Current Market Insights
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Current Market Insights
Talking Property - The 2025 Sydney Property Market
SQM Research's Louis Christopher offers an insightful breakdown on the State of the Market in Sydney for 2025. We unpack why Sydney’s 2025 property market rose overall yet lost steam late in the year.
• three rate cuts then a CPI shock reframing expectations
• supply targets missing by a wide margin
• electricity prices driving inflation and sentiment
• APRA’s soft investor caps in hotter non‑Sydney markets
• migration outpacing new dwellings and lifting rents
• vacancies near 1% and rental affordability strain
• data integrity issues with auction benchmarks
• underquoting eroding trust and fair competition
• first‑home buyer schemes and high‑LVR risk
• late‑year weakness in mid and top‑end Sydney
• unemployment risk and the spectre of stagflation
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Welcome to Talking Property. Today I'm joined by Australia's best property analyst, Louis Christopher, as we dissect the 2025 Sydney property market. Louis, thanks for joining us. Nice to be here once again, just before Christmas, of course. Indeed. It was a good year for property, Louis.
SPEAKER_02:Overall, housing prices were up for most capital cities, if not all capital cities, I think, for the year. So yeah, it was a relatively good market for home sellers, property owners. They certainly had their wealth increase. Not so great, of course, for renters trying to uh tenants trying to turn themselves into first-time buyers to an extent because prices have gone up a little bit more once again. So just stretching the affordability. The interest rate cuts, of course, helped the market. And look, we still recorded economic growth overall for the country, albeit relatively slow economic growth.
SPEAKER_00:Indeed. Well, look, much happened throughout the year, and I think you can, you know, by December you can forget inadvertently what happened earlier in the year. So let's take a look at our first slide today at the issues that shaped the market. So three interest rate cuts in February, May, and August. The market was thinking a fourth cut may have been coming on Melbourne Cup Day, but that quickly changed, didn't it?
SPEAKER_02:That's right, because we had some adverse CPI numbers come out, uh, which were suggesting that uh inflation was a little bit more elevated than what we all thought would be the case.
SPEAKER_00:The Albanese government, as we know, were re-elected in May. That was important because they brought forward uh their first uh uh homeowner scheme that you've just alluded to that was stimulatory uh for the market. Um, did the Albanese government do anything else post-election that you felt weighed or or impacted positively on the market?
SPEAKER_02:Well, we all know that they are endeavoring to increase supply uh of dwellings. Their target of 1.2 million dwellings by mid-2029 uh still stands. Uh however, the run rate required on that continues to rise uh because they're not meeting their year-on-year targets at this point in time. So to meet that target, you have to build about 240,000 dwellings a year, and it looks like for this year we'll be building or completing roughly around 165,000 dwellings.
SPEAKER_00:So well behind the run rate required as you.
SPEAKER_02:Absolutely. And so what that means, of course, is the run rate required goes up if they're going to meet their target by 2029.
SPEAKER_00:We saw inflation falling nicely during the year and then suddenly it jumped again. Yes. Do you think that was government driven or global driven or a bit of both? What caused the inflation rate to pop essentially lately?
SPEAKER_02:The number one reason why inflation popped was electricity prices. Okay. The latest read shows that electricity prices across the country rose by 37% the last 12 months, which is just a huge number.
SPEAKER_00:Price of energy is in everything.
SPEAKER_02:Yeah, absolutely it is. Uh so that's been the primary driver of why we've got a little bit higher inflation than what we all hoped. Uh, what's driven that? Uh look, I think it is a combination of global factors plus domestic factors in the form of the country attempting to get to net zero. Uh, and that has meant that there's been less investment in coal-powered uh uh plants, which has affected our base load supply and capacity.
SPEAKER_00:Do you feel that the Trump tariffs and everything that was going on there that was talked about a great deal earlier in the year, um did that play any role in in global inflation later in the year?
SPEAKER_02:I can't comment about global inflation where it's had an impact yet. It it doesn't appear so. Uh, but when we look at what's happening with domestic inflation, the the core reason why we've had a CPI increase once again has been electricity, overall housing costs, less so imports, from what I can see. It's mainly to do with energy costs.
SPEAKER_00:Yeah, and there's no no end in sight.
SPEAKER_02:Not at this point. That said, though, uh one of the primary reasons why it went up by 37 percent is that rebates came off. You recall that the federal government had rebates on on electricity, and that artificially lowered the electricity price. Then the rebates came off, and so there was this huge jump.
SPEAKER_00:It fed straight through the inflation rate.
SPEAKER_02:That's right. So I I don't think we'll see electricity prices rise again by say another 37 percent for 2026, uh, because you this adjustment to exclude the rebates will eventually wear through the system.
SPEAKER_00:Uh coming back to our slide, late in the year, um APRA intervened in the mortgage lending market. Just tell us about what uh APRA was up to there.
SPEAKER_02:Yeah, so look, it it over long and short of it, APRA is just looking to try and put on caps on investor activity. But these caps are nowhere near as aggressive as what we had in 2017 and 2018. And the truth is that these caps have not been hit by any of the major banks. So they're trying to minimize higher risk lending. Uh and I don't think we're going to see a material impact upon the market because of these caps. Because I just don't see them being actually the thresholds that they've actually set up, I don't think we'll actually hit.
SPEAKER_00:And am I correct in saying that this was probably aimed at cooling markets other than Sydney and Melbourne? Because we're not seeing rampant investor activity and speculation in Sydney. I know they're definitely not in Melbourne, but you do have markets like Perth, Brisbane, and Adelaide that correct me if I'm wrong, they're running at double-digit growth.
SPEAKER_02:Yeah, that's exactly right, plus a number of coastal regions around Australia, plus Darwin that's been rising at that rate as well. Uh so yeah, it's true. Sydney and Melbourne are not in any type of boom or anything like that. It's been uh the other cities uh which uh potentially has forced APRA's hand.
SPEAKER_00:Louis, coming to migration, um the IPA um is our source here. 468,000,390,000 net migration into Australia in the 12 months to September 30, 2025. What impact does that have on housing?
SPEAKER_02:That's an estimate at this point in time. I generally like to go off the uh ABS immigration numbers, and that they're showing a little bit of a slower rate than that, but nevertheless, it is at a level that is above what we had prior to COVID. Uh and so if that number turns out to be correct uh for 2025, that means that the overall population would have expanded by about 580,000 people. Uh we, as mentioned, we've probably built about 165,000 dwellings this year, uh, and therefore those two numbers just don't mix very well at all. Uh, demand would be definitely higher than supply. Now, I happen to believe that uh population the population growth rate is actually moderating. So the ABS's numbers are suggesting a more of a moderation than what that number would suggest.
SPEAKER_00:Is the government listening? Less people want to come here, we just don't have the capacity to house the numbers that we're talking about.
SPEAKER_02:I'm not sure if the government's listening, but selling the people is speaking up. I mean, if you look at recent uh polls, uh you're you're seeing the vast majority of Australians from various demographics uh speaking up and saying, look, our migration growth rate is just too strong. And it is, quite frankly.
SPEAKER_00:When it comes to housing, where does that play out most predominantly? Is it in the rental market? Uh is it um in the sales market? Is it in the homeless rate? Is it a mixture of all of those? Because homelessness in Australia is is a growing and serious issue, isn't it?
SPEAKER_02:It is, it is. So you can see it on the ground if you decide to walk through a CBD one evening. Firstly, you see it in the rental market because net overseas arrivals are migration, generally speaking, they will rent first. And they generally come to Sydney and Melbourne first, and then they flow out to the other set cities. It's been an issue for the rental market. It's one of the main reasons why we still keep recording rental vacancy rates across the country at just above 1%.
SPEAKER_00:Which is historical lows, yeah.
SPEAKER_02:That's right. So you what you wanted as a market equilibrium is a rental vacancy rate somewhere between two and three percent.
SPEAKER_00:Uh, just before we move on to your forecast for 2025 and take a deeper look there, everyone expected the RBA to cut rates in July. They didn't. There was an uproar. They went on to cut for the third and final time in 2025 in August. Given what has happened since then, and you outlined the energy rebates and the role that that played, um, I know it's a little bit unfair in hindsight and retrospectively, but did the RBA cut once too many in 2025?
SPEAKER_02:That's a good question. Uh I don't I I think they've actually got it right overall. Uh look, if they lift rates in 2026 and early 2026, then we'll be able to look back in hindsight. And and then, yes, I think you'll be right to say, look, yeah, they cut one time too many. But I think when you look at the overall economy, I mean it's a mixed bag out there. That is the reality of it. You've got lower um lower job ads than what we had this time last year, uh, as one example. So employment growth is des definitely slowing.
SPEAKER_00:Yeah, we've got a few slides coming up on employment. Actually, I do want to dig in on employment. Our final point on that slide was the unemployment rate in 2025 peaked at 4.5 and then dropped back again the next month. But employment is an issue, isn't it?
SPEAKER_02:It is an issue, that's right. And one of our uh uh assumptions we've got behind our uh model, behind our models of 26 is that unemployment will actually trend upwards.
SPEAKER_00:So these were your four scenarios coming into 2025. Correct me if I'm wrong, but very quickly we came down to one scenario being scenario three.
SPEAKER_02:We did, and that was in February. So we notified our audience that we were down to one scenario, scenario three, that was very quick. I'm glad it happened early. Yeah, that's that's uh what we've been uh basing ourselves off.
SPEAKER_00:So predominantly a Sydney audience today, and and you feel based on scenario three, with the rate cut coming in the March quarter, population growth around that half a million a year into the country, Sydney put on six percent where inflation averaged around three percent. Yeah. So it was double the rate of inflation.
SPEAKER_02:Yeah, that is correct.
SPEAKER_00:Yeah. So is the fact that the house prices uh off a high base are doubling the rate of inflation for for the year, is that a ultimately a positive thing or otherwise for for for the economy and and and households?
SPEAKER_02:Well, I guess it depends on who you are. If you're an existing property owner, fantastic, happy days. If you're not in the housing market, you're being left behind.
SPEAKER_00:And that's what's happening in in our country at the moment, is it, is that the haves of of are getting further in front than the have nots, who who are just finding it very, very difficult to keep up, essentially.
SPEAKER_02:That's exactly right. If it keeps going, it's going to create uh in an increasing amount of social incohesion.
SPEAKER_00:Would you say we're on that path now?
SPEAKER_02:And it's it's we've been on this path for a long time, in my view. And you can tell that by the home ownership rates because they've been falling away over a long time now. Uh I think this is going to be a major problem uh on our hands when we have home ownership rates fall below 60%. Yeah. Uh so they're just hovering above 60% now. They below they fall below 60%, and I think that'll have major ramifications for elections.
SPEAKER_00:I was going to touch on politics uh with all of this because as the years gone on, these issues are becoming more acute. The government of the day represents a larger and larger component of the economy. That's right. Um, there's more people that are going from the private sector to the public sector. Um, cost of living is is trending up, and people's lifestyle per capita, uh, generally speaking, is going backwards. But the Labour Party were re-elected with a thumping uh majority, and if you look at the current polls, um they're essentially wiping the Liberal Party off the map.
SPEAKER_02:They are for now, that's exactly right, but I think they've got some major economic challenges where the voting population could easily change their view on the Labour Party.
SPEAKER_00:I did note uh Wayne Swann's uh post-election analysis, and he said that our support is far and wide, but it's not very deep, so let's not get ahead of ourselves. Yeah, probably probably fairly decent message for him to be telling um the party.
SPEAKER_02:Look, I I think that's a fair call. I mean, let's remember the uh election prior to 2007, where Howard the Howard government had control of both sides of the House. And in the 2007 election, they completely lost government. That's right. Yeah. So it can happen very quickly.
SPEAKER_00:You know, John Howard openly says that uh there's no point controlling both sides of Parliament and using it. Yes. Uh so he did use it and it backfired on him. So it will be interesting in 2026 to see whether uh the Albanese government stays centered or it does push further ideologically.
SPEAKER_02:Look, I I think if we see unemployment continue to rise and get up beyond 5 percent, if we continue to continue to see sticking inflation uh with ongoing surges in energy prices, that scenario I think the voting population will have little patience for. And especially over and above that, if immigration levels keep surging, that will not be acceptable to the public. And they'll vote.
SPEAKER_00:There is a name for that scenario of just outlined stagflation, isn't it? Correct. Everyone talks inflation, deflation, disinflation, and stagflation is the one that's constantly overlooked.
SPEAKER_02:And it's the one that the central bankers get most concerned about because they're kind of stuck in a in a in a corner. Correct. Uh if they lift interest rates, unemployment will go up further, they'll enter into recession. If they cut rates, inflation will likely go up. Uh so it's a it's a bad scenario for any central banker.
SPEAKER_00:Indeed, it is. Louis, let's have a look at underquoting. As we can see here, 25 New South Wales agencies are under fire for underquoting. Out on the field, so being a little bit more micro now in our analysis, we all year have had home buyers walking into house and saying, What's the guide for this property? And we'd tell them the guide. So let's say we would say the guide's 1.5. They were saying things to us like, Well, I wouldn't pay 1.8 for this place. It's like, hang on, the guide's one five, why would you say uh you wouldn't pay 1.8 for it? So well, that's what happens in the marketplace. So buyers are absolutely conditioned to disbelieve the price guide that they're quoted, whether it's accurate or not, and they're adding 10, 15, 20, in some cases 25% to what they think the property will go for above the agent's price guide based on their experiences in the market. It's been a red button, hot hot button issue all year. Have you got any data that tells us what properties tend to sell for above the agent's price guides across the board?
SPEAKER_02:Look, I don't have data at my fingertips on this, but I can tell you we've been monitoring underquoting since last year. And the first quarter of us are monitoring this, I think was the June quarter 24. And I recall we found over 4,000 instances in one quarter alone of absolute underquoting. So this was a situation where the price guide was X, the property would pass in, and then the private treaty asking price when it was posted was more than 10% of the original auction price guide. We found 4,000 instances of that in one quarter across New South Wales.
SPEAKER_00:So the Sydney Morning Herald and the Melbourne Age went really, really deep on this issue throughout the year. Yeah. And that was their findings as well, is that the most certain and obvious example of underquoting is a property that uh sells well above the agent's price, as fails to sell well above the agent's price guide and then is advertised for a number completely disconnected to what the price was during the campaign. Correct. Yeah. So at the moment there's there's one real estate agent which we don't need to name that's that's been absolutely front and center as being uh uh the profile, you know, the the the high profile casualty of the state government's war on underquoting. Uh is that fair or is that messaging to the rest of the industry what they're doing to this particular fellow?
SPEAKER_02:I can't comment on that particular agent, but what I can tell you is that through the data, what we have found are regular culprits. Yes. Uh just people who are doing it and groups and shops that are doing it time and time and time again.
SPEAKER_00:And hence these 25 agencies have been highlighted here and they're probably doing a deep dive on them.
SPEAKER_02:Like I said, look, best wouldn't be wise for me to comment specifically. Uh, but all I will say is that we are monitoring uh the underquoting through data uh monitoring. We are sending on our data onto the government, onto the Department of Fair Trade. And I know that's just one of their tools that they use in this space, and I know that they've been more and more active in this space in recent years than where they were, say, five years ago, ten years ago. They have data, they have multiple points of evidence now uh to catch out these people who do this.
SPEAKER_00:Yeah, they do. Look, we uh have been investigated for underquoting consumers are unhappy with what a property sells for above the price guide. There's only one instance in 2025. Um the Department of Fair Trade seemed to have a set criteria at how they come at the agent, and one of those is uh you know a multi-point explainer. Um, the agent needs to send the agency agreement or communication with the vendor or communication with prospective uh buyers, how is the offer process handled? Um they signed us away and gave us a clean bill of slate on that one complaint. But um what they are looking to do in that example is have the agent self-incriminate. One of the ways the uh agent's self-incriminating is fudging the paperwork. Yeah. Where they retrospectively uh are under investigation and they go, when they pull all their paperwork out, they go, This doesn't look good, and they start doctoring doctors.
SPEAKER_02:Well, they've got to be very, very careful about that because they they're digging a major hole for themselves. Oh, it's not. They could be just done if they get caught doing that, they could be caught breaking multiple laws that are far more serious laws to break, other than just underquoting. Yeah. Right? You are not meant to fudge documents. That is a very, very serious matter. Yeah. Uh look, I'm not the expert in terms of how serious it is, but uh all I know is that over in the financial services sector, if you get caught doing that, there are criminal possibilities for that in terms of criminal laws being broken.
SPEAKER_00:And rightly so. So that so the agent, uh the most high pro high-profile um uh agent caught up in all of this at the moment stands accused of that very act. Yeah. There's one area, uh, Louis, that the regulator is not pushing into in terms of controlling underquoting, and it's a contentious point I'm going to make. When when they were looking to outlaw dummy bidding, the Department of Fair Trading took powers upon themselves to. Be able to penalize vendors who were caught dummy bidding. Now, as part of this investigation with The Age and the Herald, they recorded a real estate agent at a high-profile firm in Melbourne coaching a vendor on how to underquote and why they should underquote and the benefit in doing so. And it was blatant. And the agent was uh subsequently sacked from uh his position when the age gave this recording to to his superiors, and they said that's not who who we are, and and and this person's got to go, and I'll let others decide whether that's a company wide culture or or this particular agent. But should vendors who knowingly participate in underquoting should they should they be in the firing line? Because they're as equally responsible for misleading home buyers as what real estate agents are if they go along with it?
SPEAKER_02:Yes, I do. I I think if uh uh vendors are knowingly doing it, they're going along with it, they're just as uh guilty as the agents themselves. Let's represent let's remember the agents representing the owner. Yes. Yeah, so so there's a lot of laws surrounding uh principal and agency relationships. Uh and so yeah, the the owner really is just as culpable. And in some respects, um the the there is an obligation on the owner to see exactly what is going on. So I don't think it's enough for the owner to say, oh, I didn't know what was going on. Uh they ought to be understanding what the agent's doing.
SPEAKER_00:Yeah, now the Department of Fair Trade gave agents plenty of scope to run their auctions. Yeah. Anything up to 10% was kind of fair game. Some days it'll go the full 10% above, some days it might only go 5% above, and and the vendor will have to lower their price to get the sale and all the rest of it. But we are talking here about agents and vendors who systematically, not once off, but systematically underquote by 20, 25 percent. They'll shamelessly put a price guide of 2.2 on a property uh with a reserve of 2.8 or 3 million. That's what we're talking about here, aren't we?
SPEAKER_02:Well, it goes back to your opening comment on this. Home buyers out there are starting to take this into account. This is concerning because what it does is that it reduces confidence in the system of buying and selling property overall. It reduces confidence in what I call the asset class of real estate. That's no good for anyone over the long term. Uh, you want more participants, you want liquidity in the market. Uh by having more distrust in the market, you're gonna see less sales activity. That's gonna create supply issues. Um, you know, it's just no good for anyone trying to do a hard uh day's job in this business.
SPEAKER_00:Well, that's the point I was going to make to close this off is that agents who tell the truth can't survive. If you've got two$2 million properties on the market, one's with agent B who's quoting auction guide of$1.6 and another agent who's quoting$2 million for their$2 million house, I can tell you that the honest uh the honest Joe is going to have no one at their inspection and they're all going to be down the road of the$1.6 million opportunity.
SPEAKER_02:Yeah, that that's exactly right. And so you know that creates frustration amongst honest agents. They then end up having two options. They leave the industry, or it's like you can't if you can't beat them, join them.
SPEAKER_00:Yeah, that's right. I don't know if you realize this, but Graham Samuel's son down in Melbourne, the ACCC. It was the ACCC Graham Samuel. Yeah, his son was done for underquoting, a real estate agent.
SPEAKER_02:Yeah.
SPEAKER_00:He probably started as an honest Joe.
SPEAKER_02:Yeah.
SPEAKER_00:And ended up getting nailed for underquoting because that's the industry that he's playing.
SPEAKER_02:That's the industry, and that's what we've got to uh stamp out. We've got to stamp out as much as many bad things as possible in the industry. And you know, as you know, one of my bugbears is auction clearance rates, but we won't go there today.
SPEAKER_00:Oh, we might actually. Let's bring it up. Fair enough. Let's get right into it. That uh brings us up to our next slide here, Louie. Um I'll just slowly go through this because there's a few levels on this today. This is domains Sydney, and I'll come back to the importance of the word Sydney. Sydney auction clearance rate for the last weekend in November 2025. Now, as is customary, um, every Saturday evening when you look at these results, there were 1,500 um auctions scheduled, but only 993 were reported, giving us, as we can see there, a clearance rate of 63 percent. This happens every Saturday night. This is not a one-off for those that are uh not following this as closely as you and I, Louis. There's a massive unreported amount each week. So much so that is there a consistency now in the clearance rate of the unreporteds, if that makes sense.
SPEAKER_02:When I've looked at this in the past, uh I would suggest to you that circus 70 percent of what's unreported are failed results on the day. 70 percent. Yeah. Now they may sell a couple of days afterwards, but that's not the point. Right. On the day, you know, selling under the hammer, uh 70% of unreported, in my view, overall, as an average, are failed campaigns.
SPEAKER_00:Okay, so that would cause future vendors and prospective vendors to view the whole sale process differently if that was all factored back into the equation, wouldn't it?
SPEAKER_02:Potentially, but there's another way I like to look at it. Yep. Um the benchmark where agents compare their own personal auction clearance rate uh versus the stated mainstream media auction clearance rate, that's the problem. So if you're an agent, let's say your genuine clearance rate is say 55%, okay? And the benchmark is saying, oh, we did 65%, 70% on that day, you're going to think you're not doing a good enough job. You're you're you you got you're underperforming compared to benchmark. But the the problem is not the agent, it's the benchmark.
SPEAKER_00:Oh, indeed, yes.
SPEAKER_02:The benchmark is the issue. And strangely enough, we actually get a lot of support from various real estate agents with our auction clearance rate series. Because they know, number one, we're collecting all the results.
SPEAKER_00:It can be relied upon.
SPEAKER_02:It can be relied upon, and then it's a better benchmark for the industry to use. It's as simple as that. It's a complete benchmark, it doesn't have to be revised every week. And we're getting more and more support for it.
SPEAKER_00:Oh, good. Well, as you should, because it's a legitimate number.
SPEAKER_02:The only issue is that it's not as timely. It doesn't come out on a Saturday night. We need more time to get all the results in. It comes out Tuesday afternoon, as you're aware. So timeliness is always one in this game when it comes to reporting of housing data. But there's a trade-off between timeliness versus accuracy.
SPEAKER_00:Oh, well, let me talk to you about one of those trade-offs now, if I may. Keeping in mind, I said this is Domain's Sydney auction clearance rate. And if we can go to our next slide here and look at what constitutes part of Domain's Sydney auction clearance rate on this particular weekend, and this happens every weekend, Armadale. Now, how far out of Sydney is Armadale, Louis? It's a long, long way out. It would be closer to Brisbane than than Armadale, it would be, absolutely. These results formed part of Domain's Sydney auction clearance result of 63 percent on that particular weekend.
SPEAKER_02:Yeah.
SPEAKER_00:Coming over again, Salamander Bay. PRD didn't have a particularly strong day on this day. Salamander Bay, what's that, two hours out of Sydney?
SPEAKER_02:I would have thought so.
SPEAKER_00:Yeah. That's in the Sydney auction clearance rate. Yeah. And the reason this is important is that the main's data, as we know, talking about timeliness, is picked up by the mainstream media and then disseminated through all of its channels. There's Channel 9 channels and probably some other media picks it up as well. Yeah. And everybody's making, drawing conclusions and making decisions based on data that's that's horrendously poor. In this weekend, the property did actually sell. Ballinar, if you can believe it, was counted in the Sydney auction clearance rates to domain. Now, you're uh what are you two hours out of Brisbane when you're in Ballinar, I think the people of Ballinar would be shocked.
SPEAKER_02:So is this happening each week? Like have you noticed this before? It's not an aberration.
SPEAKER_00:It's not an aberration, it's just something a data error. It's just something that's been getting under my skin for a long time. That's really odd. And the reason I'm raising it, because I want to now start this we're talking about the media cycle here and the timeliness. Yes. But more and more people are making decisions around AI. And this thing about AI's intelligence is a nonsense. AI is not an intelligence. It's just drawing on existing information. So if you're saying to AI, give me some intel about the real estate market so I can make some decisions, it's drawing on this sort of dodgy data.
SPEAKER_02:That is true. That is true. It would be interesting to see whether domain are using AI to compile it. This could be a classic AI mistake to include all these auctions across New South Airs as though they're part of Sydney. But then again, I think AI is actually smarter than that. So I I it's a it's a question worthy of posing to domain why they're doing it.
SPEAKER_00:So if we if we bring up some suburbs in Sydney, now not every suburb performed as strong as these, but just to give people an idea of how the data discussion can be blown off track, Ashfield, which is really strong at the moment, like Ashfield has had a good year, you can see we're running at 100 percent there. If we go across to Kingsgrove, 100 percent. So the auction clearance rate um for homeowners in Kingsgrove is is colored by what's happening in Salamander Bay. Bring up our our next slide here. I recently uh uh saw Terry Ryder of Hotspotting speak, and he gave a to a terrific speech. But one of uh uh the points that he made is in the data companies how they come up with drastically different conclusions as to how certain marketplaces are performing at the same time.
SPEAKER_02:Ah, yes, yes.
SPEAKER_00:Yeah, so can can you give us some insights into what's happening here, Louis, that we get so so much to disparate.
SPEAKER_02:Yeah, look, there's various methodologies out there in terms of trying to calculate housing price indexes. I've had disputes in the past on the most quoted methodology being the one that comes from Quartality, previously known as Core Logic, with their daily housing price series. And I found some issues with it a long time ago, which I think they addressed some of them, uh, but uh I still have issues with it today because fundamentally you cannot measure housing prices on a daily basis because of the lags in the data. There are various methodologies out there. Domain has their series, CoreLogic has their series, Prop Track has their series. We've decided in terms of what we publish out there, we want to be a little bit different. We just want to publish asking prices, so we do measure median house prices based on actual sales as well, of course. Uh and yeah, you see some huge variations. Often the variations um come from smaller cities. Uh so you know I often see huge variation in terms of what's reported for the city of Darwin. Yeah, or Hobart. There's a five year old. Hobart, that's another one as an example. Sometimes Perth can be right off uh in terms of the various methodologies uh that are quoted.
SPEAKER_00:Uh so the smaller the sample, the easier it is to have it distorted.
SPEAKER_02:To have a distortion. That's exactly right. Now let's think about Darwin for a moment. I mean, it is quite a small city.
SPEAKER_00:So just on that point, I think people should know this can happen in suburban Sydney as well. If you've got a waterfront. If you've got a waterfront uh peninsula and and three waterfronts tend to, for whatever reason, trade within a short time frame, that'll send the median price up, then it'll be all advertised on all of the uh the real estate articles.
SPEAKER_02:Well well, Peter, what you will find is that you will rarely see anything from us where we publish the top ten best performing suburbs for a capital city. We don't put those stories out. And there's one good reason for that, is because the data just can't properly measure changes from one period to the next accurately and consistently because of the small sample data set you get out of a out of a suburb. And so you will see suburbs reported, you know, up 40%, okay, when the when the median increase across city might be up, say six percent. But I can assure you that that suburb has not risen by 40% in value. All that's happened, all that's happened is that in one period the the bottom end of the market sold a little bit more than the top end of the market, and then the next corresponding period the reverse has happened. And so the median artificially, median price artificially jumps up, but the real market hasn't moved by that much at all.
SPEAKER_00:So can can we say that you're a data purist versus a media company that's got a data company on the sideline that's looking for sensationalism in the property market?
SPEAKER_02:I'd like to think that, yes, that's exactly right. Um I mean, look, property data is it is definitely challenging. It's very different to say equities data, which is highly standardized. Let's think about it. Every property is fundamentally unique. Even property A versus property B, right next to each other, a say, for example, it's a semi, uh, three-bedroom semi, I guarantee you you will find differences between the two if you walk through in terms of quality, wear and tear, and so forth, which impact upon the price.
SPEAKER_00:Yep, home buyers will tell you that every day of the week.
SPEAKER_02:Exactly. So so this is the thing. Um, and and you know, our job is to try and standardize the data as best we can, but it's it's never going to be perfect. Perfect, yeah. The best way to do that is having a larger sample set. When you have a larger sample set of data, then you're you're better tracking what's going on in that region uh compared to say a street or just a suburb.
SPEAKER_00:So now that you've outlined the nuances and challenges with data, would you buy and sell real estate based on uh the research provided by AI or the findings found by AI?
SPEAKER_02:Uh I would go certainly beyond AI.
SPEAKER_00:Because the consumers are being guided by it increasingly. I'm not saying it's wrong or wrong.
SPEAKER_02:I've seen, you know, you can look up, for example, a property valuation from AI if you want to. Uh a free property uh uh AI valuation. Uh now I just want to be on the record, we do not uh our uh automated valuations are not driven by AI at all. And uh I can't say they will be for the foreseeable future because there are inherent errors within AI data collection and and calculations that I can see. So I think consumers, uh look, I know AI is extraordinarily convenient to use. You can just pop in the question into Google AI or into Grok. Um, and look, they are getting smarter and smarter. They've improved from where we were, say, two years ago, uh, but they're far from perfect. Uh, and so you do need to do verification research over and above what AI may or may not tell you.
SPEAKER_00:Just in closing off on AI, Louis, uh something interesting that happened to us last week. We uh had a matter at NCAT, and the member um who was overseeing the situation said to all involved if your uh evidence is produced by AI, we'll completely dismiss your case. Oh wow, there you go. So do not come in here with AI-generated garbage because you'll go straight back out the reasonably easy to spot actually. Let's move on a few micro segments of the market um if you don't mind. First home buyers and the state government introduced the home guarantee scheme. Uh it was introduced on October 1. Lots of uh sensationalist reporting like this here, Louis, on our slide. Um, what did the data tell us? Is this an accurate headline?
SPEAKER_02:Clearance rates, in our view, did initially rise when uh we saw the uh initiative announced in terms of the change. When it actually became action on the ground, uh we didn't see any material uh rise in clearance rates, and indeed, auction clearance rates have been falling away in Sydney and Melbourne in very recent weeks. The scheme has encouraged first home buyers to enter into the marketplace, but I wouldn't say that in our largest capital cities that it's moved the dial by March.
SPEAKER_00:That that was our experience. October was like a shot in the arm, a shot of adrenaline, and then the further we got through and past October one, yeah, it just seemed to have settled down a bit. And uh, I think when you're talking about Sydney real estate and million-dollar properties, buying a million-dollar property with five percent in is probably not the wisest move.
SPEAKER_02:Yeah, highly, highly leveraged. If the market starts to fall, you're going into negative equity real quick.
SPEAKER_00:And it's not often that the real estate industry puts a wise message out, but there's many people in the industry that have quite rightly pointed out that the seeds of the subprime crisis in the US in 2008 was government policy putting people into housing who couldn't ultimately afford it, and it ended up causing a mass, obviously, mortgage meltdown, as we know. Now, this is quarantined to first home buyers only, and it's not as widespread as what the Large S was in America, but government policy inducing or encouraging people into housing that ultimately can't afford it is not is not smart, is it?
SPEAKER_02:No, it it it long term it is counterproductive, in my view. It can cause damage to the economy. Uh it can put people into housing, which really ultimately shouldn't be there. Uh so yeah, it it definitely elevates the risks and creates potentially more volatility in the housing market as well. Uh look, they're doing it because they're trying to uh make housing more affordable, but it's not addressing the root cause about why housing is unaffordable. Which is undersupply.
SPEAKER_00:The root cause is understandable.
SPEAKER_02:Undersupply and rampant demand, driven by excessive population growth.
SPEAKER_00:Yeah. These were your forecasts for the rental market on our next slide here for 2025. Sydney had a pretty good year?
SPEAKER_02:Yeah, look, Sydney had uh a pretty good year. Rents rose in line with inflation, uh, gone at a day, so we're getting rents, rental increases of 20% plus, which we did when we were coming out of COVID. Uh so this was actually not a bad year for tenants per se, though rents still remain elevated in real terms compared to where we were prior to COVID.
SPEAKER_00:Yeah, no, no one's saying the Sydney rental market's cheap, that's for sure.
SPEAKER_02:No one is saying the Sydney rental market is cheap, that is correct. Uh, you'll see that these uh median rents were got therefore combined dwellings. So if we were to look at, say, freestanding houses, the median rent's above a thousand dollars a week.
SPEAKER_00:Oh, yes, indeed. Yeah, twelve hundred. Yeah, I'd say that's what it feels like in the environment. That is correct. Yeah. Okay. Louis, um, you just touched on it there about uh auction clearance rate late in the year. It feels like for the first time in quite a few years, the top end or the upper echelons of the Sydney market started to cool late in the year. Is that that's anecdotal, Reed? Is is that supported in the data?
SPEAKER_02:So on our auction clearance rate series, we're now recording clearance rates in Sydney are below 50 percent. Uh and And last week we recorded a clearance rate which was lower than the same corresponding week in 2024. It's the first week we've recorded that in all of 2025. And I like looking at what happened this time last year because then you don't have to worry about seasonality. And let's let's face it, Peter, there's a lot of seasonality at this time of year. So yeah, it's uh Sydney in the last few weeks of the selling season uh has been weakening. To me, when I look at the data, it does suggest that the middle and top end of the market is just looking more patchy uh compared to the lower end of the market or the more affordable end of the market. Uh and when I've seen that in the past, it's generally commensurate with a slower economy as well. Uh so look, it's early days. Um, if we were to see this pattern on the opening of the new season in February 2026, uh that will be uh a significant cause for concern. And City could be slowing uh more quickly than what I initially forecasted.
SPEAKER_00:Yeah, well look, just on the ground, what I would say is coming into the Melbourne Cup Day 10 days before, everyone thought another rate hike was in was in the pipeline, rate rate cut, sorry, yeah uh was in the um was in the pipeline. The data swung very quickly when that inflation rate quickly moved up to 3.8%, and then uh money markets and even Michelle Bullock herself started saying if this continues, rate hikes are very much back on the agenda. Yeah, and and when we saw buyer behaviour parallel what was happening in in that space as well, for what it's worth. Yeah, it played a role in buying.
SPEAKER_02:Yeah, I I think sentiment has changed. There has been disappointment about the fact look it's looking very unlikely we'll see any more interest rate cuts in the near future.
SPEAKER_00:Louis, that's an outstanding wrap on the 2025 Sydney property market. Thanks very much for your time today. Thanks again, Peter. We look forward to catching up with you in 2026. Indeed. Thank you for your time today, and uh we look forward to speaking with you next time on Talking Property.
