Suburb Trends August 2020 | How the WFH movement will alter where we choose to buy w/ Kent Lardner

Which suburbs will thrive post COVID and which will be passed over?
In the 2nd edition of the new monthly report with Kent Lardner of Suburb Trends, our hosts discuss around the current unemployment rate and what areas are most impacted? Which suburbs are the hottest and questioning if they will stay hot post COVID? And weighing in on why certain suburbs, areas and property types will survive the ‘property price falls’ the media keeps banging on about.

Here’s what we covered:

• Quarterly report on small area labour markets.

• What is the unemployment rate sitting at?

• How has COVID devastated statistically ‘younger areas’.

• Why does increasing unemployment in certain sectors not impact the whole economy?

• Why do hours worked data better represent unemployment?

• Which suburbs are hot and which are cold?

• Who is getting pushed out of the market and what suburbs are they going to now?

• What impact can the percentage of fully owned properties make?

• Will beach side properties stay at the top?

• How AirBNB properties in coastal suburbs, shifting to short and long term tenure have boomed.

RELEVANT EPISODES:
Episode 123 | Martin North
Suburb Trends July, 2020
Episode 135 | Eliza Owen

GUEST LINKS:
Suburb Trends - Website

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 12 August, 2020.

Veronica Morgan:

This is our suburb trends report for August, 2020. 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 be discussing the latest employment stats and what these could mean for the property market, as well as the leading indicators for hot and cold areas. Plus, we'll be looking further at the unit market for signs of a greater impact from COVID-19.

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 buyers, agent cohost 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 the data game Kent Lardner.

Chris Bates:

Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage 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:

These months? We'll be looking at the nation's hot and cold spots. Those suburbs where inventory levels combined with vacancy rates are giving the strongest indication of where the market is heading. But before we go there, we're going to focus on the latest jobs data, which contains some pretty critical information for the property market. Can this data comes out quarterly, right? And the most recent releases for the March, 2020 quarter, which won't really capture the impact of lockdowns. But before we get started on what you've seen in this data, that will be relevant. Can you briefly explain for the listeners who releases these stats and what's contained?

Kent Lardner:

Yeah. The small area, labor markets data is released quarterly. It was a week or two ago that we saw the March quarter information come out. It's released down to an area called an essay to a statistical area level two, and also the local government area. However, the big call out at the moment is as you mentioned that the lags and the dollar a significant the seasonally adjusted unemployment rate at the moment nationally is about 7.4%. I've read many stories out there saying it's, it's more than likely double that.

Chris Bates:

And for what was the data, you know, they assigned to, was there some pockets when what's they say too is happy? Is that area is that they,

Kent Lardner:

The statistical area level too, if you, if you break it down, it's a census measurement. The smallest measurement that they display, all of the census information is called a, an essay one. And the essay two is a, is an aggregate, typically have, you know, anything from two or three suburbs grouped together. And, and there are fantastic measure all of these statistical areas of my go to but they, they publish these at an essay two level. And when you look at well, I've just updated it on my website, you look at it and you look at the spreads across all of the when you grew up in together by a broader area, an essay tree area. Most of them trained very at a very similar rate, right?

Chris Bates:

So it's not like there's one pocket of Australia that's or parts of Sydney or parts of Melbourne that are getting hammered a lot more than others. That's, you're finding that it's generally across the board, everyone's kind of been hit with unemployment.

Kent Lardner:

I think we'll see. Well, my statistics or my analysis so far saw that it was very sprayed across multiple industries and multiple geographies. However geographies have started to show some, some early indications or steal your word are being hammered. Obviously those areas impacted the most by tourism and accommodation. So some of the regional areas have been been hit, but I think it's still too early.

Veronica Morgan:

Yeah, it's interesting. There was a, there was a front page or not, I don't know what paper it was saying that Alexandria was going to be the hardest heat in, in Sydney because higher proportion of people that worked at the airport that lived at Alexandria. So it was an interesting pinpoint. I'm not quite sure where they might've got that data from. And even if it's reliable, what would you say to that?

Kent Lardner:

Well, I've just pulled up. Erskineville Alexandria is the and it has spiked up. Yeah. So w and it belongs to the three called Sydney in a city. And there has been an increase. Yeah.

Veronica Morgan:

And that was in the March, 2020 data that you're, that you've seen that spike.

Kent Lardner:

Sure. Correct. Obviously it's lag, but equally you've still got a lot of the jobs that you can, job keeper stuff, playing havoc with the the unemployment data area. I,

Chris Bates:

Your twenties, I imagine you know, a lot of them are shooter aunts university students you know, hospitality workers, a lot of them that sorta millennials starting out in their careers as well. So I imagine it's not just the airport, that's getting, you know, unemployment, but I guess it's generally a lot of younger people in that area does have a lot of younger people.

Kent Lardner:

Would you agree with that, Ken? Yes, but probably a call out to is a lot of us have been focused on one or two industries. And you know, being, you know, food and accommodation. It's not the employee employment sector. You look at it, you look at construction. I think that's the big, so, so even if there isn't a downward turn in, in unemployment, in a given sector, that's small, the overall impact is not going to be as big as one of those big B employers like construction,

Veronica Morgan:

But it is if it's localized and you've got a lot.

Kent Lardner:

Absolutely. And yeah, and a lot of these inner cities that's sustained up, you know, the food and accommodation.

Veronica Morgan:

And interestingly in Erskineville and in Alexandria in particular that you've got two things there. One is definitely a proximity to the airport, which is, you know, suppose the premise that this article was using, was it a lot of people work at the airport or in the airlines, et cetera, et cetera. And of course they were stood down in March. Certainly, you know, I had friends that work at Quantas who was stood down in March. So that would have been reflected at the very end of that quarter, but also you've got the type of stock. So it was, can be her had something like, I don't know, a thousand units built over the last few years. Alexandria has obviously had a lot of redevelopment in that area as well. So you've got a lot of people who, you know, live in and not they're cheap. They were cheap to live in. They might be now because rents have been falling. But you know, you, so a lot of the young, no, no kids, your typical demographic that would live in a unit that is,

Kent Lardner:

Yeah. And, and those, those areas have evolved a lot in the last 20 years obviously. And the population densities are very high. The rental tenure is very high. A lot of the people who bought into those areas have mortgages. So, so yeah, it's vulnerable at the moment.

Chris Bates:

Yeah. Do you think it's too early? Cause you said that just before and why do you think it's too late? Because a lockdown is having Phineas. You haven't had this for COVID situation play out or is it a lot more.

Kent Lardner:

7.4% unemployment rising from 7.1. I'm not buying that. That's just not representative of, of the anecdotal stories, the, the situ the real situation, which would be, if you truly look at the data that probably should be matter is matter matters is hours worked. There was a good article in the fin review. A few weeks ago, April 20, 29. It was, and it was why hours work is a better job, this number.

Kent Lardner:

And I'm, I agree with that. I think participation rates is where it's at for me, because these are unemployment data figures just don't seem to be representing the reality.

Veronica Morgan:

How will they actually measure, how will they derived these?

Kent Lardner:

Oh, the unemployment rate I think, is a few hours worked and you're in, yeah, yeah.

Chris Bates:

You got a job. You're kind of, that's what I want. Right. I want to say that. And I, it looks good for that numbers, but that net doesn't take into consideration honor employment right away. If we're gave me an extra day, would I take it? Yes. So I'm really, I'm under underemployed actually want more work, but I am employed so honor, employments are much better example, but then that doesn't really explain how many, how much underemployed are you and that's why your hours work is probably a better one again.

Kent Lardner:

Yeah. I think there's a great website. I'm just trying to dig it up. It's it's out of the university of Newcastle and it's it's the unemployment, it's an index that looks at falling employment. So it's called the center of full employment and equity. And it's, it's a really great resource to look at. And it does come with these things at a level that I can't hope to cover.

Veronica Morgan:

So if you are looking at something like that, versus the jobs data that you were talking about, right. The minute which comes out of the abs, then what value is a job start? I given the lag and given the fact that it may not be the best measurement.

Kent Lardner:

I think it's great always for relativity relativity measure. So if you're comparing one area to another, even though may not capture absolutely everything in regards to a full employment or underemployment the relative uptick in unemployment is, is of significant value when you comparing one area to another.

Veronica Morgan:

So is there anything that we should, you know, from that latest release that you think, Ooh, property owners, you know, property buyers should be thinking, Whoa, there's something there there's a bit of a lead indicator or something that might be potentially more impacted by COVID potential?

Kent Lardner:

No, no. I'm always trying to use time series data in all of the models. And when you look at a lot of the variables that were data variables I, they went up and down they're flattened down a lot. So the one that's really left and driving a lot of these bottles is unemployment as imperfect as it might be. It's a significant variable that's leftover in these models. So, you know, if you look at it interest rates, they kind of went down and got to a level where they're hardly that they hardly driving the big macro economic models for, for housing prices so that the population will that's flat lining and going down.

Kent Lardner:

So it is probably still going to be a variable, but in the other direction building starts, you know, these are, these are all variables that you want to look at through time and unemployment's of biggie in the mix. And I think it's going to get bigger and bigger. And that's the thing.

Chris Bates:

Job Kepper has been extended again. So twice now, and or the, the rules around it are being changed in terms of allowing more people to get it. So, you know, really is the unemployment data going to be useful until that's all finished, right? Because it's to fads the figures really. And you know, how many zombie sort of businesses that won't survive when job caper finishes and those jobs will go there just kind of hanging on side. It's very hard to look at unemployment that moment, because it's not really known at how deep it is, where it's, there's a hotspots. And the problem is you got to find, it's not going to be evenly spread across the city. You're going to find that it hits certain demographics and certain areas much harder. So watch this space, I guess. Yeah.

Veronica Morgan:

Yeah. Last month we looked at the three hottest and coldest spots across the country for both units and houses. And we're about to see if anything has changed. So let's look at the inventory levels. Can't the cold spots. Yeah.

Kent Lardner:

Yeah. We've got a few cold spot, warm spots or hot spots as well. Focusing on the standout really is the, we, we split a lot of the data gets split. El geographies gets split into the capital city and the rest of the state. So a lot of the capital cities data, you look at greater Sydney and then rest of new South Wales, for example, one of the standout things even though I'm not a big fan of, of medians, as you know, the standout though, when you do look across these capital city metrics is a significant uptick in the rest of state.

Kent Lardner:

So if you're looking outside of, of Sydney, the rest of new South Wales has had a significant change in terms of pricing, same with rest of Victoria, et cetera. So the rest, you know, the rest of our ye the regional regional areas seems to be where the action is in, in certainly in the housing market. Interesting.

Chris Bates:

Yeah, you're saying the supply in Azaria is going out.

Kent Lardner:

No, I'm just using the median as a as a lead indicator. I don't trust median as a change in value, but it's an interesting statistic to drill into. So what I look at is the, the aggregate of, of sale prices grouped by greater Sydney, rest of new South Wales, et cetera, the I E the capital city. And then I'll look at the median that was that was for the last 12 months up until end of July.

Kent Lardner:

And I compare that median to the same period a year ago. And what I've found is the rest of new South Wales, that's ticked up by 8%, whereas greater Sydney had changed by 5%. So the Delta is really interesting. Greater Melbourne was a 2% change. The rest of Victoria was 8%. So it's, it's fascinating to see the variance, which tells me that there's a lot of activity, and there's a lot of anecdotal stories out there saying people are are looking to the out of town locations in the regions in greater numbers.

Veronica Morgan:

And we've definitely, we've had a couple of episodes on that, where we've been interviewing demographers and you know, a futurists around that, you know, the mindset change, you know, and also the enabling of that due to the different ways that we're working. And we've proven that working from home, you know, it's quite Bible for many people. So that's interesting to see that that's even now, so that's even so July we're talking. Yeah. So it's very relevant in terms of how there's been. Well, how many months of covert, if we'd been dealing with Fort this four months worth of covert data in there, right.

Kent Lardner:

Well, yeah, so I think things started to change a lot around January, February. So it's, it's diluted by the fact that it's a 12 month rolling average. And I think it's an early indication of what's to come very interesting.

Chris Bates:

I think it was starting to happen potentially when you say January, because the Sydney market and Melbourne were getting extremely hot again after the election last year, like we're talking potentially around 15%, would you agree Veronica since around, after the election, like, it would bounce back extremely fast. Okay.

Veronica Morgan:

Official, I think core logic said something like 12% uptake in Sydney, median house price in the nine months following the election or something like that. So it's yeah. Significant.

Chris Bates:

And we started even, and in a lot of the sort of first home buyer markets that are around the sort of lifestyle suburbs say in the West, where you up Veronica, the beaches, you know, parts of the East. We're probably more than that from, from what I saw. And so people were getting quite frustrated. A lot of first time buyers are getting pushed out and there was kind of famous 2016. I felt like where, you know, a lot of young couples were saying, well, I can't get what I want in Sydney anymore. I can't bond the beaches. I don't. And we're getting clients looking down towards granola and you know, oyster Bay, Como those areas. And then I think Como Cove it's happened and it's really allowed people to, to really kind of follow that. So I think it was already starting to happen. People were thinking about giving up on those inner ring sort of areas. And I think coven just kind of pushed them further down that path, or sorry, spoken over the top.

Kent Lardner:

You bring, one of their employees is invited to work from home if they like, we actually tried to get a Lassie and mr. Price on he's way too busy. So where would you leave?

Chris Bates:

Yeah. Well, that's it, and that's a last Sienna, a funny, because they've just announced a $1 billion, maybe even more billion tallest timber tower, sustainable design building in the Southern Southern hemisphere around central station. So it's kind of two different worlds, right? You're announcing, you know, a $1 billion development, but then you're telling everyone they've got to work from home forever. So I thought that was quite funny.

Veronica Morgan:

What did they tell him? They had to work from home forever or they could, if they wanted, cause I think this is, yeah. I think this is the interesting thing that, there's it becoming an awareness that, Oh, I like working from home and not all the time, you know, or, or as we, when we interviewed, or in fact we haven't released this episode yet, but we've got one coming up with Simon.

Veronica Morgan:

Who's a demographer with the young Bernard salt's group. They're the demographic group. Is that what they called? You know, he was talking about this the idea that certainly when you're in your career trajectory, you, you can't afford to work from home all the time, you know, so there's, there's going to be the, pendulum's going to swing back into the middle. And so hence probably the billion dollar building, but but it is interesting that this whole idea about breaking down the working week, maybe commuting two or three days means that that opens up possibilities for moving outside the metropolitan area. And it's just interesting to see that that's already showing in media and you know, that, that relativity, as you say there, the usefulness of media and data is showing that that's that starting to take effect and there's competition, presumably amongst new buyers or new entrance into those rest of new South Wales and rest of Victoria markets that are, you know, having any marketing impact on prices already.

Chris Bates:

It's funny you say around Atlassian because I've actually got quite a lot of clients at the last 10 and done a lot of them. Aren't born in Australia. A lot of them are Spanish, English, Belgium, French. And they've come to work for Lausanne because they've offered them, you know a job and, you know, a lifestyle to move to Sydney. And a lot of them actually want to live kind of around you Veronica around Newtown Erskineville yeah. Cause they, you know, they like that sort of inner city vibe. They moved to Australia for that, that buzz. You know, and a few of them were maybe a little bit older and decide that like thirties, forties, et cetera, but they have got a young workforce and they are potentially looking for those family homes, you know, but it's interesting.

Chris Bates:

It's a lot of those employees would prefer probably just to commute because they live around the city anyway, they can go to, they can socialize, they end up their coffees and they've got the full set up and that's 17 screens, you know, at the office sort of thing. So I think the commute by choice market is, is not going to go go away. And there's lots of people who are, would much prefer to commute because it's only 20 minutes rather than just sit in their office at home and be by themselves, you know? So it's very interesting to watch this space.

Veronica Morgan:

Let's look at the top areas or the hottest spots and we've gotta be careful using the word hotspots cause we're not using it in the same context that has been misused in abuse across the cross. No, maybe we should wait for next episode. We have to think about changing a name. I love the cold spots. That's great. So what are the top areas that are, that are where we're seeing very low inventory coupled with low vacancy?

Kent Lardner:

Yeah, we've got, we've listed down for boy Mayfield up in Newcastle blind down North of Woolongong, Ballarat and Berrera, which is, you know, the representative some about of the Sydney area. So there are our focus areas, probably the big call out there is Barrera is exposed to a fair bit of the rental market, which is just slightly down the road. There's a lot of rental properties in and around Asquith and whatnot that do compete there. However the suburb itself of brow or which we'll go into does have a very, very low proportion of rental property.

Kent Lardner:

So that's why it's in. Interesting. Yeah. Yeah. So it's fascinating there. So boys, the first one, not a lot happening, not in terms of available listings, so it's very scarce. There's a, the typical asking price, listing price mediums around 1.2 million give or take and infringe rate levels are all below the two marks. So it's as tight, very tightly held summarizing as well.

Chris Bates:

Is that it's thorough Austin, me Stanford wide pronounced. Yeah. So all those sorts of pockets. I mean, I've got three clients, which is how bond by and through up with three clients trying to buy in that area. And I think at the moment there's eight properties on the market that houses that and if you take it, there's a couple that are four male and three male, which, you know, are more the premium end of the, kind of the bell curve. They're not really there, they're rare, rare listings if you take them out. And then you take out some of the really cheap end of the market, which you don't want to buy. There's like literally a couple of properties and it's extremely tight in that sort of North kind of thoroughal North part of you know, North or not. Yeah. And, and just to put into context,

Veronica Morgan:

What you've got, there is a, a sort of a fairly short strip of coastal area where you're North of Woolongong. So you between Wollongong and Sydney, it's, you know, you're on a good day, you could drive to Sydney in an hour and it's got a train line. So life's got lifestyle accessibility, and also you've got two sort of job centers I will and gong and Sydney. So you know, that's probably a, it's a very interesting that it's top list really, but the next one, but there's two others that sort of relate to that proximity to a city and offering that lifestyle cause Ballarat and Barrera.

Veronica Morgan:

I mean, Ballarat obviously around about just over an hour train ride from Melbourne, I understand. And and Barrera obviously is it's a very Northern, the Northern most suburb of Sydney potentially. It's very bushy. It's very suburban, but like you say, can't, it's in there because there's very little in, by way of rental in that space. So highly owner occupied does have a train as well. Yeah. Train or all three, have the ability to commute to a major city and, you know, an hour or thereabouts and all three offer lifestyle. Yeah. I've always been a fan fan of Barrera and down Brera waters. It's beautiful, beautiful part of the world. I appreciate the Mayfield though.

Chris Bates:

I mean just on, Barao sort of you know, Cohen et cetera, those areas, I mean, because it's all surrounded by national parks it's, there's really no more land left, right? So from a supply point of view, there's no more houses getting built in barrel per hour height or nothing around there because it's national parks. And so, you know, there's potentially a lot of you know, darker properties around there potentially as well. So you've gotta be careful with that, but then there's lots of, we had a couple of clients by last year that properties that are actually backing onto the national park which with the North side as well, so, you know, great light. But then also when you look out the back door, you're looking into bushlands. So that's another reason why those areas are potentially good to invest. Um but I think schooling's obviously a part of it as well to, to think through. So Mayfield was the next one I believe is that right? Ken? It is Mayfield.

Kent Lardner:

Um it's a big suburb. So we've gone from a very small suburb in Berrera to Mayfield. So, you know, Mayfield's a monster of a suburb. And then you add onto that you've got Mayfield East and Mayfield West is two other adjacent suburbs that get thrown in the mix, but we're just focusing on Mayfield. So it's, it's relatively affordable at a median over the asking price at the moment around 575,000 very tidy inventory levels, obviously less than one month. So stuff comes on and it's bouncing off in typically less than 30 days.

Veronica Morgan:

So tight, very tight, you're a Nova Castilian. So you know, you're, there's always going to be a Newcastle suburb that creeps into this list.

Chris Bates:

Doesn't it bias, lived in my field 15 years ago, if someone paid you. What's interesting about,

Kent Lardner:

What's interesting about Newcastle is the region. The regentrification of a lot of the suburbs is, is happening by Sydney side is coming through don't carry any bias or grudge from what it was 20 years ago.

Chris Bates:

Yeah, that's so true because Mayfield, I grew up in Newcastle and Mayfield was, it was a rough place. Right. And it was and like, you know, you had around the TAFE all that sort of area, there's a bit of a light night scene sort of going on there.

Veronica Morgan:

And so it was new town, so exactly right. And in fact, in, when you look at the sort of types of houses in my field, you can see that there's older style houses that write for gentrification. They've got lots of character and yeah. I mean, God bell Balmain was a working class suburb and you know, full of working worker's cottages to that very point. And all of a sudden, you know, in the sort of eighties and nineties, a worker's cottage became something to brag about.

Chris Bates:

I fought a worker's cottage, Oh, ho what's got Mayfield. Is those how it happens was your Veronica is alluded to, but then it's also, those homes are really access to the city access to the beaches. And the city of Newcastle is gentrifying. They're doing a good job. Would you say can't in terms of just reviving the city? The city was a ghost town. When I grew up, everyone would go to the, the three shopping centers, Charles town, or guitarra, I can't remember if there was a third. You know, and, but the city has got a bit of a life back. A lot of the, you know, the millennials are starting the bars and the cafes and kind of reviving the city. And Mayfield's like, you know, 10 minutes to the city and 10 minutes to the beach.

Kent Lardner:

It's so close it's so literally you could walk to the city. No, no big problem. But I'm finding myself explaining what's happening to the city in and around Newcastle and CBD area too. A lot of people who haven't been here for 20 or 30 years, so I'm kind of having to become a cheerleader saying, come and look at the place and make your mind up. It is stunning. Hmm.

Veronica Morgan:

The mayor of Newcastle. So let's look at our cold spots. Let's get off the excited bandwagon about gentrification. Okay. Sorry.

Kent Lardner:

All right. So the first one here, I mean, I've got Austral in a lot of these house and land areas. Obviously dominate my, my data. One thing I wanted to focus on specifically is the block sizes in these areas, you know and one thing I remember back in my days in mortgage insurance is the biggest claims we paid were often these houses on, you know, two to 300 square meters, really very small blocks, big, big claims, and often two or three claims in the same street. Really. I know, I can't really know that I just can't. Yeah. And the data is bumbling up the same properties again, and I'm going fetal. So I think that's a, that's a standout and you know, you've got a lot of properties coming on.

Kent Lardner:

However they do get into the data, but the reality is that they're blocks of dirt with a rendered image of a property being listed. So they get counted as a house, but in reality, the holding costs are very, very low. So it's not the same as the secondary housing market data that's widely used in other markets. So my point really is Australia probably in me, inclusive. We need to focus on secondary housing market data and probably focus less on new stock because there's lots of white papers out there talking about the problems with measuring new stock.

Veronica Morgan:

The problem with not measuring it though is the reality is that there's massive supply and ongoing supply. And that is an issue for people, particularly if they're picking up every single government grant that's going at the moment they can still end up with negative equity on day one.

Kent Lardner:

Oh, Whoa thing, isn't it? Yeah. You only have to look, look through and find a property that's been listed for a long time. That's not owned by the developer and then your, your heart bleeds for that family trying to get out. Yeah. Yeah.

Chris Bates:

It was around the bread jury's Creek airport. It's, you know, they're all coming in the next decade. And you think are cards good place to invest right near this new airport? Cause that's, what's people working at the airport apparently. But yeah, it's interesting when you look at Austra you know, it's just, if you look to the the East of it you've got all new house on land packages that were kind of built in the last five years, Edmondson park, Hoxton et cetera. And you've got, they've all kind of on those small blocks, which you talk about.

Chris Bates:

But then if you go to Austria, it's all the farmers, or it's not really farmers. They're more like, you know, acreage is, and big has, you know, houses on beat blogs are all trying to sell their houses, but you know, three to 5 million because development approval is you can put 20 houses on them. And so it's just interesting, you know, if anyone wants to kind of figure out why these house and land packages don't work well, what how do the people in their West Hoxton feel when they look over their back fence or there, and there's all these sort of bigger blocks that are going to get caught up into small house, on my packages in the next 10 years, how is their house going to compete with all these new house and land packages? And that's just, it's quite simple to think about it like that, but I feel like that really helps people understand how is going to come and how your house isn't going to be able to differentiate itself or be better than what's the comp plate landscape.

Veronica Morgan:

It can only do so much. So Ripley Dean Logan. Okay. We know that that's how that was featured on the list last month, the reserve in there, but it's the same scenario, right? That'd be Prince spot we're. Okay. We're not going to go on a blade at this point. I think we've made the point, but it's pretty miserable. Isn't it?

Chris Bates:

And then just show one point in there. I actually just did a quick look on real estate then, and I do do use domain as well to check on the, like the suburbs, like their listings, basically across Brisbane. And as I zoomed put the suburb in, then I zoomed out, you know, lots of areas of that 50 a hundred plus. And then when you go to that South West corridor is over a thousand plus listings. So across the whole of Brisbane, everyone's like 50, a hundred, maybe a couple hundred.

Chris Bates:

And then this one little pockets got over a thousand. So, you know, just looking at, is it easy to buy a property when there's over a thousand listings in that area? Yes, exactly. No. Yeah. And Veronica has got a great line where she says, you know, it's easy to buy a hard to sell. It's either don't deal with the pain today and actually, you know, spend a lot of time trying to buy a good property, which is tough. And then it's easy to sell it, you know, 10 years later when you want to sell, because you've done the hard yards. Whereas do you want to do the painted out tomorrow? So I think that's just a really big warning sign. When you look at listings in that sort of pocket avoid,

Veronica Morgan:

And Kent, what impact can the percentage of fully owned properties make?

Kent Lardner:

Well, one of the conundrums or challenges we have is the percentage of fully own represents the people who are in the house at the time of the census. So it doesn't necessarily tell us what the percentage owned of those rental properties. So typically we see split up for say, you know, here's the percentage that are owned with a mortgage within each owned outright, and here is a percentage rent rented or rental tenure. But if we pull out the data, which is, you know, the third of properties out there that are rentals, how many of those rent rental properties are, have a mortgage and don't have a mortgage. And you look at some of these old money suburbs, Eastern suburbs, as a classic example, I know families that own five or six units outright that they've owned them for 30 years, 40 years. Yeah, for sure. Even though the, the, the vacancy rates might be a bit high, they don't care that doesn't mean buy an apartment in Bondai in 1990, you know? So it's not going to be hard to pay that one off, is it?

Veronica Morgan:

And that is interesting because I different data, but you know, we often talk as sort of in property investment circles, we talk about, you know, don't look at buying an investment or a property in an area where it's got more than a third or more than 30% is investor owned. Right. They're sort of 70, 30 sort of magic rule. Right. And, but then you look at Potts point I don't know, Elizabeth Bay in units, we've sort of segue in here a bit into units, but you look at pots pointless with Bay. There's something like 60 to 70% mental. Yeah. But, but yes, exactly. Right. But if, and, but then that's also been the one pocket of Sydney that's had the highest capital growth over the last 30 years. So, so then you go, well, how does that work? You've got two completely opposing bits of data, but then like what you say that, that assumption around the 70, 30% rule on, on I'm sorry, investors versus owner occupiers, is that investors all have mortgages, isn't it?

Kent Lardner:

Yeah. I think the keys, you know, just understanding the data you're looking at and scratching the surface a little bit. And it takes time to get a feel for it all. But yeah, I think that's the key is, you know, yes, it might be, you know, that whole essay three region of inner Sydney or the Eastern suburbs North might be up around 60 or 65% rental tenure, but there's a messy proportion of that. That's just fully owned or owned with a very, very small mortgage.

Veronica Morgan:

And we saw that we've seen that in terms of shopping strips. So, you know, not residential property here, but we've seen it where a lot of local shopping strips. So Balmain is a good example. And I think sort of Paddington and places like that, where the shops have owned and earned outright often by sort of older families that have been around the area, a lot of Italians and Greeks have liked to buy up shopfronts.

Veronica Morgan:

And they then say, well, if I kind of get $3,000 a week rent for this, shopfront, I'm not going to, I'm not going to lease it. So therefore a lot of these shopping suits were having a lot of vacant vacant shops. And the council was starting to try to, to have put in an incentive or disincentive to leaving it vacant because obviously it's not good for business all around, but it's, it's that type of shopkeeper or that top store, that type of landlord who can afford to just go, no, I'm not going to rent it out. I was going to let it sit there, you know? So yeah, it does make a big difference, doesn't it? It does. It does to that.

Chris Bates:

Is that the easy thing to find out where's the best way to find it out? Is it the census camp? I mean, why do you find it out from I grab it from the census and then try and display it in a, in a better fashion or my website, or get a big plug in for suburb trends.com trends, favorite property website the, you know, but with the owner occupy rate, it's really good for, you know, a client actually asked me this week, he said you know, he's thinking about buying off the beaches.

Chris Bates:

And he's like, well, you know, it's got 60% sort of owner occupier, right. Is it a good thing? And I was like, well, in that scenario, there's probably a lot of people that go holiday homes in the area. So that's probably, you know, not getting on the rental market. So that's probably skewing your numbers, but generally speaking, it's a good number to look at because that shows the owner occupier, market's driving that market rather than invest market, which the investor market always looks at. Well, what's the rent, what's my depreciation. And you know, what's interest rates and should I invest or shouldn't I, so it comes in and out, it's like a light switch. And so if that market drives your property price, you've got to be careful. The investor market doesn't vanish like it has recently. The other big thing, which the dooms day has never kinda acknowledge is the amount percentage of properties in a suburb that are paid off that have no debt that are unencumbered. And those people are not financially stressed at all. They've got no mortgage. They might be every, they lose their job. They haven't got a mortgage to pay. So yeah, they, they might live off savings. They might have re you know, et cetera. So, or if you've got a B portion of the properties in an area paid off, that's another thing that's another sort of stress test or, you know, on the market. So those are two things you should always be looking at.

Kent Lardner:

Well, that's where I go to, I use the tenure fully-owned percentage, a lot in the machine learning models. And typically what you can apply as an assumption that if those families also own a number of rental properties in the suburb or in the region, which is, which is common, then that same percentage may well likely apply to those rental properties that they, they own.

Veronica Morgan:

So let's move into the unit data. What are our sort of top three and bottom three in that space? Should we continue with the tops? Let's talk about the tops and then go to the bar,

Kent Lardner:

Elizabeth, by now that's been fairly solid for at least 12 months in terms of low inventory levels. Yes. It's got a high rental tenure, but we've just covered that off. So yeah, pretty solid income level. You know, the, the typical average weekly income is up around the, to Tamer. It's got a lot of solid attributes to it. The same one we've got on the list is Newport, but I think Chris, you've got a lot to say about Newport Christy.

Veronica Morgan:

Do you put this on the list, Chris?

Chris Bates:

Yeah. Confirmation bias and trying to process a property in the area by Renee Rifkin moment, Elizabeth Bay, for example, or I think the reason you're never going to see lots of stock listings is because of when you've got a good investment, whether it's shares or property and it's performed well for you and you ha you're not worried about it, not performing well in the longterm.

Chris Bates:

You don't get as fearful, right? So if you own a good company and you, it, you know, it's a good company, you know, it's going to survive any downturn because it's structurally it's sound. And it's got all the ingredients right. To succeed long term, then you don't rush to sell and your neighbors aren't selling as well. So there's not this fear going around the area. And I think Elizabeth Bay in Potts point is an example of an area where the unit, market's not going to freak out, you know, because everyone's going to be like, well, they're not building any more quality stuff here. There's only so many apartments and in 10 years time, it'll still be an amazing place to live. So that even though you see that unit listings across the city arising, I just don't think those are the sort of areas that you'll see problems.

Veronica Morgan:

And if not, so you've got the style of apartment two, we've got a lot of sort of Spanish mission style, a lot about deco. You've got use the most recent blocks really were built in the seventies, or there might be some redevelopments of a few old hotels. You know what I mean? So it's, it's, there's no, there's very little in the way of new development at all.

Chris Bates:

The same in Newport, you know, you were saying now, I mean, I was actually down there on the weekend. And there was one little apartment that was overlooking beats that came on and I was like, Oh, that's quite nice little property. And like, it went like in a day you know, it is, there's no development going on in that sort of peninsula for new units. There's one apparently happening that all the agents are trying to flog their reach at you.

Chris Bates:

It's interesting. All the agents have got it on their front doors. Like they're trying to push this new development cause I get a big commission on it. But yet there's this, this no new stock coming on. And secondly, there's lots of people, a lot of houses up here aren't suitable for downsizers there's stairs and there's maintenance, et cetera. So a lot of people who have got these bigger houses that are tough to keep up to scratch and costly. But they don't want to leave the area. They don't leave the, leave, the lifestyle and their friends in the area. So you'll find that they'll gobble up any nice units pretty quick. And there's not that many.

Kent Lardner:

So you would point I've got friends and family, you often say, yeah, we were looking to retire. We just want to move down to the, to the beaches in a unit. Um so the, you know, they might own a house up at, around, you know Belrose or wherever Northern beaches areas. And yeah, they look to the unit as their retirement location and.

Chris Bates:

It's like, yeah, it's not just like the potential a bit. It's narrow, been positive D Y you know, all along the strip, Fairlight manly, and then all the way around where you are Veronica in the inner West you know, people, they want more of that city life get the theory around the city. So yeah, lots of downs. Well, that's it, they're free of kids.

Veronica Morgan:

And, and by then, and they like, right, well, want to go spend, I want to go to the opera and I want to go to the theater. And you know, that, that proximity to the city slowly becomes very real. I actually noticed in the, in the hot list, there's on those Sobo trans website, there, you can look at the top 40 six out of the top 10, our beach side. Is that a coincidence or perhaps the, with all these coastal erosion on the front page of the papers maybe that will change quickly now.

Kent Lardner:

Oh, I look at the data just speaks for itself. So, you know, we base it predominantly on inventory levels. So if people are buying in the in those suburbs and demand outstrips supply it'll show up regardless, and it's also tightly held.

Kent Lardner:

So it's inventory, isn't just purely about supplying or it's supply and demand, of course, but it's, it's not purely about where you've got enough demand to buy whatever's coming on the market. It's the fact that people aren't motivated to sell. They don't need to sell it. I want to say. Yeah, I think equally there's not an abundance of, of building going on in a lot of those locations. So it took me a constraint of supply.

Veronica Morgan:

Okay. The other area on your list was Rose Bay bond Bondai and Bondai has had fair amount of construction in recent years. It's expensive. Bondo is just fat, fascinating spot though.

Kent Lardner:

I think you mentioned earlier on a lot of your friends at Atlassian you know, like to live in these spots. So I think a lot of people who move to Australia love to drill down on Bondai. I'm going to throw in a plug for a friend of mine called enter a bond, or she manages short longterm rentals and Airbnb, and she's given me a really terrific insight into the suburb of Bondai. And she had a number of Airbnb properties. And what they instantly did is just flick a few of them over to short and longer term rental tenure. But equally some of the Airbnb owners simply said, no, we'll hold on.

Kent Lardner:

Not a problem. And what happened was a lot of people who were working from home, they're blocked out of their office. We just went and rented a property, one of the, one of the units. So she didn't miss a beat with, with what's happened because it's a rock solid suburb.

Veronica Morgan:

And that's interesting that you say that, you know, those owners didn't feel the pressure to sell. They're not panicking. They're just going to ask, all right, we'll wait it out. Or we'll pivot, you know it's quite interesting, isn't it? What about our bottom three areas though? Cause I think a bit of a different story on one of those I think potentially is affected by Airbnb.

Kent Lardner:

Yeah, well, we've, we've got a few of these locations, people coming back at us a month, but Sydney Olympic park is one that broader region of of Orban being the essay three has inventory levels are getting close to that month, eight month Mark and, and climbing. So it's not just the suburb, but the, you know, the other markets that are immediately around it, the other suburbs around her also in over supply. So so we've got Sydney Olympic park at least price median, 700,000. So it's, it's not cheap. Yet you still have your inventory levels up around, you know, for that particular suburb 18 months. So it's a, it's a big count.

Veronica Morgan:

Um I wasn't trying to, you know, offload something quickly there be,

Chris Bates:

Oh yeah, that's here as well. Kent, you said 67% of the properties are rental. So whenever it's rental, you're like, well, that's an investor on the other head, like, so 70% let's just call it of the properties are owned by investors. So brand new. Yeah. So they've only owned them for a very short period of time, Veronica, which is 5% of the properties are fully owned and they're probably my developers to be honest.

Chris Bates:

And so that means pretty much all of the properties I've got debt on them. Now, if they've got debt around, they've all been recently built and most likely they've got a lot of debt on them because you know, they're bought by investors who it's good to have a lot of debt on them if you're an investor because the tax deduction, or if you're a first time buyer, you haven't got much cash. And so you're getting a 90% line or an 80% line not many first time buyers have more than that, their deposit. So 70% of the properties are owned by investors. I'd say that's probably more than that. And VR VR, all of them have basically got debt on them and lots of debt on them. So it's a very confronting when you look at those two statistics and compare that to a, you know, a premium suburb that maybe 30, 40% of for the owned and 20% to 30% are rented. Um it's completely other world.

Kent Lardner:

And you've got more competition. So those adjacent suburbs, the overall region region has at least 45% of the properties are rented a rental. So, you know, it's, it's a, it's a tough space. The second one we had was Melbourne, Melbourne city. I think we covered that last one. So we don't need to dwell too much on that. But you know, we know the story that there's an abundance of Airbnb properties. We've got an abundance of properties that were leased to international students that aren't being leased. We've got massive supply, a lot of new stock. So a lot of headwind.

Chris Bates:

Or a lot of our gain in Melbourne is, are flying in the, sometimes I'll get a car, but sometimes I'll get the bus, you know, the sky bus, whatever it is. And you go over the Balti bridge and look to the left and you've got this amazing sort of Vista of the city. And every time I go to Melbourne, there's a new tower. Like there's not just one tower, there's three or four going up in the background. And you know, there's so much development that's still happening today. I mean, it's been cut back for the next six weeks, but generally spoken that there's not, it's not like there's not building any more apartments for anytime soon. There's still thousands and thousands that are still getting built today down there.

Veronica Morgan:

So, and yet the last data I looked at 66% of them in the last decade on sold at a loss or at the same price that they'll purchase for. So, which is, it's a real loss, you know? And so it's like, there's evidence to say, don't buy it. And yet there's still being built. So people are still buying them, you know, so, or have been maybe, maybe maybe that's going to be open up the Gates and let all of Hong Kong light, they can buy it, they can, and they'll go and buy a house new day.

Chris Bates:

But I mean, it's like a client I spoke to a couple of weeks. He was so sure that he wanted to buy this place in Docklands. Cause he wanted to live in this building. And I think I might've said this story to afforded Alison's you know, and it was a very confronting conversation and he kinda got there and and then I've checked, fired him up on LinkedIn a couple of weeks later and he said, yeah. And I took the advice I'm renting in that building that I wanted to buy and we're going to put our money elsewhere. And like, for me, that's exactly the best outcome. You know, if you want to live in Melbourne city, go rent, there's no shortage, enjoy it. When you get over that building, if it's got problems, just go rent, a different building. You're not gonna have probably renting and no and CBD yeah.

Veronica Morgan:

Rank best. Yeah, exactly. Yeah. And then the the third one, the list, the arthritis. Yeah. Same thing. But look, looking at the, at the list of, you know, the 10 colder spots. So on your website, you know, obviously we see the usual suspects and we're just seen it that again, high density, newly developed areas, holiday units also dominate, which we haven't because they didn't make the top three or the bottom three. But you know, it was a few suburbs there in the Whitsundays for instance, a poor old Darwin that was in the top 10 thrown in for good measure. And has it, I know it's been a month, it's only been a month, I should say since we last them to this. Has it been any, any noticeable change in that time? Not, not a lot. At all.

Kent Lardner:

It's been you know, I, the reason why, one of the reasons what motivated me to expand the list of, so we can talk about some different suburbs. So now we can just kind of pick, pick over the pick over the 40. So what I will do for the next for the next month is target some of those new entrance.

Veronica Morgan:

Yeah. So we'll should be interesting. So we, you know, we want to sort of get greater understanding through all of this. And obviously these are the leading indicators, as we've mentioned before. And as we explained in our last suburb trends episode, which was our first one, which was July, 2020, I don't encourage you to go back and listen to that. Cause that will it, we explain the methodology, which just in a nutshell is really looking at leading indicators for price movement, and obviously vacancy rates coupled with the inventory level.

Veronica Morgan:

Thank you. And you, you created a, you went away from that and created a market risk matrix, which is a lovely once again, available on your website, it's a great visual representation of a briskets and a place called Barkley floated. And I say floated because it looks like bubbles. It floated to the top of the chart for both units and houses. I had to look at where Barclays on the map, it's a local government area in Northern territory. So I'm not sure a lot of our listeners are from the territory. But I have to say it's pretty sad story for anyone owning anything in Barkley based on, based on that data that you've you've put.

Kent Lardner:

Well, the why that page has been designed is view your inventory appears on the X axis. And what you can do is then look at the same metric of inventory, but then compare it to one other dimension of data. So the first one being vacancy rates, and then, and then you scroll down the page and in that same position on the X axis will be that location, but then you can compare it to the, to the change in infantry that, you know, the 12 month trend change, then the next one down, you're looking at it inventory versus unemployment rate. And the last one is the median price change. So you can get a four different dimensions on inventory levels by looking down those matrices.

Veronica Morgan:

It's really interesting. So it carries, everybody goes suburb, trains.com today, you there's a tab there of market. Oh, actually on the front, the homepage has all these boxes here. You can click on it's market risk is the box, right? What's it called risk? I think I've called it. I've called it risk quadrants. That's it? Risk quadrants. So it's yeah.

Veronica Morgan:

If anyone has a bit of, a little bit of a nerd loves this stuff, you'll love this. Each month we discuss something that doesn't fit the pattern though.

Kent Lardner:

Uh what's this month's anomaly, I've got two data anomalies. We did mention them both. I think the first is the, you know, the new stock versus the secondary market and the economic forum. We have counting blocks of dirt there's houses. And you know, the answer to that may not be at my fingertips right now, but in, in certainly in, in places like Poland and the U S they've they've identified it as the same problem, a great white paper. I read recently on that identified that there's information asymmetric, that asymmetric information when it comes to new property development which was, which was identified as causing problems in the way they were reporting housing statistics in Poland.

Kent Lardner:

So I'd agree with that. There's some, some problems. So that, that's the first one. The second one was we covered it off was, you know, the percentage rental tenure. We need to kind of break that down or appreciate that. Yeah, it might be 62% rental tenure in, in some of these Eastern suburbs suburbs. But we don't necessarily know what percentage of those are owned outright. So I think it's just understanding the data a little bit better and.

Chris Bates:

The better that the suburb has performed, it would mean that the more properties that are probably paid off, you know, because a lot of properties were bought for cheap prices a long time ago. Yeah. And so that more likely people have held onto them cause a big capital gains. Like if you bought an apartment and say in Bondai as an example, and you bought it for a hundred and that's with 800, you don't want to sell that property.

Chris Bates:

Cause you don't want to give, you know, a hundred, 150 grand of capital gains tax to the government. So you just hold onto it. Yeah. And also you don't have the precious to sell that somebody else might have exactly. Cause it's positively cash flow. It's, you know, you always know that it's gonna perform okay. And because of the suburb dynamics.

Veronica Morgan:

Yeah. It's so interesting because I've never really been able to explain that. And I know, I know it to be true, but I've never been able to explain it to clients. I've often just pointed out as an anomaly, but now that sort of given us some sort of thought into why that is an anomaly and I think that's fantastic. Wonderful. Thank you. This has been a great snapshot and we're looking forward to coming back with next month's report. Chris, what's been your greatest takeaway from this discussion?

Chris Bates:

I think when I case lists I like to do a little bit of digging and I did it this time and it's just, you know, looking at the top three and thinking, why is that the top three or the top 40 just looking at the list of the suburbs and and the same on the bottom and just digging a bit deeper. And yes, it just keeps on confirming what I believe and what I know, but it's still good to keep on seeing the data and, and keep on fact checking. Cause you know, when you need to keep digging to, to just always make sure you're doing the right thing.

Veronica Morgan:

Yeah. For me. And you know, obviously it just reaffirms, there's no such thing as one Australian property market. Also just the fact that you've, you've pointed out Ken, some of those data anomalies in the sense that there's a problem in the data because of all the new stock skewing the total reporting in a way. And, and, and that goes in terms of reporting it overly negatively as well, because you know, you Martin North for argument's sake who you know, we've we've interviewed and, and you know, he's very concerned about that high level of new development. And he's been well publicized as saying that potentially, or that the Australian property market back to back to talking about one homogenous market, which doesn't really exist, but he's over is overvalued by 40%. And a big part of that is because of all this new stuff in there. So that for me, but it also just reaffirms exactly. It is what we know, but it's explaining what we know. So, you know, we've gotta be careful about confirmation bias, but you know, that that scarcity and established areas, you know, I think it just Rams at home that we can look at the patterns in the cold spots and it's new, new, new, new, new, I was supplied with suppliers of supply.

Veronica Morgan:

And then, you know, you're looking at what are the common denominators in those hotter areas? It's scarcity, it's lack of supply. It's not, it's not just scarcity, but scarcity of the type of property it's it's you know, establish it. So it's a, also a diversity of the ownership and the types of people on the, and the financial positions of those that own in that area. So I think that's been another fabulous discussion. Can't wait till September's, what's going to be the focus for next month. Ken.

Kent Lardner:

Follow the same, I'm thinking, but we'll focus specifically on the new entrance, into the top 40 lists. Okay. Let's.

Chris Bates:

Talk about a bit of that mortgage data and lending data. Cause I think it's very interesting to start some unpack some of the behavioral trends that covert created the,

Veronica Morgan:

I think that's a fantastic, well, I'm looking forward to it. Thank you again, Kent. We'll see you next month. Thank you. Thank you Kent.