Property Expert: Why Australian House Prices Are Falling Faster Than Expected
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How did the federal budget accelerate Australia’s housing downturn?
Tim Lawless, mate, what a time.
Crazy. Things are moving very quickly and a lot of water under the bridge since we spoke a month or two ago. Did we speak after the budget or before the budget, I think?
Time is moving so quick, mate.
I think it was before the budget. I think it was just before the budget.
Oh, just before the budget. And so obviously a lot's happened in terms of budget, but we've had another three months of higher interest rates since then or a couple of months of higher interest rates since then. We're looking at another one perhaps in August, but let me just go back to, let's talk about the budget. I've had a lot of interesting discussions with various people about the budget. In terms of data, as head of research at Totality, formerly known as CoreLogic, one of Australia's leading analytical organizations when it comes to the property market and other things, but let's just talk about the property market today. What is the data telling you about the state of the market, let's say right now, post-budget?
Yeah.
So post-budget, the market's clearly weakened. It was weakening pre-budget, I think is important for the context, as you say, higher rates, affordability, serviceability challenges, really low levels of consumer confidence, and then the budget. So I think the budget really did amplify the downturn we were already in, the fact that the market was already slowing. But since we've seen the budget handed down, there's a lot of anecdotes. There's very little hard evidence of, say, investors pulling back and first-time buyers on the sidelines, but you can speak to anybody in the market and they're seeing it. So I think, well, since the budget, we've seen housing values, the downturn nationally has gathered some momentum.
We've seen Sydney and Melbourne already moving backwards in values. Adelaide's now falling over a rolling four weekly basis. Brisbane's absolutely flat. Perth is seeing about half a percent growth month on month. Go back a couple of months ago, Perth was rising in value by nearly 2% month on month. So everywhere is either slowing down sharply or now going backwards in value.
Maybe we can unpack it a little bit more too, Tim, if you don't mind. Yeah. The point you made was an interesting one, a good one, that pre the budget, we'd had three rate rises. But, you know, we've got interest rates up quite high, relatively speaking. Put us up to where we were before the rate reductions, which was at that point considered to be restrictive interest rate environment. You mentioned that we were already starting to see a little bit of an effect from those three rate rise increases. And I think that's when you and I last spoke. And you were sort of predicting house price changes. In other words, it's always difficult to talk about Australia because it covers a lot of territory. But you were sort of predicting pretty much a flattening.
And we were saying that then. But what is it that the budget – I mean, I know this is only hypothetical at this stage, but you probably don't have data to back it up. But what do you think it is that the budget did to make that go faster or have a greater effect?
What is it? Yeah, I think there's probably two really important outcomes from the budget. The first one is very direct towards investment, of course. So if you're an investor in Australian housing markets, you've generally been attracted to the opportunities for capital gain. So that was already becoming – The tax on capital gain. No, no, no, just capital. You were going to make a gain on the property. Yeah, yeah. So the point I'm trying to make is yield didn't really factor into your decision as an investor. In other words, the rents? Yeah, the balance between your rental payments and the, or your rental income and your holding costs, being mortgage repayments, maintenance, whatever. Yeah. Strata. Insurance, et cetera.
All that sort of stuff. So yield was always, well, for most investors, a side forward or a secondary or tertiary part of the decision-making.
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Chapters
6 chapters
1
How did the federal budget accelerate Australia’s housing downturn?
0:00–7:35
2
Why are investors pulling back and how big was their pre-budget share of demand?
7:35–18:16
3
What financial math are property investors re-evaluating right now?
18:16–30:46
4
How is immediate supply, listings and turnover changing demand dynamics?
30:46–42:32
5
Will residential property remain a good capital‑gain investment amid this correction?
42:32–53:48
6
Which cities and regions are likely to outperform in the medium term?
53:48–56:46
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