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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, co-host of the Property Nerds podcast and also the head of research and director of InvestorKit Buyers Agency. Now, we have a new episode on today, the Property Nerds podcast, but we've got some exciting changes as well and some new things up ahead we'd love to announce.
So I guess to kick it off, you know, I am no longer with our lovely co-host Kent. Now, Kent has a couple of new projects on in his space and want to wish him all the best on what's happening there. So we are one nerd down, but actually we've got some excitement here. We've got another nerd back into it. So the Property Nerds are still nerding out, long story short.
Now, big part of the change as well is the direction that we want to give moving forward. We understand the importance of property and the numbers and the data, but one other thing that's often overlooked is the importance of finance, right? So, you know, finance and its importance to property is well and truly understood when you realize that, you know, you can't always buy a median property price in any market with just straight cash. It's something very rarely done and something that, you know, doesn't really exist without finance. Now, what does that mean?
It means that a lot of finance insights will be brought to the show moving forward and a lot of nerdy finance numbers alongside what's happening on the property data space that I'll be bringing forward to the podcast. But something unique as well is that it's not just any other nerd. It's actually my wife. And I don't know if I'm allowed to call her my nerd. Can I call you a nerd, Leigh?
Yeah, you can now. Well, you know, Leigh is my wife and she runs a business called Hills Finance. Leigh, did you want to maybe give us a little bit of info to the first time listeners to another nerd in the mix? Well, firstly, I think it's important to point out that there's definitely no pet names during this podcast. So I'll be calling you by the name of Arjun and you can call me by my name, Leigh.
So, yeah. Doesn't that feel strange? Like, I think, you know, probably I'm always wondering when I call Leigh by her name, Leigh, I probably get more stares at home than anything else. It's almost like it's foreign. Like, why are you calling me that?
Yeah, it's normally against the rules. But today and every podcast going forward, that's fine. So, yeah. So basically, obviously, Arjun and I are a husband and wife combo. I've had various roles in the banking network.
So basically working my way to the premier banking divisions where I was looking after high net worth individuals as their relationship manager and basically helping them grow their wealth before moving into mortgage broking, being able to fully focus on home lending. So that brings me to present where I do now run my mortgage brokerage Hills Finance and that's based out in Bella Vista in the northwest of Sydney. Awesome. And Leigh, I guess what makes you, you know, different when it comes to other mortgage brokers in the space? Because, you know, I'm sure there's a whole bunch of mortgage brokers out there.
So what makes it different for you in terms of what you do and the insights you'll be bringing to the Nerds show? Yeah, definitely. So harnessing my experience in servicing a large volume of high net worth individuals has resulted, I guess, in what many people think is complex lending and basically being able to make it as simple as possible for my clients. So example, complex income structures, multiple companies or trust structures. So I really think one of my biggest strengths is making the complex simple, but also being on the journey with clients on their property investment journey as well.
So basically having a property investing or having property investing experience and having being able to build up property portfolio of 11 properties with Arjun that we've built together across multiple states, both residential and commercial. I do think that does make a difference for my clients as I'm on that journey myself personally, too. Yeah. So with regards to investing, I think, you know, when you talk about the whole complex becoming simple, this is where me and Leah definitely the yin and yangs, because whenever she explains something so simply and it makes perfect sense, here you go, like where I come in and I'm this guy who loves to break things into a thousand different ways of scenarios, opportunities, pros, cons. And I just hit her back with the stare of, so what do you mean?
Don't we have all those moments all the time? So it should be interesting on the show moving forward where we bring the simplicity and how she does an amazing job with that, with my kind of cut it into a different, you know, a few different ways. But Leah, I guess from that perspective, what makes you a nerd? Yeah, so it's a good question. And look, I do consider myself somewhat a nerd.
So basically, when I look up the term nerd, what that actually means from what I read here in front of me, basically, it says to be or become extremely excited or enthusiastic about a subject, typically one of specialist or minority interest. And so I thought about how that relates to me. And I mean, I don't think most people get excited talking about the different lending policies and complex lending structures over dinner. So I guess that's what makes me a nerd. Yeah, yeah.
I think that's definitely an exciting to us roundtable discussion on the dinner table. But yeah, I don't know how much of our friends really appreciate it when me and you go off on tangents about trust and loans and data and hotspots and whatnot on the typical table, do we? Yeah, we can just probably talk about it forever. So yeah. Well, what are we talking about today?
We've got a few different things. So we've got a few headlines we're going to go through. We also have some interesting insights that Lee's got for us on lending indicators, which I'm very pumped to hear. And we've been hearing a lot about the Olympics as well. So I'm going to give you my two cents on the data from that aspect.
We've also been very, very grateful for a lot of questions that have been coming into the info at thepropertynerds. com. au. So if you do have any questions about property data, finance data, property strategy, don't hesitate to drop a note on info at thepropertynerds. com.
au. And Lee and I will do our best to prepare, roll in mini Q&As where we can into sessions or even dedicate a whole episode to Q&As in the coming up shows. So yeah, we have lots of fun answering questions. It's what we do for a living. So don't hesitate, drop them in and pass them through.
Now, the first headline I have here, Lee, is Australia's property market tipped to reach $9 trillion. And yes, that's trillion with a T. Now that was released with CoreLogic jointly with Domain. This is huge, isn't it? I mean, for us to move from what I recall, I used to always have that $7 trillion chart in front of me, then now we're going into the eight and potentially nine by the end of the year.
How big is really the property market, Lee, to give it some context? Yeah, so in the article, it stated that it is bigger than both the Australian stock market and commercial real estate combined. So that's largely due to prices and a large pipeline of construction. Yeah, huge changes from, I guess, the price movements that have come into it and construction too. And that number actually there is typically an important factor on just commercial real estate.
You mentioned it's bigger than commercial real estate, Australian stock market, and the superannuation space combined, right? So what that says to me is just makes it that much more harder from the market cap size on your commercial typical searches versus your residential on what stock is out there. But I think the big story from this article is the mix of supply and demand playing into these growth numbers and why Tim at CoreLogic is so confident on the fact that it may reach that $9 trillion mark. And what he mentioned there was that in July, total numbers of homes listed was 21. 7% below the five-year average.
And nationally, the sales volumes as well was 42. 6% above the five-year average. So what that shouts out is low supply, high demand in sales volumes. And the relationship between low supply and sales volumes is also that makeup of that inventory data piece that we talk about. So it really talks about how listings falling off was what we saw before to start that COVID, call it trend or COVID boom.
And what that moved on to was that the absorption rate really started picking up here, which has then increased sales volumes to now come onto the demand side of the equation. But what that absorption did alongside the lack of listings that has made a change that hasn't been seen in so many years is that total listings have declined massively. So when total listings do decline that much, I mean, when you take a look at the CoreLogic total listings data points, there is no question that that is flowing onto pricing because whilst new stock, even if it does decide to come in at a higher point, which I'm noticing in many of the SA3 regions across the country, the absorption rate is still so substantial. And what the damage that's been done in some of those listings that have been absorbed away or not coming to market, it's going to create a huge, huge amount of shift that's required in listings and reduction in sales volumes to bring it back to previous years. So that is definitely some headline that I'm going to agree with.
And Leah, I guess you'd say the same So basically, most banks are looking at a debt to income ratio between six and seven to be, that is the maximum ratio that they're looking at. So for obviously investors who end up taking on more debt for more purchases, it can become an issue for the client in some places. The other thing is there is a big gap between the different rate types and repayment types of different loans that clients might be taking on. So there's different rates for owner occupied P&I versus owner occupied interest only. And then that bumps up again for investment P&I rates versus investment interest only rates.
So what we're seeing at the moment with those big gaps between the different rate types is a lot of clients, I guess, are taking advantage of the current fixed rates. And I'm seeing more and more, even investor clients are more and more actually considering your principal and interest repayments versus just looking at the interest only. So I guess the reason for that would be that the fixed rates are very low at the moment in comparison to a year or two ago. And then again, the P&I rate is much lower again. So that's really bolstering and helping out with servicing where needed for clients.
I guess with that point though, clients who do want to take on interest only, they just need to be mindful of, I guess, the higher rates that are involved and whether they're, I guess, willing to take that on. But also taking on the flexibility of a variable rate loan that will allow them to continue to build their portfolio as well. So that's something I'm seeing at the moment. So basically there is a little bit less mobility for investors if they are going down that fixed rate route for their home loans though. Yeah, so I think it's almost like there's probably a little bit more time in between purchases during this period because for those who are considering investment loans, fixed loans, I'm assuming that with that lowered mobility, they start waiting for their bank to play catch up on the market.
Whereas bank B or bank C, if they were variable and done valuations with them, would have said, hey, look, no, three months in into this property boom here, we have seen 50 or 60K rise and our valuation is reporting it. Where sometimes the bank that they choose the best rate with to fix and stay there and they only can resort to their valuations there are saying, well, no, we're not ready to respond yet. So really good point, Lee, on the mobility, the fixed rate versus variables and how whilst fixed rates have massively jumped in terms of the use of preference, I guess it does have that other side to it where, yeah, you're getting a great rate, but you're not getting that same mobility towards scaling a portfolio if it involves multiple valuations in an aggressive time to build it, right? Exactly, yeah. So I guess the other thing that's interesting from this ABS finance numbers is that it's happening widespread.
Like there are significant percentage rises all over the board in different states. So we are well and truly across the country considering both investors rising their take up. We're seeing owner occupiers rise their take up. And I think another thing that really helps is that the refinance boom that occurred, if many people remember last year, do you remember all those cashbacks flying around, Lee? Like everyone was just willing to take out money from their pockets just to go, hey, like come with us, here's 4,000, here's 3,000.
It was like an expectation to be getting that as a client if you're refinancing, like. Yeah, it's like I don't care about how much interest rate you're saving me, where's my 5K? Where's my Dyson vacuum? Where's my massage chair? Like it was just like, it was just an Oprah show for lending cashbacks.
So I think a lot of people who did that naturally put themselves in a position where their loan repayments are recasted out 30 years, their interest rates are lower, the loyalty tax is gone. They've used interest only or P&I to their advantage. And they've also been pleasantly surprised with some of the growth that's occurred for them to consider equity and movement. So no wonder that sort of activity is showing a lot of people promise when you think of those loan commitments rising and confidence rising. So that definitely gives some signals into what's happening for the remainder of the year and even into early 22, because we're talking about advancing this ABS data out six months, right?
We're not talking three months till the end of the year. We're talking six months into early next year. So it's very likely that property price growth conditions go into it. But as you said, the lockdowns haven't been easy for many, but I do think they are much better prepared. So with regards to the next headline here or the topic of importance, the Olympics.
So we've been pretty blessed with the Brisbane, you know, taking a position on the Olympics in 2032. So you excited for that? That'd be a bucket list for us, wouldn't it? It'll be a bucket list to leave the home. So I'm looking forward to being able to go up to Brisbane and hopefully maybe attend part of it or some of it.
Well, isn't it crazy that like 2032, the athletes are probably like 10 today. So some kid running to go, hey, mom, can I have that toy at like Kmart or somewhere or anywhere is probably an Olympic superstar waiting to come up and give us some medals. So I'm pumped about it. But at the same time, we've got to be real about it, right? So what I mean by that is the impact of property prices.
So the topic is going to be hot. It's going to be used everywhere possible for marketing brochures, house and land package, you know, data points and everything that they can think of to say, buy this property off me. But I got to say, we need to act with some caution. And by caution, I don't mean that this is bad for Brisbane. But what I do mean to say is don't be led to easily believe that it's the biggest game changer.
So I think from the data that I'm looking at, here's a few key things to point out. Prior Brisbane gaining the Olympics, property markets had already been moving double digits as per CoreLogic's insights on price movements. And it's clear to show that even before this announcement, we were well and truly into a boom, a long awaited boom for the Brisbane property market. So to have an alignment or a correlation, which we test many times in data and say that the Olympics will do X, that is A, already booming prior and B, 11 years out and C, on a budget, that doesn't make sense. So the first thing is let's not align that with the performance today.
The second thing is let's take a look at the past. The great news is the Olympics aren't something new. They are something that has happened before. And I think just to keep it local on home grounds, if we take it back to the last time we were blessed with some Olympics in 2000, the leading performance in terms of the period in which everyone feels the biggest growth is likely to happen, take it the three to five years leading up to it, our friends in Melbourne outperformed us here in Sydney. So you think of being a Sydney sider and look at all the spend that happened during that time, there is a suburb called Sydney Olympic Park.
There is train stations, there is improvements to stadiums, aquatic centers, everything that you could think of that goes, this is making my city change occurred. And even during that time, we saw price growth outperformed by a city that wasn't taking the baton from us on all that change. So I think it's not something that you can clearly align to a city and go, this is going to outperform as a result. All I would say is if you break it down, there's going to be two improved outcomes, an element of improved sentiment because it's another thing that we can talk about for people who are waiting for growth to occur. And the second thing is there is going to be improvements in infrastructure, but how impactful that infrastructure is to the relative growth, how much more supply does it allow for zoning around key infrastructure pieces to occur, and how much of that infrastructure is actually city changing, landscape changing, the opinion or sentiment on Brisbane as a city changing, that's really up to the vision of leaders, that's really up to the delivery, the time, the spend, and what can be done around it to support business.
And I don't think that's as simply explained or agreed to just by whacking on, hey, the Olympics are coming here, right? That must be the reason. That exactly is, right? There's too much surrounding it. Too much add-on factors.
Totally, totally agree with it. And so my rating is that we are in a property price boom in Brisbane as we speak. We are likely to see improved sentiment as a result of the Olympics, but nothing is screaming out at me that the result of the price growth over the years ahead is to do with the Olympics, and forecasting out a cycle talking 2030 to 32 or 28 to 32 is very, very irrelevant based on the data available today. Usually some of the metrics are moment in time and give us a good lens for the one to three years, but not so much going out to eight to 12 years. So that's our thoughts on the Brisbane Olympics.
Would you agree there, Lee? Yeah, like completely. It makes complete sense that there's so many add-on factors, not just the Olympics. It's everything that comes with the Olympics that will impact the property market overall. Yeah, and there's just too many pieces moving for it to be based on that making it a successful outcome or not.
So this leads us on to the final two pieces of today, which is another article by CoreLogic. So CoreLogic has released the listings and sales to new listing ratio. So for the three months average to July, so It's selling for a whole 18 to $40,000 more. Isn't that huge? Yeah, it's crazy.
So this is where you've got to be careful with indexing because you can't assume that this is going to happen forever. It will not. But looking at the data Lee pulled up earlier on ABS advancing out six months, this is the sign to say that over the next six months, we're definitely likely to see that finance commitments translate into price growth. But also now taking a look at CoreLogic's dwelling sales to new listings ratio, from 1. 2 low points in our capital cities up to a two, the demand is at its strongest in the country from listings to price ratios in Adelaide, moving very strong in Sydney and some of our other cities as well.
And Brisbane, as I mentioned earlier, sitting at that 1. 3 mark, very healthy. So that really confirms the supply position we're in and how those total listings that have just been swallowed up due to the new listings falling and more buying occurring is putting us into a shortfall of supply. Now Lee, I know when we think about price growth, the thing that probably makes you go, oh no, here we go again, is when APRA starts coming into the mix of things and thinking of, do we put brakes on this? Do we change that policy?
Do we change this policy? What happens in your world when you start seeing some of these policies change and start to impact lending? And how does that kind of change in your world? Yeah, so how APRA, I guess, impacts a mortgage-broking business from day to day. So when APRA is tightening up, we see actually a lot of clients in a rush.
And there could be a couple of reasons for that to get their applications in. Number one is obviously there's a lot of policy changes that come with APRA changes. And then if you've got clients with expiring pre-approvals, there's a bit of a rush to make sure that we're updating pre-approvals or reapplying for pre-approvals before the cutoff of those policies. So that's one big thing. Another thing is a lot of buyers do seem to hesitate to go onto the market when that happens, when changes with APRA happens because of the- Good old sentiment.
Yeah, that's like people just go, oh my God, this is happening. So naturally it's a big change, isn't it? Yes. So basically, and there's always a lot of talk about it in the media at that time when these things happen. So again, it changes clients' perception of what's happening in the market.
And that's a big thing there. Well, just an example of that, Lee, is if we go back to Sydney and Melbourne, right? What happened during 2018 and 19, you had a combination of lender changes, policy changes, APRA comes in, negative gearing, policy talk, all these things. And many people are quick to forget this because it was such a short time period, but I saw declines in the Sydney market and Melbourne market, as an example, ranging from 6% to 15% just in a year and a half. So it just shows you how crucial lending is to the journey, right?
But I know me and you talk quite offline about this is, what about the structural changes that come from some of the lending changes? There are huge things that can come in if an intervention comes just because price growth is occurring. Yeah, so APRA should basically be focusing on lending structures, not property price growth. So because people should have a choice to grow wealth or not, pending the lending standards are okay. So yeah, it shouldn't be based on property price growth.
Yeah, I totally agree. I think lending standards is the key here, right? There are meant to be booms, falls, stability in markets. It doesn't mean that every year we should just be rising 1% to 2% and everything happens. Demand and supply should have a whole bunch of changes as time goes on, but it shouldn't be driven by, we need to come in and structurally change lending because your property did well or this market did well.
That's a choice. As long as lending standards exist, it's just the choice that's increasing. But I can agree where it's a double standard to look at and is it too open for lending? Is that causing that? So it's not an easy job, but I do feel that that's where the focus should be on and not the price rises necessarily.
Yeah, that's a very important way, I guess, to wrap up that piece, Lee. And with regards to the final segment or final piece of today's show, I just wanted to give a shout out to, again, a few people who've checked in and give us some questions. And one of the questions I actually wanted to shout out was one that we received. And that question was very interesting. So Leonard, thank you for throwing that over to us.
And it mentioned that, look, Arjun, some of your notes on inventory levels, is it a moment in time metric which measures how things will be short term, but not how things will be in the long term? How would you distinguish a hotspot from a location with more solid fundamentals in the long term? In other words, does the metric filter out locations such as mining towns, which are hot for now, but not in the future? How does this metric take into account future potential changes in demand? So great question.
Thank you for submitting that through, Leonard. So my answer on this from the property data sides of things is you are spot on. Inventory levels is a little bit of a moment in time. And this is where we look at inventory levels from both a today snapshot and also its trend. Now, its trend, what we found, has a forecasting impact for six to 12 months with some decent accuracy.
There is some improvements there in markets when inventory trends down at a healthy number for prices in the following six to 12 months, even at a three to six months in some markets that we've seen in the coastal region. So it is definitely short term driven. But this is where it's important to really talk about what the hotspot versus fundamentals mean. Because when we assume that fundamentals and what that is, we're looking for things that are easy to talk about and usually feel good. And that's not the way to look at fundamentals.
For example, you mentioned, Leonard, in your question, overseas migration, changing interest rates, credit policies. Well, changing interest rates and credit policies, if that's a blanket effect, is there a fundamental location that is impacted by it then? Not really, right? So I would say that fundamentals is an interesting topic because when you look at market growth and you stretch it out long enough, I'm talking not Darwin for five years during 2012 to 2017 declining heavily, not even 10 years for Brisbane having a slow 2010 to 2018-19, right? I'm talking if you stretch it out 20 and 30 years, you start to see that almost all or if not all of our capital cities, for example, and many more regional cities, the average between that 5% to 7% annualized growth, right?
So per annum, 5% to 7%. So then you'd question yourself and go, well, there's not a whole bunch of people moving into Adelaide. How did that fall into the 5% to 7% range? Well, it did. There's not a whole bunch of population growth or things happening in Darwin, but it still did grow towards that 5% to 7% in the long 30-year term.
And that's in line with your Sydneys and Melbourne. So what I've come to realize is that over the long term, most of these metrics don't play into its impact because over the long term, they go through various ups and downs in demand and supply in short periods. And overall, those short periods stretched out with their periods of boom, decline, and stability tend to be some pretty healthy long-term growth. So really, if you think about it, the time in market solves a problem for many people when you think of that 20, 30-year and beyond. So really, would you not want to make the best decision you can for timing of the market over a short-term period using data indicators like inventory levels to de-risk, reduce opportunity cost, increase a competitive environment?
Because that's where growth occurs. Growth does not occur in lack of activity. It occurs in high activity, leading volumes of sales, lowering listings, falling days on market, these types of things. So yes, it is a moment in time metric. But as you go through making decisions, it should be the best moment in time as your first focus.
And then the second thing is you did mention a few things like mining towns and so forth. They are more risk mitigants. If you feel like there's a bit of diversity in employment, and diversity in employment does not mean size of jobs, size of population. You could have diversity in employment in Albury-Wodonga and Wagga Wagga and a few other cities. It doesn't mean that they have to be a major town.
Diversity in employment can occur from smaller things. But I would say if you're talking about solid fundamentals, you could probably stretch that term to a medium term rather than a short term six to 18 months, which is the metrics and showing pressure. You'd probably put the fundamentals of jobs, credit, building approvals, migration, all of these into various demand supply confidence categories. And over the short to medium, when you stretch it out to say a five-year term, the picture of job vacancies rising, economic strength, all of these things can come into a better fundamental decision, not just one that's driven by inventory. So I hope that helps separate that kind of comforting statement everyone talks about of migration, population growth, fundamentals.
