2GB with John Stanley: Property Uncertainty, Rising Costs & the Supply Challenge

On 2GB Nights with John Stanley, Peter O’Malley joins the program to discuss why the property market feels increasingly uncertain despite seemingly steady auction results. Beneath the headline numbers, buyer competition is thinning, demand is softening, and the outlook for housing supply remains constrained by high construction costs and economic pressures.

They also discuss:

•  Holiday weekend conditions and what a “quiet” market really means 
•  Sydney auction results and signs of weaker buyer competition 
•  Why interest rate hikes are having a greater impact than budget announcements 
•  Winter’s low stock levels masking softer underlying demand 
•  The risk of a spring listing surge placing further pressure on prices 
•  Which groups are most exposed to losses, including recent purchasers and first home buyers 
•  How stamp duty, selling costs, and interest expenses affect real-world outcomes 
•  Soaring construction costs pushing smaller developers out of the market 
•  Why only large-scale projects currently stack up financially 
•  The clash between negative gearing proposals and the realities of development feasibility

As always if there is a specific topic you would like for us to cover, please reach out and let us know!    

Transcript

Holiday Lull And Market Mood

SPEAKER_00 0:00

Now it's a holiday Monday and of course uh quieter on an on a long weekend in uh certainly New South Wales and Victoria. Queensland listeners, of course. You have the King's birthday later in the year. I don't know how all that works out, but uh let's go to Peter uh Malley. We speak with Peter on a regular basis about what's happening with the property market from Harris Partners Real Estate. Pete, good evening once again.

SPEAKER_01 0:19

Uh good evening to you, John.

SPEAKER_00 0:21

Quiet across much of Australia today. Uh but of course the market really is in this situation where you're still trying to work out the impact of what's in the budget, when it'll happen, and what the effect will be.

Sydney Auction Results And Buyer Demand

SPEAKER_01 0:34

Yeah, buyers and sellers are having to trade with some unknowns out there at the moment, John. Um look, wasn't such a bad weekend for for vendors out there of the 430 reported auctions over the weekend, 223 sold in Sydney at a median price of 1,402,000. So that's a solid result. Um what we're seeing on the ground is that there's not a there's not deep buyer competition for each listing, but there still is a genuine and fair-minded buyer for every property that we're putting to the market, John. So vendors who want to sell are following the advice of their real estate agent, they'll get sold for a fair price. It won't be an all-time high price, but it'll still be fair, and there might be more pain

Rate Hikes Versus Budget Blame

SPEAKER_01 1:20

to come for the market. So a lot of vendors are choosing to take the fair price today, knowing that it could be lower in a month's a month's time.

SPEAKER_00 1:28

And and I think we've discussed this before. The the market was already started to flatten in the earlier part of the year. The budget's now come in and added to all of that. So you've got to work out where this is going, and part of it involves keeping an eye not just on what's happening in Parliament in Canberra, but also what's happening in the Middle East as well.

SPEAKER_01 1:45

Oh, that's a great point that you raise. I I think the budget has been credited for want of a better term for for much of this downturn when um the reality was the three rate hikes that we've seen this year is the cause of the downturn that we're seeing in the property market. John, if I can make this point that we're obviously in winter now, and in Sydney uh and Melbourne, stock levels are traditionally low in winter and and expand rapidly in spring.

Winter Low Stock And Spring Risk

SPEAKER_01 2:12

And one of the things, as I said, the auction results this weekend, they're probably a pass mark, to be fair. They're not they're not so bad in in some ways. Um, but that's on low stock levels. When we get to spring and we see stock levels double, if not triple, um, that's when you might see another leg down in the property market with you know another five to ten percent correction from where we've already experienced.

SPEAKER_00 2:34

Yeah, depending on where you are, we talk about five or ten percent, and that sounds quite dramatic, but then you look back, say, over the last what ten, fifteen years, the increases have been quite dramatic, haven't they? So unless you've got in recently and you're not planning on hanging onto your property, because uh long term it it's always going to go up in value, it isn't necessarily a disaster, is it?

Who Gets Hurt In A Downturn

SPEAKER_01 2:58

Uh no, for long-term holders of real estate, this is annoying the downturn. Um, you know, if they're looking to sell, the ones who it's devastating for is the first home buyers who purchased on the five percent deposit scheme, and people have bought an investment property or their primary residence in the last two or three years, they're probably not able in they're probably not in a position where they could sell their property and break even, for example, John.

SPEAKER_00 3:22

Yeah, yeah. How how often, because uh look, I mean, uh I'm probably not a good example of this. I bought my first home and I've still got it. So um these that that's not that's not typical. But if you have bought your first home and uh in recent times you'd be quite alarmed at the moment, how long do people generally hang on to their first home?

SPEAKER_01 3:40

Oh, look, it's usually a five five-year play because you're not really buying your forever property. You're you're more about buying a rung on the market, aren't you? To to to to enter the market and then scale up from there. So what what I would say, John, anyone who's purchased um uh from 2021 during the COVID boom and resold onwards, about 50% of those anecdotally across Sydney have probably lost money. Um, you know, when you factor in stamp duty, uh selling costs, interest costs, and and and what they resell it for. So yeah, the property market doesn't always deliver uh great windfalls, and um you need to be careful and take a long-term view as you've just outlined with your own residents there.

Building Costs And Developers Pull Back

SPEAKER_00 4:22

Can I just ask you one final question? Because I've just looked at a couple of the stories, stories that are done on properties that have been sold, and this is the Sydney market, but they were talking about reasonably big-sized properties on good land, and they were saying that there haven't been uh developers at on as many of these properties because right now the cost of building, particularly in Sydney, is so high, and a lot of people are very cautious. Now, the idea is, isn't it, with negative gearing trying to push people into that new property? But if the people building it can't build it in a way that's going to be reasonably uh profitable, that's not gonna help at all, is it?

SPEAKER_01 4:58

Not at all. You're absolutely right, John. That's the tragedy of the current property market, is building costs have skyrocketed. A lot of projects don't stack up. Uh developers are spooked by the uh you know the impending tax regime and the inflation that's out of control, and they're opting to stay on the sidelines. How that ties in with the federal government's plan with negative gearing remains to be seen. But the reality is the only developments that seem to have any legs at the moment are mass developments with scale, and that's why you're seeing the big developers, your Murvax, Multiplex, Meritan are still continuing to push forward with developments, but that mid tier developer and the small sort of property filler flipper, if you like, will do a duplex, they've gone to the sidelines because they can't make it work.

SPEAKER_00 5:45

Yeah. Very interesting, Peter. As always, uh, we'll talk again very soon. Thank you. Look forward to it. Thanks, John.