Talking Property - State of the Market: June 2026 Artwork

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Talking Property - State of the Market: June 2026

June 29, 2026 • Harris Partners Real Estate

0:00 | 35:39

In this deep dive on the issues that have dictated the market performance in 2026, Louis covers:

the shock and awe conditions facing the property market
the historical crash in Auction results
the best and worst performing segments of the Sydney market
why the market won’t crash
the true impact of the Federal Government's Budget
when the RBA are likely to cut interest rates
First Home Buyers facing negative equity and
the unfortunate rise in homelessness as rents & immigration numbers surge.

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Midyear Numbers And Market Mood

SPEAKER_01 0:05

Welcome to Talking Property. Today I'm joined by Australia's best property analyst, Louis Christopher, as we dissect the state of the property market. Louis, thanks for joining us as always.

SPEAKER_00 0:14

Good to be with you once again, Peter.

SPEAKER_01 0:16

Louis, quite an unbelievable first half to 2026. Before we go into the issues that determined the market, as we're at the midpoint of the year, where are we numbers-wise?

SPEAKER_00 0:27

Well, it's certainly a national housing downturn now, Peter. It spread beyond Sydney and Melbourne. The capital city average decline since the start of the year now is looking at about 2.5% to 3%. And Sydney is looking at like about 3.5 to 4%.

SPEAKER_01 0:43

If we bring up the issues that have determined the market this year, three interest rate hikes, rising inflation, the unemployment's popped, unfortunately. That's obviously hit consumer confidence. The federal budget, no less, on top of all of that, and then unsurprisingly, auction clearance rates have fallen. What would you say are the issues that have uh uh impacted and hit the market to the degree you've just outlined?

The Shocks Hitting Housing Hard

SPEAKER_00 1:12

The market has suffered a series of shocks uh starting from the interest rate rise in February, then going into the outbreak of the Middle East War uh at the beginning of March. Then, of course, we had two federal interest rate rises. Over and above that, energy prices started to rise, and there were real concerns about petrol rationing. Uh, and then over and above that, we had the property taxation changes where we recorded a real lurch down in the clearance rate, which was already weakening uh following the interest rate rises and these other factors. But just the uh announcement of the property taxation changes definitely saw an exodus of investors out of the market. And it and we saw clearance rates on our numbers fall in Sydney from I think it was about the the low 40s, which was pretty weak, down to the low thirties.

SPEAKER_01 2:07

So there is some debate as to what impact the budget had uh on this downturn given the market was, as you said, you know, falling leading into the budget. Yes. What are your numbers showing in terms of the true impact across the country?

SPEAKER_00 2:22

There has been a true impact. Uh it would look it would be wrong to say that this is the sole reason for the housing downturn. Yeah, I got it. But it's it's also wrong to suggest that this has that the property taxation changes have had no material impact. As I note uh some ministers have said very recently or implied that fairly recently. That's that's disingenuous.

SPEAKER_01 2:44

So what you're saying is that that those that are out there blaming the entire downturn on the budget are wrong. Yep. And those that are uh on the Labour side of things that are saying the budget is not a good thing.

SPEAKER_00 2:53

But it's got nothing to do with are also wrong. It's a combination of factors. That is what the data is uh is exactly showing. But yeah, the property taxation changes have definitely impacted the market. Labor uh outlines that they knew this would impact the market uh at the beginning uh when they announced this, so we're hoping for more affordable housing. Well, they're getting it.

SPEAKER_01 3:15

I think uh that's a point that needs to be made. Affordable housing is housing is code for falling house prices, isn't it?

SPEAKER_00 3:21

Yes, it is. Yeah. In an ideal world, what you would prefer to see is a situation where affordability improves by rising incomes compared to housing prices, where you you see some nominal growth in housing prices, but family incomes are growing quicker.

SPEAKER_01 3:38

Or as a society, we're building more homes at an affordable rate for younger people, but that's not happening because of building costs.

SPEAKER_00 3:46

That is correct. Well, it's it's not happening for a number of reasons, but yes, building costs is definitely a major factor.

SPEAKER_01 3:51

Yeah.

Why Affordable Units Hold Up

SPEAKER_01 3:52

Now we could talk about the dire state of the of the market, but I do want to talk about what's performing best in Sydney. Um, performing best doesn't mean it's necessarily rising, but what areas or segments of the market, in your view, have been most resilient during this downturn in 2026?

SPEAKER_00 4:10

Affordable units have appeared to have done a little bit better. And we've noticed this now in more recent cycles that what we see is that uh during upturns, freestanding houses outperform units, and during downturns, units perform freestanding houses. Outperform freestanding houses.

SPEAKER_01 4:29

Yeah, look, that that would segue with our experience on the ground. To give to give you an idea, last week in Ashfield we put an apartment uh on the market and we told the owner six to six sixty based on sales. Uh went for 738. Yep. Uh 26 first home buyers and their parents turned up for the first inspection, and the property drew uh six offers in six days, and uh three parties went over seven hundred thousand dollars on a unit that the research told us had a maximum value of six hundred and sixty thousand.

SPEAKER_00 4:59

There you go. Uh uh it's anecdotal evidence, but it's showing up in our numbers as well. We're just not seeing the rate of decline in units, so we're seeing free standing standing houses.

SPEAKER_01 5:09

And coming to our bullet point here about the rental market rose 7.5 percent in the first six months of 2026, like we're talking annualized growth there of potentially 15 percent. Peter, I think that's actually our 12-month change. Okay, it's 12 months change.

SPEAKER_00 5:24

Yeah, it's 12 months. Yeah, it's an annual change.

SPEAKER_01 5:26

So for the last 12 months, we're talking 7.5 percent growth in the rental market in Sydney?

SPEAKER_00 5:32

Yes.

SPEAKER_01 5:32

Yeah. Is that causing uh people that are renting with the help of their parents to go out and buy their first property, which is why it's fueling the market?

SPEAKER_00 5:41

Yes, we would be seeing more renters turn themselves into first-home buyers, and and that has been occurring. The 5% deposit scheme that was essentially uncapped back in October 2025, did see an increase in renters turning themselves into first-time buyers, but clearly not enough because rents have still been rising. I've got a lot to say about the 5% deposit scheme because I I think the truth of the matter is that a number of those first-home buyers who bought in using that scheme uh are now underwater given the housing price falls, uh, which you know is not a good position to be in.

SPEAKER_01 6:19

It brings me to one of my next questions. Um

Where Sydney’s Pain Shows Up

SPEAKER_01 6:23

we find ourselves selling properties in different parts of the city.

SPEAKER_00 6:27

Yes.

SPEAKER_01 6:27

And my anecdotal read from what I'm seeing is that Western Sydney has taken a serious whack. For a long time, um, you were quite right in saying the outer ring was going to uh outperform the inner ring, and and then and that was without doubt what happened. But but are you seeing some you know serious carnage happening in certain suburbs in Western Sydney and southwestern Sydney?

SPEAKER_00 6:51

And being up front, Peter, it's it's fair to say that the declines that I'm seeing through the data have been across Sydney. Yes. Uh I hear you that there is weakness in Western Sydney, but I'm also recording some severe weakness in, for example, the northern beaches. Yes. Uh I'm recording severe weakness in Sydney seats and suburbs for pockets of uh affluent property. Uh and uh when I consider this downturn in Sydney, I think uh we're seeing an economic slowdown as well in Sydney. And the financial services sector, which the city has the the largest expo proportion exposure to compared to any other capital city, um is is bleeding. So we are seeing job losses in the financial services sector. Uh and I'm actually relatively close, so I can see it firsthand. And that historically has had an impact upon the Sydney market. That's not to say that we're we're not recording weakness in the western suburbs, and quite clearly you're seeing it on the ground, which is which is very useful. I I guess my argument is we're seeing it across the board in Sydney, in our view.

SPEAKER_01 8:04

What I would say in the inner west and certainly eastern suburbs and uh northern beaches, from the research that I've done and the sales that we've been involved in, that five to five uh fifteen million dollar bracket that was so, so strong coming out of the COVID slammed.

SPEAKER_00 8:19

That has been slammed in the last three to four months. Absolutely. I've got anecdotal evidence uh looking at individual properties, properties that had like a eight million dollar price tag on them, you know, dropping to the sevens quite clearly. Hundreds of thousands of dollars been taken off to try and move them.

SPEAKER_01 8:34

When you take into account stamp duty selling costs and the downward pressure on market, I think we're very close, unfortunately, to seeing people have million-dollar losses on real estate, aren't we?

SPEAKER_00 8:45

This is true. Now, in all this, you know, we're we're going through a bit of a shock and awe. And sooner or later the market will return to some type of equilibrium where the market will trade on a higher rental yield. The thing is with affluent real estate, uh, when you think it through, we know that you still are CGT free on your principal place of residence. There so therefore, there is a probability here that affluent people will buy even more expensive real estate as their principal place of residence as a tax shelter. So I think in time, once the economy does settle and stabilize and there's a little bit less fear in the economy and in the markets, we will see Sydney's affluent um property market do okay. And how far away time-wise are we from that, Louis? 2027 perhaps.

SPEAKER_01 9:39

Yeah.

SPEAKER_00 9:40

This adjustment let's keep in mind that um this is not the first time Labor have put forward property taxation changes. They flagged it way back in 2016, for the 2016 election, if you recall. But we've never been as close to it being a reality as what we are now. That's exactly right. Yeah. The point being is we did some modelling um back then and also in 2019 on their policies, and and our modelling showed that this adjustment period would last between two to three years, keeping everything else equal. Now, I don't think everything will be equal over the next two to three years. I actually think we might see some interest rate cuts in time. But nevertheless, the key keeping everything equal, the adjustment period is likely to last at least two years. And then the whole market will trade on a higher rental yield, and when it does, finally we'll see investors come back into the market again.

SPEAKER_01 10:32

Louis,

Clearance Rates And Selling Strategy

SPEAKER_01 10:33

let's go to the auction clearance rates at the moment on your numbers and bring up our next slide. Just talk us through what has happened with the auction clearance rates because rarely have we seen them operating at the levels that they're stuck at at the moment.

SPEAKER_00 10:45

Yeah, so clearance rates are basically uh back to where we were briefly during the 2020 first lockdown. Uh so if you strip out that that uh those few weeks of panic that we had during the first COVID lockdown, uh we're recording the lowest uh and consistently the lowest clearance rates since our series began.

SPEAKER_01 11:08

The thing that is disconcerting from my perspective is is we have auction clearance rates that are stuck between 30 and 40 percent for the last three months. Yeah. But we're in winter when stock levels are low.

SPEAKER_00 11:18

Yeah, so what tends to happen seasonally is that you you see a little bit of a rise in the clearance rate over winter, but we're not getting that. And then the the real concern is uh yes, seasonally you see tighter listings. Uh, and we are seeing less listings now, but they're still at the same levels that we recorded this time last year, Peter. So I don't think sellers are actually leaving the market. We will, in about 60 days' time, go back into the spring selling season, and that's when we will see a seasonal rise in listings. And normally what you see during the spring selling season is a fall in clearance rates. So if nothing changes in terms of where interest rates are sitting or assuming the government sticks to uh six to their knitting, they don't want to change course on property taxation changes. The odds are pretty high that we'll see even lower auction clearance rates during the months of August, September, October, November, and December. So you're you're talking about falling into the 20s, if not the teens, there. It's possible. It's possible. The 20s, yeah. I think the 20s uh are a real likelihood keeping everything else equal right now.

SPEAKER_01 12:27

For my 26 years in real estate sales, Louis, I've constantly cautioned people against having the spring selling mentality. And I've uh I've often said to clients that you should aim to sell in winter and buy in spring. And uh your your what you're saying, what you've just said there is your numbers back that up. Absolutely, always have. Yeah. Uh Louis, a little bit of an interesting um uh side issue with your auction clearance numbers, which people have pretended for a long time don't exist because you use a different methodology, which I've explained numerous times on Talking Property, so we won't again. But um you use a different methodology to the rest of the marketplace. That's right. Um but suddenly the mainstream media is if we bring up this uh uh post that you did here on social media, became very, very interested in your auction numbers.

SPEAKER_00 13:15

And they still are. Uh look, uh the media, of course, are interested in in grabbing headlines. Yes. And yes, our clearance rates are uh are painting a picture of a pr a very weak market where you know in Sydney essentially uh two-thirds of properties scheduled for auction are being passed in, withdrawn, rescheduled. Uh and you know that is that is a reality. But yeah, the media is definitely more interested in that because it is it is pay painting a rather negative story on the market, which is because it's aligning with their narrative. It's aligned with their narrative, and and look in a more bullish market, they'll probably go with other providers in terms of higher clearance rates. And that's what we we we tend to see. And uh, you know, um it is what it is, uh Peter. You you know I've had a long history with disputing uh auction clearance rate methodologies and and what's been reported. Uh, you know, I'm an older man now, so I'm starting to settle down on that. And I'm I'm I'm I'm just happy with we've got our own clearance rates out there, and we've got a very strong supportive following, uh I note, by many, many real estate agents. Yes. Uh and this is a point I think a number of the data providers do not seem to respect, is that agents are using these reported clearance rates as a benchmark to what's happening in-house, what's happening on on their own turf. And um, you know, if you if you're having an overly juiced up clearance rate as a benchmark, many of these agents don't look that very good. Whereas actually they're performing okay, they're performing in line with what's going on with the market. Uh so uh no, we we we have been having increasing support. Um there'll always be a trade-off though between timing uh and accuracy, though, Peter, I've always found in the housing market. We can't come out on the weekend itself, um, but uh we can come out on Tuesday with all the results.

SPEAKER_01 15:05

And I I do respect that the mainstream media um want to report the Saturday auction clearance rates on Saturday. I don't blame them. That's that's fine. I mean if I was an editor, I'd have to do the same. You'd have to do the same. But what the what the viewers at home do need to realize is that there's consistently a major discrepancy between the preliminary rate and the final auction clearance rate, and it's always scaled down. It's rarely, if ever, scaled up.

SPEAKER_00 15:28

Well, I was about to say that can anyone name a week where it was scaled up?

SPEAKER_01 15:32

Yes. Yeah. It's never happened. So consistently for the last three months, the auction clearance rate has been stuck in the low 30s, and the mainstream media have been called it, calling it as being uh uh positioned in around 50 percent. Now, how that dictates behaviour is that if you're a prospective vendor uh coming to market and you're listening to the mainstream media saying, well, auction clearance rates are at 50 percent, they're not the best odds in the world, but they're not the worst. Um, that has a bearing on your thinking one way. But if you are completely attuned that, for example, last weekend the auction clearance rate on your numbers was 32 per cent, that might change the decisions you make as a vendor. Absolutely. Yeah, absolutely.

SPEAKER_00 16:12

Look, I I I I for one um believe that there are multiple strategies to bring a property to market, uh, and there is no perfect strategy, and I think it just depends on the market. So there's a time and a place to auction a property, uh, and there is a time and a place where perhaps doing a tender or just standard private treaty is the way to go. That's just my view. Uh, and uh I'm not saying my view is uh the holy way. Um so yeah, I'm not anti-auctions, uh I'm not uh overly positive for auctions, I'm here to report what's going on in the market.

SPEAKER_01 16:47

Yeah, indeed. Well, look, I'm pretty comfortable in saying to our clients, you have to consider whether auction is the right sales strategy at the moment. Yep. When you the other uh adjunct to all of this is that of those 32 percent that are counted as successful auctions, more than half are selling prior to. So if your vision of an auction is multiple emotional bidders in the backyard competing for your home, that is just not the reality out there on the ground. Not right now, no. No, no.

5% Deposits And Negative Equity

SPEAKER_01 17:15

Um the treasurer, moving along, Louis, the treasurer um is under pressure as to what he's induced first home buyers uh uh you know into with the 5% deposit scheme. Uh we're eight months in to that scheme having been um introduced. Uh what's your takeouts?

SPEAKER_00 17:31

Yeah, so uh the actual scheme itself has actually been with us since 2020. There was a major expansion of the scheme in October 2025 where essentially it was no longer means means tested, and the housing price cap was clearly lifted. We understand that uh from October through to March 2026, nationwide uh there were about 120,000 people uh taking advantage of the scheme and applying for it and receiving the scheme. And in Sydney and Melbourne, that translated to about 50,000 first home buyers getting into the housing market between October and March 2026. Now, on the face of it, that sounds like the scheme's been reasonably successful. However, going back to my earlier point, the housing market's been falling at least since February. And so sadly, a number of these people, particularly in Sydney and Melbourne, are now in a situation where they're in negative equity. In other words, where the value of the home is worth less than the debt that is owed on it. Underwater, as they say. Underwater. That that is exactly right. But the problem is in this country, you can't just hand the keys back. If you decide to sell your property and you still got debt outstanding on that home, you have to pay the bank, otherwise, they are going to personally make you bankrupt.

SPEAKER_01 19:06

Look, this is a a vexed issue for mine. I I've seen both sides of the ledger, where, as I said, I've seen evidence like uh auto valuations to take them with a pinch of salt in some ways, but realestate.com for some properties that I've been following in Western Sydney have shown since February one property's uh autoval has dropped from 135 to 115. $200,000 drop um in in Glenwood, for example. Yep. And then I have my experience in Ashefield with the one bedroom unit, which is not isolated. Um, we've had that happen a couple of times where it j a crowd turns up out of nowhere and drives the property above uh expectations. So um, yes, if you uh jumped into purchasing a property in parts of Western Sydney in late 2025, you're absolutely underwater and some at the moment, and then there's other segments of the market like the affordable unit market, which seem to be supercharged on it. So I think um the message out of all of that, people need to be very, very careful on the ground.

SPEAKER_00 20:06

Look, I have never bought a property uh like when we bought our first home, we bought it on a 15% deposit. Uh, and that gave us a buffer. Uh, and I'm glad we had that buffer. Uh that that's important to buy on just say a five percent deposit or even for single families doing on a two percent deposit, well, that's really tight. Well, it's completely reckless. Well, it's yeah, it's dangerous. Yeah, and uh I I do feel for those first-time buyers who've done that uh in recent months. Now, the good news is that the market will eventually stabilize, and uh the good news is that provided you can can keep servicing the mortgage and paying it down as quickly as possible, you will get yourself back into positive territory sooner or later. But there are risks. We have not seen the bottom of this downturn yet, and I don't think we'll see it at the earliest until 2027. The degree of negative equity uh that um some or a number of people are going to face is going to be quite significant. And people need to recall the issue with this is that you won't be able to borrow money elsewhere. If you go for a loan and you write on your balance sheet you're a negative equity, okay, no lender's going to give you money. So there's uh knock on effects. There are knock-on effects which are not really discussed out there, but it's the truth.

SPEAKER_01 21:29

Great point, great point. So if you've got aspirations of buying a property and then starting a business.

SPEAKER_00 21:33

Starting a business, uh buying a car, taking a holiday, you know, if you want to not recommend borrowing money to take a holiday, but that you get my point. You cannot borrow elsewhere if you're in negative equity on your home. The tentacles spread if you're in negative equity right through your life.

SPEAKER_01 21:50

Yeah. Louis, I think it's really important, and I always caution buyers in every downturn that every downturn ends, and I caution sellers in every boom that every boom ends. Need to know that we're running cycles. This is, in fairness, quite an unusual cycle given what's driving it. But this downturn, whilst it has further to run, it will end. It will end.

SPEAKER_00 22:10

Now, what we've been seeing is that because of the property taxation changes, investors need will want to be compensated by a high gross rental yield. Sydney trades on a gross rental yield now, on average, roughly just under four percent.

SPEAKER_01 22:26

Yeah, well let's bring up our next slide, because that was related to the rental market, Louis.

Rents, Homelessness, And Migration Pressure

SPEAKER_01 22:30

So thanks for introducing that topic. What are we seeing in the rental market? Because you know, coming into this year I was particularly bullish about what would happen with rental prices. Bullish meaning they will, I believe they were going to rise far stronger than anyone anticipated. Not to say that I was happy about that, but uh what has happened with the rental market?

SPEAKER_00 22:49

So advertised rents have been accelerating once again since about the start of the December quarter 2025. To your point earlier, uh we're now recording, for example, in city uh rent rises for the past 12 months of about 7.5%, which is very, very strong for uh the Australia's largest capital city. With the property taxation changes, the probabilities have increased that we'll see a further acceleration in rents simply by virtue of the fact we'll have less investment properties in the marketplace.

SPEAKER_01 23:24

A shrinking rental pool?

SPEAKER_00 23:26

Yes. Now I've heard a counter-argument which I think is interesting to sort of mull over, and that is we might be seeing demand destruction, that there is a limit in terms of what the market's willing to bear in terms of our rents, and that the community will adjust accordingly by, for example, um lower housing formation, people sharing together more to share the burden of the rent. And if we were to go into an economic slowdown, a material economic slowdown, I'd struggle to see how rents would really accelerate from here.

SPEAKER_01 24:03

Right, I will you you you've led into my one of the next points that I wanted to raise. Once you see the level of growing homelessness in our society, you can't unsee it. I don't know if you know if if you know that.

SPEAKER_00 24:17

I've seen it all I've seen it expand and expand all through my life. Yeah. Uh you know, it's been particularly uh noticeable in the Sydney CBD.

SPEAKER_01 24:25

There's communities forming around beaches. Yeah. Uh tent communities, van communities, car communities, uh, and it's not just in in Sydney beaches either, I might add. Uh up and down the coast. Yeah. Um is homelessness the next phase of the rental crisis?

SPEAKER_00 24:42

It's a it's a a logical outcome that that's what you see. Um when the population is expanding faster than our build rate, um, what happens? People share more, but those people who are unfortunately not that are in that position um become homeless. So, yes, homeless rates have been rising. And that no great surprise, and it it's it's sad, it's a sad um outcome uh of an economy that could be better managed.

SPEAKER_01 25:13

Oh, indeed. Now look, when you mention homelessness to people that have not tuned in to the issue, and I'm not I'm trying to not wanting to sound conceited here, but when you mention the issue of homelessness, they do jump to the person sleeping on a piece of cardboard with their begging bowl out in Pitt Street Mall. That's the vision that comes up with homelessness. Um but it is far more nuanced than that, where you've got people living in tents, vans, car communities, they're showering in council facilities at at beaches and parks, etc. And this is how they're getting by.

SPEAKER_00 25:47

But it's it's not just that, Peter. Let's think about, for example, um women who are in an abusive relationship. Yes. And of course they need to leave that relationship, but what are their options? I'm sure uh a proportion of of these women, they're thinking very closely about this, saying, okay, do I stay another week with my abusive partner or do I live out on the street? I mean, what an what an awful, horrendous decisions to make decision to make. But sadly, because of our housing shortage, these type of events have been playing out.

SPEAKER_01 26:21

The other one that's a little bit more nuanced that that I'm seeing as a real estate agent, I I constantly go into people's homes to do market appraisals, and they've got um a working adult child that's moved back home. And when I say working adult child, I'm not talking about an 18-year-old that had a go and came back because they wanted their clothes washed. I'm talking about a professional adult child in their 20s or 30s, but the cost of living, the cost of rents, the cost of getting ahead has driven them back to mum and dad. Now, technically they've got a roof over their head, they're in a fortunate position where their parents can have them back home. But if you've gone out into the big wide world, uh you've got yourself a degree, you've got yourself an apprenticeship, uh, you've uh rented a property, um, and rents because of the immigration policy and the shortage of dwellings have forced you back home. My way of thinking is that person is technically homeless. They're living back with mum and dad. Yes, they have a roof, they're not sleeping down at the local beach in a van or a car, but they've gone out and tried to make a go of it in good faith and haven't been able to pull it off.

SPEAKER_00 27:28

Yeah, and so now they're gonna have to live with the fact that they they will feel it like as though they've failed in life.

SPEAKER_01 27:32

And and then there's further knock-on effects from that again. So you can see here that Pauline Hanson, we won't touch the one nation issue today, but she she is talking to the homelessness. So the politicians and and if you if you're following the ads, if you do listen and watch ads, you see that the homelessness issue is growing as as a social construct, isn't it?

SPEAKER_00 27:54

Yeah, that's exactly right. And yes, there is a there is a a logical path that a very strong migration flows into the country, not matched by supply increases, yeah, uh, will increase homelessness. That is the reality of it. So I've always looked at this argument as a demand and a supply issue. I find it disingenuous uh certain organizations who just try to argue it on the supply side without even considering the demand side. That's just crazy talk. But we we we need to do better on both. And I I believe there's always been a time and a place to ramp up migration and a time and a place to slow down migration, more so than what we've been doing now.

SPEAKER_01 28:34

So given that we're clearly not building enough dwellings and it's clearly playing out in the rental market and the first home buyer market for affordable properties, what do you make when you see the government's take a bow for only letting 300,000 people into the country? Um and they say they're listening to the people because we have dialed it back from 450,000?

SPEAKER_00 28:56

It's still above uh what we had from, say, 2015 to 2019. Right. So when the numbers were running uh in the 200s.

SPEAKER_01 29:05

But were we building more dwellings then?

SPEAKER_00 29:07

Well, we're building about the same amount as what we were now. Right. But migration rates were lower. The country was expanding uh by less than what we are now, and uh rental vacancy rates were clearly higher than what we have now, and rents were more stable, more in line with the CPI.

SPEAKER_01 29:27

So, Louis,

Investors Pull Back And Policy Fallout

SPEAKER_01 29:28

uh wealth inequality in Australia has never been wider in our lifetimes. Um the policies that the government are implementing and pushing through the Parliament are they going to rebalance things or make it worse?

SPEAKER_00 29:41

What's been put forward uh, in my view, uh has the propensity to increase rents. I think there's been a complete lack of care or unbelief that investors are required in the housing market. Uh they're required because uh they help, for example, on new builds. But investors will not be in the market when the market is having a major downturn. Um this is uh just one of these beliefs I think that that the Labour government's just got wrong. That their view that we're going to see now an increase in housing construction. We're not going to see it because that takes investors, and investors are not uh going to jump in the market while it's falling. Who wants to catch a falling knife? Yes. Historically, investors have never jumped into the market when it's falling. They are momentum driven. They'll go into the market once it bottoms and starts rising, but they will not jump in on mass uh while uh it's falling at a rate of knots.

SPEAKER_01 30:44

So just adding a little bit of meat to the bone there is that um uh the government have removed negative gearing off existing properties, but you can still negative gear a brand new property.

SPEAKER_00 30:56

You still can. Yeah. My argument though is you're not going to see investors take advantage of that uh anytime soon on that because no one wants to jump in while the market is falling. And let's also consider that new property generally trades at a premium to the rest of the market. That premium narrows and narrows like a car coming off a showroom floor uh on new property. Indeed, it does. And so the risk of uh having negative equity once again for an investor is actually quite high when they're buying new property.

SPEAKER_01 31:30

The best time to purchase a brand new build is the resales, as everyone gets their settlement letter, and um they've bought off the plan in the previous two to three years, and settlements upon them, and it's like my life has changed, my financial position is different, I now need to sell this. The only problem is, particularly with bigger developments, there's other people in the same boat, and you see a number of properties in newly completed developments coming up for resale and they're competing against each other, and as you said, the brand new property syndrome, the value drops immediately.

SPEAKER_00 32:02

You know, in recent years we've had some rather uh poor examples of very uh of builds going very badly indeed for the uh new uh purchases. Um now I think standards have improved a little. The government the state government here in New South Wales has made a genuine attempt to make sure we we don't have these type of issues again. Um but I think there's been a stigma attached to New South. That's right.

SPEAKER_01 32:29

I was going to say standards have improved, but confidence has confidence has not as yet. Yeah. Louis, uh yesterday um the Greens and the Labour Party did a deal. Yep, and we'll finish on this point, to um uh ban self-managed super funds from borrowing money to purchase property. That's just another element of demand that has been taken away from the property market. Um before today in the media, everything else about the budget has been discussed deeply, so we won't drag people through that again. But this issue about banning self-managed superfunds from borrowing to buy a property, what's your take on that?

SPEAKER_00 33:10

It will once again mean less investment properties in the market. Now, I don't think um the proportion of properties held, residential properties held by a self-managed superfund, is that high compared to total ownership in this country. The reason is that you were not getting the negative gearing benefits holding a property in a self-managed super fund to begin with.

SPEAKER_01 33:34

So they're more likely to be commercial.

SPEAKER_00 33:38

So I I think the actual impact on the ground is not going to be huge over and above what's already happened. Uh of course, I have my own political views, and I am a believer that uh self-managed super fund people should do what they want with their super, uh, except obviously spend it on consumption, but in terms of investing, it's fundamentally their money, and they uh they they should be allowed to do it. Uh that said, uh I've also taken the view too, you've got to be careful about about putting all your eggs in one basket. Um I think the the government's viewpoint on this is that we should still see diversification in terms of investment holdings. And if people put everything into their home and no additional investments, well, that could be risky.

SPEAKER_01 34:26

Well, the policy that they've agreed on with the Greens yesterday essentially pushes most people's super back towards industry super funds.

SPEAKER_00 34:35

It can, yes. Uh look, it's it's certainly taking it away from residential property, but there are other commercial. There are private superannuation funds out there by some very large names, AMP, Macquarie, BT, which are not industry or union-driven superannuation funds, which invest in equities, fixed income, you name it. Um so uh I I I I am concerned that that was a real motive behind all this. The reality is, though, for uh for those out there that there are more options than just industry super funds, even with this policy change.