Welcome to the Fear and Greed business Interview. I'm Sean Aylmer. Property prices rose for the third straight month in April, with seven and twenty dollars added to the median value of a home. Our lift in values was recorded across every capital city in the market could be set for an even bigger burst with a reserve bank widely tipped to cut interest rates when it meets later this month, and there might be another cut or two later in the year. Tim Lawless is head of research at Totality formerly core Logic. Tim Welcome back to Fear and Greed.

Welcome to the Fear and Greed business Interview. I'm Sean Aylmer. Property prices rose for the third straight month in April, with seven and twenty dollars added to the median value of a home. Our lift in values was recorded across every capital city in the market could be set for an even bigger burst with a reserve bank widely tipped to cut interest rates when it meets later this month, and there might be another cut or two later in the year. Tim Lawless is head of research at Totality formerly core Logic. Tim Welcome back to Fear and Greed.

Goo Day, Sean, thank you again for the invitation.

Goo Day, Sean, thank you again for the invitation.

Take me through the April numbers where you surprised how broad based the increases were across the capital cities and the regions for that matter.

Take me through the April numbers where you surprised how broad based the increases were across the capital cities and the regions for that matter.

Yeah, this is a remarkable result. We haven't seen every capital city and every regional market up in value over the world in quarter, or for that matter, of the year to date for a long time. There's been a lot more diversity in the market than this. So yeah, even though this is very broad based positive result, it's definitely not shooting the lights out like a point three percent national rise in values following a point four percent rise last month and point three in feb I mean, this is a pretty mild growth phase at the moment, and you've got to admit it happened during April, which was a month of disruption, not just the Teriff announcements and then the subsequent drop in confidence. There was also back to back long weekends. We saw a drop in listings coming to market, but we did see clearance rays coming right down as well to the low sixty percent range, even once one week there in the high fifties. So yeah, generally, i'd say this market is a little bit better than flat, even though we are seeing the positive outcome.

Yeah, this is a remarkable result. We haven't seen every capital city and every regional market up in value over the world in quarter, or for that matter, of the year to date for a long time. There's been a lot more diversity in the market than this. So yeah, even though this is very broad based positive result, it's definitely not shooting the lights out like a point three percent national rise in values following a point four percent rise last month and point three in feb I mean, this is a pretty mild growth phase at the moment, and you've got to admit it happened during April, which was a month of disruption, not just the Teriff announcements and then the subsequent drop in confidence. There was also back to back long weekends. We saw a drop in listings coming to market, but we did see clearance rays coming right down as well to the low sixty percent range, even once one week there in the high fifties. So yeah, generally, i'd say this market is a little bit better than flat, even though we are seeing the positive outcome.

Last year we talked about a two speed market Perth, Adelaide, Brisbane, the rest. Maybe there was a three speed market because some places like Melbourne that we're going backwards. Where are we now, Do we still have a bit of a two speed market?

Last year we talked about a two speed market Perth, Adelaide, Brisbane, the rest. Maybe there was a three speed market because some places like Melbourne that we're going backwards. Where are we now, Do we still have a bit of a two speed market?

Well, I think there's always but we're not seeing anything like what we're seeing last year or the year before that for that matter. So you know, coming into the middle of twenty twenty four, the level of diversity was extreme. In fact, we hadn't seen the range and the annual growth rates. That's significant, which was more than twenty percent from the best performing market, which was Perth. In the lowest performing market, which was Melbourne, there was about a twenty five twenty six percent difference between the annual growth rates. That's really converged over the last six months to an extent. Now we're actually seeing below average levels of diversity. I think this convergence in markets is a mixture of both. Some of the weaker markets like Sydney and Melbourne have reaccelerated back into growth, and you've got those mid size capitals you're talking about, Perth, Adelaide, Brisbane have all shown a real slow down in their rate of growth, and that seems to be something that's a new feature of this market. Is a fairly broad based positive upswing, but the pretty mild everywhere you look.

Well, I think there's always but we're not seeing anything like what we're seeing last year or the year before that for that matter. So you know, coming into the middle of twenty twenty four, the level of diversity was extreme. In fact, we hadn't seen the range and the annual growth rates. That's significant, which was more than twenty percent from the best performing market, which was Perth. In the lowest performing market, which was Melbourne, there was about a twenty five twenty six percent difference between the annual growth rates. That's really converged over the last six months to an extent. Now we're actually seeing below average levels of diversity. I think this convergence in markets is a mixture of both. Some of the weaker markets like Sydney and Melbourne have reaccelerated back into growth, and you've got those mid size capitals you're talking about, Perth, Adelaide, Brisbane have all shown a real slow down in their rate of growth, and that seems to be something that's a new feature of this market. Is a fairly broad based positive upswing, but the pretty mild everywhere you look.

What about housing affordability and what that means for homes the units, Because it seems that in housing affordability was getting was increasing, it's becoming very expensive to buy, but homes are doing better than units.

What about housing affordability and what that means for homes the units, Because it seems that in housing affordability was getting was increasing, it's becoming very expensive to buy, but homes are doing better than units.

Yeah, this is quite the conundrum, and you're right, affordability has never been this stretched. Our affordability metrics go up to the end of last year so December, and at that time, each of the four metrics, which is, you know, how much of your income are you paying towards a mortgage, what's your media multiple which is about eight times nationally, how long is it takes to save for a deposit, and how much income is being dedicated to rent? All those metrics were at record highs nationally and you'd think they would start diverting more demand towards the lower price markets, and absolutely it has. You know, if you look at US stratified Headonic Index, which looks at the upper quartel versus the lower quartel, absolutely it's those lower quartel markets that have outperformed, particularly you're out of fringe suburbs. But we haven't really seen that swing towards apartment markets as much, particularly in the really unaffordable market like Sydney, where we're still seeing houses while and truly outperforming apartments. You can see the markets like Perth, Adelaide, Brisbane have all started to see the unit sectors out performing, but that's generally against a backdrop of very low supply levels as well as the affordability challenges. Sydney's really interesting, you know, it's the most unaffordable market. It's got a median house value now that's getting close to the one point seven million dollar mark. Now, it's extraordinary. Yet we're still seeing the most demand flowing into detached housing.

Yeah, this is quite the conundrum, and you're right, affordability has never been this stretched. Our affordability metrics go up to the end of last year so December, and at that time, each of the four metrics, which is, you know, how much of your income are you paying towards a mortgage, what's your media multiple which is about eight times nationally, how long is it takes to save for a deposit, and how much income is being dedicated to rent? All those metrics were at record highs nationally and you'd think they would start diverting more demand towards the lower price markets, and absolutely it has. You know, if you look at US stratified Headonic Index, which looks at the upper quartel versus the lower quartel, absolutely it's those lower quartel markets that have outperformed, particularly you're out of fringe suburbs. But we haven't really seen that swing towards apartment markets as much, particularly in the really unaffordable market like Sydney, where we're still seeing houses while and truly outperforming apartments. You can see the markets like Perth, Adelaide, Brisbane have all started to see the unit sectors out performing, but that's generally against a backdrop of very low supply levels as well as the affordability challenges. Sydney's really interesting, you know, it's the most unaffordable market. It's got a median house value now that's getting close to the one point seven million dollar mark. Now, it's extraordinary. Yet we're still seeing the most demand flowing into detached housing.

Yeah, what I mean, what is about Sydney side They like their backyard or something. Well, I think.

Yeah, what I mean, what is about Sydney side They like their backyard or something. Well, I think.

Every Australian likes the backyard. There's definitely a scarcity factor in houses. I think it probably speaks more to the types of buyers that are active in that market. There's probably a prevalence of buyers that have had the benefit of previous home ownership. They've been able to build up their equity and their wealth through previous housing cycles. There's not many first home buyers in the marketplace, at least in relativity to the other states and capital cities, so that might have something to do with it, as well as the fact that coming into sort of twenty fifteen to twenty nineteen, there was a pretty decent amount of new apartment supply pumped into the city market, and maybe that that overhang is still playing through.

Every Australian likes the backyard. There's definitely a scarcity factor in houses. I think it probably speaks more to the types of buyers that are active in that market. There's probably a prevalence of buyers that have had the benefit of previous home ownership. They've been able to build up their equity and their wealth through previous housing cycles. There's not many first home buyers in the marketplace, at least in relativity to the other states and capital cities, so that might have something to do with it, as well as the fact that coming into sort of twenty fifteen to twenty nineteen, there was a pretty decent amount of new apartment supply pumped into the city market, and maybe that that overhang is still playing through.

Okay, and the regions did pretty well.

Okay, and the regions did pretty well.

Yeah, the regions are still that performing, the capitals not as much as they were through last year. But we're still seeing this outperformance, but it's not your usual suspects, as we say, if you remember, through the pandemic, we saw the same trend where the regional markets were a lot stronger than the capitals, but that was markets like Byron Bay, Sunny Coast, Gold Coast, the Southern Highlands, really high profile lifestyle markets through the pandemic we're performing, whereas now it's very different. It's markets like Geraldton in WA. It's Townsville, Rockhampton, Mackay and Queensland that are really leading that regional growth. We're seeing housing values in each of those markets rising by about twenty percent or more peranna, which is quite extreme, but off generally a pretty low base and they are typically very affordable markets that also have quite strong regional economies.

Yeah, the regions are still that performing, the capitals not as much as they were through last year. But we're still seeing this outperformance, but it's not your usual suspects, as we say, if you remember, through the pandemic, we saw the same trend where the regional markets were a lot stronger than the capitals, but that was markets like Byron Bay, Sunny Coast, Gold Coast, the Southern Highlands, really high profile lifestyle markets through the pandemic we're performing, whereas now it's very different. It's markets like Geraldton in WA. It's Townsville, Rockhampton, Mackay and Queensland that are really leading that regional growth. We're seeing housing values in each of those markets rising by about twenty percent or more peranna, which is quite extreme, but off generally a pretty low base and they are typically very affordable markets that also have quite strong regional economies.

Tim, I want to talk to you about interest rates and what that means for the market. Will be back in a minute. I'm talking to Tim Lawless from Cotality. If there is a bank cuts interest rates on the twentieth of May, which most people think they will do, what's that mean? Well, firstly, do you think they will and what's the mean for the market.

Tim, I want to talk to you about interest rates and what that means for the market. Will be back in a minute. I'm talking to Tim Lawless from Cotality. If there is a bank cuts interest rates on the twentieth of May, which most people think they will do, what's that mean? Well, firstly, do you think they will and what's the mean for the market.

Yeah, I definitely think they will. I think the fifty basis point cut that a lot of economists we're looking for in the markets we're pricing in seems to be more remote of a chance now. But yeah, I think we'll probably see a twenty five basis point cut. The relatively low core inflation numbers that came out for the March quarter tould help with that, and obviously lower interest rates are real positive for housing markets. It provides a direct improvement to serviceability and borrowing capacity, and indirectly it should help to boost confidence as well, which which took a bit of a hit through April on the back of the US tariff announcements and the global uncertainty. So yeah, I think this will be a positive outcome for housing markets. But still it's from a pretty high base and we're still a long way from interest rates getting back into stimulatory territory. So even though it's going to be a positive for housing markets, we certainly aren't expecting a twenty five basis point cut to the cash rate to be the catalyst for a new round of material growth. Even if we see another two or three rate cuts through the year, I think regulators will be watching household debt levels quite carefully and would be really cautious if we started to see housing values moving into another serious growth trajectory on the back of higher debt.

Yeah, I definitely think they will. I think the fifty basis point cut that a lot of economists we're looking for in the markets we're pricing in seems to be more remote of a chance now. But yeah, I think we'll probably see a twenty five basis point cut. The relatively low core inflation numbers that came out for the March quarter tould help with that, and obviously lower interest rates are real positive for housing markets. It provides a direct improvement to serviceability and borrowing capacity, and indirectly it should help to boost confidence as well, which which took a bit of a hit through April on the back of the US tariff announcements and the global uncertainty. So yeah, I think this will be a positive outcome for housing markets. But still it's from a pretty high base and we're still a long way from interest rates getting back into stimulatory territory. So even though it's going to be a positive for housing markets, we certainly aren't expecting a twenty five basis point cut to the cash rate to be the catalyst for a new round of material growth. Even if we see another two or three rate cuts through the year, I think regulators will be watching household debt levels quite carefully and would be really cautious if we started to see housing values moving into another serious growth trajectory on the back of higher debt.

Do you think, I mean, APRA, the regulator, has been pretty tough on lending standards, rightly or wrongly. I presume what you're saying there is that they're unlikely to take their eye off the ball when it comes to that type of thing because they don't necessarily want a booming housing sector.

Do you think, I mean, APRA, the regulator, has been pretty tough on lending standards, rightly or wrongly. I presume what you're saying there is that they're unlikely to take their eye off the ball when it comes to that type of thing because they don't necessarily want a booming housing sector.

Yeah, I think that's exactly right. And of course there's a lot of debate around the serviceability buffer, which is currently set at three percentage points. Arguably, you know, it's pretty illogical that interest rates would rise from here, pretty remote chance of that, So dropping that serviceability buffer down to say two point five percentage points seems like a logical outcome. But then again, if there's plenty of other levers that APRA could be pulling if they want to make sure that lending standards remain prudent, and we don't see a runaway in housing values on the back of household debt. I mean, just look at New Zealand's firm limits on high debt to income ratios and high loaned evaluation ratios in that market really does seem to be containing any sort of upswing or material upswing, and housing values with interest rates which have come down quite substantially in New Zealand.

Yeah, I think that's exactly right. And of course there's a lot of debate around the serviceability buffer, which is currently set at three percentage points. Arguably, you know, it's pretty illogical that interest rates would rise from here, pretty remote chance of that, So dropping that serviceability buffer down to say two point five percentage points seems like a logical outcome. But then again, if there's plenty of other levers that APRA could be pulling if they want to make sure that lending standards remain prudent, and we don't see a runaway in housing values on the back of household debt. I mean, just look at New Zealand's firm limits on high debt to income ratios and high loaned evaluation ratios in that market really does seem to be containing any sort of upswing or material upswing, and housing values with interest rates which have come down quite substantially in New Zealand.

Now, okay, we've got the election on tomorrow. We'll know the Prime minister presumably by tomorrow night or Sunday Monday. Is it good to get it out of the way just for the housing market only because it sort of interrupts the flow of what's happening.

Now, okay, we've got the election on tomorrow. We'll know the Prime minister presumably by tomorrow night or Sunday Monday. Is it good to get it out of the way just for the housing market only because it sort of interrupts the flow of what's happening.

Well, yeah, I think everyone's looking forward to the election being being done and dusted. Yeah. Absolutely, But at least that will provide some certainty, regardless of who your voting preferences are with, I think some certainty returning to decision making is going to be a good thing. Of course, both sides of politics, or at least the major parties had have housing policies that do seem to be quite inflationary for prices, regardless of if it's a deposit guarantee or being able to tax deduct your loan or lower the serviceability buffer, you know, regardless of who gets into power, I think absolutely we will see a pick up in first home buyer activity on the back of our affordability discussion a bit earlier on. One of the biggest challenges of getting into the marketplace for a first home buyer is both demonstrating an ability to service your loan as well as saving up for a twenty percent deposit. So I think both policies are going to be quite popular, not that they really do anything for affordability in the long run.

Well, yeah, I think everyone's looking forward to the election being being done and dusted. Yeah. Absolutely, But at least that will provide some certainty, regardless of who your voting preferences are with, I think some certainty returning to decision making is going to be a good thing. Of course, both sides of politics, or at least the major parties had have housing policies that do seem to be quite inflationary for prices, regardless of if it's a deposit guarantee or being able to tax deduct your loan or lower the serviceability buffer, you know, regardless of who gets into power, I think absolutely we will see a pick up in first home buyer activity on the back of our affordability discussion a bit earlier on. One of the biggest challenges of getting into the marketplace for a first home buyer is both demonstrating an ability to service your loan as well as saving up for a twenty percent deposit. So I think both policies are going to be quite popular, not that they really do anything for affordability in the long run.

Okay, we're out of time, but tell me what's the prognosis for the market for the rest of twenty twenty five.

Okay, we're out of time, but tell me what's the prognosis for the market for the rest of twenty twenty five.

Yeah, we're thinking further modest gained, definitely nothing to write home about. I think month to month gains of somewhere between point two two point five percent. Annualize that out you're looking at low single digit growth over the year, which I think, considering where we've been the last five years, is going to be a fairly realistic outcome. And I think the last thing anybody wants to see is affordability worsening from here.

Yeah, we're thinking further modest gained, definitely nothing to write home about. I think month to month gains of somewhere between point two two point five percent. Annualize that out you're looking at low single digit growth over the year, which I think, considering where we've been the last five years, is going to be a fairly realistic outcome. And I think the last thing anybody wants to see is affordability worsening from here.

Tim, thank you for talking to Fear and Greed.

Tim, thank you for talking to Fear and Greed.

Absolutely pleasure.

Absolutely pleasure.

Thank you. That was Tim Lawless, head of research at Catality formerly known as core Logic. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed Daily business news for people who make their own decisions. I'm Sean Elmer. I'm John his aid

Thank you. That was Tim Lawless, head of research at Catality formerly known as core Logic. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed Daily business news for people who make their own decisions. I'm Sean Elmer. I'm John his aid