Welcome to the Fear and Greed Business Interview. I'm Sean Alman. Australia's property market just keeps on going. Fiscal year twenty five is coming to an end with prices rising around the country, helped along by strong demand and interest rate cuts, and in the next twelve months we're set to see further price growth, driven largely by Sydney and Melbourne, according to domain's Price Forecast report. Doctor Nicola Powell is Domain's Chief of Research and Economics. Nicola, welcome back to Fear and Greed.

Welcome to the Fear and Greed Business Interview. I'm Sean Alman. Australia's property market just keeps on going. Fiscal year twenty five is coming to an end with prices rising around the country, helped along by strong demand and interest rate cuts, and in the next twelve months we're set to see further price growth, driven largely by Sydney and Melbourne, according to domain's Price Forecast report. Doctor Nicola Powell is Domain's Chief of Research and Economics. Nicola, welcome back to Fear and Greed.

Thanks Sean.

Thanks Sean.

Before we talk about the year ahead, the last twelve months or so, how would you sum it up? What are the big trends look the last.

Before we talk about the year ahead, the last twelve months or so, how would you sum it up? What are the big trends look the last.

Fight, Well, this current financial year has been an interesting one. I think that particularly when we were pre empting the cash rate reductions, and I think particularly when we started in the first half of this financial year, that pre empting of that rate reduction was really heightened, and when it finally actually came to fruition, you know, in the early part of this year. So in the second half of the financial year, I think we saw it being amplified across our housing markets. And what was interesting towards the latter part of last year, we already started to see demand start to rise, and I think it was mainly coming from investors and those are stude buyers that just know what a rate reduction does to a housing market, and then when it was delivered. I think that we've obviously seen two rate cuts. Now I think what we have seen is by a confidence is starting to return and our expectation is that is going to continue over the next financial year.

Fight, Well, this current financial year has been an interesting one. I think that particularly when we were pre empting the cash rate reductions, and I think particularly when we started in the first half of this financial year, that pre empting of that rate reduction was really heightened, and when it finally actually came to fruition, you know, in the early part of this year. So in the second half of the financial year, I think we saw it being amplified across our housing markets. And what was interesting towards the latter part of last year, we already started to see demand start to rise, and I think it was mainly coming from investors and those are stude buyers that just know what a rate reduction does to a housing market, and then when it was delivered. I think that we've obviously seen two rate cuts. Now I think what we have seen is by a confidence is starting to return and our expectation is that is going to continue over the next financial year.

So what's been the standout city or area for you for this.

So what's been the standout city or area for you for this.

Current financial year is tier cities. So I think the standout performers really in recent times has been Persed. It's been Adelaide and it's also been Brisbane. You know, these have been standout performers for pretty much, you know, the last five years. Look at the diversity of performance and when we have a multi speed market across our major capital cities. We're expecting that multi speed market, but some shifts occur in next financial year, and that means that the market is complex. It means that you have to understand those local areas and those local nuances. But when we have a look at the comparison, you know, over the last five years, we've seen Adelaide house prices increase eighty four percent. We've seen Perth see a seventy three percent increase, Brisbane a seventy two percent increase in five years, and then you go down to Melbourne. Melbourne has been the weakest performer, has only seen a fourteen percent increase. So there's this mass amount of diversity and Sydney sits at like middle of the road forty six percent over that five year period. So when you look at the last financial year, growth was led by Adelaide person Brisbane, and we saw slower conditions in Melbourne and Canberra, and we started to see a bit more gross coming out of the Sydney housing market and momentum is building in Sydney's.

Current financial year is tier cities. So I think the standout performers really in recent times has been Persed. It's been Adelaide and it's also been Brisbane. You know, these have been standout performers for pretty much, you know, the last five years. Look at the diversity of performance and when we have a multi speed market across our major capital cities. We're expecting that multi speed market, but some shifts occur in next financial year, and that means that the market is complex. It means that you have to understand those local areas and those local nuances. But when we have a look at the comparison, you know, over the last five years, we've seen Adelaide house prices increase eighty four percent. We've seen Perth see a seventy three percent increase, Brisbane a seventy two percent increase in five years, and then you go down to Melbourne. Melbourne has been the weakest performer, has only seen a fourteen percent increase. So there's this mass amount of diversity and Sydney sits at like middle of the road forty six percent over that five year period. So when you look at the last financial year, growth was led by Adelaide person Brisbane, and we saw slower conditions in Melbourne and Canberra, and we started to see a bit more gross coming out of the Sydney housing market and momentum is building in Sydney's.

So just sticking with Perth, Brisbane and before we move on to the bigger capitals in Canberra, where's affordability at in those markets?

So just sticking with Perth, Brisbane and before we move on to the bigger capitals in Canberra, where's affordability at in those markets?

Now we've seen a drastic change in affordability. I think if you are a local to that location, I think you would be really feeling the pinch, particularly if you're a first time buyer. When you look at the change of affordability over a five year period, it's been very extreme in Perth, Adelaide and Brisbane, and I think you know our loop in with Melbourne as well. You know, we've seen an underperformance of Melbourne. And the thing with Melbourne is it's undervalued at the moment relative to our other capital cities. If you rewind roughly about five years ago and you do this comparison of price house prices in Melbourne relative to Brisbane, Adelaide and Perse, they were about thirty five to forty five percent cheaper than Melbourne. Today they're pretty much on part there's only about a very one to three percent, which is extraordinary, right, it's extraordinary price change.

Now we've seen a drastic change in affordability. I think if you are a local to that location, I think you would be really feeling the pinch, particularly if you're a first time buyer. When you look at the change of affordability over a five year period, it's been very extreme in Perth, Adelaide and Brisbane, and I think you know our loop in with Melbourne as well. You know, we've seen an underperformance of Melbourne. And the thing with Melbourne is it's undervalued at the moment relative to our other capital cities. If you rewind roughly about five years ago and you do this comparison of price house prices in Melbourne relative to Brisbane, Adelaide and Perse, they were about thirty five to forty five percent cheaper than Melbourne. Today they're pretty much on part there's only about a very one to three percent, which is extraordinary, right, it's extraordinary price change.

I don't understand that was that the state government changes that he'd invest in Victoria. I can't quite get my head around why Melbourne has underperformed so much.

I don't understand that was that the state government changes that he'd invest in Victoria. I can't quite get my head around why Melbourne has underperformed so much.

Melbourne has significantly underperformed, and it is really unusual because Melbourne actually leads price cycles and tends to even lead in front of Sydney, and then Sydney kind of follows Melbourne's lead. That has not been the case. I think it's a variety of things. I think it is the taxation changes, so it does mean investors have sold off in bulk. First home buyers have definitely taken that market share, but you know, first time buyers don't have a deeper pockets as investors, and I think new investment activity has also been very weak across Victoria. But one of the core two of the core things for Melbourne is they've had high levels of supply, which I think choice has definitely been there for buyers, which means it's really kept a lid on price growth and demographic patterns. So we have seen a massive shift in population dynamics in Victoria. You know, when you capture that pandemic period too, there was a massive exodus and that population dynamic is still recovering. And this is what feeds into I don't want to reveal our forecast yet, but this feeds into what our forecasts are for next financial year. By the financial year of twenty twenty seven, Victoria is expected to be the fastest growing state for population growth. So the recovery is building for Melbourne.

Melbourne has significantly underperformed, and it is really unusual because Melbourne actually leads price cycles and tends to even lead in front of Sydney, and then Sydney kind of follows Melbourne's lead. That has not been the case. I think it's a variety of things. I think it is the taxation changes, so it does mean investors have sold off in bulk. First home buyers have definitely taken that market share, but you know, first time buyers don't have a deeper pockets as investors, and I think new investment activity has also been very weak across Victoria. But one of the core two of the core things for Melbourne is they've had high levels of supply, which I think choice has definitely been there for buyers, which means it's really kept a lid on price growth and demographic patterns. So we have seen a massive shift in population dynamics in Victoria. You know, when you capture that pandemic period too, there was a massive exodus and that population dynamic is still recovering. And this is what feeds into I don't want to reveal our forecast yet, but this feeds into what our forecasts are for next financial year. By the financial year of twenty twenty seven, Victoria is expected to be the fastest growing state for population growth. So the recovery is building for Melbourne.

Okay, we'll get to that in a moment. Stay with me, Nikola, we'll be back in a minute. My guest this morning is Nicola Power from Domain. You left us hanging, Nikola. It's all about what's going to happen, not what has happened. So let's start with Melbourne, which is where we went. We're talking about before the break strong population growth. We've actually seen it even in the last few weeks or months in terms of clearance, fraith ent prices. It seems to be I wouldn't say the boom city, but certainly the leading city at the moment.

Okay, we'll get to that in a moment. Stay with me, Nikola, we'll be back in a minute. My guest this morning is Nicola Power from Domain. You left us hanging, Nikola. It's all about what's going to happen, not what has happened. So let's start with Melbourne, which is where we went. We're talking about before the break strong population growth. We've actually seen it even in the last few weeks or months in terms of clearance, fraith ent prices. It seems to be I wouldn't say the boom city, but certainly the leading city at the moment.

We've seen a marx changing conditions across and you mentioned the clearance rates. They have been really consistent and they're consistently in those high sixties, so that is a massive improvement compared to twelve months ago. Momentum is building. I think we're particularly seeing it that in the premium end of Melbourne's housing market, and what our full carts are for next financial year is a six percent increase for house prices, which means Melbourne is going to take the lead along with Sydney. We are going to see the strongest rates of price growth coming out of Sydney and Melbourne. This is a massive change for Melbourne. You know, we have to remember that pretty much over the current financial year nothing happened with price It was pretty much a zero change. We're going to see move into a recovery and most importantly, what our expectations are. The house prices in Melbourne are going to be at a new record high by the end of the financial year. So we are making a big call here. We are expecting Melbourne to move into an established recovery and fully recover in terms of price.

We've seen a marx changing conditions across and you mentioned the clearance rates. They have been really consistent and they're consistently in those high sixties, so that is a massive improvement compared to twelve months ago. Momentum is building. I think we're particularly seeing it that in the premium end of Melbourne's housing market, and what our full carts are for next financial year is a six percent increase for house prices, which means Melbourne is going to take the lead along with Sydney. We are going to see the strongest rates of price growth coming out of Sydney and Melbourne. This is a massive change for Melbourne. You know, we have to remember that pretty much over the current financial year nothing happened with price It was pretty much a zero change. We're going to see move into a recovery and most importantly, what our expectations are. The house prices in Melbourne are going to be at a new record high by the end of the financial year. So we are making a big call here. We are expecting Melbourne to move into an established recovery and fully recover in terms of price.

So what's the growth rate in Melbourne go to be this over the next twelve months or sir?

So what's the growth rate in Melbourne go to be this over the next twelve months or sir?

We're expecting a six percent increase in house prices. Now that's not boom time, you know, I think that's modest rates of price grows. But it means that the medium price is going to be at a new record high and we're estimating it to be or forecasting it to be at one point one one million dollars and that's a new record for Melbourne.

We're expecting a six percent increase in house prices. Now that's not boom time, you know, I think that's modest rates of price grows. But it means that the medium price is going to be at a new record high and we're estimating it to be or forecasting it to be at one point one one million dollars and that's a new record for Melbourne.

Okay, Sydney, what's going to happen in the Emerald City?

Okay, Sydney, what's going to happen in the Emerald City?

Sydney, we're expecting to lead lead price growth out of all of the capital cities. Seven percent increase for house prices and a six percent increase for unit prices. Now, our call is that Sydney and Melbourne are going to lead price grows and one of the core foundations of that is what we're going to see over the next financial year is the baton is passing and that batton is passing from affordability driven markets such as Adelaide Brisbane to interest rate sensitive markets and that is Sydney and Melbourne. What you tend to find is that Sydney and Melbourne are much more sensitive to changes economic conditions and therefore changes in the cash rate. And our expectations is the reduction in the cash rate is going to be amplified through Sydney and Sydney and Melbourne's housing markets much quicker relative to other cities.

Sydney, we're expecting to lead lead price growth out of all of the capital cities. Seven percent increase for house prices and a six percent increase for unit prices. Now, our call is that Sydney and Melbourne are going to lead price grows and one of the core foundations of that is what we're going to see over the next financial year is the baton is passing and that batton is passing from affordability driven markets such as Adelaide Brisbane to interest rate sensitive markets and that is Sydney and Melbourne. What you tend to find is that Sydney and Melbourne are much more sensitive to changes economic conditions and therefore changes in the cash rate. And our expectations is the reduction in the cash rate is going to be amplified through Sydney and Sydney and Melbourne's housing markets much quicker relative to other cities.

What about Camber, We don't talk a lot about it. It hasn't had a great year. What about the next year?

What about Camber, We don't talk a lot about it. It hasn't had a great year. What about the next year?

Camera hasn't had a great year, It hasn't had a great few years. It really did lead price growth during that peak in the pandemic and has really struggled to move into an established recovery. But this is one of our other callouts for next financial year. We are expecting Canberra to move into a pricing recovery. We're expecting a forecasting a four percent increase for house prices in Canberra and a three percent increase for unit prices. It's not going to quite be fully recovered, but it's going to be well on its way to recovery. And house prices are going to be sitting about seven percent lower than their peak that was hit during the pandemic, but we'll be on the road to recovery.

Camera hasn't had a great year, It hasn't had a great few years. It really did lead price growth during that peak in the pandemic and has really struggled to move into an established recovery. But this is one of our other callouts for next financial year. We are expecting Canberra to move into a pricing recovery. We're expecting a forecasting a four percent increase for house prices in Canberra and a three percent increase for unit prices. It's not going to quite be fully recovered, but it's going to be well on its way to recovery. And house prices are going to be sitting about seven percent lower than their peak that was hit during the pandemic, but we'll be on the road to recovery.

Okay. So we can't really leave without talking about Perth, Brisbane, Adelaide. They have done so well my running between the lines suggesting that they won't be doing as well this year.

Okay. So we can't really leave without talking about Perth, Brisbane, Adelaide. They have done so well my running between the lines suggesting that they won't be doing as well this year.

They're not going to be doing as well as what they've previously seen. I mean, when you look at Adelaide, it's been the unstoppable housing market, double digit growth for many years. Much more subdued conditions in terms of price growth coming out of these capital cities. Look, demand is still there's still a bit of momentum, particularly in Brisbane, but I think Adelaide and perse really are the capital cities where we're going to see a marked slow down relative to what we've seen over the current financial year. So we're forecasting a five percent increase for house prices in Perth and a six percent increase for units. This is the only capital city where we're making that call that units in Perth are going to outperform house prices, and I think that that's the investor story, and it's the affordability story. And then when you go to Brisbane five percent increase and unit prices and Adelaide, one of the slower capital cities, four percent increase for house prices and a three percent nudge up for unit p.

They're not going to be doing as well as what they've previously seen. I mean, when you look at Adelaide, it's been the unstoppable housing market, double digit growth for many years. Much more subdued conditions in terms of price growth coming out of these capital cities. Look, demand is still there's still a bit of momentum, particularly in Brisbane, but I think Adelaide and perse really are the capital cities where we're going to see a marked slow down relative to what we've seen over the current financial year. So we're forecasting a five percent increase for house prices in Perth and a six percent increase for units. This is the only capital city where we're making that call that units in Perth are going to outperform house prices, and I think that that's the investor story, and it's the affordability story. And then when you go to Brisbane five percent increase and unit prices and Adelaide, one of the slower capital cities, four percent increase for house prices and a three percent nudge up for unit p.

Even though it's slower, we're not going to get economic growth at four percent, so it's still a real return in a sense.

Even though it's slower, we're not going to get economic growth at four percent, so it's still a real return in a sense.

And I agree. I think I think when we look at these housing markets, they've had such continuous momentum over many years, and I think, really it is affordability catching up with that momentum is probably the best way that I would describe it. There is only so far budgets can stretch, and when you've got a wide gap between where home price is, it's in the actual capacity of a buyer to pack for that home. I think that in itself is going to slow price growth, but it's even keeping price growth more modest in other capital cities like Sydney and Melbourne because we still have got affordability issues. I mean, we've seen rates come down and we're expecting another tour three rate cuts this calendar. Year, but there's still lots of uncertains. There's lots of turmoil happening across the world which can impact us domestically here in terms of inflation.

And I agree. I think I think when we look at these housing markets, they've had such continuous momentum over many years, and I think, really it is affordability catching up with that momentum is probably the best way that I would describe it. There is only so far budgets can stretch, and when you've got a wide gap between where home price is, it's in the actual capacity of a buyer to pack for that home. I think that in itself is going to slow price growth, but it's even keeping price growth more modest in other capital cities like Sydney and Melbourne because we still have got affordability issues. I mean, we've seen rates come down and we're expecting another tour three rate cuts this calendar. Year, but there's still lots of uncertains. There's lots of turmoil happening across the world which can impact us domestically here in terms of inflation.

Nickla, thank you for talking to Fear and Greed.

Nickla, thank you for talking to Fear and Greed.

Thank you.

Thank you.

That was doctor Nikola Powell, Domain's chief of Research and Economics. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed business news you can use. I'm Sean elmar Enjoy your day.

That was doctor Nikola Powell, Domain's chief of Research and Economics. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed business news you can use. I'm Sean elmar Enjoy your day.