00:02We saw house and unit prices decline over the quarter across the combined capitals,
00:07but there are some cities that are seeing deeper price falls. Other cities are still rising,
00:12but the deeper price falls are coming out of markets like Sydney, Melbourne and Canberra.
00:17Yeah. So let's go through a little bit more in detail of the state by state and territories.
00:22You mentioned there those deeper falls in Sydney and Melbourne to the tune of,
00:28you know, 2.9, 2.5% that quarterly change there, but it's not the same story across the board,
00:36despite the combined number being negative. That's exactly right. I mean, the theme though,
00:42largely across Australia is even those cities that are still growing, they're growing at a
00:47slower pace. We're certainly seeing those deeper falls in Sydney and Melbourne. They tend to be
00:52more sensitive to changes in interest rates. And I think that's what's being amplified through those
00:56housing markets. I mean, when you look at Sydney, we saw house prices fall by about $60,000 in the
01:02three months to June. But when you look there, you can see other markets like Brisbane, like Perth,
01:08you know, that are still marginally rising. But then you've also got markets like Adelaide. Adelaide
01:13was quite the interesting one. It was the only market where we saw house prices re-accelerate
01:18over the quarter. It really was the only city to do this. But largely speaking,
01:23those that are growing aren't growing as fast as they once were.
01:26So what is the reason behind this? What is the convergence on pressure demands that you've found?
01:33Things that are just converging all at once. Obviously, three rate hikes this year. And we
01:39know when we see rate hikes come through, it obviously dents borrowing capacity and takes
01:43a little sting out of demand. And that's exactly what we have seen. Cost of living pressures are also
01:50weighing on. And also, consumer sentiment has been very, very weak. And when Australians feel low
01:56about their own personal financial circumstances and the economy, they delay their decisions around
02:03property. And then, of course, we've seen taxation changes to the way that we treat property investment.
02:09And that is also having an impact as well.
02:12On that last point, Nicola, there, how much have the changes in the budget with respect to CGT
02:18changes and negative gearing changes impacting, say, units versus homes?
02:26What was interesting for unit prices is that we saw pretty much every single capital city decline
02:32over the quarter for unit prices. When you're looking at house prices and the markets for house prices that
02:38fell, it was deeper. But it's this broadening and every single capital city for units actually
02:44falling. I think that tells a lot. I think it says a lot about investors. Investor sentiment has
02:49weakened substantially. And I think we have seen a pullback in investor activity, and that is likely
02:55to continue. And I think that's one of the reasons why we've got this broad weakening of the unit sector
03:01across every single capital city that is apart from Darwin.
03:04I guess the big question is, how long is it expected to continue for this downtrend?
03:09So we are expecting 2026 to continue to see those deeper price falls. It is going to be a weaker
03:16rest of this year. I think, though, to change the conditions, we really need something to occur
03:23to really be that kind of game changer. And that will be a rate cut. But ultimately,
03:30we are going to be in an environment where interest rates are going to be higher for longer.
03:34And the expectation for a rate cut isn't going to be anytime soon. It really is only likely to be
03:40in
03:41perhaps the latter half of 2027. So I think we are in for weaker conditions. What we will start to
03:47eventually see, though, is new listings will start to pull back. And that concept where sellers just
03:54don't want to sell when the market is weak will start to help to stabilise price. We have seen a
04:00sharp
04:00decline in house prices, particularly in Sydney and Melbourne. So it does mean it has been quite the
04:06sharp start to the downturn in these cities.
04:08We know that economists model certain scenarios when it comes to a changing, the changing elements of the
04:15equation, whether it be sentiment, government policy, tax, interest rates, etc.
04:20How would you liken the period that we are going through right now to what we've seen in decades
04:26gone by when house prices have pulled back?
04:29It's quite different, really, because what we've got at the moment is obviously rates have moved
04:35higher. We've seen that before and we know what impact that has on the market. But we haven't had
04:41a policy change that is really directed to one buyer group, and that is investors occurring at a time
04:49where the market was already weakening. So we have to remember that Australia's housing market was
04:53already weakening prior to the budget and prior to those taxation changes actually going through.
04:58But what we have got is that major change, taxation change, is occurring when the housing market is
05:04already weak. So it is multiple things happening at once.
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