Property market records one of the quickest downturns ever
The latest property market downturn has become one of the shortest and shallowest on record, ending just three months after it started.
Dwelling values took a hit between November 2024 and January 2025, falling 0.4 per cent nationally, latest data from Cotality (formerly CoreLogic) shows, after a series of interest rate hikes and cost-of-living pressures weighed on buyers' hip pockets.
But in February, the month of the first interest rate cut in more than two years, the market started to turn around. The Reserve Bank cut the cash rate in February and May, to have it now sitting at 3.85 per cent.
Cotality's Home Value Index for May showed dwelling values have jumped 1.7 per cent over the first five months of the year. Values in every capital city rose in May, by at least 0.4 per cent. Sydney values rose 0.5 per cent in May, Melbourne was up 0.4 per cent, Brisbane 0.6 per cent and Perth 0.7 per cent.
Cotality research director Tim Lawless said the latest slowdown was more like a levelling-out of values, rather than an actual downturn, and was a lot less steep than the short downturns of 2020 and 2015.
Dwelling values fell 1.8 per cent between April and June 2020 (the start of the COVID-19 pandemic), before skyrocketing on the back of cuts to the cash rate that ultimately reached rock bottom at 0.1 per cent.
A similar, quick market turnaround also happened in 2015, when the Australian Prudential and Regulation Authority tightened lending criteria, particularly for property investors. Values fell 1.4 per cent in the December 2015 quarter.
'It really shows how much access to credit, or the ability to borrow money from the banks, can affect housing values,' Lawless said.
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ABC News
3 hours ago
- ABC News
Alan Kohler on making housing a bad investment
Sam Hawley: Interest rates might be coming down, but house prices are, once again, heading in the other direction. Given there is a major problem with housing affordability, and there are so many people who can't even afford to enter the market, why on earth is that? Today, the ABC's finance expert, Alan Kohler, on how conditions are ripe for a housing price surge, just as they were back in the early 2000s. In other words, why history's repeating. I'm Sam Hawley on Gadigal Land in Sydney. This is ABC News Daily. Sam Hawley: Alan, interest rates are coming down and they could drop even further this year. So that should mean houses are more affordable for borrowers. But it's not that simple and you're going to explain to us why. Now, to do that, let's go back to the turn of the century. In 2001, the Reserve Bank was cutting rates just like it is now, wasn't it? Alan Kohler: Correct. Sam Hawley: What was going on back then? Alan Kohler: In 2001, the Reserve Bank cut interest rates six times that year. News report: Nervous anticipation for one of the Reserve Bank's most expected interest rate cuts, the sixth and last this year. Alan Kohler: And that was in response to the dot-com crash in the United States, which happened on basically in March of 2000. It continued for a while. The Nasdaq halved, more than halved. And there was a recession in the United States. The Reserve Bank was concerned that the Australian dollar would rise too much because of that, because obviously the US Federal Reserve was cutting interest rates in response to the recession. So the Reserve Bank of Australia cut interest rates in precaution, even though there was no recession in Australia. The economy did slow a bit. There was a bit of a fall in the share market, but not anything like what happened in the US. Sam Hawley: And the other thing that was happening back then was there was some pretty major policy changes, including the introduction of the capital gains discount and the return of a first home buyers grant. So just remind me of those policies at that time. Alan Kohler: Yes. So in 1999, the Howard Government appointed a business tax review committee, a panel of three businessmen to report on the business tax system. And what they wanted to do, what Howard and Costello wanted to do then, was to reduce the company tax rate from 36 to 30%. So they asked some businessmen to tell them whether that was a good idea. And well, they told them it was a great idea. Go ahead. But in the course of doing that, they also recommended a change in the capital gains tax regime so that instead of the capital gains tax being adjusted for inflation, they recommended a simple 50% discount, which the Howard Government duly applied. Peter Costello, then-Treasurer: Under the reforms which we announced today, a 50% reduction in the taxable gain, that is 50% of the gain is not taxable. Alan Kohler: And although it's the case that that didn't really change the amount of capital gains tax at the time because inflation was quite high. So actually, the 50% discount was roughly the same as the inflation adjustment for the average time that people were holding assets. What I think happened was that it changed the psychology of investing in property because everyone understands a discount, whereas nobody really gets inflation and certainly can't do it in their heads. Sam Hawley: So even if you don't understand capital gains tax, just understand that if it's 50% discount, that's a good thing. Alan Kohler: Exactly. Sam Hawley: If you're a homeowner, right? Alan Kohler: Precisely. And that added to negative gearing, which had been in place for a long time, to make investing in housing an attractive thing to do. The businessmen who recommended it thought that it would lead to Australia becoming a nation of share owners and buy the shares of their companies and drive the prices higher and lower their cost of capital. But that, in fact, didn't happen because people just want to invest in housing. And that's what happened. And as you say, also the Howard government reintroduced first homebuyer grants in 2000, which had been out of action for a while. The first homebuyer grant was in the 1960s under Menzies, but the Hawke-Keating government didn't do them and Howard reintroduced them. Sam Hawley: Okay, so rates are going down. There's these two major policy changes. And at the time, there was a simply huge rise in immigration. Alan Kohler: Exactly. And what caused that in around about 2005 was a change to the way foreign students were assessed in 2001. On July 1st, 2001, the system was changed. Up to that point, foreign students' visas were issued on the basis of either gazetted countries or non-gazetted countries. China and India were included in the non-gazetted countries and it was very difficult for students from those places to get a visa. After July 1st, 2001, that changed and became the same for everybody, which is the way it ought to be, of course. But that led eventually to a huge increase in students from China and India from the mid-2000s. And that led to a doubling and then tripling of net overseas migration into Australia. At the time. Sam Hawley: Wow. All right. So we get a pot and then we put all these things into it and we stir it around. So there's the capital gains tax, there's the first homeowner's grant, the rates are dropping and there's this massive increase in immigration. And when you stir it all around, you come out, Alan, with house prices rising. Alan Kohler: Yes. Well, so all of those four things that we've discussed added to demand from investors and migrants and so on. So there was a big increase in demand, but there was no response in supply. The government did nothing about increasing supply at the time. And the result was that for 10 years, between 2005 and 2015, there was a dire, big shortage of housing, an undersupply of housing for a decade, which really set the scene for a big increase in house prices. And what happened was that the house price to income ratio rose from between three to four times incomes, this is average incomes in 2000, to eight or nine times incomes at the end of that time. And that was a huge change in the way that housing related to people's incomes and also GDP of the there was a stop to immigration during the pandemic. And then post the pandemic, population growth has gone back to more than 2% per annum, which is what it was in the period after 2005. Sam Hawley: All right. So, Alan, that's the history of the skyrocketing house prices and how we ended up here. Now, today, interesting that we have exactly the same conditions. Alan Kohler: That's right. The Reserve Bank is cutting interest rates, probably not by six times, but by probably four or five times this year, possibly into next year as well. We've got first time buyer grants back on. We've got a big increase in migration. I mean, the Treasury forecast in the budget for this financial year, net overseas migration is 335,000. But in the first nine months of the year, it's already 360,000 and looks like being 400,000 this year. There's no targets on immigration, but there's a Treasury forecast and net overseas migration is going to well exceed the Treasury forecast. And of course, there's been no change in the capital gains tax discount because the Labor Party failed to win in 2016 and 2019, where that is their policy to reduce it 25%. All the conditions are in place for another rise in house prices. Sam Hawley: Exactly. So what are we seeing already and what do we expect to see then when it comes to the cost of housing in Australia? Alan Kohler: Between November last year and January this year, house prices actually fell by close to 1%. This is the national median price, having increased 17% in the previous 12 months or so. And since January, they've risen again by more than the increase in average wages over that period. News report: House prices are continuing to rise across the country, with experts predicting property values to grow between 6 and 10% by the end of the year. All the capitals rose more than 0.4 of a percent in May. That brings the national index 1.7% higher over the first five months of the year. Alan Kohler: House prices are already starting to rise in excess of the rise in incomes. And the thing is, you know, everyone says houses are unaffordable, which is kind of true, which you would think would mean house prices don't rise very much now, because if they're unaffordable already, then people can't afford them. But in fact, falling interest rates makes them more affordable. The determinant of affordability is the amount you can afford in terms of interest repayments or mortgage repayments. Really, a better measure might be time to save a deposit, because the problem is that deposits are becoming unreachable for a lot of people. So housing is becoming inaccessible. It's OK if you've got a deposit, because your parents have given you one, given you the money, but those who don't have access to some sort of provision of a deposit can't get into housing. And that's the problem. Sam Hawley: Yeah. There's just a certain number of people that keep buying properties and pushing the amount or the cost of properties up. I mean, there's enough people that can afford the properties because the property price keeps going upwards and upwards. Alan Kohler: Correct. The truth is that if you don't have a parent who can give you the money for a deposit or some other way of getting ahold of a deposit, as opposed to saving it, you're a renter. You cannot buy a house. That is the reality of the situation, particularly in Sydney, Brisbane and Melbourne, but increasingly in Perth and Adelaide and Hobart as well, and also everywhere in Australia. I don't know what's to be done about it, really. Sam Hawley: All right. Oh, gosh. So, dare I ask you then, if you don't have the bank of mum and dad or any family members that can actually help you in this process of getting this massive deposit to buy a home, is there really no chance ever that you're going to land in the property market at this point? Alan Kohler: Well, there has to be a big shift in the value of housing versus incomes. Prices would need to go back to the sort of relationship to incomes that they were 25 years ago, which is three to four times instead of the current sort of nine or 10 times. And the only way that's going to happen is if house prices stay where they are for a while, like a long time, like 20 years. Now, that will only happen if there's an oversupply of housing for that period. Both the federal government and the state governments are all doing what they can. They're working hard. I know, you know, they're genuinely working hard to increase supply, but there's a problem. The trouble is that the construction industry doesn't have the capacity, partly because productivity is so low. In fact, the Committee for Economic Development in Australia, CEDA, released a report about construction productivity and why is it so low. And they do say in the report that we're building now half as many houses per worker as we did in the 70s. So that's fallen by half. But not only is productivity low, the number of workers is also in decline because the average age of builders tends to be quite high. They're all retiring and there's not enough apprentices coming through. The government is talking about increasing the number of tradies who they bring in as migrants, which is definitely what's needed. They're not talking about anywhere near enough of them coming in. And any way, the regulator of the industry is reluctant to recognise foreign qualifications in the construction industry. So, you know, there's a real kind of blockage of kind of productivity and number of people in the construction industry. I think it's going to be difficult to achieve the kind of oversupply of housing over the next sort of decade or two that is required. Sam Hawley: And Alan, while we're waiting for all these houses to be built, conditions are absolutely ripe for house prices just to keep surging. Alan Kohler: Yeah. And the governments, in addition to doing the work that they're doing on supply, which is good, they're also kind of doing short-term band-aid measures, including helping first homebuyers, either through help to buy schemes or grants and so on. And so that just tends to increase demand and increase prices, because a lot of those grants just end up on the price. So, yeah, look, I don't think it's particularly good news on the subject of housing. I'd like it to be different. And there's no big magic bullet. There's just going to be a lot of sort of small work, grinding work to be done. And, you know, the fact is we have to go through a period where housing is a really bad investment. Sam Hawley: Alan Kohler presents the Finance Report on the ABC's 7pm News. This episode was produced by Sydney Pead. Audio production by Adair Sheppard. Our supervising producer is David Coady. I'm Sam Hawley. Thanks for listening.
Sydney Morning Herald
7 hours ago
- Sydney Morning Herald
‘What Australia needs': Qantas' chief rival looks to soar back onto ASX
Investors and stakeholders have greeted the terms of Virgin Australia's public listing with enthusiasm as the country's second-largest airline seeks to promote a more employee- and consumer-friendly image in the wake of rival Qantas' record. Bankers for Virgin Australia are offering shares in the airline to investors at $2.90 apiece for its much-anticipated relisting on the ASX after a four-year odyssey through administration and privatisation. Transport Workers Union assistant national secretary Emily McMillan said she was 'cautiously optimistic' for Virgin's IPO. 'I think overall, it is positive.' 'Now we're dealing with a stable, growing, profitable airline, which is what Australia needs – and certainly, what its workforce needs.' As Virgin Australia struggled out of administration in 2020 and rebuilt a more simplified domestic business, Qantas – under the leadership of then-chief executive Alan Joyce – was engaged in a series of industrial relations battles that appeared to damage its public image. Following a case that pitted Qantas against the TWU, the airline agreed in 2024 to pay $120 million in compensation to 1820 ground staff whose contracts were found to have been illegally terminated during the COVID-19 pandemic. Private equity owner Bain Capital will sell about 30 per cent of Qantas' biggest rival, expecting to raise $685 million via the initial public offering, which would value the company at close to $2.3 billion. The $2.90 price tag for the stock represents a multiple of seven times the airline's expected earnings this financial year, the bankers handling the sale said in their pitch to investors. That's cheaper than Qantas shares, which trade at around 10 times expected earnings for the same period.
Canberra Times
11 hours ago
- Canberra Times
'Worst house, best street': The complete reinvention of a Northcote property
When Amy and her partner Mat purchased 34 Andrew Street in 2015, they had only viewed it once. "At the auction no one was bidding and it was about to be passed in, so we put in a bid and luckily got to purchase it once it passed in," she says. The couple purchased the property after only viewing it once. Pic: Supplied. Despite it being a case of "worst house, best street", Amy and Mat could see the potential in the property. The original house was a "very basic workers cottage", but the pair were drawn to it because they had always wanted to renovate a house in Northcote. After renting it out while they were living overseas, the couple returned when the Covid-19 pandemic hit and borders began to close. Three years, and two children later, Amy and Mat were running low on space. VIEW LISTING:34 Andrew Street, Northcote, VIC "We had to move into the dining room to sleep and both children were bathed in the laundry sink," Amy recalls. "It was small, but cosy." However, due to structural issues with the house, the couple decided it was time to update the property. Rather than renovate the original home, Amy and Mat decided to create a completely new house suited to their needs. Pic: Supplied. "The old house had begun to sink so far into the ground that a dummy floor had to be laid so we weren't walking on a lean." While the original plan was to renovate the existing house, architects James Lane and Tom Eckersley helped the couple see another side. The centrepiece Escea fireplace. Pic: Supplied. "They made a compelling point that we were not living in the past, so why not create something that reflects how we live today, rather than replicating a bygone era we never actually experienced," Amy says. "That comment really resonated with us and the twisting shape of Andrew Street was created." Wanting to repurpose as much of the old house as possible, a friend helped the couple carefully remove the old weatherboards and salvage the classic Northcote red bricks before demolition. Having grass for the kids to play on was important for the couple. Pic: Supplied. "Our incredibly talented next door neighbour then crafted the weatherboards into our current front door and also built the bench seat out the front," she says. "The salvaged Northcote red bricks found a new life in the outdoor entertaining areas. "A little bit of the past is still present in the future." When it came to designing the new home, functionality was at the top of the list. One of the bedrooms with built-in robes. Pic: Supplied. "We wanted the house to grow with our family of four," Amy says. "We wanted grass for the kids to play on, and we are big entertainers so the whole house needed to know how to party." The new outdoor area is now perfectly set up for entertaining with lush grass, inbuilt barbecue, wood-fired pizza oven, alfresco dining area and lap pool. With both of their in-laws living in country Victoria, the self-contained unit above the garage was created to accommodate them on trips to Melbourne. One of the bathrooms featuring twin sinks, generous storage and a calming neutral colour palette. Pic: Supplied. "They love the space, and the fact that they can have sleep-ins when they are staying with us." Thinking about her favourite aspects of the property, Amy says seeing the pool when she walks in is definitely at the top of her list. "The way it reflects off the walls and roof inside the home is super cool," she says. "Also, coming home to the fire in winter is the best." Amy loves the reflection of the pool on the walls and floor in the house. Pic: Supplied. Amy and Mat have made the decision to put the house on the market, and although they will miss it, they believe the new owners "will be thrilled". "It's such a well-designed home, there are no wasted spaces. It's intimate and warm." 34 Andrew Street, Northcote is currently listed for sale by Sam Rigopoulos and Paula Beavis from Jellis Craig price guide is $3.3 million to $3.5 million. An auction is scheduled for June 28 at 1pm.
