Suburb Trends July 2020 | Micro vs Macro Markets w/ Kent Lardner

Breaking down the performance of the property market on a suburb level
Starting a new line of monthly episodes for the Elephant in the Room Property Podcast, Veronica and Chris team up with Kent Lardner, Director of Suburb Trends to discuss how different states, regions and suburbs perform; and to break down misconceptions of the property market. This month's Suburbs Trends is all about discussing why different regions perform as they do and the correlation between a suburb's inventory and sales.

Here’s what we covered:

• How many property markets are there?

• What tools and metrics are used to assess the market?

• Why is there currently so little stock?

• What are the 'cold' spots?

• Why are certain markets flooded with low quality new builds?

• What property experts should you listen to?

• How does regional property hold up?

• How do units hold up against houses?

• Where are the 'hot' spots?

RELEVANT EPISODES:
Episode 71 | Kent Lardner
Episode 115 | Eliza Owen
Episode 123 | Martin North

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 on 8 July, 2020.

Veronica Morgan:

We've got something new for you in this episode, it's our inaugural monthly suburb trends report. And we're here to help you make sense of what's happening in various property markets across the country. Right now we'll be looking at where prices are moving either up or down and why they're moving right.

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 cohost of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates:

And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal box. We always recommend you engage the services of a professional.

Veronica Morgan:

You've heard us say it many times, despite what the headlines may suggest in times of boom and bust Australia is not one big property market it's made up of thousands of micro markets. These monthly reports were really demonstrate the diversity of market behavior across this vast land to do this right. We've partnered with property, data nerd. And I mean that with the greatest respect Kent Lardner, who is a founder of a suburb trends, we've had discussions with Kim before back in episode six and 71, go back and listen, if you haven't, they're foundational for understanding property data. Kent, can you please introduce yourself for those who haven't heard those episodes?

Kent Lardner:

Hello, Veronica and Chris, how you going? I, I'm a bit of a data geek as you know I help businesses with data and analytics and research problems and I help individuals do their property research through my websites, suburb trends.com.

Kent Lardner:

Ken, I've been looking forward to this. There's so much data out there. It's very easy to get completely overwhelmed with. You know, what to listen to. On the other hand, you can kind of oversimplify the data like top 10 lists and all that clickbait that you see out there. So can, can you share us the methodology you use when assessing the performance of different areas and what's really happening?

Kent Lardner:

Yeah, I I keep things fairly simple. I carve up the market into actually around 500 markets. I use something called a statistical area, level three. It's a, an Australian Bureau of statistics area there's give or take there's about 350 of those around the country. What I typically do is I carve it up and say, that's a housing market per se three, and that's a unit market per se. And when I tell you that up, there's about 173 unit markets around the country because some of them, some of these regions just really don't have any units. So it's not big enough to be called a market. So in total I've got 173 unit markets, 324 housing markets. And so when you tally those up, it's around 500 markets. I analyze what I typically then do is I focus on two key metrics, the first metric for houses, for sale or the sale market.

Kent Lardner:

I look at something called inventory. This is widely used in the U S and even in New Zealand, they're using it, but in Australia it's been a little bit slow to take off. I'm not sure why, but inventory tells us is the market overstocked or under stocked, is it a buyer's market or a sellers market based on how many months of inventory the other, the other key metric I use is for the rental market, which is pretty simple. It's a, how many listings are there 21 days or older? So that's a, an input into something called vacancy rates, but I like to actually break it down and focus on the count of listings over 21 days. Cause it's a little bit easier to understand.

Chris Bates:

Hmm. So I guess with the, your saying, the average averaging at how many sounds are done per month, and then say, look, there's enough properties to on the market. Even if there was no new listings, the current stock would take X amount of months to kind of get rid of, I guess.

Kent Lardner:

Yeah. So in theory, if no new listings came on and you had a hundred listings currently, and 10 were selling per month, a hundred divided by tended to take 10 months to clear out the shelves, to clear out that inventory. So that's the, that's the theory, the measurement of, of inventory. And, and the great thing about it is it does capture both supply and demand in a single metric.

Veronica Morgan:

And I'm curious, Kent, why not suburb level? Why S a three level?

Kent Lardner:

Well, I do, I do go down to the suburb level. Absolutely. But with a lot of suburb level metrics, I, I actually call out a lot of caution with regards to suburb metrics because they volatile. So month to month, if you've got any metric, doesn't matter what it is. If that bounces around it's high, low, and high and low, that volatility tells me there's something wrong with the sample size or the sample distribution pertaining to that suburb. When you break it out to these levels, it's the Goldilocks measurement, because it's a lot smoother. So I start with the essay three, I start with that regional metric. And then I determined whether the region is a buyer's market, seller's market or balanced market. Then I drew down to the suburbs and that's what we're doing here

Veronica Morgan:

Each month, the volatility side of things, that's sort of driven by both listings and transactions, right?

Kent Lardner:

Generally the sales volume stay fairly consistent. So your volatility doesn't necessarily cause what you can do with it with sales volumes, as you can average that out using a rolling 12 month average. So by and large, using 12 month rolling averages is a common approach to dealing with some of those volatility or sample size problems you have at a suburb level, but even doing that still gives you problems with a lot of metrics, including on market, including listings volumes. So there can be some challenges at a suburb level specifically when you get down to small numbers.

Chris Bates:

I liked that because what you sign is that if there is a hundred properties, it is going to take, you know, 10 months to kind of get rid of that stalk, but it might be, you know, a lot of it goes into the next say three months, and then it really dies off for over the next seven months because you're averaging. And is that kind of right in thinking that even if there is rises in the spring and the, you know, the autumn sort of property markets averaging it out, that that kind of allows it to still be

Kent Lardner:

Relevant, it does move things out so that, you know, that's always the trade off. So that, you know, and especially if you look at Melbourne, you know, it's very seasonal and not much happens around the AFL grand final. We all know that. But, but generally, as long as you understand what you're doing, I think you've got to be able to talk to how you're manipulating and, or processing the data, talk to the limitations of the data. What you've got with a rolling 12 month average is a problem that sometimes if things are happening there's a little bit of a lag effect because you you're looking in the rear view mirror,

Veronica Morgan:

But for the seasonality you've got, you've got an AFL in every single data point, right? Because you've got 12 months of data and every time you're looking at it. But what about the thing that everyone's been complaining about lately is a lack of stock. And over certainly since 2016 in Sydney, anyway, we've noticed a definite lack of stock. And when you look at those transactional the bar graphs, for instance, that show one that I love on your website actually is, is the the price segmentation graph. You know, that's one of my favorite charts. And when you look at those over time, you can definitely see volumes of transactions have fallen. And it is hard to separate that transaction from listings at times, because, you know, there could be a lot of listings on the market, but as you say, there's still a level that are transacting. But what we can see is that there have been a falling listings over the last few years and a falling transactions that follow that, how do you pull that apart so that we can make sense of that? And so it's not cat and mouse or chicken and egg.

Kent Lardner:

Yeah. Yeah. Well look, there's a positive and a negative to this. The, the positive of, of reduced listings volumes is it it's kept the market in balance. So there's a lot of markets that are still considered sellers market, purely on that ratio of inventory, you know, yes, sales volumes have fallen down, but so have listings volumes, therefore the market isn't going to plunge in terms of prices when you consider that there's not a high level of inventory. So that's the beauty of the inventory metric is both supply and demand. So I think, but one of the, you know, what Veronica, what you covered there was that the market had already slowed down a lot. There was very, very few listings in so many suburbs pre COVID and, and, and post COVID. We finding that that's probably accelerated a little bit further.

Kent Lardner:

We've got what very few listings in many markets having said that sales volumes have dropped down. And then when I look at it at an essay three market across my 500 markets, I would argue that the unit market's the one that's most interesting because sales volumes or listings volumes are still high and sales volumes are low for a lot of areas. So I would argue that around 41% of the essay, three regions that I, and by that I analyze 41% would be considered buyers markets for units at the moment, and about 70% of buyers markets for housing markets. And most of those are in regional areas.

Veronica Morgan:

So I have many buyers markets for houses.

Kent Lardner:

The house is only seven, 8%, seven, 17%, 56 out of 324 markets that I review would be considered buyers markets. And the bulk of those are in regional areas, not the capital cities.

Veronica Morgan:

Very interesting. Now, you know, how much we balk at the idea of chasing hotspots, Kent, you've come up with some cold spots. We should definitely be steering clear of. And I guess that's what we've just been touching on. So you're here to help us understand what's causing them and the signs we can look for when assessing other areas. But let's talk about, about the cold spots. Let's talk about those regional areas and also, you know, the, the unit areas that we need to be really worried about.

Kent Lardner:

Yeah. I wouldn't say steer clear as much as I, I, what I do more than anything, I just talk to the data and then, you know, how people want to behave and use that data it's entirely up to them. So I don't say Steve clear or not, because I don't want to be, I want to be outlined by a real estate agent. That's unhappy with me. But so w what I've, what I typically do is I look at the, the essay three regions, that's our first thing. And I've identified I identify three areas or three regions in the housing market, and three regions in the housing market that are hot and three that are cold at the moment. And the metrics that I use are both inventory and the change in inventory. And then I'd drill down to a representative suburbs.

Kent Lardner:

So if you, like, I could, I could talk about some of those locations right now, let's do that. Okay. So the, the three areas that I would consider cooling the region is called Rouse Hill McGraths Hill. And that's in the Sydney Baulkham Hills Hills Hawkesbury area. The inventory level for houses here at the moment is very close to 11 months right now. Wow. And that's increased just month or month that increased by nearly one month worth of inventory in, in the last month. So things things are cooling significantly in that, in that region, in that pocket, that three, the second area is also in new South Wales. It's armored out that's up in that new England Northwest area. That's close to 10 months of inventory, and that's nudged up a little bit higher again in the last month as well, by a few weeks of stock.

Kent Lardner:

And then the third area in the housing market is Beaudesert that's up in Southeast Queensland in that Logan Beaudesert area, that's sitting just over nine months have been retreat. And that's got that's reason, a few weeks of, of, of inventory as well in, in the last month. So there's three areas that are cooling that at a regional level. And we'll talk about select suburbs in a moment. I'll go on to, and I'll talk about the three areas that are actually warming. We've got Waringa down in Sydney and the Northern beaches there. That's very low and it has been low for a long time. It's down, down around 1.4 months of stock. So not much happening to your point earlier, Veronica, there's not a lot of listings. The second area is Belle common down in the act just over a month. So it's been that whole ICT has been a thriving hot market for quite some time.

Veronica Morgan:

And wait, wait, just so just on that, we're actually got a buyer's agent from the act we've got lined up to be interviewed, and we'll be bringing that out because a lot of people have been asking us about Canberra in particular, but it they've, it's sort of career. It's got its own dynamics going on down there. Hasn't it? I mean, it's not responding to covert the way everywhere everybody else is.

Kent Lardner:

Well, it's the, it's the jobs market. And obviously you've got a lot of public servants down there. The median income, the household income, very high, very high. What we waiting on at the moment is the release of the small area, labor market data that could come out any week. Now, I think this recording is obviously in the first what's the data that I'm trying to look at it. So it could, it could come out in the next week or two, the small area labor market. That's going to be a big focus of mine looking at how a certain industry. So there's about 19 different job categories that they published down to the level. And then I aggregate that up and build my essay three models that I, I love my essay three. And you can, you can pretty much guarantee that the act or stay strong in terms of unemployment.

Chris Bates:

And we also, if the camera, which we'll, we will chat on another podcast with this buyer's agent that's coming on. But there, this is the housing we're talking about here. We're not talking about units and, you know, from going down to Canberra last year there's a lot of new units getting built down there. So you've got, this is, you know, the benefits of these podcasts. And what we're talking about today is showing the different markets, performing different ways. And, you know, you've got dramatically differences between say RAs Hill here, and, you know, Bella cannon in the ICT.

Veronica Morgan:

Well, I just want to add into Ken that that data you're waiting on, we will be able to report on in August, in our August monthly update. Right.

Kent Lardner:

You can, I'll be publishing the Magazine based all around that as a theme.

Veronica Morgan:

Yeah. So we'll be putting the link to the magazine this month's magazine in this podcast at the show notes as well. Sorry, I did hijack you midway through telling us about the hot

Kent Lardner:

One. Last one, last area, one last essay three. And that's one of your favorite areas. It's the Merrickville Signum Petersham essay three, which is around Sydney, the inner South areas in the city. So it's down, it's just one, one month of stock. So not much at all. So picture that nothing else came, came on the market you'd have nothing left in four weeks time to buy.

Chris Bates:

What you're also showing is that, that, you know, that Mount of buyers that are actually transacting this month, flip sites, 10 there's any 10 properties. So if there was 20 buyers looking to buy this month, and there's only 10 properties, you've already got two buyers for every property. Whereas comparing that to say somewhere like, you know, the Logan area, which has a lot of house and land packages RAs Hill is surrounded by areas of how some, they had packages, 10 months of stock. They're already for the amount of buyers on the market. So, you know, there's every property that will, there's not even a buy there's, you know, one 10th of a buyer let's call it available on it. So very few bars, lots of properties.

Kent Lardner:

Yeah. And, and, and this is what drives prices. And, and, and so a big call out for me is a focus on the rental market for just a moment is usually the rental market is a lot more dynamic and moves a lot faster, but even in that market prices just don't seem to be moving enough to attract buyers in sufficient numbers. So the market's not clearing, we're not getting back and I'll have to use the term equilibrium because of high school economics. But these markets kind of get back into that equilibrium Mark around six or seven months, maybe up to eight months. So typically six or seven months is what you could consider equilibrium, where there's not an excessive pressure upwards or downwards on price. But as soon as you get above that eight month Mark of the industry, there's a fairly significant pressure, downward pressure on price. Having said that a lot of the new newest States, a lot of the new build units don't seem to be moving prices significantly. So that's why I think they stay in disequilibrium for so long because the builders, the new builders they're just holding on because they can,

Veronica Morgan:

It's interesting, isn't it that, you know, they don't want to start discounting on new stuff because then they have to discount everything and it's says sort of a waterfall effect. But the other thing too, that you mentioned there, that, that I think Rouse Hill McGraths Hill, you said was a month ago, what, 10 months, whether we need inventory now it's 11 months. So that means they've had a month's worth of inventory added and what no sales,

Kent Lardner:

Well, there's still sales, but they're not keeping up. So, you know, really what you want to do is you want to, you want to see a, an proportion of buyers relevant to relative to the amount of sellers. So you, you need to typically in any market, whether it be houses or something, yeah. Some other widget, you really need to see prices and mechanism to clear that stock well, yeah.

Chris Bates:

Around the buyer versus the seller market. What's that watermark where on the inventory level, where you believe that a prop, that market turns that switches, is it eight months of inventory?

Kent Lardner:

It's seven to eight months. Now, it depends on when you do it. Now, I just finished an analysis, trying to look at what happens with prices and inventory levels. And typically what I found was equilibrium was around the six month Mark based on current data over the last 12 months. Um and then what I've found, once you go seven months, eight months, nine months for every month above that count of seven, you found a price decrease of 1% for every month. So it doesn't make sense.

Chris Bates:

So other way around in terms of, you know, we're talking about, you know, it's not looking good for the sort of house and land packages, Armadale is an interesting one, which we haven't spoken about, but on the buy side, when you have only one month of stock on the market, which is in the beaches, et cetera, at those prices likely to be rising normally. Yeah, absolutely. So that same ratio. So typically for every month below the magic marker six, you you're seeing increases in prices. Now, all bets are off at the moment. This COVID world we'd will, but so markets aren't behaving normally, but generally speaking you know, you can't bargain too much when you're just not, not too much to choose from.

Kent Lardner:

And there's, you know, there's, there's a lot of buyers out there for that one, one, one month of stock. So I think the difference is bargains can be had when there's a lot to choose from.

Chris Bates:

What do you think is happening in the almond Dow sorta patch? I mean, has that been a recent trend with co that I know there's a big university there that might've had an impact? I mean, in, do you know what's happened up there?

Kent Lardner:

Yeah, I haven't, I'm spoken to when he went up there, all I can really do is look at the data. It's been a fairly consistent rise. So it hasn't been, it hasn't been a dramatic shift. Okay. so yeah, I think a lot of these things creep up, you know, a lot of new builds are usually in the housing markets. It's newest state, you know, States that come up. But I, I can't answer you on that actually actually drilling down and looking at the wire what's happening in Armadale. I'm just looking at a snapshot of data in front of me.

Kent Lardner:

And we often forget that in regional areas is quite a lot of house. There's quite a lot of development at times. You know, I think I mentioned it in a recent episode. I was driving down the South coast recently and I couldn't actually, I was a bit surprised, you know, looking at Shoalhaven and places like that, which I'm aware of a lot of houses on them subdivisions and new developments out there, but, you know, it just seemed to be more and more. And so, I mean, they're, they're quite close to Sydney armadas a little bit further away, but I think a lot of these regional towns do have quite a lot of new development, new development. It's interesting to Logan moment, we, in our full of forecaster episode and in the filler forecast report, which is there to be downloaded from the website, if anybody is interested we talked about well, we actually did some research to look at what actually have has happened in, in Logan Shire in particular because 10 years ago, you know, there was so much being talked up about it.

Veronica Morgan:

And very a lot of unwitting investors, particularly from Southern States, went up there and bought these house and land packages. And I would imagine after 10 years when they were seeing no price growth and in many cases they've lost money not just in opportunity cost, but real money. You know, that there's, there's, there's lots of evidence there of prices falling. And so I guess if they got pressure for rents as well, they're going to start to, to loading up, you know, the listings market we stop. Right. Would that be one of the reasons?

Kent Lardner:

Well, I'll look up. I think what you're saying is relevant. I don't hear a lot of people mentioned adjusting for CPI or adjusting for expenses. So if you have product is a flat, if they flood in real terms, if they're still going backwards through.

Chris Bates:

Painful cats, a lot of you don't really want to do those numbers when you've bought a property, it hasn't gone up. You don't want to then hurt yourself even more by adding in opportunity costs and inflation and other costs. You're a hundred percent right with, with Logan, Veronica, I've seen lots and lots of clients with it in their portfolio. And they've common. You know, they've generally seen some property expert. Who's promised them, you know, that, that a growth corridor between gold coast and Brisbane kind of boom, and there's going to be all this infrastructure and it's going to be amazing.

Chris Bates:

And the reality is that a lot of these investors now, like, yes, they haven't had a price growth. Yes. They've lost money. A lot of the cases when you take into consideration costs and selling costs, but what you're showing here can and we are picking this data. This is, you know, the numbers do the talking is if they wanted to sell right now, well, then they're competing with 11 months of other stock on the market. So, you know, it's a race to the bottom, isn't it really, if you really need to transact, well, you've got to offer a bit of a fire sale. Don't you need to get it off the market.

Kent Lardner:

Look, I would say that it, it depends on the market. And, you know, back to that old elasticity thing that we learned in high school is that sometimes it might only be a modest adjustment in prices to attract enough buys in, to bring things back into balance. You know, so it depends on how scared the buyers are. And if they're easily spooked off or, you know, whether whether a five or a 10% or a modest adjustment in prices is enough to bring them back in sufficient. And

Chris Bates:

That depends on the location, I guess, just as a buyer, if you can, you know you go up there and you look on domain or real estate, and you've just got lots and lots of choice, you know, as an [inaudible] tactic, you're not going to be desperate. Are you, you're not going to be like, if I don't get this one, I'm going to be devastated because, you know, there's lots of other things on the market. So you're going to come in with low ball offers and hopefully the market or come to you.

Kent Lardner:

Yeah. The savvy, the savvy buyers would know that, but there's still a lot of wood ducks out there.

Chris Bates:

Yeah. And I think it's just you gotta, you gotta get a bit lucky to get one of those wood ducks, right. If you're selling and you know, when you own these properties, you got to basically bank on the smart buyers, only wanting your property rather than the wood ducks. Cause that's a bit of a luck of the draw.

Veronica Morgan:

So Chris said you were doing a little bit of research before and you looked at at Rouse Hill, you found one example that sort of could typify what some owners have been experiencing. The, do you want to share that?

Chris Bates:

Yeah. I mean, sometimes, you know, like to go down to a property level than just, you know, as soon as you search a suburb look at this, you know, go straight to domain real estate, you can see what's sold. It's very easy to start to figure out what's happening in a market. And probably just the three sold, you know, last week you know, they sold it for 900. They bought it five years ago for actually more than that. And actually tried to sell it in 2017 for nine 60 and didn't get what they wanted a property sat on the market for five months. So you can kind of say you know, that they've, that's a really painful experience. They've lost money over five years. And they also went through a lot of pain a few years ago trying to sell it and just sitting on the market for months and months.

Chris Bates:

And so there's decided obviously to pull the pin on it and just get rid of it last week, but that's a, that's a painful kind of story there. And it wasn't a cherry picker. It was just the first one that came up on real estate and threw it into our Bay daughter. And, you know, we've got a story there and that's, that's, I think a really interesting thing for any property investor to do. You start to look at price hours and find out when did they buy it? What did they pay? You know, what's the story behind it.

Kent Lardner:

I like the fact Chris, that you've, you've, you've, you're talking to it as, you know, they are real people, I'm feeling pain. I think a lot of these numbers gloss over that point.

Veronica Morgan:

Yeah, Absolutely. And look, I mean, even just a cursory look at what's on the market in a, in Armadale as well. I mean, you've got sort of, you can always group the properties into four groups, you know, that you've got properties out of town on a bit of land. You've got properties in town, which are often sort of an older style of property, maybe a bit of charm and obviously walkability and all the rest of it. Then you've got the oldest subdivisions, there might be 30, 40 years old and the house is looking a bit tired and and then you've got new stuff, new stuff has just been completed. So all of that gets tipped into the pot and obviously makes it deep. I would hazard that the properties that are probably suffering the most would be those more modern ones that are dated, I would guess out of those groups as those, those four groups you know, that would be the harder properties to sell in our model at the moment. That's my guess.

Kent Lardner:

I think the other challenge too, is you get governments come in with special grants and whatnot that influence markets on Julie. That's a big call out that thrown out with a lot of new builds.

Veronica Morgan:

Yeah. So we've got a lot to say about that. Those incentives are for the construction industry. They're not for first home buyers, you know, and, and I think that that's what first time buyers sort of forget, they, they, they think, Oh, these are for me, they're not for you. You know, they're actually for you to help prop up an industry. And as I said before, and I'll say it again, I'm conflicted because we want a good economy. Construction industry is, is very important to that. So talk, can you talk to that? We've talked about the apartment, sorry, the houses we talked about in particular, the dangers of house and land packages and areas in which there are lots of them. And then obviously when you get markets under pressure, they tend to rise to the top or the bottom of the heap. However you wanna look at that. And obviously those are the three areas where we're seeing very low inventory and, and I guess we need to call, call the distinction here. We're not talking about, Oh, the median prices in these areas is going up or down. We're talking about the underlying factor that will impact on impact prices is going up or down. Correct?

Kent Lardner:

Correct. Correct. So, and, and we'll, we'll talk to an example of where inventory is going up, but, but prices also going up. So, you know, there's some conflicts there that sometimes show up when relying on medians and that's often the result of what's stopped, what's listed. So if you've got all new stock on the market, prices can go up, but that doesn't doesn't mean your value of your property is going up.

Veronica Morgan:

No, that's a, is that your normally for this month? Yeah. Yeah. We've got to do units first. Don't we?

Kent Lardner:

You got to do units. So this one's interesting. I think the unit market overall is fascinating because you've got large volumes of concentrated stock in a given suburb by nature of it being a medium or high rise. So that's a given a couple of other interests, interesting statistics that pertain to units is that so many of them convert to rental. So the rental tenure is also often high. And I think that is making the unit market extra vulnerable in these COVID times. So I've got three cold spots or cooling spots, three warm warming spots. The the first on the list is with Sunday essay three. And that kind of covers the broader area of MCI. And I, I think you call it in Whitsundays. So up there we've, we've got effectively more than two years of inventory. So it's, it's, it's, it's really high. And, and, you know, it's

Chris Bates:

Jumped a lot in the last, you know, I imagine potentially it's a lot of Airbnbs and the investors are like, well, let's just get rid of it now.

Kent Lardner:

Yeah. That's a, that's, that's a been a biggie that was a hot topic in the news a few months back the high volumes. But I think, you know, obviously in area like the Whitsundays massive impact of tourism yeah. You know, one of the biggest employers, if not the biggest employer is tourism. So I think a lot of that would be the result of tourism. Things have probably added another month of inventory in the last four weeks alone in which Sunday, the that the second area is here. You guessed it browse Hill again. So for units as well. So, you know, we're close to 17 months of inventory in, in Rouse Hill McGraw Hill.

Chris Bates:

Yep. So there's been a lot of new builds that, you know and a lot of people in apartments that, you know, don't want them anymore. And they're just on the markets, he signed it from once a year and a half of what would transact normally just sitting there kind of getting styled.

Kent Lardner:

Yeah. And, you know, I would have, I could have easily argued, wow. This area is going to be so solid because of the transport and the rail links and whatnot. So that's still, those fundamentals are still there. This is just purely a supply and demand issue,

Chris Bates:

But there's a massive volume of its supply on the market. Now, even if there was normal demand, which is probably a lot way right now, there's still a year and a half worth of stock on the market. So it's still like, why would BAAs be desperate to buy it when there's so many choices out there? That's kinda the message.

Veronica Morgan:

Well, also there'd be trapped. Think about it, you know, like you, you buy a property and then you got to know, if you got your eyes open, you've got to know that if you do need to sell for whatever reason and, and conditions don't change, then you are going to be facing 18 months to two years before you can sell your property.

Kent Lardner:

Well, that's the point if I had six or 700 K to spend on an apartment, where would I be looking?

Veronica Morgan:

Definitely not there.

Kent Lardner:

And that's it. You've got, you've got choice now. You've got, you know, whereas in, when, when inventory levels are low, you don't have a lot of choice.

Veronica Morgan:

So with, with, with Sundays, I mean, MCI, I mean, that's, that's certainly mining is one of the industries up there, right? Is, is a lot of these construction. And we also gotta remember the lag time between when, you know, from when properties are conceived or approved, funded, then built then hit the market and then occupied, et cetera, et cetera, et cetera, this sort of the long continuum you know, were these built with fly in, fly out in my, I mean, I don't know. I mean, do we, do we know what led to all this construction in the first place?

Kent Lardner:

No, I don't. I don't have that answer at my fingertips can involve the suburb to look at. So if you're, if you're online and you've got yourself a little browser pull up the suburb can involve, we'll have a look at that because I've got an excessive 16 months of inventory there. And that, that was my focal focus suburb, but have a look at what's safe. What can involve does?

Chris Bates:

I think a lot of it, Matt must be, you know, that sort of backpacker travelers lost their jobs. You know, tourism isn't just died and a lot of people would just think, well, I used to always go to Woodside on Sundays on holidays. That's not likely to happen. Let's just, you know, financially we're in a bit of trouble, let's just get rid of our investment property up there.

Kent Lardner:

What do you do take up, which shop do you take up? Chris

Chris Bates:

Trying to have a ball. That's the best advice.

Veronica Morgan:

I think this stuff is cheap too. I'm literally looking at it at the moment. You've got apartment starting at 159,000, so I can see, you know, there's a really nice one here. And you know, you look at it with your Sydney lens and that's the scary thing. 275,000 negotiable. It's two bedroom, two bathroom. It's got lovely views over the ocean of the Whitsundays. You know, I guess over the years when people have been looking up there and feeling positive about just generally the economy that they think that that's a bargain, I'm going to go and haul it out there all the time.

Kent Lardner:

Well, like, you know, that, that could be the call out here is like weekend is

Chris Bates:

Yeah. Yeah. That could be as well. What about the third one? You said that's obviously we've got two guys. We've got Rossville. Okay. Samba.

Kent Lardner:

Yeah. It's a one per unit. So that's heading towards that 12 months of inventory level.

Chris Bates:

So it's a woman that's in a, not on the kosher. It's massive. You think inland as well. You're not really running out of lanes cause she can go North, South Eastern West. So you think the unit market wouldn't be the strongest in some way, like a woman, but because people can still get houses, but you know, it sounds like that was my heart.

Kent Lardner:

Well, listen, first property I bought was down South of Brisbane and there was just land everywhere. And I bought a town home that just had no idea. Right. And you know, as the market started to get hot another, they they'd buy another knock down and build another 10 but 10 times. Yeah. You know, it's a market could never really get a run runoff because as soon as it started to get warm supply just ramp up.

Veronica Morgan:

Well, it is the thing, isn't it? When land is relatively cheap compared to capital city prices, normally you don't see apartments, you see houses being built. But I think too, there was a lot of noise a few years back there. Wasn't a new airport being built into lumber and you know, I, a lot of spruikers banging on about how airports, you know, bring property prices, bring people, et cetera, et cetera. Maybe when it's being built, I think it's one of your favorite lines, isn't it? Chris? You know what happens when it's been, when it's finished?

Chris Bates:

Yeah, Yeah. A lot of jobs to build it, but you know, especially in the new technol logical covert world, there'll be less and less paperwork in the airport. That's a cold side. I mean, I think the reality is you've got to be extremely concerned with supply. Anyway, whenever you buy units, it's the one risk you've really got to focus on even more so than houses, but you know, then you need to worry about if you are going to sell, you've got to be obviously really concerned about how much supply is going to be on the market when you sell it. This is what this is alluding to. So what about the hotspot?

Kent Lardner:

Well, the hotspots you know, we've got a few suburbs in there. Byron Bay will, will show up here. I never thought of Byron Bay as a, as a, a unit market at all. But it it's showing up the region that it belongs to is called Richmond Valley coastal. So that's up there, that's a 1.69less than two months of inventory. The other one that's in there is Bayswater Besson Dean, which is in the Perth North East pocket or purse. So, you know, poor old WIS bean, you're bearing the brunt of a lot of news stories for a long time. There's a, there's a positive out of out of Perth. And the third one in that list is, is the essay three of manly. And again, there is no, the Northern beaches is just, just rocketing.

Veronica Morgan:

We really noticed in all the beaches just going crazy our late last year, it would be certainly it was one of the areas. You know, we had a few searches going on. It was one of the areas that I think responded really quickly following the election. Maybe it was because Tony Abbott was no longer there. I remember it was, it was quite phenomenal. It was, it was like bang and all of a sudden you just prices were rising. All of a sudden competition was just really furious. And it was, it was quite amazing. I mean, obviously, and where we were looking more sort of the family homes, not so much manly as a suburb. But manly is quite unique in terms of the unit market in that you know, it's a long way from the CBD. If you are driving, obviously you've got beaches, which is a really appealing, but for anybody who buys an apartment, there's walking distance to the ferry, that's, that's got scarcity all over it. Yeah.

Kent Lardner:

Well, the, the, the one that I'm interested in is we all love bar and buy, but the, the, the price that you would look for a property up there, I mean, the median asking price, the listing price for an apartment up in Byron is 770,000. So that means that half of the properties you're going to be finding up there listings for apartments, again, to be above that Mark. So very expensive. And to consider that it's bar and buy specifically, it's, it's below three months of inventory. So it's the very high demand area and I can't help, but think that the unit market's been driven by the fact that people can't afford houses up there.

Veronica Morgan:

My B I mean, it's funny, cause I know bar in itself tends to sort of follow Sydney prices in many ways. And you know, you do get a lot of escapees from Sydney. So you've got sort of people going there, live people going there to rent their properties out. There's also been a real furor of Airbnb market up in Barra and it's not a very popular thing at all up there. You've also got proximity to two airports, you know, you've got balancer and gold coast and not that many people are using it at the moment, but in many ways that makes it a very accessible place for people who are looking to have a partial semi sea change because they can still work and they, you know what I mean? So there's, there's actually a lot of very unique factors about that area apart from the beautiful landscape and beaches.

Kent Lardner:

I was, I was focusing on Belle gala and they are hot. It is. And the price, you know, the medium price of bell gala for apartment the asking price at the moment over $1 million.

Veronica Morgan:

Wow. Now there's not a lot of apartments in Balgowlah

Kent Lardner:

And that's probably, that's probably why the average amount of listings about eight, you know, at any given day, if you went to try and buy and only find about eight listings,

Veronica Morgan:

And this is, this is key to it though, isn't it certainly in Byron Bay, same deal. There are, there are quite a lot of holiday apartments. But you know, if you look about gala, there's not a huge, massive new development. You know, I think the signs that there aren't there anywhere that's had a lot of new development or recent development is under a lot of pressure anywhere that's hasn't had the ability or the land available borders is holding up very, very well.

Kent Lardner:

Well, I think so. And you can also got the old art deco style that, you know, it's common core through the rain wicks and the cookies in the Eastern suburbs, but also Belle gala seemed to have a lot of these beautiful, old that deco style. So if you were to look at that as a sub market group, you wouldn't classify that in the same league as a high rise.

Chris Bates:

I love it. I love this just talking about these and this is why we changed to do this and a bit of a deep dive every month about what's happening because the media would love to, and even, you know, people who come to me or I speak to, they'll say, Oh, is it a buyer's market or as a seller, it's going to easily quickly flip from a buyers to a sellers market. And I kind of always kind of go a bit deeper and say, well, what are you actually trying to buy? Where are you trying to buy, et cetera? And that could be a sellers or a buyer's market. It's completely different to what the, you know, they thought initially. So I think it's really important for our listeners to, to kind of keep going deeper with the data and focus on what you're trying to buy. What's actually happening in that market. So if you're trying to buy an apartment in Manley or Byron Bay, it's going to be tough, right? It's, there's not much on the market and there's more likely to be more demanding as pie.

Veronica Morgan:

So the, the thing too, you know, I'm looking at best mundane for instance, and NWA in Perth. The thing is that with apartments, you gotta remember this data incorporates apartments, townhouses and villi units. So there's, there's quite a lot of diversity in the stock that's captured in the unit data. And so when you look at some of these areas like ambassador Dean, then in, I just quickly looked up units, apartments and units for sale. I've got nine results. And most of those nine are actually Villa units. So they are single level you know, attached strata units and they look like little houses really. And so retirement, they're great for retirees. They're great for first home buyers. You know what I mean? So they're actually, it's a, and I know we've spoken with Jeremy McCabe is a Victoria and Melbourne, a buyer's agent in the past around Villa units and their PR and their popularity in Melbourne, you know, because they do have these multi-buyer appeal. And, you know, so I guess that's, you've got to look at the type of stock that forms the unit stock. And you've also got to look at the amount of it that exists. And I would suggest that whilst is low, then these areas are great. But if there's potential to build lots of units in its zoning, that allows for what's a high rise, then you could be in trouble.

Kent Lardner:

Yeah. I was talking to the jail. One of my JLL friends down in South Australia was saying townhomes in, in, in and around Adelaide behave very differently than they do in the other States. And they're more aligned, but his view, they're more aligned to housing markets.

Veronica Morgan:

Mm Hmm. And it's really difficult to, to actually cut through that, if you are looking at data because you do have to have that local knowledge right now, how about we talk about your anomaly Canton, because every month we get to discuss something that doesn't fit the pattern what's July's anomaly.

Kent Lardner:

Yeah. My anomaly is the suburb of Bowen Hills, the market unit markets. So in Bowen Hills, what I found is inventory level building, but the price has gone up. So that's a bit of a problem. So the medium price has jumped by 4%. So if I were one of these magazines or publications that we'll do a hotspotting list of the top growth area, I'd probably feature and Hills, but in reality it's an anomaly inventory levels are building. So it's a, it's more a reflection of the stock that's listed for sale inventory level is currently over 12 months. So prices are not going up. Values are not going up in an area with 13 months of stock.

Chris Bates:

So that's Bowen Hills in Queensland, near Brisbane, Brisbane. Yeah. So, you know, what's causing that, Ken, obviously I think we know, but you know, explaining to our listeners

Kent Lardner:

Typically you've got a, at the moment I'm counting just over, well, nearly 80 listings at the moment on average. So about 78 listings. And then you look at, well, how many properties are selling on average? When I look at that there's a round six, give or take six properties selling per month. Wow. So that tells me that the inventory levels are significantly higher than, than 12 months. So it's, it's a, it's a conflict in the data saying that prices are going up if you use median prices as your guide. So the asking prices, the average listing price has been going up, but that's a reflection of what's listed for sale.

Chris Bates:

Yeah. Is your comparison with any other apartments on the market and last month, any six people boards or averaging generally is any six people buying every month. Yeah. So you've just got to, you know, and that's, that's the thing, isn't it you've got, if that, how is your property going to be scarce when there's 80 of them and there's only six buyers, you know, and that's part of the real thing that I think we've got to keep drumming down because I think a lot of people still don't get the kind of dynamics of supply and demand and why you've really got to be careful buying anything that you can have supply issues with.

Veronica Morgan:

I think also what's, what's alarming. There is that that's a statistic that is real, I prices rising. However, when you dig down, like you say, you got to dig deeper because then that explains it. It's, it's, they're not really rising. It's just that you've got newer stock and that sells at a high price. But then that data then gets often misused by spruikers who say, look at the prices rising in this area and people who are not as savvy enough or, or understand enough of really what's going on, who aren't able to critically analyze that data to say, actually, I'm not buying one of those because then I'm just contributing to prices going up.

Kent Lardner:

But that also includes media. There's a lot of media types dumping on that.

Veronica Morgan:

Hmm. Which is why we're doing this podcast. Now, this has been a great snapshot and we're looking forward to coming back with next month's report. Okay. And on the rental side of things what's been happening, you I've jumped.

Kent Lardner:

I mean, to some suburbs On the, on the rent rental side. So I've got three cold suburbs or cooling suburbs and three warming suburbs. The cooling suburbs are calculated based on the volume, the count of listings that are older than three weeks. So the number of rental listings over 21 days old we've got South Brisbane. That's got over 300 listings that are now three weeks old. We've got st. Kilda. I've included st. Kilda for a reason it's starting to repair a little bit. So there's a month that, that County starting to reduce, but what our interest in st. Kilda in the housing market, this is so at a broad level, not a massive housing market, but prices are starting to change there. And what's interesting here is I'm finding a lot of, well, I'm assuming a lot of landlords are holding on to the least price that they were getting last year and not appreciating the market conditions and adjusting fast enough.

Kent Lardner:

So the reason why I picked out some killers that looks like the landlords might be a little bit more savvy and, and making those adjustments. And the third one in the list is Strathfield the suburb of Strathfield, lot of, a lot of properties there. And we've got know 200 listings that are older than 21 days there. And do you have that cooling spots? I'll talk about the three warming spots. So I've selected these based on overall that they region the essay three regions doing quite well. In terms of the overall number of listings are older than 21 days, but also the trend line. So we've got Penrith. We've got a suburb called Kirwin up in the Townsville essay three. And the last of it's a lovely suburb called new Lampton up in the Newcastle. They say three. Hmm.

Chris Bates:

Is that what I'm going to come? Number one every month, I'm going to find a way to showcase new Lampton every month.

Chris Bates:

I just have to step in here because let's face it new Lambton. That's your area. Are you wearing a Chris or no? You're Pittwater. Aren't you?

Veronica Morgan:

Nah, not me say I was just trying to think that if the three of us were so clever, because cause I'm in that that Merrickville slash Peter Shem area. I think, I mean that essay, sorry, I was just going to basically say how clever the three of us are to actually all have property in these hot areas, except for the fact Chris sit you're in Pittwater nodding moringa back to, okay, so you, so you, you you're beating your chest over new lamps and you're saying that rentals they got low vacancy rates in those three areas. Very interesting Penrith, Kerwin, Townsville, and new Lampton. And given the Townsville is one of our, our areas where poorer the downward pressure on unit prices because of the inventory on the stock. That sort of interesting to see that one little suburbs doing all right.

Kent Lardner:

Yeah. Yeah. I think too, we're gonna to look at some of the jobs and I understand my local market, one of the biggest employers, the medical industry, you've got a big hospital here, so that's one sector that's growing significantly. So I think that's the big driver of that and that, that points to what we'll cover in the magazine next month, which is looking at the the unemployment data and then breaking that down by sector.

Veronica Morgan:

And we'll, we definitely covering that in our August report with you. Okay. So, and also, just before we sort of finish up on this rental thing, what would you say these rental data, this rental data, this vacancy rate data is a leading indicator of,

Kent Lardner:

Ah, look, there's a, there's a couple of things here. The first leading indicator is that it will lead to a reduction in rental prices because people have choice. So people are effectively exiting properties that they would consider they're paying too much for and going and doing a deal and, you know, jumping ship and finding another property to rent. So that's happening at scale. I think the, the second thing that we are likely to see is landlords post that September cliff that may decide that they've had enough and they, at least they prop the current rental property gets listed for sale.

Veronica Morgan:

Well, I saw on the news today that a federal government is putting a lot of pressure on the banks to extend that that the grace periods. So that might get pushed out a little bit,

Kent Lardner:

But that's just the cane that's been kicked down the road. Right? Absolutely. Absolutely. So, you know, at some point in time those government subsidies subsidies and and the question is, will win and in what markets do they have the greatest impact? Yeah,

Chris Bates:

I think with the rental side, it's really a great point that can around the investor that's, can't rent the property out because there's lots and lots of properties for rent and lots of choice. You know, generally if it's a good property, you just drop your rent and you always find a tenant, but when there's so much supply out there, like even that might not even be an option for these investors just to offer a bargain rent. And at some point in time, you know, they get, they lose patients. The pain becomes too much and, you know, they'll, they'll throw it on the market to sell. The problem is that goes back to what we discussed very early on in the podcast was around the listing numbers of sales. And that's no better either will they know you

Kent Lardner:

Could be in a double whammy, sub a suburb, which is something we can cover in, in, in next month. But you know, if you're in a market, that's got a low inventory in terms of properties for sale then that's not going to be as painful. You might do. Okay. But there's a lot of suburbs, especially around the inner city areas where you, you, you've got the double whammy, very, very high inventory levels. And now extremely high vacancy rates,

Veronica Morgan:

Time to face the music for some investors, which is not very pleasant. I have to say hi, okay, well, this has been a great snapshot and we're very much looking forward to coming back with next month report. Chris, what would you say has been your greatest takeaway from this discussion?

Chris Bates:

I think I've been dying to break down the dots are, and, you know, really help our listeners kind of understand, you know, around Australia and even in our capital cities, where are the danger zones and, you know, what's actually happening on the ground and comparing that to some suburbs that are doing really well. I think this data over time will be a really great education tool for people to really get a good grasp of the micro markets within the cities.

Veronica Morgan:

You know, for me, it's been just that, not using median price, you know, we've we've, and I've found myself funnily enough, it's habitual sort of wanting to lean towards thinking, Oh, you know, we're talking about price data here, but we're not. And I'm loving that. And I, as I said, even myself, trying to retrain my, my thinking and the way in which we have this conversation and, but it's so important to get to the underlying fundamentals. And so I'm, I'm quite excited about, you know, building on this. How about Ken? What's the lasting thing for you?

Kent Lardner:

I love the takeaway for me is before we do next month, make sure that I go in and look at these suburbs online. So I think I got caught short on a couple of suburbs there. So next month the lesson learned is make sure we're going to look at a lot of these listings and spend a little bit more time on eyeballing properties before next month.

Veronica Morgan:

Well, me too, to be honest and probably Chrissy, no, I think that what we will all do is jump in and have a have a quick look, I mean, I have to say when I traveled the country buying property various different locations different types of property, different market conditions, or all sorts of things. And I suddenly got thrown into new suburbs and had to quickly upskill and I, and you know, this is actually bringing back that skill for me. I haven't done this for a long time and it's fascinating. It's like, you know, what are the dynamics? What actually is he is impacting on this market? So we're going to ask, as Ken said, and thanks for that, Ken, we're going to bring more of that in coming episodes. As I said, this is going to be a monthly thing as an addition to our normal elephant podcasts. So thank you for listening. We'd love to hear your questions and feedback connect with us by the website or email us@questionsattheelephantintheroom.com delay you. Thanks for joining us. We'd love to see you again. And remember don't be a Dumbo.