458 | Are We At The Turning Point? From Slow Growth To A Surge in Listings - Chat with Tim Lawless

And Ben Kingsley , owner of Property Investors Council of Australia and a back to back winner of the Property Investment Advisor of the Year award , and both are partners of the multi award winning Empower Wealth . Co-creators of Moor , the free lifestyle design app , as well as best selling authors of the armchair guide to property investing and make money simple again .

Stay tuned as they bring you the insiders guide to property finance and money management .

Tim's expertise is sought by governments and regulators , as well as corporations in the property , banking and financial sectors . As research director , tim heads up a team of analysts in Australia and New Zealand and reports on property market conditions and the interplay between economic and demographic forces . Tim is now a five time returning guest .

Welcome back to the property couch , tim .

One of the questions we often ask all of our guests is the money backstory . But we did that with you back in episode 412 . You told us that your wife , amanda , was the banker . You guys had a really cool backstory around money and how that worked in your household .

But what was really encouraging because I listened back to it yesterday was that you did talk about finance and mortgage and debt with your kids . So that was super encouraging .

So I guess the only question I've got for you today is have you had many conversations with the kids of late around just the sheer size of the tightening cycle or is it sort of just business as usual of the lawless household ?

So , yeah , he's working pretty hard . And my daughter , madeline , she's in grade 10 , grade 11 next year and she wants to do a lot of business oriented subjects because they obviously getting into grade 11 and 12 , getting to the point to end , they get to choose a lot of their subjects , the kind of guide where they're hoping to go .

So she's getting into economics and maths and a lot of sciences . So , yeah , definitely all those conversations are happening and maybe that's the silver lining of all this uncertainty we have in the economy is it makes for a really , really good dinner conversation .

But two , it was a great episode because you wrote a report about the longevity of property and you did analysis over 30 years , which Ben and I really enjoyed , and it kind of gave your version of the Vanguard chart where you had the performance of property over 30 years and all of the X factor events that happened over the journey .

So it's well worth going back and having a look . But I guess what we want to talk to you today is about your latest research paper . Regarding what the title is , a rise in fresh listings will test the depth of by demand in spring , which obviously piqued our interest .

So we'd love to get under the bonnet with you to chat about this , but before we do , has it been a popular research report , tim , of lots of people who wanted to pick your brain about it .

It's going to become even more interesting and I think one of the key factors we've been seeing really supporting housing prices to date is really low advertised supply levels . It's not like demand is rocketing along . We're seeing the number of purchases in the market is roughly around the five-year average .

So even though population growth is booming at the moment , most of that flows into rental demand and then gradually into purchasing demand .

So fundamentally , if we do start to see a shift in available supply or advertised supply and it starts to get higher against a backdrop of demand at relatively average levels , then we could start to see some heat coming out of the market . In fact we're already starting to see that a little bit .

In some of the markets that have really led the recovery cycle so far , like Sydney is just pretty clearly eased back in the pace of growth .

We were in a downward market at that particular time and there was a lot of commentators and economists who were forecasting further deterioration of property prices and , to their surprise and to many , what we have seen is that sort of loss aversion , that human behavior kicking in .

Now that has obviously been subsidized by really strong unemployment level or employment levels low unemployment , and so we've actually in a surprise environment where we've got this super strong tightening cycle but we've actually got prices increasing .

Yet a lot of people have been tapped out from , you know , in terms of their ability to actually access finance to be able to do that . So it is a fascinating dichotomy of what's going on in terms of being able to see price growth when traditionally higher interest rates means further declines in values .

None of that's happened . We're seeing housing prices rising , as you say , Ben , against this backdrop of really high interest rates , a really heavily indebted household sector sentiment that's around recessionary lows or close to recessionary lows and holding there . So that's why it's really surprising .

But it's a really good testament to just Economics 101 , where you have really low supply levels and demand is outweighing supply and that's simply pushing prices higher .

But over the longer period , as you've demonstrated in your 30 years of research , it's that top quartile that does significantly well over the long period of time . But I was thinking with these really high levels of serviceability that taps those people out . So they've lost 30 to 40% of their borrowing capacity . But yet that was the recovery .

In terms of the Sydney market , we saw the Sydney market . Clearly it was the top 75% quartile that led that and I think from memory , looking at your chart pack , that also Melbourne has showing that evidence .

It's a little bit more balanced in other markets like Perth and that type of thing , but obviously part of your hedonic index has a stronger weighting in the Sydney and Melbourne markets in terms of how you value your overall national price point for dwellings .

But absolutely it is that upper quartile and Sydney and Melbourne that has really driven the stronger conditions . But we're also seeing values rising across the lower quartile as well , just not quite as quickly , and arguably it's that upper end of the marketplace that's probably a little bit more insulated from high interest rates .

You tend to have a lot of say subsequent buyers that can rely on , say , previous equity accrual to get into the market . They're probably not as reliant on credit and in many cases there'll be what a bank would be describing as a high quality borrower .

Essentially , that simply means they might have low debt levels relative to the loan that they're applying for , or low debt levels relative to their income as well , which tends to put them on a better footing for getting the best mortgage rates .

There was a lot of sort of C and D class or inferior located properties or whatever . That wouldn't give us what we call a quality asset for a sustainable decade , two decade period .

So what we have seen in this increased listings as we're coming into the spring season , the feedback we're starting to get from our buyers agencies the quality is improving and I think that's interesting in terms of how that plays out over the course of the next six to eight weeks .

We generally see new listings following that trend as well , so vendors are probably feeling a little bit more empowered or a little bit more confident to test the market .

But also , as we move through this period of high interest rates and it looks like we'll probably be moving through high interest rates for another year or so before they start to come down arguably we'll probably also start to see more signs of stress as well .

I think the market's been quite resilient in that sense so far that most borrowers are on track with their mortgage repayments .

But as we see more people migrating off for a fixed rate onto a variable rate that's much higher , as well as simply household savings being depleted and maybe changes in household dynamics that might lose a job , lose one income , whatever then arguably we're going to start to see mortgage areas picking up and more people having to sell .

I think to date we haven't really seen too much evidence of that . It's probably something that will start to show up to some extent through the second half of the year and into next year .

So it could be a self-fulfilling or self-perpetuating challenge to your point around . It could be a tipping point where we go all right , well , now that's a problem , because it had to break somewhere , right , because what was the chicken or the egg ? Which one was to come first ?

So , yeah , I think that's going to be a real sticking point and if you need to sell and go into the rental market , it is , I guess , just beset by a lot of uncertainty .

It's probably another reason why I think Australian borrowers are really going to be quite fixated on staying on track with their mortgage repayments and to do that , you'll probably find there's going to be a further pullback in discretionary spending wherever households can , just simply to stay on top of their repayments and make sure that they're not getting into any

sort of financial strife alongside their debt .

So it'd be nice to give our community your thoughts there .

So really ramped up between May through to about September last year in terms of value falls were accelerating and then the rate of decline started to ease off as we saw supply shortages becoming more apparent . So what we started to see through winter now , as you say , is a little bit unusual . It's this upwards trend in new listings .

So normally between autumn and winter we see about a 5% drop in the flow of new listings coming on the market place . Simply , the months are colder , presenting your properties not quite as good as what it is in spring or summer . People are less willing to go outside and go to open homes , all that sort of stuff .

So what we've seen through winter to date is actually a 13% rise in the number of new listings coming on the market . So completely bucking that downwards trend and as we move into spring , the normal seasonal trend , again based on that pre-COVID decade average , would be about a 10% rise in new listings coming on the market place through spring compared to winter .

In fact , last spring was the first time we've ever seen spring listings , or spring new listings , lower than what they were in winter . So there is a bit of probably accumulated supply in the wings here . So what we're expecting is this trend will probably continue into spring and early summer . We've seen an early start to the listing season .

I think a lot of prospective vendors are probably looking to beat the rush to some extent , get into the market when they know supply levels are really low , when they know selling conditions are still quite strong and values are rising .

But as we get into spring , if I'm right and we see this trend continuing to rise , then one of the or probably the key pillar that's really been supporting housing prices is starting to become a little bit less solid . That low supply is now rebalancing and , to the headline which you mentioned a bit earlier on , this will really test the depth of buy demand .

My guess is we probably won't see buy demand lifting as much as what we see listings rising through spring , For the reasons being that you outlined at the beginning of the podcast the fact that access to credit is still quite challenging . We've seen about a 20 to 25% reduction in borrowing capacity .

Sentiment is still really low as well , which is in itself quite the blocker . So what we're probably at the cusp of now is just a gradual rebalancing between available supply and demonstrated demand of the market , which will probably take a little bit of heat out of the pace of growth we've been seeing since early this year .

We're getting a lot of questions from customers coming to us and asking us to help them around the fixed rate cliff . We know that over the course of these next couple of months we're seeing another bulk amount of people coming off those fixed rates .

You've been kind enough to supply me with a fair bit of data around challenges for investors in terms of the increased listings from some existing investors who may be overstretched in terms of their portfolio . What's your read in regards to ? You mentioned a little bit earlier about mortgage stress being another catalyst for potentially bringing further supply on ?

Have you got any other sort of evidence to suggest around the fixed rate cliff and what's happening there ?

Let me rephrase that 99.5% of all borrowers were less than 90 days behind on their mortgage repayments . Essentially , there's very little evidence that borrowers are falling behind at the moment , but that 0.5% had risen from 0.3% back in September last year , so it's gradually just starting to rise from absolute record lows and still remains very low .

To put that 0.5% into context pre-COVID you generally see around about 0.7% to 0.9% of all borrowers running a little bit behind of their mortgage repayments . So we're not even back to pre-COVID levels just yet .

One other thing we can look at would be something that is a bit more timely and how many homeowners are actually selling their property after a really short hold period . Eliza Owen did some really cool work on this a month or so ago and it looked at what proportion of properties sold within , say , two years or three years of being purchased .

So that's clearly rising , but again from really low levels to a little bit above average now .

So again , that's probably another , I guess , just warning sign that we are starting to see some buyers who probably bought around the market peak and have run into some financial stress of being proactive and offloading their property before they really are forced into that position .

And to be honest , if I was in that position I'd be looking to offload now as well . I think selling conditions are really good . Most people can sell their property and probably get rid of their debt . That's very rare to see instances of negative equity in the Australian housing market , but there are going to be some examples of that .

So I think , going forward , what's that APRA data ? We see the June quarter update coming out in early September and my guess is that will show a more material uplift in , say , pre-90 day areas and post-90 day areas , but again from really low levels to something that's probably getting back to more around average levels .

You said cities where advertised supply levels have risen have also seen a reduction in the pace of value growth , but also , on the flip side , those with tight supply levels have seen accelerated value growth . Can you talk to some of those observations , tim ?

So total listing numbers in Sydney they're still above sorry , they're still below their five-year average and lower than a year ago , but they're getting pretty close to those levels . Melbourne listing numbers are now 5% above the previous five-year average . So clearly some upwards pressure here . You can see the trend is clearly rising from quite low levels .

New listings coming into Sydney are now about 21% above the previous five-year average for this time of the year and about 31% above average in Melbourne . So we're definitely seeing signs of more fresh stock coming into market in those two cities than other cities and total listings , finally , are starting to trend a little bit higher .

And if you look at the growth trends in Sydney and Melbourne , even though they're still positive , sydney has seen the monthly rate of growth pretty much halved from about 1.8% back in May down to 0.9% at the end of July and just looking at our high frequency indicators , that's holding at around 0.8% month-on-month growth now .

Melbourne's dropped from about 1.3% growth down to 0.8% now , whereas markets that have remained really tight , if not even tightened . I think the best example here would be Perth , where we're seeing total listings in Perth about 45% below the previous five-year average and trending lower , even though new listings are around the five-year average .

It's a really rapid rate of absorption In the Perth market . That's a clear example where we have seen an acceleration in the rate of growth . Brisbane , stock level is about 40% below the five-year average . Adelaide is about 41% below the five-year average and again these are markets where we've seen the rate of growth accelerating .

In fact , those three markets Brisbane , adelaide and Perth are all showing the strongest month-to-month growth now , at least across the major capital cities .

And then if you have a concentration of people who are looking over the borders as well , going or I'll be in those markets as well it kind of becomes a bit self-fulfilling too , doesn't it ?

Adelaide's still very affordable , but for locals , interestingly enough , because Adelaide incomes tend to be a little bit lower , housing affordability is still a bit challenging in that market for domestic or local buyers . But interstate buyers coming into those two markets , I think their dollar value goes a lot further than their own local markets .

So yeah , I think that's a big part of it .

Another explanation as well also comes back to a more , I guess , holistic level of housing demand in those markets , particularly in Brisbane and Perth , where you have a really strong rate of interstate migration that's supporting purchasing demand , rather than just , say , in Sydney and Melbourne , which is completely being driven by net overseas migration .

It tends to have a much more influential effect on rental demand than purchasing demand . So I think that rate of interstate migration that's very positive in Queensland and WA would be another factor that's really supporting purchasing activity .

But to build on Bryce's point about this concentration , what's obviously a clear observation , from where I sit as well , is the fact that when you've got APRA has a 3% buffer rate , one of the unintended consequences of a buffer rate like that is reducing that borrowing power of the investor as well .

And so to Bryce's point all roads for investors are really leading to that price point of $400,000 to $600,000 . They're scouring the country at the moment in terms of looking for those opportunities .

So the unintended consequences of APRA's policy there is that the first home buyer and those people who want to get into a property are now competing against the cashed up investor who is moving the market . There is no doubt in my mind they are artificially inflating the market with the growth .

So they're all thinking they're geniuses because they're picking the best market and hey , we're playing in that space too . We've got entry level investors who need a bit more income as part of that particular story . But in my mind it's pretty clear that if APRA keep restrictions on borrowing power for the next few years and keep the buffer rate of that 3% .

The reality is you're going to continue to force concentration of investment into those cheaper markets and that's going to be challenging for owner occupiers in terms of their ability to get in .

When we know it from our East Coast clients and how the market works , if the price is offered at 400 and the first home buyer in that market has a ceiling of 420 , I'll just go 422 , 425 . I mean , what's 25 grand for me as part of my portfolio ? So that's the frustrating bit in terms of what's happening when it comes to these macro potential throttles .

And , of course , even though rents are really tight and rental incomes are going up , rental income hasn't gone up anywhere near as much as what mortgage repayments have . Just use . A market like Sydney is a good example .

We've seen just the past year not even looking at since rates started to rise just the past year to July typical mortgage repayments for a Sydney investor are up about $1,200 a month and the rental income's gone up by about $350 a month . So there's a massive disconnect there .

So I think just trying to get the cash flow equation or just simple maths down is becoming really hard , especially when you're getting assessed at a higher interest rate than what you need to repay it , as well as the fact that I don't think APRA is really going to adjust that buffer rate until interest rates start to come down .

So I think the reality is that 3% buffer is going to stay there for some time .

That could help form the basis here .

I can't really see that component of migration really flowing into a purchasing decision at any time in their stay .

This is mostly about permanent migrants , skilled migrants , long-term migrants , and I think as they confront these really tight rental conditions , they probably are looking to fast-track their purchasing decisions wherever they can , if they can afford to do so , if they can find the right stock . It just eases the uncertainty in finding shelter .

There's probably also an element of maybe foreign buying picking up as well . We can see that in the latest NAB survey that foreign purchasing activity is lifted from its COVID lows back to roughly around pre-COVID levels as well .

So maybe , if we are seeing some foreign students really struggling to find accommodation , there could be a family benefactor looking to purchase an investment property for them . Remember , foreign buyers need to generally buy new or land and build and so forth , so there are restrictions there .

But I wouldn't be surprised that there's a slightly different mix of foreign buying activity starting to happen amid really tight rental conditions .

Darwin's also a little bit contracted , but Canberra is also one that will probably see more supply coming in .

What was fascinating also is when you went down into some of the sort of regional area analysis and you showed the SA3 levels and you were talking about the largest rises in some of those areas and there were some clear patterns wasn't there in terms of the particular market places where there was a larger amount of supply coming in compared to the five-year average

. And then on the other side you've also got this dropping listings which also showed some flavour into Western Australia and South Australia and regional Queensland and obviously on the listing side . Can you just talk to those sort of observations that you've got when we lift our eyes a little bit out of the CBD locations ?

So markets around regional Victoria really dominate this list , areas like ballerats , the dalesford area , as well as number one and number two on the biggest change for the five-year average . In fact , ballerat listings are up about 61% on their five-year average . Dalesford , ballon , kreswick , that's that , that is a three are up about 60% .

Keeping in mind these areas of move from remarkable lows right through the pandemic . These were some of the , I guess , tightest rental sorry , tightest purchasing markets in the country . So it's offer offer really low level and starting to rise . So arguably the five-year benchmark is maybe a an unfair , unfairly low benchmark to look at .

Hobart is another one that's really quite , quite heavily featured on these , these tables that show the biggest rise in total listings and again it's moved from a very low level . But a few different examples will be getting into some of the inner ring markets of Melbourne . So Hawthorne , stonnington East know some pretty decent markets .

Stonnington's up nearly 15% of the five-year average . Essendon's up about 13% . But remarkably , when you look at the trends in those two areas they're completely different . They're coming down from quite high levels rather than a lot of the regional Victorian markets rising from very low levels . So it looks to me like some of those .

A lot of inner Melbourne markets really did it quite tough through the pandemic is a lot of people moved away from those inner city areas , moved to the out of fringes or the regional markets . Listing numbers were elevated for a period of time there . So you really need to look at those sort of trends through the pandemic to understand .

What does the relevance to the five-year average mean ? In some of these cases we're actually seeing a fall , a clear trend towards fewer listings , despite those markets being above their five-year average . On the other hand , look at some of the markets where listings are extraordinarily low relative to the five-year average and falling really sharply .

A lot of these areas tend to be in regional Western Australia or regional South Australia . So a really good example would be somewhere like , say , albany in WA , coastal , arguably lifestyle market , relatively affordable .

It's benefiting from a pretty decent rate of internal migration down there and we've seen in that market about a 63% fall from the five-year average and again , plotting that data out in trend terms , it's absolutely plummeting . It's showing no signs of turning around .

So I think buyers looking into some of those regional , more sort of lifestyle or coastal tree change style markets outside of your sort of more popular areas Around Victoria or New South Wales , to a lesser extent , queensland , are going to be finding that stock levels are really tight and finding options to buy are pretty scarce and they're selling really quickly amid

those really low supply levels . So , yeah , definitely chalk and cheese . When you look at some of the different extremes in these listing numbers .

This is a classic case of when we look around for lifestyle locations around the country which aren't necessarily commutable , locations that can sit in dormancy for a decade or even longer and then have their moment in the sun . And so you know , from an investor's point of view , people might be sniffing around these types of areas and I don't blame them .

The yields are going to look pretty attractive . The you know the valuation is going to look pretty attractive in those areas . But just be mindful when you're making long term investment decisions of that sort of 20 , 30 year period , what you've got to be asking yourself is what is the driver that's going to have that growth sustainable ?

So you might pick the market , you might time the market , you might get that nice little 20 , 30 percent rise , but then just be be prepared that you're going to be sitting on that property for the next maybe 10 or 15 years , we don't know . I mean obviously population growth and you know baby boomers , cycles and all that type of thing .

But you've got to ask yourself is what is the industry , what is the thing that's going to drive that ? Right now ? I suspect it is a lot of retirees going down into that particular marketplace and that type of thing . But what's the what's the engine room of the economy down there and what's going to be happening in those for that ?

Long term sustainable growth Is that . Is that a view you also hold , tim ?

It's got a good brand , the Barossa . You've got the Limestone Coast in South Australia . You've got Bunbury as well in WA . But you could even go to some other markets . Look at Cans or Townsville .

I mean Townsville is a really diversified economy but that market's done it tough for the last 15 years , despite its diversity , because it is quite connected to the resources sector and has had some pretty severe weather events coming through as well . So absolutely they'd be looking at the diversity of the economy .

And for investors it's really important to be looking at those long term drivers of capital gain and , to your point , I think they can look remarkably appealing on paper .

But you know , say of a five or a 10 year period , you'll probably find a lot of those demand side drivers just dry up and there isn't a great deal of economic growth in those areas , despite low supply levels .

I mean , I know we talked about Hobart a lot in terms of a lot of investor activity that went in there and it did a tremendous amount of growth over that particular time .

But if I look at your weekly release and I see the amount of vacant property , there is no rental shortage in Hobart at the moment , you know , in terms of its vacancy rates and so forth . So that's that irrational behavior .

And so what we're trying to teach people is yeah , you can absolutely get the timing of the market well and potentially get a nice little kicker of equity and you can add on to that because you've got the yield .

But our story is around quality and sustainable quality over a long period of time , and so you can run the risk of some of these markets which are going to give up some of that gain . So , even though the demand supply looked amazing at that time , the score was brilliant , as per our algorithms as well .

We're also thinking beyond that cycle and thinking about what's going to sustain it , what's going to make it , you know , basically have that , that confident growth period over a long period of time , because we know Hobart I think it was back in 2007 or eight or that had a 50% growth in like a massive spike and then effectively did nothing for the next 15 years

, similar to the Townsville story .

So I think that South East Queensland is going to be , you know , not the epicenter , but it's going to be have a lot of infrastructure associated with the Olympics coming over the next nine years as well .

So I think when you look for those , those really important drivers , they quite often aren't going to exist in some of your small regional markets , even though there might be quite appealing from a lifestyle perspective or a retiree for an investor . You know , making sure there's going to be sustainable rental demands and capital growth , much more unreliable .

So some of the things that that you two lads have been chatting to is , if you're a , if you're a short term investor who wants to get into a market and pick it , ride a little bit of a spike and then ideally , pull that , pull that money out . We would say pull the money out , keep the asset , play the long game .

But if you , if you , if you have a short term perspective , that's okay .

But if you're playing a long term game where you only want to you know , ben and I were talking to this point before if you only want two or three good properties , combine it with your super , hold it for the long term , well then it's probably not the game that you want to play , whereas there are a small minority of people that like to accumulate 10 and

15 and 20 and 30 properties , and if that's the game that you want to play , it is very much the minority game . You are going to be up against it because governments will probably come for you . They don't want to see people having big , large portfolios like that . So I think that's a distinguishing factor to do You're really clear on what game you're playing .

And if you're clear on that , well then you . The discussion that we just had rewind for last 10 minutes sort of has a bit more context . Hey , tim , in the in the report you you talk about activity in the real estate sector as a as a sign for listings as well .

Before you talk to that point , could you just rewind a little bit for the people who are listening to this who are not involved in the real estate industry at all ?

I mean , we are as a company , we are a subscriber of your service , but can you tell people what that looks like and some of the activity that real estate agents can do in the background first , and then why that activity matters ?

You can see some information about who owns it , the attributes of the property , the marketing history over the past couple of decades , all that sort of stuff . So a lot of industry professionals and also non-professionals utilize that platform to get an understanding of individual properties and market trends as well .

So when a real estate agent will go to list a property or even going back a stage , they'll go to meet with a prospective vendor and give them an idea of what their marketing strategy is going to be .

They typically go along with what they call a comparative market analysis report , or a CMA , and they generate that off a platform like RP data and essentially the CMA will provide them with the nuts and bolts to the foundations .

That gives them an idea of what the listing price for that property is going to be and they form that based on the attributes of the property and what's sold around that property recently . So looking for like for like and maybe adjusting for differences in that particular property or the vendor's expectations .

So when we look at the amount of activity that's going on across that platform , it gives us pretty much a real time view on how many homes are being prepared to come to market . There's generally about a two to four week lag between when we see a real estate agent preparing a report for a property to seeing that actually ending up on the marketplace .

So it's a lead indicator for fresh stock coming on the market . It's pretty clear that CMA activity , a real estate agent activity , has been lifting . I mean , that's been the precursor to this early trend in new listings we've been seeing and it's continuing to rise .

So again , that's just tells me that spring is shaping up to be busier than what it has been the last couple of years , which is about time . I think . You know , compared to last year , spring was a bit of a non-event and we need more supply coming into the market . There's not enough choice .

But again , if I'm right and we continue to see that rising without any real commensurate uplift in buying activity , then I think that's where we start to see a healthy rebalancing between effective supply and demonstrated demand .

And , to your point , I think the risk is to the downside , in terms of , you know , when we're talking about the national property valuations because of Sydney and Melbourne you know sort of , and those listing increases we have talked about the you know , the hot markets of Perth , South East Queensland and also South Australia and some of those regional areas in

there , in your mind , what are the ? You know , taking the medium term view , what are the sort of main catalysts that you would see that would also drive further demand into the market ? I know the obvious ones but I want you to say them .

But yeah , tell us a little about what you think will be the turning point when we probably come from this slowing of valuation growth into a market that's probably going to then see more upside .

They both show pretty much the same trends that sentiment's holding around the low levels we saw through the early phase of the pandemic and about where it was during the global financial crisis .

The difference between those two periods is sentiment held at those really low levels for only a couple of months through those previous examples , whereas now we've been seeing sentiment holding at these really low levels the past 10 months nearly a year . So what's for a turn in sentiment ? My guess is it's probably just around the corner .

We probably will start to see sentiment rising from these very low levels , alongside a growing expectation that interest rates have now peaked and that inflation's falling faster than what the RBA was expecting . But sentiment needs to rise a lot to get from where it is at the moment , even just to back to average levels .

So I think the things that will really drive an improvement in sentiment will be as soon as we start to see interest rates coming down . I think that's probably game on . Alongside a drop in interest rates , you'd have to think that APRA will ease back on their service ability buffer . There's currently a 3 percentage points .

Maybe drop it back down to 2.5 percentage points . That also implies that inflation's become under control maybe not necessarily back into the target range by the time interest rates come down , but that's probably not until 2025 . Hopefully rates are coming down through the second half of next year , so I think that'll be the key one .

As soon as we start to see inflation getting back into target ranges as well , it simply means that the cost of living pressures and biting is badly either , so I think they'll be the key ones .

To watch is really interest rates and inflation feeding into consumer sentiment and how consumers feel about their own economic and financial situations , and once we start to see sentiment getting back to normal levels , that's where you'd expect to see a much more broad rise in purchasing activity in housing activity overall .

It's so interesting to see where the general sentiment is quite low but the time to buy a property is actually sitting at a positive rate . It's just really interesting .

So you'd have to think , even though the time to buy a dwelling index is showing a bit of a rise , you'd have to think a sentiment rises more broadly and rates come down . That's when we'd start to see that index showing a little bit more around , growth a little bit more .

But yeah , I think it just speaks to the fact that supply levels are so low that a lot of consumers are still picking . The marketplace is a bit of a safe haven , I agree .

So if listings increases , that gives our audience an opportunity to go okay , great . Some of the A and the B plus properties that we would consider good opportunities , they should be starting to consider during this period . Because , on the back of what you also just said was the fact , well , what will actually change the sentiment ?

You don't want to be making those decisions too close to those events that change the sentiment , otherwise you will start to get caught up within the slipstream of general thinking and mass thinking as well .

So I think for me , for our audience , I think hopefully they have those two things there is an opportunity for those that are prepared to get the types of properties that they would like , hopefully as they start to come through the spring season , but be ahead of the masses that do it all at once , based on those sentiment changes .

So , tim , it's always a pleasure having you join us on the property couch . You just make a lot of sense and we understand that you're a busy man this week , so thanks for squeezing us into your schedule . On behalf of everyone here at the property couch , thanks for joining us again .

But today's was really interesting current affairs for what could be just around the corner as we tip into spring tomorrow .

I think you're going to see cooling prices in Sydney and Melbourne as supply continues to arrive and the trigger on the other side of that is going to be around when interest rates start to ease and , potentially , when borrowing capacity buffers also are potentially reviewed . So what does that say to us and what does that say to our community ?

That you may have just been blessed with this extra opportunity and this little window to be able to look at those two big markets as potentially buying opportunities for those people who are fortunate enough to be in that situation .

But we also know from this information that the markets in Adelaide , perth and South East Queensland , and even some of the northern parts , like even Townsville cans , are going to be interesting markets over the course of the next couple of years , in my view , because we're also forcing people into those affordable markets that we talked about when it does come to

the investor tapping on to that . So , tim , I think I'm really supportive of the ways in which he reads the market and we're forever blessed to be able to get access to thought leaders like Tim to be able to inform our views .

And my final point here , bryce , is I'm starting to see a lot more communication from property spruickers talking about the next big boom that's coming , and so I also want to put some warning signals up to some of that sort of dialogue , because I'm not sure I mean .

I think what I would like is a is a steadier , more sustained market with longer growth , rather than these boom bust sort of cycles that we're come to expecting , this FOMO and FOMU and so yeah that what would be nice is , you know , transitioning back to where we were 10 , 15 years ago , with some steady growth and the fundamentals doing all the heavy lifting .

And number two , I do hope that the people who are in a position to take advantage of the information that Tim just shared Actually get that opportunity been , because , like you said , melbourne and Sydney , if there is more listings and they are more listings in the types of property that we want to pursue , because a lot of them we wouldn't be interested in .

But if you see , the opportunity to catch those A&B plus properties that are very have been historically difficult since the pandemic , to be honest , when we've been in a low-listing environment , yeah boy , oh boy , oh boy .

When you , when you get access to those properties and then you get to fast forward two or three years down down the road , gee whiz , that is good opportunity .

So , alright , my life act today been is Largely around , something that a bunch of our community might or you might know this too but I , I love YouTube , I love learning from YouTube , and sometimes someone says something and I'm like pause , rewind , write it down , because I've got a journal that I capture all these really great ideas that I that I learned from

Jim Rohn many , many years ago . So so if I get something cool , I want to write it down on and be able to remember it . Well , youtube automatically generates a written transcript for every single video that it up . They uploaded to its website , and I Probably , deep down , probably knew that , but it's not obvious where it is . So there's the .

When you're watching a video , there's three little dots down the bottom . So if you're watching a video on desktop On the right hand side , it'll it'll feed up a whole bunch of other videos that you should do . If you hit the three dots , it'll say it'll give you two options and one of them says show transcript .

You hit show transcript and where those videos appear , they disappear and then , all of a sudden , you can start to see the transcript , which has been Amazing . So , for anyone who is cut and paste run , yeah well , it just means I can get it done quicker and I don't have to rewind .

And what I'm saying , can I get it done fast enough when I can't type quick enough and all that sort of stuff ? Or , in this case , I can't scribe in my journal quick enough ? So for anyway , I guess it's a life hack for anyone who , a loves YouTube , b loves learning from YouTube and C loves writing down great ideas that they found on YouTube .

The transcription service is very good , very helpful , and has been a little game changer for me . So there you go . That's today's life hack , mate . What's what's making property news for you ?

Obviously , we saw the auction clearance rate results from last weekend nationally , seeing the clearance rate sitting around 69.9 . So we just dropped under that 70% . So this is about testing . You know the depth of demand that we were talking about before . So we also know that . You know .

Obviously I'll be doing my economic and RBA update next week so I'll be able to release the results . That were the the august numbers , but we do know we are . We are seeing continued growth in some of those markets as well . So a really interesting time for the property market , certainly being tested with this new supply coming in .

It's just how much supply is going to be coming is something that we'll be talking about on a regular basis . So that's really the biggest property news . Now .

We've sort of got rental caps and rental freezes sort of behind us , and so really the thing that I'm focusing in on now is you know , where are those opportunities in the market Around the country and what do they look like . So we'll keep everyone abreast of that Over the course of the spring and into the summer . Buying and selling season price .

So we've had some great guests now next week First time guest and this person has actually worked at the RBA and he's going to talk about some of the mechanisms of what happens inside the Reserve Bank Australia when it comes to property .

So wonderful , wonderful insults that insults , insights that you and I are looking forward to unpack further and sharing with this community , mate , but until next week . Knowledge is empowering , bryce , but only if you act on your own .

If you're new to our community , I want to encourage you to listen to our very first 20 episodes , as the concepts we share in EPS 1 through 20 are foundational principles , pillars and frameworks that you need to know For you to get the best value from our content . Week to week on our show , my little tip is to listen to it at one and a half speed .

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