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This is a Momentum Media production. Nerd alert! Property nerds. The home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends. Hello, hello.
This is Arjun here, your host of the Property Nerds podcast. And today we've got a bit of a different flavor here on our episodes. And firstly, you'll probably notice that I haven't had the second hello in this mix, which is usually my lovely wife and the director of Hills Finance, Leigh Paliwal. So give you some context on that. Lee and I are both actually in Singapore as we're recording this.
And we're very, very grateful and lucky to be traveling here for work, catch up with many of our expat clients and business relationships. And as a result, Lee and I have gone down the divide and conquer route. And she's got a few key catch-ups to make use of our limited time here in Singapore. And I thought we'd still carry on the spirit of the Property Nerds, especially with some new content that we've got today with a special guest on. So if you haven't tuned in also to our most recent episode, which is on the housing fundamentals white paper, that was something that I personally went through with Lee in a previous discussion around what's happening in Australia.
And we're going to revisit some of those points today just to go deeper, but also give you a different spin on them. Thanks to our guest here for today's episode. Now, before we dig into an introduction of who I've got on with me today, I also wanted to let everyone know some exciting news. We've recently launched our most up-to-date white paper. And this is actually on an interesting topic.
It's called Australia's Renewable Energy Boom. And we're talking about a few markets that Lee and I, the rest of the InvestorKit team, have talked about that we feel are going to benefit greatly from some of the vast amounts of renewable energy spending that's occurring across Australia. Now, before you dig deep into that white paper, it's really important to know that these cities are seeing this job increase, job advertisements, dollar spending advertisements. But whilst renewable energy is a very, very new world to many of us in many cities, it's not quite something that we can say just yet is 100% proven as replacing many things or 100% the way to go. And that's not a debate we're doing on that white paper because many people are in the for or against, and that's not what we're here for.
We're here on that white paper to just simply say that what renewable energy does and the investment does is it creates opportunity, jobs, improvements in the environment, and other things. And so all the other stuff, leave that at the doorstep when you're catching up and checking through this white paper. This white paper is to tell you about all the economic benefits that can come from it and from this new spending on a few cities that are of interest. So if you want to get to know more about those cities, just jump on investigate. com.
au. It's totally free. It's a free white paper that we release as part of our monthly releases of information that you can jump on prepared by the InvestorKit Research and Data Science team. And that's on investigate. com.
au and the white paper section. So that's enough about the most recent white paper coming out. Today's episode. So today's episode, I've got with me John from Domain and not just anyone from Domain. We've got the chief revenue officer of Domain in the house.
So, John, how's that for a title? How are you feeling about that introduction? I'm very flattered, Arjun. It's a pleasure to be here with you. No, very, very good to have you on, my friend.
I know we've been excited to connect and work closely. We actually do work closely with Domain and APM on the back end in terms of our business here at InvestorKit. So we work closely there. But I wanted to also actually have that discussion with you in terms of what's happening more in the market and get someone else's opinion. I think everyone's probably sick of hearing my voice all the time about research, data, nerding out.
But I guess it would be good to speak to you today. And firstly, know more about your journey and how life first started before getting into Domain and what you're doing at Domain at the moment. Great. Thanks, Arjun. Well, it's a pleasure to be on this podcast.
And it's great to meet you, Arjun, and be excited. I got a chance to look at some of the research you've done. I think we're very like-minded in terms of how we think about the market, how we think about the long term. I'm really excited for what you and your listeners are doing for the industry as a whole, which is so important, not just for professionals in the real estate industry, but mums and dads, investors all across this country. It's a really important work.
So for me, I grew up in Sydney. I'm a Sydneysider. And I'm a bit of a nerd in my background. I got my first computer when I was four, which was back in the 80s. It was not very common.
And I loved technology, loved geeking out on things, loved numbers. And the degree that I pursued was one in leadership and technology. That was my undergrad. And as I was growing up, two things were happening. I actually started my world of property investing, which I'll come to.
But I've kind of been in pretty geeky roles. I started off as a management consultant. I did my MBA. I got to travel all around the world, I guess, understanding businesses. My favorite one being I was helping chicken farmers in Mozambique understand their cost structure.
How cool is that? Yeah, it was nice. It was very nice. And after I did my MBA, I happened to join a real cool, geeky, nerdy company, a small company called Google at the time. Very small company indeed, mate.
Very small company. Yeah, it was only a few thousand people back then. And I was one of the first 100 employees, a few hundred employees in their London office back in 2006. Started off in marketing, went to technical operations, and then up in sales. So I ended up staying at Google for 13 years in Europe and in America, and then stayed in another Silicon Valley company, Uber.
So I was there for a few years. Similar kind of stuff, running customer engineering and running agency sales, which when about a year ago when me and my family were trying to come back to Australia, proved very, very important because Domain is a company that is trying to help moms and dads, sellers and buyers all across Australia. But primarily, we go to market through real estate agents. They're the ones who recommend our services. And so my experience at Google and Uber really set me up for really learning how to help Domain be more successful in creating that ecosystem.
Well, I think, do you feel like with the journey that you've been on, and that's been so exciting to hear more about your property investing and how long ago this all started and where you've even taken it across countries, which would be an adventure on its own. But do you feel like that's been a big part of connecting you closer to what you do today for work and probably drove the career towards where Domain has come up? Or did property just fall on your laps with Domain and it wasn't as intentional? Yeah, I'd like to say it was all part of great planning, but I was kind of lucky, honestly. When we were looking to come back to Australia, we have two young girls.
They were both born overseas. We were looking to come back to Australia. I was looking for a technology company that wasn't quite at the startup stage, had some stability, was a brand name, but was kind of small enough that I could experience being at the senior level. Because before I'd been in middle management at Uber and Google and really enjoyed that and led very large teams. But these are companies of tens and hundreds of thousands of people.
And it so happened that Domain at the time was looking for a chief revenue officer. And it was a real perfect fit because the size of where that company is at, it's a thousand people, the size of revenue, the size of the commercial team were things that were comfortable to me. Even the way of selling primarily through agents was something very comfortable to me. The fact that it happened to be in a subject matter expertise that I was really passionate about was more coincidence than anything else. So I'm very, very grateful how it all worked out.
And now that I'm here, it's hard to imagine working anywhere else. Yeah, look, I think that's the beauty of your openness of your journey, right? It's taking you cross countries, cross companies. And as you remain as open as possible, some of these doors start to open up, fall on the laps, and here you are today. So, mate, look, that's really exciting in terms of all the journey that you've been on.
And I guess it leads to a very relevant tip that's very much today in today's market. Today's market has obviously driven many questions on many people's minds around, is it the right time or not? But I picked up something very interesting just understanding more about your Australian venture. Your Australian venture was across many cities, many states, and considered long term. Because when you talk going back to 90s and then today, I guess how important is reflecting on your own journey, applying it to today's market apply when it comes to a property investor who might be thinking of investing today?
Yeah, yeah. And Arjun, those of you who are, I know your audience that have been with you in your journey, in the journey of this podcast, what I'm saying is nothing particularly new. So I don't take credit for these ideas. I take credit. I'm grateful to have parents and upbringing that kind of helped forge those ideas.
But pretty much it's The availability you have of data and domain. And are you talking about what we're seeing right now? Yeah. Yeah. So one thing to understand about how Australians look at property is this.
For example, domain, we have almost 9 million unique monthly visitors. It's a very large proportion of the adult online population. Now, we know at any one time, there's only about 400,000 of them who are actually looking for a house at that time, which means that something like 95% of people who are online, who are looking at our articles, using our apps, things like that, are not actually in the market right now per se. And so one thing I would say about the data is we have seen a continued interest in people to understand more about property, whether it's through searching, viewing listings, reading articles on the Sydney Morning Herald, The Age, The Australian Financial Review. These things continue to be strong.
If anything, people, and some of it is just there is fear in the market, which ends up driving more eyeballs and things like that. People are interested. They're checking. They want to know what's going on. They are afraid or they might be looking for opportunities.
Certainly over time, as interest rates have gone up, house prices have flattened or gone down, and you have a combination of both sellers who are potentially holding off selling because they're not sure, and buyers who are holding off buying because they're not sure if things will go down. We have seen the amount of activity in the market materially decrease over the past few quarters, particularly since this year. So that's something which is there. It's happening. It's something where it is what it is.
Now, again, 90, 95% of transactions are still happening. It's births, deaths, marriages, divorces, empty nesters. These are the things that drive most activity. Most people choosing to list something online. But we are seeing because of that 5% or 10% optional, people who don't have to move right now, don't have to sell right now, there's some deferral.
And similarly with buying, those people don't have to buy right now, they're deferring. So you are seeing a suppression of that kind of bottom of the funnel activity. How good does that make us feel as sitting in this country in Australia where we have these costs and different things change, yet like you pointed out, a very important point was if you don't have to. And that's the thing that many people interestingly fall and make a mistake on in their analysis. They assume that, okay, interest rate changes, interest rate increases.
Wow, I'm going to get myself a deal here because everyone has to sell. And that's quite an interesting point, right? Because what you've raised there is something that's very, very, very important for listeners, which is there is a big group of people who didn't have to sell and big group of people who don't have to buy. And this is what's causing that, I guess, offset or misalignment in buyer versus supply data. And this is causing the shifting winds because of people's behaviors changing.
But it's not the thing that people are thinking would happen, which is interest rates go up, delinquency rates sky up, and everyone has to in this carnage everywhere, right? The pitch is very different from what people assumed would happen and what maybe is happening from what you're seeing, right? Yeah, it's a different, this is, I don't want to say this is a recession because I don't think this is a recession yet. It's a different kind of effect that you would see in a recession where people are having their homes foreclosed upon, some people are defaulting, et cetera, et cetera. That is a different situation.
And yes, in that situation, there's a lot of price drops, there's a lot of distress sales. Those do present particular kind of investment opportunities. Again, that can be positive or that can be negative in the short term, but will play out well in the long term. This particular kind of effect is very much the following. You're seeing interest rates go up, but you're seeing given most people, particularly when it was purchased last few years, has number one purchase at a lower price point, number two has generally locked in their rates for two or three years, that people aren't quite feeling the pinch.
Some people are, some people are, but it's on the margins. It's very different to a recession where you have a majority of people who are under some kind of distress. You're not really seeing that distress. And so you are seeing a reduction activity in both buying and selling, but that's more out of caution, more than a compulsion of I have to sell. My house has been foreclosed or we have to buy right now.
Yeah, and I think this is a perfect opportunity for us to dispel the myth of how much distress can happen in this place because there's a cap to it. And this is where we were running through some data on our side. And if you really break down the housing market, firstly, I thought to myself, okay, well, let's talk about dwellings. There's just over 10 million dwellings in Australia. So with that 10 million dwellings, let's talk about the two years that we've gone through of historic low.
And I know historic low is probably the most overused term over the last few years because it just kept declining. But there was about 500,000 to 600,000 transactions per annum that occurred over this last year and a little bit less in the year prior considering we had COVID lockdowns and all that sort of stuff. But let's round it up. Let's call it a million transactions over those two years between 2020 and 2022. That represents about 10% of dwellings that could have been transacted on in a very, very low interest rate environment.
That's right. So what people need to understand when they think of these interest rates, and I'm glad that you bring up that point of, yes, there are some people who are not feeling the pinch because these low rates and others who aren't. But the main thing here is that the cap at which people can feel it is very limited because of the people that were on rates that were much higher pre-2019 anyway versus the people who are on these 1 million of 10 million plus dwellings. So there's actually in fact only 10% of market that actually transacted in this extremely low rate environment. Isn't that interesting?
It is interesting, right? You add two other factors to that, that a meaningful percentage of that 10% have fixed interest rates, so they're not feeling the pinch yet. That's one. And secondly, even for people who purchased during that time, most of their equity has gone up 15% to 20%. Home prices have gone up 15% to 20%.
Their equity has doubled. So even if things are going down, they're not going to find themselves underwater. So that's why there isn't as much distress as you might see in a classic recession environment. Yeah, it's a very, very good point to mention. And when we look across the country, what we're noticing is a bit of a divergence between cities.
Cities like Sydney and Melbourne are kind of forming one bucket of movement based on what they're seeing. And then we're seeing other cities, you know, different rates of slowdown or some regional centres even picking up. So I guess on your side, as you consider what's happening around the country, how difficult has it become to now comment on Australia as a whole, right, with now the divergence? Because the last two years we've seen everything pretty much rise up now to a divergence emerging. And what are some of the team noticing on your side from this divergence and which cities sort of stand out in the analysis?
You know, I think that any credible real estate professional understands that real estate is a local market. So we will talk about, you know, macro trends. We will talk about Australia as a whole. But we have always moved, you know, in different cycles at different times. And if I speak more broadly, you know, Auckland has actually kind of led the way.
And they kind of are about four to six months ahead of Sydney and Melbourne, who in turn are about four to six months ahead of, you know, the Brisbane's of the world, who are a few months ahead of, you know, some of the regional cities, regional centres that we see. So there's two trends which I would point out. Most cities we are seeing and most states are following the same cycles just at different times. Right. So, for example, Sydney, Melbourne started to peak about six months ago.
Brisbane probably about three months ago. Other smaller regional centres, you know, are peaking now. Right. So that's why we are seeing that. So I don't think they're necessarily different or divergent so much as different timings.
Now, the thing that argues against that is there are some macro trends where fundamentally there is a sea change. You know, there is a permanent shift from Sydney and Melbourne up to Brisbane. There has been some permanent tree change from the cities into the regions. And that will mean that those cycles do not follow exactly because it's not just different timings, but actually a redistribution. The tricky thing is we don't really know how it's going to play out yet.
We don't really know. There is some evidence, for example, that some of the tree change from the cities into the regions may actually be somewhat reversing, where there are some people who move back saying, well, look, everyone's in the office. I need to be too. Or, wow, you know, this region is great, but we don't want this lifestyle at this stage of our lives. You know, it was a nice experiment, but we're moving back.
Right. So the reality is we won't know. We won't know for another 18, 24 months what exactly was permanent and what was temporary. And I'll give you another There are so many factors that go into it. What is the geopolitical impacts of Ukraine?
How deep is the inflation rate effect? You know, is it actually transitory? Or is it something that's fundamentally changed about inflationary expectations? Therefore, how long will interest rates keep going up? Therefore, how much longer will we have volatility where sellers and buyers who can wait it out can wait it out?
And therefore, how long do things keep declining? We don't know. It could already be over for all we know. It might have already peaked and the good times are back and the downswing was a few months. Or this could be the start of something very serious where we give up all the gains that we've given up over the last few years.
We don't know. All we do know is that eventually we'll return to 5% to 7% yearly gains even if you take this bad stretch along. And I think, you know, John, there's some very, very important points you mentioned on a particular piece to do with the declines. The declines not lasting that long and the uprises lasting longer in history. That's right.
It shows us this other period which we haven't talked about is that there are many periods of property either growing just above the average or just under. So what that means is it just showcases the patience people need in that in middle point as well because there can be moments of your big upswings of two to three years. There can be moments of that, you know, short performance. How many that short downturn performance, how many examples would you have heard on the barbecues of people selling too early or seeing the whole, you know, I've held it for a long time and it hasn't done as much. That's the truth, right?
I mean, there are many periods of flat. I'm not doing much. I'm doing a bit of something. I'm doing a bit of nothing. That just shows to me the importance of really taking this long term, but also that one should buy when one can buy instead of, hey, this decline, will it last X period or Y period?
Because we do both agree on the fundamental 5% to 7% long term annualized averages. Yeah, you know, I'll speak to that, Arjun, and I'll give you a piece of data that challenges a little. If there was one piece of counsel I'd have about investing in property for success, it would be set it and forget it. In some ways, train yourself to not look at the short term fluctuations because you might be scared to act. To use the Warren Buffett phrase, he says, we, you know, in his company are very, very lazy.
We don't like too many transactions. And it speaks to how little they try and do. They try to be very passive investors. To look at some of the data, generally, you're actually going through one of two stages. If you look at the last 25 years, you're going through a slight decline.
Again, the decline is the minority of years, maybe like a quarter, a third of the years, but it's going down and that hurts. That's painful. It's not a lot, but going down or flat feels bad, particularly when you're leveraged. Most of the times it's going up and it's actually generally not going up 5% or 6%. If you look at the averages of the peaks, the yearly gains for that time are like 10% to 15% per year.
So you tend to have this kind of feast or famine, which is very scary. It's very emotional. It generates a lot of fear. So my counsel is, as you were saying to your listeners, try not to time the market too much. Try and find a good place, get it, and try and aim to hold for as long as possible, ideally a lifetime.
And during that time, there's a lot of periods where you'll be holding onto the railings going, oh my goodness, it's going down. I should get out of here. And there'll be other times going out where it's going, well, it's gone up 10%, 15% last year. It's going up again. I should get out of here.
And in both things, the best thing you can do if you can help it is don't sell. And the liquidity of property, right? It just adds to that too. It's not easy or immediate to sell. It takes time.
There's a process. So we need to respect that process as well and let it really only be used when you find the moment is to consolidate a portfolio, clear some debt, all those life stages you mentioned at the start in terms of, hey, there's no choice. These are just the life stages, birth, death, divorces, things like that. So made some sage advice there, my friend, with robust. Thanks, Arjun.
I know that the markets that we've seen over the last year, one thing that's been very interesting has been the rise of the smaller capitals. Yeah. Your recent domain house price quarterly review in the report, June ending, there was the clear strength of Adelaide emerging as a huge, huge win for in terms of capital city house price growth. It actually was the fastest growing capital city, if I'm not mistaken, for the year prior. And also from a quarter perspective, it ended that quarter with a rate of growth of 3.
6% amongst houses. So this is just phenomenal. I mean, when you look at the divergence of the growth trends or the different trends in your Sydney and your Melbourne and Adelaide, what has the team noticed in terms of these smaller capitals that has been an absolute standout for why they've really started to pick up like Adelaide or if not pick up, outperform during the last 12 months like the markets of Adelaide? You know, Adelaide's an interesting example. It's one of the places I had the privilege of investing a lot over the years.
I made a big bet there actually on a certain General Motors Holden factory, which didn't quite play out, which is good learning for me over the time. But it's a wonderful city, a beautiful city, a place that attracts a lot of people because of its temperate climate. It's got some great education institutions. It's just a lovely place to live. I don't think that Adelaide is particularly special though, relative to other capital cities.
I think a lot of what you're talking about with regards to why has Adelaide gone up and others have gone down is more explained by the difference in the timing of the cycles than it is by any particular attributes of Adelaide itself. You know, as we talked about before, Auckland first, Sydney, Melbourne next, some of the bigger capitals and then some of the smaller capitals. And that's how I place Adelaide in there. Or put differently, I expect Adelaide to kind of follow the cycles that others have followed just at a more laggard pace. Now, again, I could be wrong.
I could be wrong. There might be something structurally about Adelaide which have made it particularly resilient at this time. You know, I think we've seen both for migrants, you know, and for some people in the cities, people love capital cities. They love the airport infrastructure. They love the educational institutions.
If you want good value and if you want a place that's, you know, got a place that's comfortable, that's great to have kids and you want to be in a capital city and you want to be affordable, there aren't that many places left. And Adelaide is certainly one of them. But I dare say that Adelaide will be like the others, just a bit more delayed. Yeah, it's a good point to raise in terms of following some patterns you've seen. But I think upon analysis, what we kind of noticed, just to throw some extra points out there, was that we noticed a shift in some supply trends.
And this was our review of places like Sydney, Melbourne, and then Adelaide in contrast. And perhaps this is to do maybe with some of the later periods of the cycle that we might see these markets come in. But what we noticed was Adelaide had, you know, anywhere between sort of 35 to 43%, depending on which government areas that we looked at, lower supply than pre-COVID and substantially below their five-year averages. And then we saw Sydney, Melbourne sit very much in line with their five-year averages. And maybe this could be also a partial reason of why Sydney, Melbourne started on the earlier trajectory first, because they reached an equilibrium of housing supply and demand really pulled away as interest rates increased and, you know, inflation and all these other global impacts started to play into it.
Whereas Adelaide just kind of snuck in there going, hey, we've still got, you know, a third less property for sale and a hell of a lot less properties for rent. And so as part of that, it's these perhaps trends in supply that are maybe just creating some change across results, which is what has put Adelaide in that upper place. But John, it's always good to reflect on data like this with yourself and just get to understand what's happening in domain. In that front of domain itself, what is sort of some of the new and exciting things in work for property data lovers like myself, or even just some of the sales agents and consumers themselves who are scrolling around in and around in domain and trying to see what's coming up? Can you give us a bit of a sneak peek?
Can we get some intel here on the property notes? I'll give you some intel, nothing too crazy. I think in general, we're data nerds here. We appreciate that we've got a very privileged position that we are in a purview to see what people are searching for, what they're looking for. So many of Australia's property transactions go through us, and that we have information through our price finder, which is information on the vast majority of Australian properties.
We can look at all that together and form some really interesting impacts. And so what we've been doing actually through Dr.
