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.
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Current Market Insights
Episode 93: Housing Incentives, Rezoning & Sydney’s Next Growth Wave
Hosts Ciaran O'Brien and Peter O'Malley unpack major government announcements set to reshape Sydney’s property market. From new first home buyer incentives to large-scale rezoning plans, these policy shifts aim to boost affordability and supply — but will they actually deliver, or simply push prices higher?
We also discuss:
- Federal first home buyer guarantee allowing purchases with 5% deposit and no LMI
- Treasury’s claim of only 0.5% price impact vs. historical evidence of price inflation from incentives
- Removal of income limits potentially opening benefits to higher earners
- Chris Minns’ announcement of Willara station completion and rezoning for 10,000 homes
- High-density strategy around transport hubs to reduce car dependency
- Inflation figures at 2.8% reducing chances of a September rate cut
- Electricity costs emerging as a key inflation driver
- Auction clearance rates improving to 56.5%, with equal split between sold prior and under the hammer
- Stale listings moving as signs of a heating market emerge ahead of spring
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, gone. So 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 is my good friend, mr Peter O'Malley. Peter, kieran, g'day, how are you going Good to? I'm going well. Good to see you, peter.
Speaker 3:I want to jump in today's episode and there's quite a bit to talk about. I think all sadly in. I guess, in our case all sadly centered around political announcements, political decisions now, but as they relate to property in Sydney, I want to start the discussion today by talking about the federal government's home ownership changes. They've made a range of announcements as part of their election as to ways that they were going to assist people to get into the housing market. One of the things that they talked about was reducing the amount of deposit required by first-time buyers to get into the market without incurring a lender's mortgage insurance or LMI penalty.
Speaker 3:Now, when it was first announced, this policy sounded relatively tame and more as a I guess, a bit of a popularity point, more so than a really well fleshed out policy. But now the government's come out, made some changes and I guess in some ways tried to really beef up what this actually means. So to kick us off, what do you, I guess? What do you understand about the policy and then what are the more recent kind of conversation points around it that I guess. What do you understand about the policy and then what are the more recent kind of conversation points around it? That, I guess give it the focus we want to talk about today.
Speaker 1:Well, look, the Herald, the ABC rather reported it this week here and they said the scheme the first home by guarantee would allow people to buy a property their first property with a 5% deposit and avoid paying lenders mortgage insurance, as you've just outlined. Housing Minister Claire O'Neill said the scheme would allow first home buyers to be paying down their own mortgage rather than rent sooner. That's perhaps a seven or eight year period where they're choosing to pay off their own mortgage rather than someone else's, and that's a really good thing. The government is citing Treasury Department modelling which suggests the total impact on house prices will be around half a percent increase after six years. Don't know how Treasury got to that level, kieran, but there you go. Experts go on to say that the prices will actually be pushed up a lot higher than that, particularly in the first couple of years after the scheme is introduced, given it will be stimulus to the market, the property market.
Speaker 3:So a couple of things to unpack there, first and foremost for people that don't understand or don't know much about LMI what exactly is LMI, and what kind of impact does it really have on someone who's trying to put together a deposit for a property?
Speaker 1:Yeah, look, it's often the difference between able to enter the market and not be able to enter the market for a lot of young people, right?
Speaker 1:So if you can't get a deposit of a certain size, the mortgage lender will say to the borrower yes, we're prepared to lend you that money. We can see that your earnings and your earnings are likely to improve as your career progresses, but based on your existing earnings, we can see that you can afford to pay the property back. However, you don't have a large enough deposit to for us just to give you the money straight out. So therefore we'd like some mortgage lenders insurance in place here to protect us should you the money straight out. So therefore, we'd like some mortgage lenders insurance in place here to protect us should the worst happen and you fall over in terms of repayment. That can be a significant sum of money and that can be the difference where you can have a first home buyer who scraped together 5% or 10% deposit. If they were, in theory, paying a mortgage instead of paying rent, they could make ends meet, but they can't quite get to that lender's mortgage insurance to allow them to enter the marketplace.
Speaker 3:Okay. So as a practical example, let's say someone had saved $50,000 for a deposit and they thought this might be enough to make an offer on a property, but they haven't met the 20% threshold or whatever the LVR is that's being sought at the time and theoretically then that lender's mortgage insurance comes off, whatever deposit amount they might have. So all of a sudden they're even shorter from where they need to be. Is that the concept? Oh well, they wouldn't get the loan under the current structure, they just wouldn't get it at all.
Speaker 1:yeah, so going forward, the government will say to approved borrowers we can see that, based on your career earnings, where you're going to the loan amount that you're looking to take out, that you're a good and safe bet. So the government will step in and make sure that you don't have to pay mortgage insurance.
Speaker 3:Okay, so I guess a very cursory level sounds like a great incentive right, a way for the government to stimulate younger couples, young singles, whatever, into the property market you mentioned. The treasury modelling suggests that property prices will increase 0.5% over six years off the back of this. Given that Sydney property increases, you know more than that, sometimes in the month. How you know, how do you think treasury actually came to this figure and, realistically, based on your experience with other incentive schemes over the years that you've been in real estate, what do you think the actual impact is likely to be here?
Speaker 1:yeah, look, when it comes to treasury's forecast there, I don't think you can take it with a pinch of salt. That's's ridiculous. Yeah, it really is.
Speaker 3:The property market literally could go up that much by the time we finish this recording.
Speaker 1:Indeed. Well, on the announcement, or certainly the introduction, come October 2025, that's quite possible. That's right. Yeah, so this policy feeds the demand side in the housing market further, yep, and history tells us that whenever the governments throw an incentive into the demand side of the equation, the market rises by more than the benefit on offer.
Speaker 3:Yeah.
Speaker 1:So, in very basic terms, ones that most people can remember, in 2008, when the world was in meltdown, the Rudd government introduced I think it was seven thousand dollar bonus for first home buyers under on homes under five hundred thousand dollars and almost overnight the market rose during the gfc, when wall street nearly completely imploded, sydney property prices under five hundred thousand000 rose by $14,000, $21,000 as first home buyers chased a $7,000 incentive.
Speaker 1:So for Treasury to say that this would only impact property prices by half a percent over six years. I think what they're really ignoring there is the unintended consequences and this is what bureaucrats and treasury departments are known for which is modelling, where they change one thing, believing that nothing else in the model will change based on the new policy, other than people right at the point of wanting lender's mortgage insurance and everything will be modelled from there. But when you change the rules, you change behaviours, and if you offer an incentive like this, you will change the psychology of first home buyers and you will end up creating a which others can decide whether it's good or bad. I'm just speaking purely clinically about it. You will create a surge of demand with this policy here.
Speaker 3:Yeah, and I can't help but wonder if the government's also made these models or predicated them on this false belief they have that they're delivering 1.25 million new homes, you know, over this short period of time and that of course, their supply efforts are going to match the demand that's increased through this. I mean, the demand's already very high and we have that issue across Sydney in general, supply is not coming fast enough and you know, I agree with you. I can't help but think that they've said well, under our proposal, this will be fine because we're building millions more houses, but but of course, the reality is so different from the messaging.
Speaker 1:Yeah, if there's weakness in the Sydney property market or the inner city market at the moment, it is at the bottom end or the lower end of pricing. And what this is designed to do and the Housing Minister, claire O'Neill, says as much in her statement there that it's a seven or eight year period where a first home buyer is choosing to pay off their own mortgage rather than someone else's, ie renting. So this is going to. This is an attempt to rein in the rental market as well, which hasn't really been discussed in too much of the media. Commentary about this is that if you can get young people saying rents are too high, I'm better off buying my own property, you will have the bottom end of the market come alive as first home buyers make that switch from being a tenant to an owner-occupier.
Speaker 3:Yeah, which, as you say, theoretically should bring down rental demand. My final question on this topic, then Peter the Herald, who also wrote an article about this, mentioned that the scheme itself, unlike previous iterations of government schemes in this space, will have no caps on the number of applicants. That said, one of the suggestions that's kind of been made by some parties, who may have vested interests against the government making this change, have said that, though there are no kind of functional caps, there will be caps in reality, because the initial surge will see people priced out of the then five percent requirement for entry anyway. Do you think it's going to be, or do you think there's likely to be, a scenario where there's so much demand and so much interest and such a surge in prices that all of a sudden people can't even get to the 5% required in this case?
Speaker 1:I think if the market became that unhinged, they would have to step in and slow it down in that scenario.
Speaker 3:So one of the things they've done here is lifted the caps on the. There's no capital number of applicants, but there is a ceiling on how much you can. You know what the price that you can go to, and I think it's 1.5 million.
Speaker 1:It's 1.5 million in sydney, but income limits on one's eligibility to access the scheme has also been removed right, so they could implement income limits, or they could implement.
Speaker 3:So let's say, you don't know you don't.
Speaker 1:You don't own a property. Yeah, um, and for good luck to you, for whatever reason, you've got a three or a five hundred thousand dollar job. Um, you, you can, you can claim this incentive does that?
Speaker 3:to me that seems like again. Just there's got to be some inequity there, right? Because if you, if you earn half a million dollars a year, let's say arbitrarily, and you haven't bought a house for whatever reason, you could access this game, use, bugger all deposit and then you have so much more free capital than someone who's earning fifty thousand dollars a year to then invest in some other high yield plus.
Speaker 1:You've got your foot on the property ladder I mean I was a little bit surprised to see that one particularly environment we're in, where the rich are getting richer post-covid and the, you know, the middle, the middle down are getting sort of crunched by higher interest rates, cost of living, the challenges of the economy et cetera. Yeah, to remove one's eligibility based on their earnings seemed like you would fuel it for people that, for whatever reason, haven't purchased a property yet but are big earners.
Speaker 3:Yeah well, it just seems like there's an easy path for them to make even more money quicker than anyone else. But you know well, the time will be the judge of how well this works out, but I'm yeah interested to watch the space.
Speaker 1:I think well if, if we can say I'll go to saw least, like who's a respected economist, he says, uh, the scheme might help some first home buyers, but it has failed to address the underlying problems with australia's housing system. And um, that is a really, really pertinent point here is that these are all band-aid solutions. Yeah, they're not fundamentally fixing the supply demand imbalance. Um, we do need those 1.2 million dwellings that the federal government's promised, but I I haven't seen them. I don't know where they are, which is probably a good segue.
Speaker 3:I was about to say, it's a perfect time to switch over to the second thing I wanted to talk about today, peter uh, which is primarily, I guess, for our listeners in the eastern suburbs. But chris minns has announced that he is going to complete the long, dormant, partially completed Willara train station, which is, you know, clearly a critical, critical corridor for transport and one that we must fill immediately. But, cynicism aside, he's also said, alongside the announcement, he's going to rezone the area and use the train station as something of a hub to build 10,000 new homes, assuming high density is the only way that it can occur, if anyone knows Wallah, obviously it's a very small suburb, I mean given that we've just talked about.
Speaker 1:So it'll triple, it'll nearly triple, the number of residences in Wallah.
Speaker 3:Oh yeah, like insane change, given that we talk about how supply is an issue you know again, on the surface, this sounds like a great announcement from Chris Minns New train station, better transport access pipelines, more houses sounds great. As someone who has spent a lot of time in the east, grew up in the area, this seems like a ridiculous spot to not only bother putting in another train station, but also seems like a really unlikely position or location to complete 10,000 homes that are both done in an efficient enough time to have any impact, but also at an affordable price point. I'm really interested to get your thoughts on this whole thing, to be honest.
Speaker 1:The price point's less of an issue. I think there might be enough people to take on these dwellings at a commercially viable price for the developers to build. What I see is something completely different to what you've, the points you've just outlined, all of which have, you know, merit, what? What I clearly see the agenda here. I don't know if it's a hidden agenda or it's an open agenda, but the government don't want people to own cars.
Speaker 3:Yeah.
Speaker 1:What will come out next out of these 10,000 homes? Here's my prediction is the majority of them won't have car spaces. Yeah, wouldn't be surprised. So basically, what they are doing with Sydney is they're trying to drive it to pardon the pun drive Sydneysiders to a point where they use the public infrastructure, the public transport that's been put in place because you've got a new railway station here. Obviously, we've got a completely new metro system in public transport. That has taken place over the last 10 years and clearly will over the next 10, and they're building high density around existing metro and railway stations and new ones, as is outlined here in Wallara. So the take-out I get is that, even if Wallara could handle 10,000 new dwellings, keeping in mind that on average it's 2.5 persons per dwelling, so we're talking an extra 25,000 residents in Willara.
Speaker 3:Yeah.
Speaker 1:And let's say every household has a car on average. I don't see 10,000 more cars coming into Willara. That's a really congested part of town as it is at the moment. So I think you'll find that increasingly these new developments are it's over public transport. You don't need a car to live here and they'll try and market and sell that way of life.
Speaker 3:I must admit I don't completely mind that. I think that's perfectly reasonable, right? If you choose and have the capacity to live near the city in a high-rise apartment building, you probably don't need a car, right? But I don't know. It seems to me like in a city where we've spent years, for better or worse, expanding southwest, building the population away from the high density of the city, not building sufficient public transport routes. I acknowledge the metro is fantastic. I've ridden it in recent months. It's such a great system. I wish it was more prolific in Sydney. I think the whole city would be better for it. I don't know. I just don't see the merit or the value in spending time and money investing in a railway station in a location where there's a railway station a stone's throw away and jamming more people into a suburb that really doesn't have the space for it and, as you say, will then only be suitable to a certain percentage of the population that either don't have a car or don't need a car or have the capacity to then travel where they need.
Speaker 1:Well, there's always more space. I think it's playing the sky, right? Well, I was just going to mention the sky. There's always space if you're prepared to go up, which clearly they are. Yeah, so the skyline in Sydney in 25 years will be much, much more condensed than what it is now.
Speaker 3:Oh, look, and I think it needs to be. I don't think that's, you know, whether we like it or not. I think it has to be to support the growing population.
Speaker 1:Yeah, but let's come to that point. Who asked for the growing population? Like Chris Minns is attacking. We need to kill NIMBYism. He's talking. He's been quoted elsewhere in articles I've read, saying most Sydneysiders acknowledge we have to do our bit. I don't know. I must have missed a vote. When did we say that we were going to overcrowd Sydney to this degree? Former Labor Premier Bob Carr said Sydney was full two million people ago. Yeah, and here we are with the existing Labor Premier carrying on as though he's been given a mandate to what double the population of Sydney and the dwellings accordingly. Like. I just don't remember whenever this there was a discussion, a debate where the people were saying yeah, yeah, sydney's empty. Sydney needs more people.
Speaker 3:Let's fill it up. Labor needs more voters, peter. That's the uh, that's the the bottom line. I look, yeah, I'm not optimistic, this will even get done. I, I think he'll do the station. I'm not overly convinced that he'll get 10,000 high-rise apartments into Woolara. Between you and I, I think Chris talks a lot and delivers very little so far, but it'll be interesting to see.
Speaker 3:I tend to disagree with the pricing point. I think there is plenty of people that will absolutely want to live in high-rise apartments in Woolara, but I cannot see them being affordable in any way, shape or form, given its proximity to the east, its proximity to the city and then its proximity to a. But affordable to who? Well, that's the great question, right, if we've got a problem in Sydney at the moment that people can't get a house deposit together for their first home, then Chris coming out saying that we're going to build 10,000 affordable, or homes that are more affordable in Wallara, I just think that's a ridiculous statement.
Speaker 3:I mean, it's one of the most expensive suburbs in the city. I can't see how, uh, just changing the density and slow trickling some apartments is going to make it affordable for anyone, anyone that you know already can't access a house somewhere on a train line, you know like. Anyway, I may be just getting focused on the wrong point, but the whole thing irks me when we've got much worse transport issues across Sydney and a lot more people moving out to, then having to come all the way in and try and Well, he comes from a theory Like if you stitch all of his comments together, you get an idea of what his psychology or thought pattern to all of this is.
Speaker 1:And he says it's easier and cheaper and more productive to build above transport hubs and railway links than it is to see Sydney expanding further and further west each time. We need more housing. So these were the comments that he was making as soon as he was elected just over two years ago. So he's just following through now and this is what it looks like 10,000 more dwellings in Wallara. I have little doubt that they will sell them.
Speaker 3:I agree, but my point is and sell them well. My point is, though I think that is the right solution, it is cheaper and it is easier, but I just don't see 10,000 apartments in Wallara being affordable.
Speaker 1:You know who's going to buy them, but if they sell they're affordable. Yeah, if you can sell 10,000 of them, and they all sell, they're affordable to someone, to 10,000 people.
Speaker 3:Yeah, 10,000 investors who then lease them out to international students who knows?
Speaker 1:Well, that's not true, because investors are just skinny on the ground. So that's another. That's another cheap soundbite that's in the media at the moment where everyone's beating up on investors. You ask any real estate agent around sydney. At the moment. Investors are selling out because the the regulation the anti-landlord regulation has just been going up and up in favor of the tenant for the last three years to the point where they're just throwing the towel in. So our ratio of landlords selling out versus people saying I've just bought a property or I need to rent my property out coming in, we're probably seeing a bleed at the moment of four to one. Kieran.
Speaker 3:Yeah, well.
Speaker 1:So this cheap soundbite, when, when, when we're losing a debate in the property mark, in the property world, let's just blame investors because they're greedy capitalists.
Speaker 3:It doesn't stack up yeah we need more investors at the moment not not less well, luckily they'll have some uh affordable in inverted commas uh centrally located high-rise apartments in the coming future.
Speaker 1:Yeah, but if they don't want cats in there, the tenants are allowed to have a cat and a dog in the apartment to do who knows what in there? Who wants to sign up for that? Who knows?
Speaker 3:Yeah, we'll see if any of this comes to fruition. I have no doubt, given that he's been pretty firm on infrastructure, he will complete the station at the very least. Well, he won't complete the station without the apartments, because the apartments make the station viable.
Speaker 3:Yeah, it'll be a luxurious two-minute ride to the next station. Anyway, look as we move on. Today, Peter, I understand there are some new inflationary figures out today, which, as always, we love talking about what inflation is doing, and, as always, it's a great opportunity for me to press you on whether or not you think it may influence monetary policy in the coming months.
Speaker 1:Oh, I think it will. Yeah, There'll be no rate cut in September on these numbers, Kieran. That's a shame and it's probably put what most economists thought going into today an almost certain interest rate cut in November. It's probably put that at a 50-50 at the moment.
Speaker 3:Okay, so what are the numbers telling us?
Speaker 1:So they have. Inflation climbed to 2.8%, it's highest level sinceuly 2024, for the month um, and it was up from 1.9 percent for the month of june, according to the abs so that's the overall inflation, not the trimmed that's. That's correct, so that, um the all-important, trimmed mean inflation, the Reserve Bank's preferred measure as it strips out seasonality and volatile items, came in steady at 2.7%.
Speaker 3:Okay, so we're holding firm, at least on the underlying inflation, but there is some inflationary rise. Any indication in the commentary you've heard as to what may have driven that?
Speaker 1:Electricity.
Speaker 3:Electricity.
Speaker 1:Is that because the government's subsidies have ended. I believe so, because that's a noticeable jump and some people are saying that there will. Some economists are still saying there will be a cut in November and it's a rogue number and it's just sort of a recalibration if you like an outlier.
Speaker 1:Mr Chalmers, the Treasurer, pointed to the end of the state energy rebates among fuel and travel prices for the higher than expected number. Volatile and one-off factors, including the end of state energy rebates, travel prices and fuel, were behind the increase in today's results. If you speak to anyone that owns a sort of a restaurant, a cafe business at the moment, they will let you know what energy is doing to their business. It's absolutely crueling them. So he can say charmers can say that it's the end to these one-off factors and we'll go back to business as usual. But the businesses that have lost those rebates will be looking to pass them straight back onto the consumer in high in terms of higher prices. They have to.
Speaker 3:Yeah, I only saw on. Might have been on Reddit. Actually last night someone had taken a photo and made some commentary about a cafe in Sydney now with a $35 big breakfast and how you know. The comments were just scathing about how have we got to this point. But, as you say, you know the cost of even running a household with power and gas is through the roof. I can only imagine keeping the burners on gas cooking in a cafe or a restaurant long term. It would be crippling.
Speaker 1:As you say, oh, it is crippling lots, and that's why we're seeing so many of our favourite venues sadly disappear, because the cost of survival is just so high.
Speaker 3:Yeah, it's a shame I miss the $10 Thaiai lunch used to be able to get is now no longer ten dollars, that's for sure. Oh, that's right. Uh, as we wrap up today, then, peter, it's always a good idea to run through our good friends at sqm research and their their auction clearance data. Uh, we didn't catch up last week, but I think the week before we'd had seen maybe our fourth or fifth week in a row with clearance numbers. The clearance rate held above 50%. How have things gone in the last few days and how has it correlated with what you've seen on the ground?
Speaker 1:Yeah, look, I think the numbers that SQM are putting out are correlating with what we're seeing on the ground, which is an improving market, kieran. So in the last week there were 997 auctions scheduled. So in the last week there were 997 auctions scheduled. That's a increase in volumes, and it had a clearance rate of 56.5 percent, which is again an increase in clearance rates. So yeah, the market is. The market is improving. There's no two ways about that.
Speaker 1:Interestingly, we always like to highlight the spread between sold prior and sold under the hammer. Of the recorded auction successes 281 sold prior and 282 sold under the hammer. So essentially a clean 50-50 split, which is really common, which is a really interesting sort of trend in the market, if you like. So, look, I think most real estate agents are pretty comfortable with the state of the market. The interest rates are doing their things, the media carrying stories about Sydney, property prices are increasing again. I don't know if they're increasing across the board, but there are certain segments of the market that are on the front foot, that are oversubscribed with buyer interest, there's no doubt.
Speaker 1:And the odd property is going well above expectations, which it always does, but the examples of properties sort of getting above expectations does seem to be increasing. That's the first anecdotal sign to us on the ground that the market is sort of heating up. The second indicator that I always look for of a market that's sort of really coming to life is stale listings listings that have been hanging around on the market longer than the vendors would like Start selling. Buyers start saying I now see the value in that property or that apartment and I'm here to buy it, the value in that property or that apartment and I'm here to buy it. And right across the spectrum I have seen an increase in listings that have been out there for a while that have started selling. Yeah, interesting.
Speaker 3:My only question for you on this topic today, then, peter, we're now, as of the time of recording, we're in the last few days of winter before we head into spring. Traditionally, spring is a hot time for property. There's always an influx and a flurry of activity. Have you just in your microcosm, have you been having conversations? Have you seen the interest changing? Are the conversations shifting amongst vendors in your sphere or in your area to indicate that there is likely to be not only the typical kind of spring flurry but anything you know, particularly strong or not this year in terms of volume as we head into the warmer months?
Speaker 1:look, stock levels are going to go up. It's a little bit difficult to get a read on it this year and other agents are reporting the same thing that month of rain that we had from late July until essentially last week in Sydney.
Speaker 3:The month from February to.
Speaker 1:August, you mean it just?
Speaker 3:Did it stop in there?
Speaker 1:It did, but it probably didn't feel that way. So when I look at most suburbs that we service, I would absolutely say that on-market stock levels are still subdued. There is certainly signs that they're starting to increase a bit, but they are subdued. There's no doubt about that, and I think the difficulty in getting properties ready for market contributed to that.
Speaker 3:Yeah, look, as always, great analysis, peter, some really good topics today. I hope our listeners have found it useful and I know that I'll continue to complain about most of Chris Minns' decisions as we move forward on the podcast. But as always, my friend, I appreciate you coming in and talking with us today.
Speaker 1:My pleasure. Thanks, Kieran.
Speaker 3:Thanks, peter, 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.
