[00:00:06.08] - Hi everyone, and welcome to episode 104 [00:00:09.00] of the "Rewarding Property Decisions" podcast. [00:00:11.04] Well, I looked at last year's spring report today [00:00:15.01] just to refresh my memory and see how accurate I was, [00:00:18.04] and it did feel a bit like "Groundhog Day" [00:00:20.03] with some of my introductions and commentary. [00:00:22.08] If I go back through them, it was, [00:00:25.01] the weather's starting to change. [00:00:26.02] Well, it's certainly been great in Melbourne [00:00:27.05] over the last two weeks. [00:00:28.06] It's really starting to come around, which is good. [00:00:30.09] Footy finals are on the horizon [00:00:32.08] and just like last year, the Bombers are nowhere to be seen. [00:00:36.03] So, got my Septembers nice and free to focus on property. [00:00:41.03] And the market's starting to warm up. [00:00:42.09] Last year it was probably more from a supply perspective, [00:00:45.04] which is again the case this year, [00:00:46.07] but there's a few other differences. [00:00:48.02] So that's what I wanted to focus on today, [00:00:50.04] is what are some of the differences [00:00:51.06] and how is the market starting to change, [00:00:53.05] which is generally, I think, from a positive perspective. [00:00:57.03] And we also wanna have a look back at what's happened [00:00:59.04] so far this year to generate those thoughts [00:01:02.00] and why we might be thinking that way. [00:01:04.03] So obviously that sort of brings in [00:01:06.01] what our observations have been [00:01:07.04] and then what our expectations are gonna be. [00:01:09.00] So that's how I've divided up the spring report today [00:01:10.09] to go through those two. [00:01:12.06] So let's start with the observations [00:01:14.01] and what we've noticed so far this year. [00:01:18.00] Really, it's been quite interesting. [00:01:21.02] Things are starting to improve. [00:01:22.06] We've seen a bit more activity, [00:01:23.09] a bit more positivity around the market, [00:01:25.07] which has been really good. [00:01:27.01] And we are expecting, or we were expecting [00:01:28.09] at the start of the year, for conditions [00:01:31.09] to start to get a little bit better. [00:01:33.06] That wasn't necessarily going to revert to price growth [00:01:36.07] through the first half of the year, [00:01:38.04] but usually you need to see a bit of positivity, [00:01:41.01] some more competition at auctions, more participants. [00:01:43.09] And once people start to see that, [00:01:45.05] that's when they lead to the next stage of, [00:01:48.00] okay, prices start to move [00:01:49.03] because I've been missing out on certain properties. [00:01:51.09] And that's generally how things have gone. [00:01:53.07] The market's been a bit more competitive. [00:01:55.07] There's been a few more buyers around, [00:01:57.02] there's been a few more numbers at auctions. [00:01:59.03] The clearance rate's starting to get a little bit better, [00:02:01.02] which we'll get to a bit later on. [00:02:02.07] So things are starting to move. [00:02:04.07] The other thing that we were hoping for [00:02:06.03] at the start of the year which has also come to fruition [00:02:08.09] has been interest rate cuts, [00:02:10.07] and that certainly came about in February and May. [00:02:13.09] We had 25 points each. [00:02:15.09] I'm recording this on the Monday. [00:02:17.06] The expectation is that there may well be [00:02:19.03] another interest rate cut this week, [00:02:20.08] so we'll wait and see how that's come. [00:02:23.03] But that's definitely been required, [00:02:25.05] particularly in Melbourne. [00:02:27.06] We've needed some form of circuit breaker, [00:02:29.07] and hopefully the interest rate cuts [00:02:31.00] is going to provide us with that. [00:02:33.06] But some of the things [00:02:34.08] that have come out of this and what we've really done [00:02:36.06] and looked at particularly over the start of this year [00:02:39.05] is break up some of our own data [00:02:41.07] and our own enquiries to try and get a bit of an insight. [00:02:45.00] And what it's shown has been really, really interesting. [00:02:47.03] So, we break our enquiries into three categories. [00:02:50.00] So we've got home buyers, we've got investors, [00:02:52.07] and they're both from a buying perspective, [00:02:54.06] and then we've got disposals, which is our vendor advisory [00:02:57.00] where we assist our clients to sell. [00:02:59.06] Now, we looked at this back to 2022, [00:03:02.04] which was basically the end of the COVID pandemic, [00:03:05.01] and it was really showing some interesting numbers. [00:03:07.01] So over that time, [00:03:08.07] our investor enquiry numbers have steadily trended downwards [00:03:13.02] in terms of a percentage of our overall enquiry. [00:03:15.07] So in 2022 they made up 47%, [00:03:18.03] in '23 they made up 37%, [00:03:20.07] and in 2024 they made up 32%. [00:03:24.03] And that was until this year [00:03:26.02] where there's been quite a change. [00:03:28.03] So for 2025, we've seen a spike, [00:03:31.03] and our investor numbers have gone up to 53% for this year. [00:03:36.03] And that's come generally at the expense [00:03:38.04] of the disposal side of things. [00:03:41.00] The home buyers have remained fairly consistent [00:03:43.04] over that period of time. [00:03:44.09] But from a vendor or advisor [00:03:46.02] and from a a disposal side of things, what we've seen [00:03:48.05] is that there's been quite a bit [00:03:50.03] over that period of investors, [00:03:52.08] particularly Victorian investors who are looking to sell [00:03:55.00] because either properties haven't performed [00:03:56.04] as they would've liked them to [00:03:58.02] or they've served the purpose [00:03:59.07] and they're needing to to get out of the marketplace. [00:04:02.03] But that's been for the last two years [00:04:04.05] and I think it's now starting to find its level. [00:04:06.03] Most of those people that wanted to sell have done so, [00:04:09.05] and now it's starting to find [00:04:10.08] a bit more of a balanced section. [00:04:12.07] And so the market is starting to balance, if anything, [00:04:15.04] perhaps back from a buyer's market [00:04:18.06] into a bit more balanced circumstances, [00:04:20.03] which is what the clearance rate, again, is telling us. [00:04:22.09] So, this switch in investor mindset, [00:04:25.03] where has it come from? [00:04:26.02] What's been driving it? [00:04:27.06] Why has there been this switch? [00:04:29.05] And has really been just this year, [00:04:31.02] where it's really noticeably gone up. [00:04:33.06] Well, again, so what we've done then is analysed out [00:04:36.04] that specific investor enquiry. [00:04:38.09] So where did they sit previously? [00:04:41.07] What were the numbers there? [00:04:42.07] So what we've done there is we've broken [00:04:44.03] that, the investor enquiry, into three different categories. [00:04:47.01] One of them being Victorian investors, [00:04:49.05] another one being interstate investors, [00:04:51.02] and the third one being international investors. [00:04:54.02] And that's brought about some [00:04:55.04] really interesting facts as well. [00:04:56.06] So the international investors, [00:04:58.03] that's been pretty stable that whole time. [00:05:00.09] It's around 4 or 5% [00:05:02.04] over that same period from 2022 till now. [00:05:05.09] But the interesting part has really come about [00:05:07.06] when we compare the Victorian [00:05:08.08] versus the interstate investors. [00:05:11.01] And the Victorian numbers have dropped from back in 2022 [00:05:15.01] from 78% of total investor enquiry [00:05:18.06] down to 39% of total investor enquiry. [00:05:21.06] And from an interstate perspective, it's gone from 17% [00:05:24.08] up to 57% of total investor enquiry, [00:05:28.02] which marks the first time in my career [00:05:30.06] where invested demand in Melbourne has been led [00:05:33.07] by interest from outside of the state, [00:05:36.03] which is a really, really interesting thing. [00:05:39.00] So what's brought that about? Why is this the case? [00:05:41.04] Well, let's start firstly looking at Victorians [00:05:44.02] and why they may perhaps not have been [00:05:46.07] as interested in investing. [00:05:48.06] And they've probably experienced [00:05:50.04] over a period of time [00:05:51.06] an environment whereby property hasn't been great [00:05:55.02] and the environment around buying and holding property, [00:05:58.04] particularly from an investments perspective, [00:06:00.03] has been quite negative. [00:06:01.05] And a lot of the talk around it [00:06:02.09] and a lot of the actions around it have been quite negative. [00:06:05.05] And that's things like obviously increasing land tax, [00:06:08.02] which we've spoken a lot about in the podcast, [00:06:11.00] the short-term rental tax [00:06:12.07] or the Airbnb tax which has been implemented, [00:06:15.06] increasing of minimum rental standards, [00:06:17.05] which has been not a one-off thing, [00:06:19.08] it's been a gradual, [00:06:20.06] there's been two or three changes [00:06:21.09] and there's another one coming at the end of the year [00:06:24.05] in terms of lifting minimum standards, [00:06:26.03] which, all of these things on their own [00:06:28.06] are things that can be worked through, [00:06:30.00] and in some circumstances, [00:06:31.01] like the minimum rental standards, [00:06:32.09] are positive things. [00:06:34.01] But these are a lot of things that have occurred [00:06:36.03] over a relatively short window [00:06:39.03] that have made things quite difficult. [00:06:40.08] Obviously interest rate rises as well. [00:06:42.04] And then the fact that there's been minimal capital growth [00:06:44.09] means that people are hesitant [00:06:46.04] to either buy property in Victoria [00:06:48.06] or actually hold onto their properties. [00:06:51.08] And that's led many investors [00:06:52.08] to exit the market rather than buy into it. [00:06:54.08] So then we look at the interstate [00:06:57.02] and why they may actually be coming into the marketplace [00:07:00.00] and looking at Victoria. [00:07:01.07] Now, a lot of interstate, [00:07:03.01] particularly those in capital cities, [00:07:04.06] have experienced really strong capital growth [00:07:06.09] over that sort of COVID period to now, [00:07:09.03] so 2020 to 2025. [00:07:12.02] Adelaide and Perth particularly [00:07:13.07] have been upwards of 70-plus percent [00:07:15.06] in terms of their capital growth numbers [00:07:17.01] over that period of time, [00:07:18.00] which is really strong. [00:07:19.03] And what that does is it leads to significant building [00:07:21.09] of equity in existing properties that you may own there, [00:07:24.03] whether it's a home [00:07:25.05] or whether it's another investment property, [00:07:27.03] which can then be used [00:07:28.05] and redistributed into other investment assets. [00:07:31.03] And property's obviously another one of those. [00:07:33.07] Rents in those capitals have also continued to rise, [00:07:36.01] which has also helped to sustain that. [00:07:39.02] But they've just had a generally far more positive [00:07:41.02] experience around property. [00:07:42.03] There's been a far more positive mindset, [00:07:44.04] and because of that positive experience, [00:07:46.06] they're now feeling a bit more encouraged and supported [00:07:50.00] and wanting to continue that journey. [00:07:52.06] Because of that, they're looking for alternates [00:07:54.09] and other opportunities, where's going to be the next spot [00:07:57.09] that I can invest my money and perhaps do quite well? [00:08:00.06] And that's really where Melbourne starts to come into play. [00:08:03.08] We've spoken about this on the podcast [00:08:06.01] around this time last year. [00:08:08.02] I put out a podcast suggesting [00:08:09.07] that I thought Melbourne was quite good value [00:08:11.04] at that point in time. [00:08:12.05] And I think what's starting to happen [00:08:14.05] is others are starting to realise this [00:08:16.03] and they're seeing that there's opportunities [00:08:18.02] to be had there. [00:08:19.08] Some of the things rather than just the negatives [00:08:22.00] which we've spoken on and the concerns that people have had, [00:08:24.06] people are looking at Melbourne [00:08:25.05] also from an opportunistic perspective. [00:08:27.03] And that's things like the fact [00:08:28.08] that it is still very much seen on a global scale [00:08:31.05] as a very strong international city. [00:08:33.08] It's highly sought after. [00:08:34.09] It's got a really strong economic environment. [00:08:39.07] The education facilities here are second to none. [00:08:41.08] We've got fantastic public and private schools. [00:08:44.02] We've got really good universities as well. [00:08:46.05] And the lifestyle opportunities, [00:08:48.00] I think last time I checked it, [00:08:49.04] Forbes magazine had voted Melbourne [00:08:50.09] still the fourth most livable city in the world. [00:08:53.00] So that is still a lot of positivity there. [00:08:56.01] The population growth is continuing to be forecast [00:08:58.07] to grow and grow and grow. [00:09:00.01] So that's going to put more pressure on prices. [00:09:02.07] And one of the main things [00:09:04.03] which we have spoken about before too [00:09:06.00] is that the median house, [00:09:07.09] sorry, median dwelling prices for Melbourne at the moment [00:09:11.07] are not sitting where they traditionally would sit [00:09:14.01] on a national scale. And people looking at that and saying, [00:09:16.05] Well, most of the time, [00:09:18.00] Melbourne sits above Perth, Adelaide, [00:09:21.04] Brisbane I think is getting to a point [00:09:23.04] where it's holding its own and will continue [00:09:25.02] to be up there, [00:09:26.00] but Melbourne's not sitting where it should be. [00:09:27.09] Even sitting below Sydney, [00:09:29.07] the gap there is considerable, [00:09:31.01] whereas for a while there, it was actually closing. [00:09:33.06] So I think there's a lot of things there [00:09:35.07] where people are looking at it [00:09:36.08] and saying, "There's opportunities to be had [00:09:38.06] and we need to get in now before we miss out." [00:09:42.04] So what are the expectations off the back of this [00:09:44.04] in terms of what we've observed [00:09:46.02] and now what is likely to happen for the balance [00:09:48.00] of this year and into next year? [00:09:49.08] And the spring is always a really good time to look at that. [00:09:53.01] In the past, when we've seen conditions [00:09:56.05] like we're seeing at the moment, [00:09:57.09] so that's things like constantly increasing rental returns, [00:10:02.03] reducing interest rates, [00:10:03.09] the suppressed values over an extended period of time, [00:10:06.04] which we've seen in Melbourne for a long time now, [00:10:08.09] and obviously yields therefore increasing, [00:10:12.00] the market usually moves. [00:10:13.06] And when it does, in these circumstances, [00:10:15.06] it can move quite strongly. [00:10:17.07] So the supply through the winter [00:10:19.06] is a really important thing to look at. [00:10:21.05] It's actually been reasonably good. [00:10:23.01] It hasn't been over the top, it hasn't been strong, [00:10:25.03] but for a winter period, it's actually been okay. [00:10:29.01] And the demand, as we've said, is continuing to build. [00:10:31.08] There's more and more enquiry, there's more competition. [00:10:35.00] And what the testing factor will be, [00:10:36.06] that supply will really start [00:10:38.04] to ramp up basically from now onwards [00:10:40.07] going into the spring market. [00:10:42.02] There's always a significant increase [00:10:44.05] in the back end of September, [00:10:46.02] noticeably through October and into November, [00:10:48.08] and then depending upon how the market performs, [00:10:50.07] whether it will run right through December up to Christmas. [00:10:54.03] But that increase in supply [00:10:56.00] will really test that level of demand [00:10:57.07] and whether or not it's there. [00:10:59.03] At the moment, the clearance rate has been growing, [00:11:02.02] it was around the mid- to high-sixties through Autumn. [00:11:05.05] It's built up to into the early seventies now. [00:11:08.06] If it can sustain that [00:11:09.09] or even sustain, say, a high sixties [00:11:12.07] through the majority of the spring market, [00:11:15.06] my view is that that's going to lead [00:11:17.01] to a pretty strong opening into the 2026. [00:11:19.08] And I think that's when we could start to see [00:11:22.00] some pretty strong growth patterns [00:11:23.04] into the new year. [00:11:25.03] Particularly, if we see further interest rate cuts, [00:11:27.05] which as I said, I'm expecting another one [00:11:29.02] or the economists are this week, [00:11:31.03] and there's more than likely going to be another one, [00:11:33.05] maybe even two for the balance of the year, [00:11:36.08] signs are that these are positive conditions [00:11:40.02] that are likely to see Melbourne driving. [00:11:41.08] And what we're seeing at the moment [00:11:43.04] is because there's starting to be that strong interest, [00:11:47.08] it is really being driven by the interstate investors. [00:11:50.08] That's where this strength is coming from. [00:11:53.01] And it's giving confidence, [00:11:54.02] and hopefully what it will do is start to give confidence [00:11:56.08] to local buyers domestically [00:11:59.04] from around Victoria and Melbourne. [00:12:01.04] And they'll then just want to rejoin the party [00:12:03.03] and start to come back in from a positive point of view. [00:12:05.09] And that's when hopefully the market will start to turn [00:12:08.04] and we'll start to see some more positivity. [00:12:10.05] But the question will really be, [00:12:11.09] how does the spring market perform? [00:12:14.04] Is that increase in supply going to be sustained, [00:12:17.01] or is the demand going to match the supply [00:12:19.03] that's come through? [00:12:20.04] And only time will tell, [00:12:21.03] so we'll have to have a look at that [00:12:22.03] and keep a close eye on things [00:12:23.05] and keep tuned into the podcast and you'll see. [00:12:26.05] That's about it for episode 104. [00:12:28.07] Thank you very much for joining me. [00:12:30.07] If you're interested, [00:12:31.06] we are now producing the podcast for YouTube, [00:12:34.01] so you can watch as well as listen, [00:12:36.08] depending upon what you prefer. [00:12:38.00] So please come and subscribe to the YouTube channel. [00:12:40.02] We'd love you to get involved there as well. [00:12:42.05] Otherwise, keep please pushing out, [00:12:44.03] subscribe on the podcast channels, [00:12:46.08] push out the podcast or the YouTube channel [00:12:49.02] to any friends or family who may have interest in property [00:12:52.00] and think that this might be valuable for them. [00:12:54.00] Otherwise, if you'd like further information, [00:12:56.00] visit our website, wakelin.com.au. [00:12:58.00] Otherwise, we wish you all the best [00:12:59.00] with your property decisions.