Suburb Trends August 2021 | The Tightly Held Index

What is the correlation between value and property being held long term?
In this episode, we chat through our favourite new metric, the ‘tightly held index’. This metric quantifies the amount and type of property that are currently held long term including additional data points that maps out the possible reason for these properties being tightly held.

Kent breaks down the data of recent suburb price movement, looking out how the demand for regional property has shifted from 2 months ago. We also scope out the Brisbane market and the future of this relatively infant capital city market.

Here’s what we covered:

What is the tightly held index?
How does this index predict future property movements?
What are the potential causes for the property being held long term?
What changes in the market will increase the supply of property?
What areas have the lowest stock level?
Why are specific properties being held and are they worth holding?

LINKS:
www.suburbtrends.com
https://www.suburbtrends.com/suburb-reviews

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan
Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT:
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded in August 2021.

Veronica Morgan: This is our suburb trends report for August, 2021. And we'll be looking at where prices are moving across the country, either up or down and why they're moving in this episode, we'll also be discussing the tightly held index and a deep dive into why some suburbs and property types are more tightly held than others.

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates: And I'm Chris Bates mortgage broker,

Kent Lardner: And I'm kit.

Chris Bates: Before we get started, I need to let you know that nothing we say on you can be taken as personal advice. We always recommend you engage with the services of a professional.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free full forecast report, which experts can you trust to get it right? The elephant in the room.com did I use

Veronica Morgan: Phyllis said, I just love to tout a tightly held pocket in their advertising. Copy. It's all about scarcity. Of course. And we know this is a key factor in price growth. This month, we've asked Kent to see what we can learn from looking at the tightly held index out Kent. Did we invent that term? And I forgot.

Kent Lardner: I think it's a great one. Let's let's own that we're owning

Veronica Morgan: It. We have, we just created the tightly held index. So tell us about your research into this. What have you found out or how have you found

Kent Lardner: Out? So what are these? I took a one week sample of properties that have been listed for sale from last week. And I whittled that down to just over 300 that I could pair it up to a last known sale. Now you've always got some data blips in that stuff. Okay. So, so once you allow for some data blips, what I then do is I crunch it through a pretty simple model. So it's not as if I spend days on it. It's just a quick and dirty model to try and identify what are some of the more important fields that identify or predict years owned. And I think there's some captain obvious in there, which is the number one property type apartment. So that's so, so in terms of field importance, in terms of the overall model, what we can see is the, the ones, if you're owning an apartment, they're the ones that are turning more rapidly. And if you're owning houses, especially if you're in some of these rural remote locations, they are the ones being held for the longest period based on last week sample.

Chris Bates: So if you're any idea of how much the apartment or, you know, non detached, I guess, townhouses as well, you grouping them with apartments or are you grouping them with houses?

Kent Lardner: Well, I group them with apartments, but you know that there is an interesting thing. One of you remember that, how we looked at that report on REI you know, we, we had a squeeze of that. And if you look at the top five suburbs that they had in that particular report, it was a really interesting thing. There's a place called princess hill on their top five, which was owned for 21.7 years on average, what was really interesting there that throws a lot of this stuff out and kind of says, maybe there's a lot of spirits noises and all of this stuff, but it was a 50% townhouse. So it's not something that you could kind of say in that top five list, is it driven by it being all freestanding homes? Well, princess hill Victoria seems to throw that whole theory right out the water.

Chris Bates: It's a princess. There was actually that there is an account north in Melbourne. So a lot of those townhouses will be sort of little cottages, a little nice frontages that are all linked together. So they must, they're not those typical sort of new townhouses that you see, but I imagine it'd be all those, literally all those nice, beautiful frontage that are sort of linked. What do you call those Veronica? What do you call them in your not terraces, but they're sort of single level kind of like cottages still

Veronica Morgan: Stuck together. Even if they're only single level, I still call them a terrorist, but even I sort of distinguished and say a modern terrorist if it's sort of Victorian terrorists, but it, but like every rule in property though, there's an exception isn't there. And I guess if you focus on the exceptions, you can learn a lot. But the reality is that sort of, you know, the 80 20 rule, the 95% rule, you know, that's an anomaly by the sounds of it. We normally talk about the anomalies at the end, we've jumped the queue. And I will say too, you know, if this topic, you know, you're thinking why talking about this? And obviously tightly held index for us is really important because it does get to the knob of capital growth really. And which is a really important concept when it comes to property investment, we are going to also go back to Kent's favorite metric a little later in this episode and really to review of all the capital cities where they're up to right at the minute as well. So just bear with us because we are getting to that. So back to the tightly held, so princess hill doesn't necessarily give us that's exception to the rule. Can we just sort of write it off as a glitch, as an anomaly? So what are some of the other things that you discovered through this

Kent Lardner: Though? Yeah. Yeah. So the variables of interest were number one, if you're an apartment, that's the big driver and they, and we've, we spoke about that last show where a lot of those do turn over. A lot of them are owned by rentals, but equally they're used as a stepping stone, et cetera. So we've all been down that road. So number one by a long shot is if it's an apartment the next variable of interest was inventory levels. So that effectively the, the, where the inventory level of where that market was about a year ago. So that was interesting. So what that tells me is if the markets are hot or cold is a driver for whether somebody sells their property, according to this small sample and simple model. So that was in,

Veronica Morgan: So you're saying from that, that areas. Okay. So yeah, given a year ago was sort of COVID land. You could almost, I mean, we're still in COVID land. You could imagine that in Melbourne, for instance, there wasn't much activity. So if you comparing a property now to a year ago, I'm a bit confused, actually.

Kent Lardner: Yeah. So what we, all, what we're doing here is we're just talking at an abstract level, the same, what are things that go into the invoice in the simple model that are making, making, trying to make sense of a lot of crappy data. So, you know, and, and, and the, the big standouts obviously, and that when you, when you do a list, then you, you sort them from years owned down, you get some insights into it, but by and large, this is not a clean, simple thing.

Veronica Morgan: So are you saying then that, oh, you're suggesting that tightly held can be a function of a crap market? Is that what you suggested

Kent Lardner: Function of a crap market or a booming market? And we saw an example of that was one that we did the analysis of a little bit more of a deep dive for an article ID for the IFR. And we found that a number of places where things had really rocked on in terms of price increase, there was a higher proportion of ex rentals hitting the market. So now they've got some of these interesting things. So you've got scenarios where people sell for a reason, and those reasons could be extra hot, or those reasons could be extra cold and I'm in financial trouble.

Chris Bates: So, yeah, as markets looking like getting better prices, it encourages more people to sell, right? So you'd expect as markets rise, it encouraged people to sort of take their profits, not just investors, but you know, people who want to do upgrades. And so, you know, as later on in booms, you, you expect to see supply increasing and that would encourage people to be in the properties longer to sell. Is that sort of what you're saying is that people are making bigger profits are getting charged to sell. So the harder the market gets, the more likely people are going to sell. Well,

Kent Lardner: It certainly was the case in, in one particular location that stood out, which was near Eucrisa, was up at mainly in the Waringa pocket, where there were a number of ex rentals being sold, people cashing in. So that was, that was rather interesting, which kind of dovetails into that next variable of interest, which is tenured rented. So the higher, the rental tenure, the more influence that has on the model, I E how many years owned. So obviously that's an inverse relationship

Veronica Morgan: Marries up very well with the full of forecast reports. Everybody knows my favorite report, but maybe the tightly held index may take over because, you know, in terms of loss-making sales, you know, the number one loss making sale, you know, easy in apartments versus houses. And also there's a turnover of investor stock versus owner-occupier. So therefore investors are more likely to incur a loss, you know, so there's this some correlations with the us, but tightly held, then there's two aspects of tightly held. I'm, I'm sort of seeing here. One is, it's a function of financial pressure, but the other one is how good the asset is. So can we separate those two things out? You know, is that making it even more complicated?

Kent Lardner: Yeah. look, the answer would be, yes, you'd need to spend a bit of time on it, but he's a really interesting one that highlights that Taren point. I would call it a fairly blue chip suburb, a small one, and that was number one in that REA survey. And that was the number, and that was on the 22.7 years. So I think that's a good example. And that was 54% fully owned unencumbered, no mortgage. That was so that's a standout, but you know, when you look at that guy said, ah, I'm onto something here. And then you suddenly go down their top five, you know, owned suburbs for houses, and that doesn't apply. So to your point, Veronica, there are nuanced nuances and nuances on top of this. Oh, it ain't easy. Do you know Taren point? I do. It's a small, small place.

Veronica Morgan: I used to work in terrorem point using his new years ago. I worked at Toyota and that's where the head office was. And I don't even know if it might still be there. So there's quite a lot of industrial property, interim point it's, I wouldn't say it's very nice to be quite honest, but it is on the Georges river. So there's a lot of waterfront and, you know, and so the family type home and that sort of, that type of property, I would imagine would have a longer tenure than say, you know, your normal bungalow. Would that be a fair assumption?

Kent Lardner: I'll tell you a question I've got, how long has the Taren point bridge been installed for? Because before that it was the Tom ugly bridge, right. And that area would have existed. A lot of those houses on the waterfront there would have existed back in the day before that heavy commercial build happened in and around Heron point

Veronica Morgan: And knocked down potentially to beat, to be, I don't know who knows, but yeah, that breach caught like the Taren point bridge myself tonight. You know, I think they call it a single span as opposed to the Tom uglies, which is one of those old 1920s, you know, riveted bolted type numbers. That's it is quite interesting. I don't, it all my, I can't remember not having a terrine point bridge in my 30 years. Definitely more than 30 years old. But anyway, so yeah, it's more than 20 it's more than the 21 year average that's for sure.

Kent Lardner: Yes. But it's an interesting suburbs. So when I look at the aerial image of a satellite image, you can see that, you know, it's, it's a, it's a suburb of two distinct markets and, you know, the waterfront is a very dominant thing in and around the the Georges river there.

Chris Bates: So, I mean, look, this tightly outing is, I think that's, what's interesting about it is the more likely a property is to turn over the less scarcity is I guess, and the more or less likely it's a turnover, the more scarce is the harder it is to buy. And so what we're sort of saying is that apartments are more likely to turn over when the market's hot out or there's more people selling, then that's likely to have, you've got very low inventory, then you're likely to have very low industry in the next sort of year as well. You're also saying if it's got a lot of renters or a lot of investors, it's more likely to turn over. And then also if there's a big portion that are fully owned, you're saying that that increases the likelihood of turning over or decreases the likelihood of turning over. It

Kent Lardner: Really varies location to location. So as you're saying that, I picked out an anomaly. Now I know we're not meant to talk about anomalies till the increase, but it goes to the point of what you just raised. Let's pick on one that, you know, quite well, Maryville Sydney, Petersham essay three from the listings last week. The average, the average length phone was 17 years. Now, when you look at that it's a, it's a, an area that's got a lot of rentals and it's got a fair amount of units. And it now, again, small sample size, but it's interesting. There's been quite a lot

Veronica Morgan: Of recent unit builds in recent times. And I would say that probably it's quite a big gap between sort of recent proliferation of unit construction and sort of back to the 1960s and seventies, when a lot of the buildings would have been built is my guests there, but also ethnic groups. So Marrickville that area, you know, was very, you know, very populated with a lot of Greeks. And obviously then the Vietnamese came after them. So potentially the ethnic makeup of an area would have something to do with it as well.

Kent Lardner: Well, it's, it's it's height. I mean, it's one of the hottest markets around, you know, with housing markets, it's 1.2, 1.2, five months of inventory. So it's that, that whole essay three pocket is one of the hottest parts of Australia right now. So yeah, absolutely just smoking hot, very hard to find you just don't have enough. You just don't have enough listing supply. I actually

Veronica Morgan: Bought a house in Marrickville a couple of weeks ago, and it was very interesting exercise because this particular client she'd been on the market. Well, she'd been looking for close to a year before engaging us. And obviously this past 12 months having been looking on your own has been pretty demoralizing. And, and to finally get to a point where you say, right, well, I'm going to get some help because this isn't getting any better. So she did that and we sat down and we do what we call a getting started session with every client at the beginning to really focus their attention on the possibilities for their search, so that we're not chasing, you know, rats up drain pipes or, or, you know, looking for needle. No, we are chasing rates. I've tried products. We're not looking for needles in haystacks. And she was on the cusp of not been able to afford a house in Marrickville. Like that's where her budget was. It was right on the line, almost a decent house that is, and we managed to pick one up. But yeah, the price increases in that Maryville in particular because half of American hill isn't as Florida noise, it affected as the other half. And then you got Sydney, was it Sydney [inaudible]

Kent Lardner: And Peter

Veronica Morgan: Shims, not as affected as Sydney, but Sydney is highly flight noise effected. And that's very much seen as entry level, really into the inner suburbs of Sydney. It's the cheapest I think from memory. And, and I don't think it's probably changed the last time I looked, you know, St. Peter's Tempe Sydney had the lowest median house prices. And so it's, that's really this affordability drive. So anyone who's decided that they don't want to go to a unit, they still want a house. And slight last, each last, last, last ditch effort is to go there. So I think that's one of the reasons why it's so hot.

Kent Lardner: That's Southern end of Newtown. Two gets a bit of a, we, when we my wife and I lived down at Iredale, straight down in a unit, a brand new down that end and yeah, excited. I'm,

Veronica Morgan: You know, my first ever property was in idle street and it was in one of those units

Kent Lardner: Because we're probably neighbors, but we never didn't know always that guy with a satellite dish illegally on his balcony, where's the waist to see people's faces. That's like flu delay in their planes. Are you on the other side of the building to me funny pocket right now, though, when you've got no planes. Right. and

Chris Bates: You've got the excitement around the Metro coming in that sort of pocket, which is a bit of a game changer. If you're walking distance to that, Metro, I think it's something that people don't realize until it's built and they go, wow, this is actually amazing because I think the other Metro isn't that amazing yet because it doesn't really link up with the city, but that whole pocket has got a lot of hype behind it, obviously with the west connects, potentially finishing as well and links to new airport. So yeah, I think that the plane is a huge deterrent, but there's not enough planes in the sky

Kent Lardner: Cell. Yeah. And I'm reminding

Veronica Morgan: Clients at the moment about the flight noise to say, look, you know, don't, don't get lulled a false sense of security. He's full change and you'll be going, oh my God, it's a big difference. So

Kent Lardner: This is an interesting statistic for that essay through the median price has increased by 160 K for houses in the last 12 months. Now, how many people would, would earn 160 K a year

Veronica Morgan: After tax? What percentage is that? How do you express that as a percentage,

Kent Lardner: I'm going to make some small talk on, calculate it really, really quickly and pretend that I already had it prepared as I as well. There's

Veronica Morgan: My two questions. Whenever anyone says, oh, I made, I made a hundred thousand dollars or whatever on their property. I said, okay, can you express that as a percentage? And over what period of time, usually there's not many that come back actually with a good result.

Kent Lardner: After, after that, it was 11.1%. But I knew that I already knew that I was just testing myself. That's

Veronica Morgan: Not that there's not the huge

Kent Lardner: No, not that huge, but it's, it's well behaved and smooth because it's at that essay three level. So, you know, sometimes when they're a bit bigger than that, I always liked to scratch, scratch around and, and, and challenge it. But I haven't 60. K's not small either. No. And I think this is common. This is what starts to happen is the curve starts to flatten out as you get above that million dollar mark.

Chris Bates: So one of the things you're saying here, can you say obviously the apartments, the amount of stock, if it's tight, that's means it's lucky. It's fine.

Kent Lardner: There's some of the drivers, but again, this is not a perfect model. So yeah, 10-year rented was one. Then we went into fully owned, was the other driver inventory crept back in again, as in what the inventory was last month. So the first inventory variable was what it was a year ago and the inventory level, as of what it is now appears. And then we move into that stock standard census stuff like moved in the last five years or moved in the last year. So there there's some of the interesting things. So what that, that often appears in a lot of the models and that moved in the last few years does have a lot of correlation to rentals captain obvious, but equally what it also means is a lot of vulnerable people have just moved in terms of, you know, financial vulnerability or you might've just moved cause of job or whatever. So it's a very tenuous, risky period. And if you buy a house, typically mortgage insurers and lenders know that most of your risk is in the first two years.

Chris Bates: Yeah. The danger zone, isn't it, is it lots of people moving to a sabotage also a good thing, right? Especially if it's new buyer pools that weren't in that pocket, but then now they can afford to buy and they're buying in those pockets. So you'd also want to have a bit of a turnover of new money coming into an area. So is it a lot of people moving into that area? A good thing that weren't there five years ago?

Kent Lardner: Well, I, the COVID rules have really shaken the tree a bit and what you've got to not pick on the local experience here in, in these commutable regional locations or your Newcastle's because we have to mention Newcastle, is that the minutes? And finally mentioned Newcastle. Yeah. There's people coming in and they are spending well over the odds. So, you know, the, the listing price is, is being blown way out of the water. They're outbidding everybody else equally. Then they come in and you look at it. The DAS at the moment are just phenomenal. So, you know, I've set up for the building approval alerts and it's going, being, being, being every day. So I think what's happening is people are buying, but they're also renovating or knocking down.

Chris Bates: We won't talk about that one right now. I can't. Cause that's what I want to talk about next month is the renovation factor in price growth and say, we can find some data that supports how much of an impact that is in that. So, you know, obviously people moving to the suburbs, you know, that a new people. I do think that that's a, you know, do you want to have buying areas or areas that are more tightly held and have lower number of people moving there in the last five years? Or are you finding that a lot of people moving there is also encouraging people to hold

Veronica Morgan: On it just moving around as opposed to moving there from somewhere else.

Kent Lardner: I don't have an answer. I'm going to say that I don't really know there's some, some areas that just don't sell because they're small. So a number of these suburbs that we're looking at are just small suburbs. So, you know, they're tightly held. A lot of them are, are older and more established as well. So it's really hard to pick on a single variable and give you a definitive, meaningful answer. I, can't not on this one

Chris Bates: And the hot pot with that one, as well as that, a lot of that, you know, there's a portion that are going to be investor stock. Investors are renters. A lot of renters move around a lot more frequent than five years. Right. And so it could be a great suburb, but you know, just because there's a 30 or 40% of the stock is owned by investors. So they're renters then, and they're moving around, that's going to make this number look a lot bigger than it. Probably the reality is a lot of the houses aren't moving. Right? And so that, that affects your data. But the last year is an interesting one. If, if if a suburb, if everyone's moving around in that suburb a lot in the last year, I think there's gotta be a, a correlation in terms of risk there, because if a lot of people are moving in and buying in that suburb, that means everyone's taking out bigger mortgages. Everyone's sort of in that danger zone that you spoke about can. So I feel like that one's definitely one that would be interesting to sort of watch and how much impact that has in, in terms of how often people are selling

Kent Lardner: The exception, where a lot of these people who cash out of Sydney and then move on to your Geelong's or whatnot. I think they lower the risk profile from any engineering in the suburbs. So it's an interesting thing. The rules have changed so much. We've never seen that degree of exit us before

Veronica Morgan: Census is going to be interesting because we're recording this today after the census. And as I was answering the questions, I'm thinking, so do you answer the, some of these questions in the view of, well, if I wasn't in lockdown, this is what I would have done because I've been locked down. Do I answer it as what I actually did do? And there's no clear guidelines in the census as to which was the appropriate, because if I answer it as in I'm in lockdown, then that's going to skew everything and you can't plan on that. You know, and if I answer it as what I would've done, had I not been in lockdown that I'm not truly doing what the census asks

Kent Lardner: Of me all the, the impact is going to be huge on some of these numbers, for example, income, we're going to see some massive shifts in income by geography. It's going to be fascinating. And then when you compare income levels and I'm going to take, I'm going to take a step here and say income levels down. And then you compare that to this massive change in house prices over the last couple of years, the affordability stats are going to be extraordinary.

Chris Bates: Yeah. I guess there's two ways looking at four to a multiple of income or percentage of income that actually is paying the mortgages and what that's it. And you know, what percentage and that instead of all, time lows, right? So you could look at it for ability to ways that it's really high, but as a percentage of income, what you're losing on interest and what the repayments are, it's ridiculously low because interest rates are low. So that's, what's driving prices is the affordability of the mortgage rather than the affordability, the price of the place compared to their income. And yeah, it's pretty dangerous to be honest because the interest rates can move and that can easily flip affordability very fast from highly affordable to ridiculously unaffordable. And then you get these real tightening and stress really well. Then

Veronica Morgan: The star tightly held anymore and everyone does start bailing out.

Kent Lardner: But I think with the affordability metrics, there's a lot of, you know, global affordability ratios that just look at median price, median income, but ultimately you need to do what you said, Chris is you need to subset the data and say, you know what? It only really matters for the people buying. What's the income of the people buying relative to what they're spending on the property and what their incomes are. So I think rather than doing it, that the whole at the suburb level or at the macro level, and everyone goes into, into the measure, it should just be the people buying

Chris Bates: What debt they're taking out. The interesting thing. So if someone wants, suppose to buy something for $3 million, like how are they going to afford that mortgage? But what the person doesn't realize is that they're probably selling something for one or 2 million, and they probably only got a mortgage of say one or two. And you know that the re-investing of profits back in property, that mental accounting is huge. Do you know, like someone sell something, you know, one, and then they bought something at two and I pretty much don't take, you know, three or 400 grand of those profits and put it in their super, or, you know, buy a share portfolio. They put it straight back into their next property. And reborrow, and the real thing that matters is what percentage or multiple their income are. They borrowing. And if not, some people are borrowing at six or seven times their income, that means they're taking on lots of debt, but if lots of people are borrowing it, you know, three or four times their income, then that shows that they're not stretching and really pushing to the limits. And so that's always an interesting thing to see the credit flow and how much risk people are taking on. Now,

Veronica Morgan: Ken, it's been a few months since we actually looked at your favorite metric, which is the inventory by a city and also vacancy, right. And as we know, every city and regional town has been experiencing price or house price growth for the past year. And anecdotally, we've been hearing about landlords cashing in, and we've been talking about that in the tightly Hilton next, especially in places where there's been negligible or negative growth for many years. Are you seeing any signs of change Kent what's happening across our capital cities?

Kent Lardner: Yeah. So there's some massive falls in inventory being driven primarily by massive drops in listings volumes. So typically if I were to go through, I'll go through them in order, but I'll, I'll pick out a couple of standouts. Obviously the biggie here is the change in the regional new south Wales. So inventory levels versus where they were a year ago, minus 51%. So half it's hard in the last 12 months. So the implications of that are phenomenal on prices, but equally, and as we move on to some of the other metrics for regional new south Wales, it tells me that there's a bit of a worry for those people who are living in these towns. So they're already there. They're not moving in from Sydney or wherever they're going to be crowded out. So this is economics 1 0 1 crowding out. So it's, it's some tough times for, for a lot of families on the lower rungs in regional new south Wales. So 51% there. So the other end of the spectrum is an interesting one. Down's only decreased by 7%. Now, the way I've sliced and diced, this approach is a rolling 12 month average. Now you can do this a few different ways, but this is how I've done. This particular one is I've done it on a rolling 12 month average. And typically we're looking at the you know, the inventory here for graded down has not fallen anywhere near the degree of all of the other greater capital cities and

Chris Bates: Their price growth. Hasn't been anywhere near as strong as well

Kent Lardner: As that sort of. Yeah. So I'd probably say right now, what, what we're seeing is things tapering significantly in Darwin. So it's not going to have the growth, certainly not happening.

Veronica Morgan: I thought there was sort of increasing inventory in Darwin because prices had started rising and there was more inventory coming on. So imagery falling is a surprise to me. I actually expected you to say the Dom was actually rising.

Kent Lardner: It's still, I mean, inventory level tightening up obviously tells us that, you know, the market's still got growth in it, but it's at 4.3, five months of inventory. Now, based on my analysis of that in terms of the housing market, what was it a year ago? So if I go back a year ago, I'm just going to zoom across my spreadsheet here and make small talk while I do that, because it's all in the one big, big sheet here. So inventory levels a year ago were 4.66. So yes, they've fallen, which obviously puts some pressure up on price, but it doesn't compare to some of these other locations go to, you know, like let's pick on regional new south Wales for a minute, 2.2, three months of inventory today, but it's dropped by 51%. So it's, it's huge. And then you go to Sydney, Sydney's close to two. Now let's just round it. It's, you know, two months of inventory. So if nothing else, nothing else listed today, if there's a moratorium on new listings, you'd have nothing left to sell in two months time,

Veronica Morgan: Which it just feels like that all the time to be quite Frank. What about Perth?

Kent Lardner: Yeah. So Perth has been a bit of a sleeper it's done rather well. So things are improving across what we call greater Perth. So it's, it's dropped by 29%, which is not as high as the other cities, right. The percentage drop it's. Okay. It's good. But it's, you know, it's not in the forties where so many of these are, and it's down to 4.31. So it's moved into what I would classify as a sellers market, not a strong sellers market, but it's a sellers market now, you know, things were a little bit different, you know, going back a couple of years has been a stagnant market for many, many years.

Chris Bates: Yeah. But I guess the impact of lockdowns is, is in this data. Right. And you know, they're not really having the challenges as the Eastern seaboard.

Kent Lardner: I think some states we've now seen that we were critical off cause we were all arrogant here in new south Wales. They looked down, strategies have worked and we failed. And here we are with people that we know being directly exposed in a very high risk of the hunter hospital, John Hunter hospital being overridden by massive number of new cases here in Newcastle. So good on you in those other states. So,

Chris Bates: I mean, I guess this is leading to lower stock levels, which means lower number of properties to potentially purchase and dramatically lower than they were 12 months ago. So it's much harder to buy a property where there's less choice today. And there was 12 months ago on the other side of the coin, what we're saying is, you know, another influx of people wanting to buy, you know, I think this lockdown is longer. It goes on the more sort of people come to us and sort of say, yeah, I'm really keen to do these. Once things loosen up. And it's a lot of the people who were thinking about it earlier in the year and finally getting or late last year are finally getting their documents together. So, you know, any freights are likely to stay lower after these lockdowns because of, you know, reduction in sort of employment growth or less pressure on, you know, wages rising cause of unemployment and rising, et cetera. Unfortunately got all those key ingredients again. And so my worry is that low stock increasing demand and also appetite to take on debt because rates are low and likely to stay low. It's going to cause a similar thing to what happened at the start of this year. Is that what you're sort of saying as well, Veronica and increasing urgency. Again,

Veronica Morgan: I am actually, and you know, and a lot of people that are coming on our books who really have been looking for some time or have been thinking about it and then thinking, oh, we missed the boat and okay, we're going to do it anyway. And so there's all of that sort of thinking that's going on in the background. I'm actually quite surprised at the amount of people we've got, you know, we just had to put start the waiting list again,

Chris Bates: Listings also correlate with that fear of missing out because we're also seeing, you know, clients who are using buyers agents, you know, some of the stuff that they're starting to consider is very low quality, you know, and they're just like, the patients is hard to be patient right now because nothing else is coming on. You're looking and you're looking for a way to buy something rather than just being patient. And the low listings also encourages that urgency nothing's coming on and fear of not going to get something. And the longer that goes on, the more that sort of rises. And so that's what these lockdowns doing is causing people to get purchase anxiety. So yeah, it's pretty worrying these. And also then you've got the people in regional, new south Wales. Can't like, if you've got very low listings and you have to get, leave your home, for some reason, those, a lot of those locals would be super stressed, right. Because they can't compete with the city buyers moving down there. And so they're having to potentially leave. Is that what you've heard?

Kent Lardner: Is it, yeah. So we will move on to, and we'll talk about vacancy rates and rental data in a moment. But what the real call out here is I would hate to be trying to buy property anywhere in Tasmania right now, across greater Hobart. I count an average of about 330 houses for sale dropping 42% compared to this on last year. So, you know, you're trying to do some statistics and stuff and analytics for, for Hobart, the suburbs, forget trying to do anything significant at a suburb level. Now it's getting to a point where you, you really can't do anything at the regional levels because the data is so thin.

Veronica Morgan: I, and anecdotally, once again, I I've come across. A number of people are moving there from new south Wales, from Sydney, it's all this, you know, oh one day I want to go to Tennessee and it's like, oh, why not go? Now? I also heard anecdotally that there's quite a lot of mainlanders. Who've, who've been leasing properties in Tasmania so that they can use as an excuse to escape lockdown and you know, so that could be contributing to their problem with vacancy rates as well. And that's just, it's quite hideous. It's so entitled. But anyway,

Chris Bates: Yeah, well, absolutely same people go back to regions again. I thought that it would run out of steam this year. Like last year, a lot of people went, prices got more expensive and they said, you know what? I'd rather just live in Sydney or near the capital city, like Melbourne rather than do the commute. And I'm not sure about return to work, but then this started this year, that absolutely changed. Everyone said not, we just want a nice apartment. So I thought, oh, maybe regions are going to start running out of steam, but this lockdown, because the apartments and in Melbourne, the houses they've got that they want have gone up so much. They're like, it's still much more affordable in the region. So we're getting this second way where people are like, I can't see a solution for me in the capital to a city long-term and I'll go to the regions and these lockdowns encouraging people to cause a real frustration, right. You're not getting the benefits of city life right now. And so people are like, I'd much rather have land and be looking at this green pastures rather than, you know, looking at the concrete jungle we're in. And so we're saying that at the moment, it's a real shift where people are having the courage to sort of follow that the dream they've always had. But yeah, it's, it's a, it's a funny one.

Veronica Morgan: Not only that though, there's been much more publicity this time around about entire buildings being locked down, particularly Melbourne, you know, there's a case, you know, they've got the lift spread around the building and then they just, you know, the whole building, that's it, you're stuck for, you know, you're all quarantined together 14 days or whatever. Yeah. And I think with that, hitting the media as well, I've got another client who just moved out of an apartment, just said to me that the most dangerous time of the day, it was literally when the doors of the lift open the ground floor.

Veronica Morgan: And it's, I think that's, I feel like that's more, more in people's minds now than it was the first lockdown. And of course I'm talking Sydney centric here because we've only had two lock downs for all. Melbourne's what ups number eight or something, you know? But I think that there's a, there's that resurgence of that concern about that more communal living and on that, I've got no idea how those co-living spaces are functioning in lockdown. Like you're stuck in, in, or a 14 square meter room or something you can't even use the common areas that was engineered. Well, we will

Kent Lardner: Cover that, I think in future because there's a lot of new south Wales planes coming out with all sorts of strategies to effectively say if it's, if it's medium or high density, guess what it's all in community. So I'm going to give you some really alarming rental data right now to highlight or back up what you just said, positive new south Wales or regional new south Wales, whenever there's, whenever the vacancy rates are below 1%, I call it a crisis. So we're down to regional new south Wales is down 2.7% and trending lower. And then we've got three other locations that are at 0.8 or below 1% regional Queensland, regional south Australia, regional Taz. Wow.

Chris Bates: And just start in lightens a little bit on the vacancy. I know it might be a bit amateur, but I think it's just, when you talk about sort of what these things really mean, you know, under 1% means that, you know, basically under 1% of properties are available on the market right now to rent. Is that sort of the easiest way to explain it again?

Kent Lardner: The, what I do as the metric I use is I say, has this property been advertised for 21 days or longer? Are you, you know, it's not a normal transition advertised for a couple of weeks, filled, gone have accounted for it as a, as an accountant or a landlord. So what we've got here is, is properties that have sat on the market for 21 days or longer. And typically I'd probably argue now the only ones that are staying on the market 21 days or longer grossly overpriced. Yep.

Chris Bates: Yep. So it's very tough in the regions right now. If you do lose your tenancy or you're moving there and you want to try the area before you buy or that's impossible, or if your landlord ups your rent on you dramatically, that could, you know, force you because they could rent it out for a lot more because there's other people desperate to rent. Yeah. You don't want to be at the mercy of that as well at the moment, which I'm sure is happening in the rental region markets, right?

Kent Lardner: Yeah. Some big, big percentages, new south Wales on average, a capital city level, the median house price jumped by 10% compared to same period a year ago. But there's some others that have jumped up quite high. One of them is Darwin's jumped up by 22%. So whilst whilst the housing, you know, the inventory level, the sales markets looks like it might be starting to ease off. I just still see things pretty tough in that rental space. And then equally you've got the next couple of biggies have been greater Perth and rest of WWI both have increased 13 and 40% respectively.

Veronica Morgan: It's very scary. I, my mind can't even really wrap around what do those people do, who are looking for somewhere to live? You know, I actually can't even imagine how awful that must be. Typically if you've got, you know, you've got kids, it must be horrible. And look in a couple of weeks, we've actually got a interview with Michelle Adair. She's CEO of the housing trust in Illawarra and talking about the affordability in a broader, in a broader sense, not just first-time buyers. And we will be talking about that because we do have a problem in this country exacerbated by these vacancy rates. But also I wonder, you know, with locked, certainly the old Airbnb market, you know, so of course, no one's traveling at the moment and well, there's very few people traveling and having holidays and yes, it was great. When we came out of lockdown last time, we were like all bolted out the gates and you know, you couldn't, you couldn't get a place. Now, all those places we sitting there vacant, you know, we had a weird a week away bookshop up Northern new south Wales and we've had to cancel that. That was Airbnb. So, you know, I wonder if that stock will start entering in, I mean, there's an obvious demand for rental stock. I wonder if any of those will actually turn, so, you know what I want to the certainty of a longer term tenant

Chris Bates: American they'll flip straight back though when the borders are open and tourism starts to rise. Well, they can't,

Veronica Morgan: If they lock someone in with a lease, but it all depends on their own financial situation, doesn't it? Right. Okay. Well that doesn't sound great. It basically inventory levels are falling everywhere, even in Darwin still,

Kent Lardner: It depends, you know, I've got an anomaly here, but I'm gonna wait. I'm gonna wait. I thought you'd

Veronica Morgan: Given us. All of them

Kent Lardner: Normally is if I slice and dice the data slightly different and I do a 90 day rolling average, I'm seeing an increase in inventory in Darwin city and Darwin suburbs. So yeah. Yeah. So it's the people being a little bit more picky, I guess I'm kind of maybe put it down to, there might be just an increasing in listings activity and the demand just hasn't kept going the way it was. So what sort of space? I think things might start to be easing in down right now, a lead indicator.

Chris Bates: Yeah. And that's when the market's super hot, right? This stuff over 90 days starts to sell. Cause people are a bit desperate or they take them off the market potentially, but they think I'll maybe I'll sell it next year because you know, market's getting better. But when the 90 days plus, or six months plus properties listings are starting to accrue on the market, it's probably those two things, isn't it that people aren't able to buy is not enough buyers for all those properties or that people are being a bit more picky. Is that sort of the, the two that you sort of say,

Kent Lardner: I haven't scratched the surface to identify why all I'm doing is observing what and the what tells me that if I sample the data and only count what's happened in the last three months and then compare it to what happened to the three months before that it tells me things have changed. And that change is that the market's starting to, to end its bull run potentially now. Yeah. So watch this space, but equally what I'm starting to see in some select locations is where your listings have nudging up just a little bit. And some, some of these areas have not missed a beat in terms of demand, keeping up with it. So your inventory levels are still going down across most of these locations where listings have nudged up, but by and large, we've seen massive falls in listings volumes.

Veronica Morgan: Now we interviewed Jared McKay a couple of weeks back and really wanted to get a sense of the Melbourne property market. And I guess look at some, you know, potential, I guess, looking into the crystal ball as to what we might be experiencing in Sydney. And we come at a lockdown, God knows when. Now he did say though, the inventory, the auction numbers in winter, this winter, which has been interrupted by a number of short and sharp lockdowns, but their auction volumes have been huge. Like three times. I think he said, what's normal for Melbourne winter. Is that coming out in your, I

Kent Lardner: Haven't looked at it, but I've got a great story that someone was telling me yesterday that people are drunk bidding because they're doing. Yeah. And they're boozing up.

Veronica Morgan: Oh my God. Yes, of course.

Kent Lardner: So that's, that's that's my little fun story. Cause I didn't want to finish on the dour note, but you hear people are, people are bidding it option powerful of red.

Chris Bates: Veronica is always says she can say the, the bidder that well she tells her clients don't drink the night before, before they go to the auction or she knows the hung over one that's on the Saturday morning. But yeah, I guess it's, if the auctions are at five, six o'clock and you're knocked down and yeah, the bottle of wine is calling you. You got to get these problems, right.

Veronica Morgan: Just on that too. I mean, we've, we interviewed Jesse Davidson auctioneer a couple of weeks back. If you want to understand about the online auction, go back and listen to that, that episode. Great episode. And no, he wasn't drying and presumably not drunk when he does his auctions, but I so I've been participating and observing a number of online auctions and it's very interesting. There are two main types that I can see. I haven't actually done a zoom one yet. The ones that I've done have all been a situation where you've got the auctioneer just on a screen and calling the beads and you can see the bids sort of rolling in on the, as they roll in, you know, on a sort of a tick, you know, leaderboard or whatever. And then the other type is the eBay type bid auction where there's no auctioneer, it's just, people are bidding.

Veronica Morgan: And then as it gets within the last five minutes of the auction and there's a bid the time of resets, and this is interesting because my suspicion is it, that is why worse her buyers than when the auctioneer is calling it. So the auctioneer calling it still does various things and the agent will do various things that they did before in live. Right? So the, the agent will be on the phone texting or calling the people that have registered that haven't been yet or the ones that are stopped beating or whatever. So there's all that sort of happening in the background. And the auction is taking instruction from the agent as well as well as sort of calling those bids that come through. So, and they're working and they just, they hold out, like we bought a property the other night and I don't know how long we sat there while that auctioneer just dragged out while the agent was clearly canvassing all the other bidders. And then finally they, and they knocked it down to us. And you know, they're doing their job. They're getting the most amount of money for the property, but we've been, we've observed a couple of other ones which have been online without an auctioneer. One went for now one God, am I right in saying it went for 75 minutes debating. Yep. So you assign like it,

Chris Bates: You're thinking you're going to win it. Right. You put an offer a 1.55, right. And then that gives you another, that gives all the other buyers five minutes. So at four minutes 50, the other one comes in 1, 5, 5, 6, and you're bugging down another five. And so it can really drag out and and having a sip of wine.

Veronica Morgan: Come on, darling. One more. Let's do it for five

Chris Bates: Minutes. Gives you that full emotional ride. Oh, we've lost it. Maybe we haven't lost it. Can we get more money out of that call? Should we do it? Should we do it all? All right. Let's just do it. Right. you know, he'd have an auction. You haven't got that time of the emotion go. You just go, oh no, let's not do it, but you don't get that feeling of, well, what do we do? Don't be right now. And you get that thought process, which might take a few minutes to come on,

Veronica Morgan: Come on, give it one more go. It's really interesting because I know that I know Jesse. He said, you know, he didn't think that that type of auction worked better. I'm thinking slightly biased, but I thinking it does for the vendor, not for the buyer. I hate them. I absolutely hate them. And even even observing the other auctions where you've got the live auctioneer, you know, I've had to have a chat with my clients about what's, what's left in my tool belt. That is normally in my tool belt when I'm on, on, in a live auction, which is not in my tool belt when I'm online. And so my two, you know, I'm limited in terms of what I can do. And, but I tell you, one thing I really noticed is the difference, the difference between the way I bid versus how most bitters bid my speed has been thinking this bid.

Veronica Morgan: I hopefully I'll get it for that bid. Right. Hopefully I'll get it there. They're bidding with that. As their intention, I'm bidding with the intention of stopping everybody else bidding, you know, so they're bidding with hope, hoping nobody else bids against them. I'm bidding to try to stop them bidding. And it is subtle, but you know, it's just occurred to me while I was sort of observing one of these options here. What's going through the mind of the people as they're bidding. And I know what my clients are saying to me when we're bidding, you know, cause I, I now have a ear piece and I'm listening to the auctioneer and I'm also got my, my client on speaker phone. We were discussing it and chatting just like you would, if you're, you know, a husband, a wife, or a wife and wife or a husband, husband, you're sitting there in front of a screen yourselves, you know, it's, it's really interesting psychology. I'm going to have to write an extra chapter for my book.

Kent Lardner: Yeah, yeah. Also

Chris Bates: Playing videos of the property and the pictures

Veronica Morgan: In the eBay store one year. It just is on this scroll. Yeah. The property

Chris Bates: Messaging. This is what you're losing the lifestyle. I'd be ramping that up.

Veronica Morgan: Well, when the auctioneer is live, there's not, it's just the auctioneer standing there, you know, a little bit awkward at times, but they're just showing their ability to talk. Right. You know, [inaudible],

Kent Lardner: It's so funny. You should ask. I was just thinking, you know, we should do, it'd be great to do an analysis to say, is the face-to-face auction yielding a better return or has the online methodology surpassed it because it's certainly more efficient.

Veronica Morgan: It is. And, but you know what? You could only do that in a hot market though. And so what I was sort of thinking is that if you were the agent and the auctioneer, you'd be thinking, okay, how many have I got registered? Okay, I'd flip. And I drop the auctioneer. If I have over X amount registered, you know, if you've only got two or three, you need that auctioneer to get in there and fish and pool them and coerce them into, into bidding. And the other thing too, is a lot of people say, oh my God, I can't believe went for that process. Only two people bidding. It's like, you don't know how many people are registered online. And this is one of the things that I don't know now that I used to know, and I'll ask the agent, but I'm at the mercy of the agent telling me whatever they want to tell me, which is what most buyers and they do in normally. And you know, I like to think they tell me the truth, but I've fairly dubious that they all do. You know? So I don't have that fullness of information. It's not that transparent. It'd be very interesting. Cooley's come out with a Cooley index every month and they do tally up the average amount of registered bidders. And they only compare month against the 12 months ago. So that's really hard to, to make a comparison. But I think I sort of, yeah, it'd be very interesting to track that on a monthly basis before and after

Kent Lardner: The other question is what impact it would have if it becomes a digitized model, will that end up in the hands of a few corporates rather than the analog model, which is in the hands of a lot of businesses,

Veronica Morgan: It's absolutely scalable. But I, I do think it's market dependent. I do think, yeah, they're

Chris Bates: Property dependent, right? If it's not a great property and the market's hot, you might only still get one or two beaters on it and that's not enough to get the competition going and yeah. Yeah, but if it's, you know, six people bidding and you're seeing all these different people bid. You're like, oh, we're not going to get this. Let's just go for it. And you could either overlay with stats, right? There's only been three properties like this sold in the last 12 months. We were on these streets. And are you willing to wait four months? So, you know, there could be so much pressure on you to encourage you to be with stats as well, plus the photos. So, so next month I'm really keen to talk about the renovation impact into median house price growth, you know, like, so Isabell was say 1.5 and now they're all selling it two to 2.5, let's say, but you know, what portion of that is the renovation impact? Have you got any idea? We can figure this out. You mentioned it earlier or am I sort of dreaming

Kent Lardner: Know what we'd have to do is we'd have to narrow it down to a couple of focal focus suburbs. And what we do is we actually pull out individual properties that have sold and we'd compare and contrast and look at their history to say, has there been a da or is it new? What did it last cell for? Et cetera, et cetera. So we're trying to find areas that are being you know, regentrification areas where there's lots of this stuff going on. As I said you know, up here, there's just so many crappy old weather bullets that are being pulled down at scale. So, you know, suburbs like

Chris Bates: A da data. So the percentage of properties that have lodged a da or a significant da in the last 12 months, is there any way to get that council data?

Kent Lardner: So a lot of the councils now publish that on maps. So Newcastle city council do it. So there's a, there's a map that they publish, but equally there's a website called planning alerts, which I just love. Right. But you can say, can go and search that as well. So I prefer to probably use the map and then pull it out and then say, well, how many of these properties have had a da? So you can look at the history of da. And then what you're trying to do is do the before and after image, that's a bit of, it's not a, it's not a simple spreadsheet, kind of, you know, cut and paste job. It's a bit, a bit of effort, but if we do it for a couple of suburbs and it's not a, then we could come up with something meaningful.

Chris Bates: So we could have a pretended to properties that have lodging DA's have been an interesting one. And then percentage of properties sold, which have done a da in the last couple of years. Right? And then you could see that, you know, how many people are actually renovating and selling, right? Because that's, what's going into the medium prices, the ones that are selling. Exactly.

Kent Lardner: And these flippers, even though the tax, the taxation system hasn't changed yet in new south Wales, we've got a family friend or a family of, of one of my son's friends. This is what he does. He fixes any flips. That's all he does. And they're big. They're big. Reno's, they're big,

Chris Bates: It's all tax free. So a lot of money to be made if you are in the last few years, whether it's in the next few years, the different question with building costs, definitely not cheap. Thanks for this. Today has been a great episode and I hope you all got a lot out of it. Thanks. Thank you. Right. We'll see you next month. Okay.

Chris BatesAugust 13, 2021de-index

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Suburb Trends August 2021 | The Tightly Held Index