a reasonable, market-based offer and he didn't even pop around and have an in-person meeting with the vendor to explain why, all things considered, this offer should be considered and accepted yeah and it's only when I was with the vendor today and talking it through that I was basically saying it looks like your best buyer has turned up, made an offer, had it rejected and moved on and your agent hasn't told you any of that because they weren't really across the fine detail and really giving the campaign everything that it deserved. So sometimes the agent, the property can be a good property and drawing good interest, but the agent's just not on for whatever reason. Presentation we know the importance of presentation as well at the moment. Is that because buyers are very wary about work, cost of works, ease of getting works done.
Speaker 1I've never been involved in so many house renovations in all my life as what I am at the moment. Because when people call me out and say how should we present this for sale, I'm looking at them and saying you can spend $50,000 here and add $200 in value to your property, but if you don't spend that $50,000, the market's going to drive your price down $150. Yeah, what do you want to do? So I don't ask people to invest in an advertising campaign to present us as the agents better to the marketplace. That's largely overblown. But I will ask a vendor to invest in their own home up front, because they can increase the value and they can stop the market pushing the price of their property down by doing, you know, some basic repairs and renos.
Speaker 4Yeah, well, like all of this aligns, honestly, with previous episodes we've done. We've just talked about how to actually, you know, really optimise your sales campaign. It is about presentation, it's about planning, it's about all of those things. So we won't linger, but it's interesting, I guess, to get a sense that you know, in this kind of market a little bit tough it's really important to make sure you stick to those principles you know and get it all right the first time, which can be a little bit tough, but you know, I think if there's vendors listening that are feeling concerned, you know there is hope out there. You've just got to make sure that you're also being pragmatic with your agent and make sure that you know, you know exactly what's going on with your sale as we wrap up then tonight, peter, given that we've talked about how tough the market is, if you can, why don't you take us through the auction clearance numbers and, I guess, put some figures to that sentiment that we're certainly feeling out there?
Speaker 1So look, last week there was 833 auctions scheduled with a clearance rate of 44.4% and, interestingly, 185 sold prior, 185 sold at auction and 28 sold after. So the whole sold prior or sold under the hammer split neatly 50-50 last week. Auction numbers will go up in the next two or three weeks from that 8.33 a week. Slightly interesting to see that many auctions on an election week. But you go and there are a lot of campaigns that didn't sell or were rescheduled. So of the 833 auctions that were scheduled, a clean 154 were rescheduled. So that's interesting as well. So that tells you there that there was a number of vendors that lined up to do a campaign last Saturday but between them and their agents they felt it was better to wait a couple of weeks, possibly after the rate cut, before having another go.
Speaker 1So not a diabolical market, I wouldn't say it's a tough market. It's just not an easy one. There are good offers out there but as a vendor, if you've overstated in your own mind, or a real estate agent has overstated what they can achieve for your property beyond market price, yes it will be a tough market. So it's not really a tough market for those vendors that are determined to sell and happy to work with the market price. It's tough for those vendors that are trying to get above market price.
Speaker 4Yeah, my only question for you on the auction numbers, peter, and I'm not entirely surprised, other than, like you, I cannot believe that so many auctions were scheduled for Election Day.
Speaker 1Like I just can't even fathom thinking about both these Is the preceding two weekends to the Election Day was Easter and the Anzac Day long weekend, so pretty bolshy saying you're going to do an auction on that day.
Speaker 4It's a clever way to get some money from your vendors without actually selling a property. But my only question for you is just based on your knowledge of the market and your history, how does 833 auctions compare for this time of year historically? Is that about right, or do you think we're a little bit low, a little bit high? Where does it kind of sit, based on?
Speaker 1Well, 536 were on election day and 297 were midweek. So what I noticed through that whole period is lots of agents who would normally do their auctions on a Saturday were doing midweek auctions. Yeah, so that was sort of like everyone had the same calendar right, the same events in the calendar school holidays, easter, anzac Day, long weekend and the federal election. And I noticed that some agents, as I said, dropped the Saturday auctions altogether and were doing Wednesday or Thursday night auctions altogether, and we're doing Wednesday or Thursday night auctions, which is why you had a higher number for the midweek auctions and you had a lower number at 5.36 for the Saturday auctions. So, to give you an idea, saturday auctions in a market like this at this time of year should be somewhere between 8.50 and $1,050. And when you get to spring that gets out to $1,200 to $1,400. Auctions on a Saturday.
Episode Closing
Speaker 4Yeah, oh, look, it makes sense, and it didn't escape me that we certainly had a lot more midweeks this time than we usually do. Peter, really in-depth episode tonight. You know quite a long one, but I think it's important that we did talk about the topics we have. You know, inflation obviously guides so much of what happens in Sydney property or national property. But Sydney in particular the election's been such a pivotal one in terms of result but also the policies that have come into it, and, as always, it's great to get a bit of a market recap for our listeners. So, despite the long chat, I hope your voice is held out. I certainly appreciate you coming in for a talk, peter Pleasure. Thanks, kieran, thank you and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 3Thanks 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.
