This episode was recorded on the land of the Wurundjeri people of the Kulin Nation. We pay our respects to their elders, past, present and future.
Richard: Hello and welcome to another episode of Precisely Property. I’m your host Richard Temlett. I’m excited to have you with us today. If you’re here for the first time, thank you for joining us. I encourage you to listen to our previous episode where we discussed all things property, but they focus on dynamic discussions with industry leaders. In this episode, we’ll be talking with Dr. Nicola Powell of Domain about the housing markets across Australia. So sit back, relax, and let’s get started. Dr Nicola Powell is one of Australia’s leading property market experts. Nicola has two decades of research experience that spans academic, government and private sector. She has a deep understanding of the Australian property market and has focused on property and demographic trends for a decade. Nicola is the leading force behind Domain’s regular data reports that keep the Australian public up to date and what’s happening in the market. She’s a well-known property expert and features regularly on broadcast television, radio, and in print and digital media. Welcome Nicola.
Dr Nicola Powell: Hi Richard, thanks for having me.
Richard: Nicola, it’s a pleasure to have you on the show today. Just to bring our listeners up to speed, we do catch up on a quarterly basis and share ideas. We work in a very similar space and really I feel that today’s session will be just like one of our regular catchups. So can’t wait to get into it and talk about what’s happening across the resi housing markets across all the capital cities of Australia. It’s such a topical issue right now, not just with rate rises and the cost-of-living crisis, but as we talk about all the time, real estate is a huge obsession with Australians. And so I particularly love our discussions because you’ve got lots of data. I’ve got lots of data. We’ve been spending a lot of time mastering our craft in this space. So hopefully there’s a really good session for the listeners today. Before we get into the main body of the episode, though, I do have an icebreaker question that I wanted to ask you. And I’m very keen to hear your answer given you said that it was going to be a very interesting one. So, the question is as follows. When you’re not deep in the data, what’s your favorite way to completely switch off from the property market?
Dr Nicola Powell: This is an easy one for me to answer. And I think it kind of feeds into that whole never judge a book by its cover. Right. I absolutely love a power suit during the week. Love my numbers. Love analyzing Australia’s housing market. But at the weekend, I spend my time in the garden and I am knee deep in mud. You would not recognize me at all. And it’s a laughing joke in the office all the time of what has been happening in Nicola’s vegetable patch over the weekend. I took some produce in last week for some colleagues and I have to admit it looked like they were genetically modified. They were the largest zucchinis I’ve ever seen known to man. So yeah, that’s my happy place actually is in the garden.
Richard: That is so hysterical. I’ve only ever seen you at conferences looking really smart in your suits. I now and I certainly didn’t know that you love your gardening. I’ve got this image of you, as you say, knee deep in mud. That’s fantastic. Well, keep that up. It’s good that we have the things outside of, what we do on a daily basis. And perhaps when we catch up next, I’ll ask you to bring some zucchinis or something from your vegetable patch.
Dr Nicola Powell: I will. I’m often taking things into the office, herbs, whatever anybody wants. I’m your woman.
Richard: Fantastic. All right. Well, today I’m keen to just let the listeners learn a bit more about your background. I know I introduced you in your bio, but I’m keen to just let them hear from you a little bit more because I’ve said a number of times that people with experience over a number of market cycles are really the ones you need to be listening to quite simply because they’ve lived and breathed a lot of what’s happening now and certainly various points of reference and so keen to understand your background. Domain does so many different reports and I do my best to read almost every one of them and I really love reading your work. But today we’re going to be talking about your house price report that was released about a month or so ago. Going to delve into just some of the key findings from that to the different markets. No doubt we’ll touch on things like interest rates, consumer sentiments, know, the risks and the opportunities. We’ll then talk a little bit about the role that both the state and the federal governments have across different cities, what they’re doing well, what they’re doing badly. And then we can just close off with a couple of key takeouts. So, the first part of it is just your background. I see that you are a doctor. So, let’s start there. Dr. Nicola Powell, what is the background to that?
Dr Nicola Powell: Yeah, look, property actually wasn’t originally my plan. I’ve always loved numbers and, you know, I think in property, we know it’s a numbers game. And I came from a classic research background, but about 15 years ago, I actually moved into property and into a property research role and I found it incredibly compelling. And actually my first journey into Australian housing was actually in the ACT. So, I solely focused on analytics within Canberra. And then within a few short years, I was offered a national role, and I’ve actually been with Domain 10 years this year, which is a significant amount of time where I’ve had access to some incredible, intelligent people at Domain as well as incredible data. And I think for me, you know, this transition where I moved into the property space and really kind of honed in and focused on it, as I say, you know, it’s been close to 15 years now that I’ve been doing just property. I love it. I really love how housing sits at this intersection of economics, Australians, so people as well as policy. And once I kind of realized the impact that really great data and really great research can have in that space, I was absolutely hooked. To be honest with you, Richard, I cannot imagine doing anything else other than pouring over housing data. And I will admit there’s one aspect that I particularly love about housing and that is Australia’s love affair with the housing market and the behavioral side, this behavioral economics that unravels across Australia’s housing market. It influences our decisions. And I find it fascinating. I mean, as you mentioned, you’ve been analysing the housing market for a long time too. So you would have been through so many cycles as well. But when you really see those behavioral traits starting to take over market dynamics where you’re getting clearance rates of 85%, 80%, it’s a really compelling and interesting one to kind of watch unravel.
Richard: Nicola, I suspect there’s a few of my friends that are listening to this show. They’re probably laughing because I love my data and my analysis and they’re probably going, there’s two peas in a pod right now talking about what they love doing because I’m very, very similar to you. And obviously that’s why we get on so well because I love having the data just to inform my own opinions and just pouring through that data, I find absolutely fascinating. All right, let’s get into the main body of the show. You guys released a, and you’re the main author of, if I’ve got it correct, it’s the domain house price report. Could you please give us a bit of a background to it and then we can start jumping into some of the key findings.
Dr Nicola Powell: Yeah, so I mean, we produce what we call our house price report every single quarter. We do it on a quarterly basis because it is a bit more robust. We do it on a national level and we break it down from basically city all the way down to suburb. And we pick out the trends, we pick out what’s happening, where, what’s the change in direction or momentum as well. And also, we obviously look at houses and units and their performance between the two. It’s one of my favorite reports. I actually have been working on this report close to a decade. So over that period of time, it has morphed and changed, but it is one of my favorite reports. It’s incredibly well respected and also well used as well. And we do release these reports. We get a lot of interest in them. And I think what’s very interesting is, and one of the pieces that I really love is I love the analysis and I love writing. One of my core things is actually the translation. So, it’s all well and good doing some great analysis, but what does it actually mean and how can your everyday Australian use that piece of information to make better decisions when it comes to property? And that is one of the passions that I have that really drives me every time I come to authoring a report.
Richard: Great. Let’s start at the top. What were some of the key findings? Again, I’ve got about 50 questions to ask, but What were some of the key findings end of 2025 into 2026? What’s happening?
Dr Nicola Powell: It’s an interesting part of the, or timing of the housing market. Cause obviously there was an expectation that 2026 there might be a rate hike. And obviously we’ve come into 2026 and there was a rate hike. So, I do think that the outlook might be slightly different compared to what we were seeing. I mean, ultimately the recent quarter was strong. And I think what it is demonstrating is that we are in an upswing, it is entrenched, but the description that I would use is it’s no longer uniform. When we look at 2025, the year actually ended with strong momentum. We had prices hit new record highs across the combined capitals. And when you look at house price growth, it was the fastest in four years. And unit price growth was actually the strongest in eight and a half years, which is quite extraordinary. But as you and I rightly know, there is no one single property market in Australia. And this is where we’re starting to see a little bit of a leadership change in terms of who’s leading price grows and where are those capital cities that are starting to see a slowdown. Perth has been one of those markets, I’m going to pick out one city and then you can kind of lead the conversation to other cities. Perth was one of those cities where we had picked would hit a million dollars by the end of 2025 and that is exactly what occurred. It’s quite incredible really when you look at a market like Perth where It’s always been seen as much more affordable, but when you’ve got a house price at that capital city level bridging over that million dollar mark, it’s really challenging to describe it as affordable anymore because it’s really closed the gap on markets like Melbourne, which I know is your hometown. But I think though, what we’ve started to see in Perth is affordability is even slowing down price growth in a market like Perth. But we still got strong momentum. We’ve still got strong momentum, particularly in markets like Brisbane, Adelaide, Perth somewhat, and even markets like Darwin, which is quite extraordinary, which I think is a bit more investor driven though.
Richard: I still, eventhough I study the market very carefully like you do, when you talk about some of these markets hitting that million-dollar price point, there’s something in people’s minds, mentally, where a million dollars is obviously a lot of money. I still cannot believe that Perth and then believe Adelaide, if I saw your stats, if it hasn’t, it’s very close to hitting a million. Brisbane obviously has done that. It seems like only yesterday where it was Sydney leading the way, of course, and then Melbourne that is, you know, up there getting close to that million dollar mark. I cannot believe there’s more affordable and I call it affordable in inverted commas now. States are at a million dollars.
Dr Nicola Powell: It’s incredible, isn’t it? It’s so incredible.
Richard: I wanted to pick up on one of your points. Yes, you made the comments about different cities and markets at different, effectively different points in the cycle. At the one end it appears to me we’ve got markets like Melbourne and Canberra that are, you know, I think they slowly starting to get positive growth. They’ve been flat for a while. At the other end, we’ve got markets like Southeast Queensland, Brisbane, Gold Coast, Perth and Adelaide. They seem to have jumped by 10, 15, 20% over the last couple of years. It’s actually just remarkable to see that the markets are at different points and some of them are moving so quickly and others aren’t. So, I suppose my question to you with the ones that have moved so dramatically. Why? Let’s talk about that. Why is it moving? Why have they moved?
Dr Nicola Powell: Yeah, look, and the standout performers we know have been Brisbane, Adelaide and Perth. If you capture, you know, let’s just hone in on that kind of five year period. And even with Brisbane, there is still strong momentum. I mean, we saw over the final quarter of last year, house prices increased by four and a half percent in a three month period. This is the longest uninterrupted upswing that Brisbane has seen in 21 years. And then when we look at unit prices, I know in Brisbane, I mean, you would remember it doesn’t feel that long ago where units were oversupplied in Brisbane. It was a very known fact that it’s a very challenged unit sector. That is far in the past. And we have seen 19 consecutive quarters of unit price growth across Brisbane. The longest run of rising unit prices that we’ve ever seen in the city of Brisbane. And I think with Brisbane, Brisbane’s almost like the unicorn, right? I see it as that market that stands out compared to the others because I do think that we’re going to continue to see price growth across Brisbane. I think some of the other markets like Adelaide and Perth are going to, they’ll still rise, but they’ll rise at a much slower pace than they once were. The thing that unites them, and originally it was affordability, I think really helping to drive gains and really being an attractive location for people priced out of our higher priced capital cities, i.e. Sydney, tothese markets. Demographic patterns have definitely been a core underpinning that, particularly when you look at interstate migration into Southeast Queensland. It has seen record levels really of interstate migrants, people looking for that better lifestyle, being able to afford to purchase. And when you do that direct comparison, what you get in Brisbane is far greater than what you get in a market like Sydney. I also think there’s other dynamics going on. I mean, they’ve got very tight rental markets as well. You know, these are markets that have had a below 1 % vacancy rate for many years. So, it is a very challenged in terms of the housing supply pipeline too. I’m giving you so many reasons.
Richard: Good. Keep going.
Dr Nicola Powell: I think one of the other ones. And the end point for Brisbane is one of the dynamics that makes Brisbane the unicorn compared to other markets is this interplay between infrastructure spending and residential construction. Ultimately, you’ve got industries competing against one another. And I think the pull for construction in the infrastructure space is absolutely winning. Brisbane, Southeast Queensland has got extreme amounts of infrastructure. And the gains is, is you’re really not that far away and that it adds a deadline. And so, the infrastructure actually needs to be delivered. And I think that’s attracting workers. It’s also from other states and territories. It’s also pulling workers away from resi construction. So in, in the market, if I was going to pick out a market that is grossly under supplied, I mean, most of our markets are, but Brisbane is, is particularly one that I, I would point out.
Richard: Okay, so basically for those states with that rapid growth over the last few years, there’s been extremely strong demand both from overseas migrants coming in and unfortunately migrants either leaving New South Wales or Victoria. And that’s just clashed or combined with that chronic under supply where just not enough dwellings are ultimately being built out. And then you overlay that also with the fact that they were comparatively affordable either to rent or to buy. That’s obviously changed. I suppose Our listeners must keep in mind then that those dramatic price increases that have come off a lower base. Some of those markets are expensive, but a lower base compared to Sydney and Melbourne. Let’s look at the other side of the spectrum. We’ve got Melbourne and then also actually Canberra. I think people, Melbourne gets lots of the negative media headlines, but people maybe are not really observing what’s happening in Canberra. Where when you actually look at what’s happening in that market, it hasn’t, it did pretty well during the pandemic and there was quite a lot of supply that came through. But more recently, rents have been flat, prices have been flat. So I’m interested in your views. What are you seeing with those two markets, Melbourne and Canberra?
Dr Nicola Powell: Canberra is an interesting market. I lived in Canberra for the best part of a decade, so it is a market that I know really well. As you mentioned, it was one of those outperformers during the pandemic. But it really has struggled to move into a recovery. You know, this is a market which is unlike other capital cities really where it’s not at a price peak. My observation for Canberra though is when population dynamics and interstate migration hits into the negative, it always weighs heavily on the housing market. You know, it is a small market. We have to remember, you know, that the, you know, it’s an SA4 area, which is small comparatively compared to our other capital cities. But I think there has been lots of unit supply over uh a good few years now. That is helping to obviously keep choice better. But I do think that this market has started to recover. And I think over the most recent quarter, what my pick for Canberra was is I do think it now has moved into an established recovery, but I really think it’s going to be a slow recovery. I think price point is key. Normally you tend to find the upper end of the housing market does lead price cycles. I don’t think that’s the case at the moment. I think it’s really the midpoint of the housing market that’s leading. And it’s interesting with Canberra, you kind of hit a certain price point and the buyer pulled the window so significantly. And actually, that price point is quite low when you compare it to a market like Sydney or Melbourne, which has multimillion dollar house sales. Canberra is a little bit different. High average wage Canberra does have but I think population dynamics is certainly weighing more so in Canberra than other cities.
Richard: Gotcha. Talk about Melbourne, we’re going to jump to Melbourne and then we’re going to go to Sydney. What’s happening in Melbourne? What are your views on the market there?
Dr Nicola Powell: Look Melbourne is fascinating right. This is a market where I look and I’m going to ask you the same question about Melbourne. It’s so undervalued and it’s been a fascinating market to watch where you have this concept of mean reversion, right? Which means that a market will eventually go back to historical performance. That hasn’t quite been the case for Melbourne. It’s really underperformed. It’s deviated from what traditionally you would see in that market. Normally Melbourne leads and then Sydney follows and that’s absolutely not been the case. Melbourne did lag earlier in the cycle and I think now it is playing catch up. It is in a step into a moved into an established recovery. And I think what happened over 2025 is lower rates brought buyers back. Also, buyers were driven by value. They wanted to make their purchase before prices hit a new record high. I think that that helped to bring a bit of buyer confidence and interest back into Melbourne’s housing market. Interestingly, when you look at supply, which is always one of my go-to things to look at in terms of what’s happening in the change of overall supply, this is one of the markets where we’ve actually got overall supply now shrinking. Which means that demand is now starting to outpace the supply that’s coming onto the market, which means that that market has moved to a recovery. look, mean, what’s your take on Melbourne? I mean, it presents so much value, right?
Richard: Look, it certainly does. And we’ve discussed the question that I asked you, obviously I pretty much ask you every time we catch up and I give you my views, you kindly give me your views. Melbourne, I’m convinced, is significantly undervalued. It’s still dealing with the hangover over the pandemic. As we both know, it normally is the second most expensive housing market. It’s dropped to number six. There’s a number of issues with various taxes and charges that are holding new supply back. But I realize now a lot of what has to do with Melbourne is just the very low sentiments, consumer sentiments. I do believe, unfortunately, the media have a very, very large impact in not necessarily reflecting all the statistics accurately in we’re actually doing a body of work that will be released in a couple of weeks time. We’re looking at what those statistics actually are. I’ll certainly send you a copy, but it’ll be published to everyone. And I do feel that a lot of the industry participants are actually picking and choosing what statistics to look at, not necessarily looking at them all and getting a complete picture of what’s happening. Right now, no one is tremendously undervalued. I can see it because we’re actually even getting migrants coming back from Perth, South Australia, Queensland because prices have jumped so much and rents have jumped so much. They’re actually looking at Melbourne and going, oh my goodness, Melbourne is now affordable, more comparatively affordable. And there’s more jobs and better paying jobs here. So, I do feel, as you mentioned about me reversion or I suppose for people that don’t live and breathe that we do just coming back to more market equilibrium or in balance to the rest of the cities around Australia, I do believe that will happen.
And it has taken a lot longer just because of a lot of the decisions that were made by the current governance during the pandemic. They’ve just, it’s, you can’t turn off demand so quickly and then expect to just come, turn it back on and then expect some supply to respond. There’s just so many metrics that are at play. And then you overlay that with what’s happening overseas with all the uncertainty. You overlay that with rapid interest rate rises, building costs increases, which we’ll talk about in a second. It just makes things very difficult. New stock to be financially viable. But also, it’s just it’s it’s consumer sentiment and it’s the city sentiment. People in Melbourne, they were locked down. They’re just still being knocked around so badly that they still recovering. They’re still unconfident. And it’s amazing because I go to Sydney or Brisbane and they kind of go, what’s going on in Melbourne? It’s so undervalued. There’s such great buying opportunities. You know, we look and we can get an apartment for 450 grand or 500 grand. And you now see what they’re selling for in Brisbane. It’s ridiculous because I can’t really remember ever where Brisbane had higher pricing so significantly compared to Melbourne. And so I do feel that things are going to continue to improve. There’s a state election in Melbourne this year. Not sure if you’re aware of that in November. That’s going to be absolutely critical for the state. And it’ll be budgets out both from the federal and the state in a month or two’s time. I’m interested to see what’s going to happen there. And critical decisions need to be made there to really help Melbourne get back on to his feet.
Dr Nicola Powell: That value, I find it so fascinating when you look over the past five years where five years ago, Melbourne was, you know, this bridge, this mid-range between kind of Sydney and then the more affordable cities. So Brisbane, Adelaide and Perth, you know, and these markets were, you know, 20% more affordable than Melbourne. Fast forward to today, these markets have really played catch up and there is very little difference between Melbourne and the more affordable capital cities. And I loved how you described that kind of pullback of buyers because I absolutely agree with that. And I think that’s something that we’re observing too, is that I do think that buyers now are being priced out of other capital city markets. And this is where I find it fascinating in Australia is, when you have a market that’s moved very quickly, you have a very high priced market like Sydney, it has demographic, it has impacts on demographic patterns. And that is one of the issues that I think has impacted Sydney where, you you’ve got these headlines that you’ve got young families leaving Sydney because they just cannot afford to purchase and they’re looking for somewhere where they can. And then you’ve got this other dynamic that the affordability that Melbourne offers is drawing people back. I think it’s by FY27, Victoria is expected to be the fastest growing state in the population. We all know what that’s going to mean for the housing market, right? It’s when you’re seeing stats like that, population growth is actually one of the key drivers of demand and therefore price cycles. And it has this kind of long-term collective effect on pricing. So, you know, I’m, you know, betting my money on, on Melbourne long-term.
Advertisement: Quickly interrupting this episode to tell you about Charter Keck Cramer. Charter Keck Cramer is an independent property advisory firm with offices in Melbourne, Sydney, Brisbane and the Gold Coast. Through our collaboration with Anderson Global, we connect with over 18,000 professionals around the world. We provide strategic property advisory services spanning multiple market sectors. Our advisory team provides specialist advice across transaction management, tenant representation and lease negotiation, strategic portfolio reviews, development advisory and more. Complimenting this, the Capital Division advises on structured property partnerships connecting property owners and tier-one developers. Our extensive valuations coverage includes Prestige Residential and Greenfield Development Markets, together with all commercial asset classes. Quantity surveying is at the core of the project’s team, cost control from planning through to post-construction. And our research team delivers property data and analytics across the residential living sector, along with expertise in strategic land use planning and urban economics. With specialists across a diversity of sectors, Charter Keck Cramer is your trusted property advisor. Now let’s get back into the episode.
Richard: Let’s jump into your neck of the woods though, Sydney. What’s happening in Sydney, which just seems to be again, almost just, it just runs its own race. It doesn’t really look at what’s happening around the rest of the country. What’s, what’s going on there?
Dr Nicola Powell: It does. I think there’s an element that Sydney obviously has this global pool as well, you know, that interest, you know, there’s a finite coastline in Sydney, which creates this high price. And also it’s landlocked, right? So, you’ve got this huge premium for land in Sydney. Now, every time I say this, I remember when Sydney’s median house price bridged a million dollars. I think it was back in 2015. Like I remember it vividly. I remember it being on the front page and I kind of chuckled, but it’s a chuckle because it’s, I don’t know if it’s shock or, you know, horror. The fact that we’ve now got Sydney’s median house price sitting at 1.76 million and we’re predicting that it could bridge 2 million by the end of next year. I mean, that is just crazy, right? We still got prices rising for house prices in Sydney, but one of the things that we’re now starting to see is a bit of rotation in momentum. So units are gaining momentum, so they’re growing faster than they were. While houses, while they’re still rising, they’re not rising as fast. And that, in real time, is affordability barriers really playing out, steering demand towards units. You’ve got the expansion of first home buyer schemes, as well as investors that have come back into the market. These are all going to be tilting demand towards units in Sydney. My expectation is we’ll probably continue to see this trend where we’ll see a period of time where units will outperform houses.
Richard: Gotcha. Talk to me about you made the comment that Sydney, your forecast may mean Sydney to 2 million. One of the questions I get asked all the time, I’m sure you have the same queries going, well, how do people afford to live there? How do people afford to pay mortgages? Now you started to answer that by going, well, some of the demand gets driven into the more affordable unit market and more people rent and they rent for longer. But $2 million, obviously it’s a significant amount of money. How do prices keep rising? Is it a function of just the scarcity of those, the housing or who are the buyers? Where is the money coming from? What are your views on that?
Dr Nicola Powell: Scarcity is such a powerful word. I really love that word, Richard, like that thing that describes houses in Sydney. It’s the scarcity of land. It’s the price premium of land. And ultimately, I mean, the dynamic that continues to drive house prices higher, are people who are already in the game, right? They already own property, they have equity, or they’re assisting family members to purchase. And this really concerns me around those that aren’t able to have that financial support from family members, from relatives to get into the housing market. I mean, this is really troublesome. But I think longer term, I do look at Sydney, and I think, you know, fast forward, let’s say 20 years, I know that is a long way away. But I do think that what we’ll see is opportunities being presented across Sydney. And I think we’ll see a lot more medium density. I’m a massive fan of medium density housing. And Sydney is grossly undersupplied in terraced homes, townhouses, in middle suburbia. This drives greater affordability. It’s a beautiful bridge between a house and a unit. And we have to remember that you may have purchased a house, but if you want to upgrade, sorry, you may have purchased a unit, but if you want to upgrade to a house, it’s almost like starting again, because you’ve got house prices double the price of a unit, which is extraordinary. And I think what we need to create in Sydney is more steps on the property ladder, greater diversity of housing. And I think when you look at the 2030s, when you see that transfer of wealth occurring, I think what’s going to happen is it’s going to create opportunities for subdivisions in some of our medium middle suburbs. So, I do feel that in time we will see more medium density housing. It’s kind of started to happen with governments up zoning around, you know, transport nodes. But I think that is the star of something that is going to be much, much bigger as time ticks on.
Richard: Very Interesting. Look, I’m also a major fan of medium density and high density and there’s certainly an opportunity I feel into the future to continue to deliver those different dwelling types at different price points. Let’s shift gears a bit. I’m interested to know what your views are on interest rates, where you think they’re going to go, but also let’s educate the listeners really on the impact of interest rates on pricing. So let’s first of all start with rates. What do you think is going to happen over 2026?
Dr Nicola Powell: Look, I find interest rates are an interesting one. I do think that, I mean, we’ve already seen the RBA hike the cash rate this year. And I think that while I am expecting another one, at least one more this year, it’s very clear that the RBA don’t want to wait. I don’t think that they want to reenact what happened previously where they waited too long. So, I do think that we have to prepare ourselves that there might be another one or two rate hikes occurring this year. I think though rates do influence behavior and this is the beautiful behavioral economics of our housing market because often you see buyers reacting prior to a rate hike even being delivered. They can react just off sentiment and chatter alone. Obviously, a higher rate impacts borrowing capacity. It does impact buyer confidence. And I think this is going to be one of the key things that actually shapes the market this year. But I think even if we see the cash rate kind of higher for a longer period of time, it’s not going to halt price growth because we still have under supplied markets. I think what it is likely to do is almost like taking a little bit of steam out of the pressure cooker. It will slow down the rate of price growth. But I am still, we’re still forecasting prices to rise this year, but we’ve got modest price growth in mind. You know, it’s not double digit, it’s, you know, five, six, 7% over a 12 month period. What’s your take for this year?
Richard: Look, I pretty much agree with what you’ve said, but I suppose trying to unpack a little bit further to give our listeners things to think about in terms of the actual cash rates. When I look at all the statistics and we talk about them all the time, the lead and the lag statistics, I’m really glad that some of them are now being published on a monthly basis so that the RBA can get more insight as to movements and what’s happening. I do feel that rates will increase at least one more time throughout 2026. Just speaking to various economists and just industry commentators like yourself or other people in the industry, it does look like there will be the requirements to lift rates a little bit more. What does that mean for sentiments? Well, you’ve answered that in terms of people reacting the way they do. It’s important for our listeners to keep in mind that the housing market in particular is extremely responsive to changing the interest rate either up or down. And that’s because a lot of people own or have mortgages. A lot of them are on variable mortgage, variable rate mortgages. So that change, it translates into that wealth effect, whether you can really feel wealthier and also whether you can afford more or less. I do also feel because we discussed this or agree with your comments about the market reacting even before rates move because they listen to the media headlines and they stay, especially in Melbourne, what you summarized about people just being scared or making decisions before the rates move, is really, that summarises what’s happening in Melbourne. People are just uncertain and they want certainty. They don’t have certainty now. They don’t know quite what’s going to happen, what the buying capacity is going to be. And so, they’re not making purchasing decisions. I don’t feel that rents will rise dramatically though over 2026. They’ll probably hover over roughly where they are now a little bit higher, perhaps a little bit lower into the future.
As we’ve discussed though, there’s that chronic shortage of supply and we overlay that with demand, and it will certainly put the floor under pricing. And then when you overlay that with the cost of delivery of new dwellings and the fact that new dwellings have to be about 25 to 30% more expensive than established dwellings, I genuinely feel there’s going to be a flaw under pricing. It’s really, it’s unlikely to fall. Certainly in my mind, mean, it’s obviously submarket as we’ve said, sub market specific, but there’s a broad statement just because the costs of new product is so much more expensive. It’ll ultimately lead to prices like in Melbourne recalibrating upwards because Melbourne just does need to deliver more dwellings. But that supply demand imbalance, I think will outweigh just the just the impact of rate rises and this is a number of rate increases. And then in terms of price points, you’ve effectively answered, you probably answered it better than I would have. So I don’t really need to touch on that. So I think that’s really what I wanted to ask you about interest rates. The other one I wanted to just ask you about is it’s both investors and first home buyers. So, let’s start with the investors. What do you see with the investors in the different states? Are they active? Are they? holding back, obviously they’re impacted by rate rises as our first home buyers. But what do you see with investors?
Dr Nicola: Yeah, look, investors, mean, lending overall. we saw, I think, ABS lending data was released last week. And actually, all buyer segments saw an increase in lending over compared to 12 months ago. So that means first home buyers, investors, as well as owner occupiers. I think it’s an interesting dynamic because when you look at the lending data, it gives you an indication of who is going to be purchasing over the next, six to nine months. And that has obviously an influence on where they’re looking, what they’re going to be buying, what type of property that also can influence segments of the market in terms of price movements too. I think investors have been an interesting one. I might answer them both together, if first-time buyers and investors. Investors have been an interesting one. I mean, investor commitments are rising. I think growth is occurring in both loan numbers as well as loan values. And I think we’re seeing investors really chase capital growth. They are re-engaging in markets like Melbourne, and that’s been a very interesting one to watch. I think investors chase the value. They chase the areas where they’re going to see capital growth. They do not chase yields, or the majority of them do not chase yields. They want equity growth. They want their capital supplies.
Melbourne or Victoria has been one of those markets and Sydney too. think that probably they’re starting to look away from markets like WA that has just kind of probably peaked and passed its peak rate of price growth. But the buyer segment that I have found fascinating is first home buyers. And it layers also into everything that we have said in the previous 30 minutes. First home buyers are leading in terms of growth in home loans as well as the value that they’re taking on. First home buyer loan numbers are growing faster than the broader owner-occupier segment and loan values are rising strongly. And I think that is reflecting higher entry prices. So first home buyers are just having to take on more to get into the housing market. And I think, when you think about the changes that have happened, it is not surprising that we’re seeing first-term buyers come back in. They are being supported by expanded government schemes and also supported by the fact that we did have three rate cuts. I know that’s kind of reversed a bit this year, but over 2025, there were three rate cuts being delivered. But ultimately, I do think we’re having a behavioral shift occur from first-term buyers. They are coming back into the market. And the two states that saw the biggest lift based on the latest home lending was New South Wales and WA. And I kind of always go to myself, well, what’s driving those markets in particular? And I think it’s telling us the expansion of the home guarantee scheme helped to buy as well. You know, the low deposit schemes are bringing first-time buyers into those markets that are really financially challenging to get into. New South Wales, obviously, so Sydney is one of them. But I think with WA, I think it’s just the change in the affordability landscape where expansion of schemes have just really helped to kind of kick first-time buyers back into a market that has literally run away with itself over recent years.
Richard: Very interesting. I must admit I did enjoy your report. I believe that’s where I started to read it first, where you said that investors were really starting to return to Melbourne because they see the value. And certainly, when I was doing a different report, and for a particular client now and I can actually see the investors coming in that large uptake, is really great to see. And but not that surprising because when they line up now Melbourne, Brisbane, Sydney, and they just see the value proposition, the fact that there is opportunity for capital growth, it makes a lot of sense. I know we’re running a bit short of time today, so probably for the last final thoughts for today, what are your views or tips for the government in terms of whether it’s the state or the federal government? What do they need to be thinking about now based on where you feel the markets or where we feel the markets are going? What do you think they need to be aware of?
Dr Nicola Powell: I really encourage the government to think through demand side policies and the impact that that has on bringing forward a wave of demand and how that does elevate property price. I suspect that what we’re going to see this year is entry prices are going to outperform because of first home buyer policies. So, I really do encourage governments to move away from demand policies. They’re not good. Any economist that you speak to does not support demand side policies, particularly those that have a finish date because it creates this vacuum effect of activity. I think the core one for me is about being really being brave and being brave in terms of stamp duty reform. Stamp duty reform will encourage us to right size our homes. One of the biggest things in Australia, we need more supply, absolutely. Right supply in the right areas where people actually want to live. And that does mean more urban infill rather than just urban sprawl, particularly in a market like Melbourne, where Melbourne is very good at that sprawling. But I think it’s not only about supply, it is making sure that we are using the housing stock that we have efficiently and effectively. At the moment, we have a massive misallocation of housing across Australia. And what we need to do is encourage Australians to right size. And I think it’s happening in a couple of ways where people are taking a massive leap and buying a home that far exceeds their current needs because they’re planning on having a family in five plus years. And that is in order to reduce the amount of stamp duty they pay over the life cycle of owning a home.
And then the other side of it is we have an aging population that are living in large homes. Where there are lots of us, particularly with homes that are owned outright, that have two or more spare bedrooms within the home. Now, it’s challenging for someone to downsize in an area where there isn’t choice, because often, and I sympathize, often people want to stay in the area in which they’ve lived for 50 years. But often there is just not the choice or the diversity of housing needed to allow someone to downsize, even if they wanted to. It goes back to the conversation we had in the opening of this podcast around the diversity of housing. So I think for me, it’s two things. It’s really thinking through demand policies and not having them. And the second one is being brave and really adopting stamp duty reform on a national level, not state-based.
Richard: Well, I love those points. And certainly, we’ve discussed them previously a number of times and I have had a couple of tax experts on the show to actually talk about stamp duty and the removal of stamp duty, how that could work, what it would cost, the timing. And I agree. I think we need a tax system that’s actually fit for purpose and fit for the next 10 to 20 years, at least to just help the different cities continue to remain as livable as they have been in the past and to just respond to the change in living preferences and the number of issues that we have. And that is certainly one that I… or both of your points, I do hope that the various policy makers really, really reflect upon, listen to and actually realize there are other solutions that we need to be exploring just to respond to where we are on the market and the challenges ahead of us. Nicola, I wanted to thank you so much for coming on the show, taking your very valuable time. I know how busy you are just to come and share your insights. I love hearing you present and speak at conferences. We often do it together.
No doubt I’ll see you in a few weeks time and we’ll catch up again and have a cup of coffee. I will put notes, sorry, links in the notes to both the reports that you’ve prepared as well as your LinkedIn and your bio. So, listeners, please do reach out to Nicola. She’s, as you’ve heard now, an excellent at what she does does, and she’s extremely lucky to have some of the best data sets that I’ve come across just at her fingertips. And that’s really important because we really need to be looking at what the data is saying. It’s not the be all and the end all, but it has a critical role in terms of whether it’s decisions on a policy basis by government or decisions for investors and developers looking at a return on investment. So thank you again for coming on, the show Nicola.
Dr Nicola Powell: Richard, thanks so much for having me. Thank you very much.
Richard: Hi, everyone. I hope you really enjoyed the session with Nicola today. I always find them incredibly enlightening. And basically, this is what we actually do on a quarterly basis, which certainly is just so enjoyable for me. And I learn a lot. just talking with her and picking her brain. In terms of the three findings for today, and that I’d like everyone to just have a think about, they are as follows. I often see people or hear people talking about the housing market or the housing market in a particular city. It’s important to keep in mind that there’s submarkets within submarkets and they don’t all move together or at the same time. It’s really important to look at the particular submarkets of interest. And also even in that sub-market, look at the different types of dwellings, whether it’s houses, townhouses or apartments, because the pricing and rental metrics actually do move quite differently. And the devil is always in the detail. So, I’d encourage everyone to make sure that they’re analyzing the housing markets from that lens.
The second theme from today is definitely buyer sentiment or I suppose consumer sentiment. And right now it is being dramatically impacted by the uncertainty overseas. as well as interest rates rises. And then in certain cities like Melbourne, just the overall general weak sentiment. And that is having an impact on buyer activity and rent activity, as Nicola very well-articulated.
The third point though, which actually ties into the, and responds to the second point about consumer sentiment. The third point is that the markets all move in cycles and things do change. They go from peak to trough. Markets do revert back to equilibrium either in the short, medium or longer term. I think it’s very important to keep in mind because there’s a lot of short term noise in the media right now about a number of very legitimate and real issues that are occurring in certain housing markets or certain sub markets. And I’m not ignoring them or discounting them, but I am also just encouraging our listeners to also keep one eye on the medium and the longer term. The market does move in cycles, it will come a point where there is more stability and where the cash rate settles and where buyers and renters are more comfortable and confident to start making those buying and renting decisions. So please do keep that in mind because property investment and development is typically carried out over a market cycle, which is between seven to 10 years. Anyway, that’s all for me today. Hope you have a lovely day. Thank you.
Thank you very much for listening to this podcast. If you enjoyed the episode, please make sure to subscribe to our podcast so you never miss an episode as we’ve got more exciting content coming. We’d love to hear your thoughts. Please leave us a review on either Spotify or Apple podcasts as it really helps us to grow. Also, follow us on Instagram @preciselyproperty for updates and join the conversation. If you’d like to get in touch with us, subscribe to our newsletter via our website, charterkc.com.au or write to us at podcast at charterkc.com.au.
Lastly, if you found this episode interesting, please share it with your friends and family. Thank you again for listening and stay tuned for our next episode dropping in two weeks’ time, plus bonus content also on the horizon.
Disclaimer: Precisely Property is a podcast presented by Charter Keck Cramer and is for educational purposes only. Nothing in this podcast should be taken as investment or financial advice. Please engage the services of an appropriate professional advisor to provide advice suitable to your personal circumstances. The views expressed by our podcast guests may not represent those of Charter Keck Cramer.
