The statistics that could help you buy a house

Show notes

Nicola Powell is the Chief of Research and Economics at Domain, one of Australia’s leading property marketplaces. With over 10 years of experience working in property and demographic trends, Nicola is an expert on the Australian property market.

In this episode, Nicola shares her go-to stats that first-home buyers need to know about to help them make the best decisions about their property purchase. She’ll explain everything from clearance rates, to supply, to price dynamics, and beyond. Plus, Nicola shares how you can use these statistics to your benefit when buying your first home.

This episode is part two of our two-part chat with Nicola. Check out our last episode, to hear Nicola explain the current trends affecting first-home buyers.

Transcript

Michael 0:00
The information contained in this podcast is general in nature and is not to be taken as financial or personal advice.

Michael 0:06
It does not consider your objectives, financial situation or needs.

Michael 0:10
You should consider whether this information is suitable for you and your personal circumstances before acting on it.

Michael 0:17
Hi and welcome to the home Run your guide to buying the first home in Australia.

Michael 0:21
On the show.

Michael 0:22
I’ll walk you through the home buying process from every angle we cover the steps to take the pitfalls to avoid and the answers to all your questions you’ve been dying to ask.

Michael 0:31
No matter what stage you’re at, you’ll learn everything you need to know about buying your first home.

0:35
I’m your host, Michael Nasser, and I’m a mortgage broker at Lendstreet, and I really love helping people buy their first home.

Michael 0:45
Welcome back to Part Two of our conversation with Nicola Powell, the chief of research and economics at Domain.

Michael 0:52
In today’s episode, Nicola will break down her go-to stats that first-home buyers need to know about.

Michael 0:57
She’ll share her top tips for first-home buyers, and Nicola will share her thoughts on whether the dream of home ownership is still achievable for the average Australian.

Michael 1:06
Let’s get into it.

Michael 1:10
Something you mentioned earlier was the go-to stats and supply is one of those go-to stats for first-home buyers that are looking at stats and that that are stats focused when they’re doing their research.

Michael 1:20
What are some other go-to stats that you would sort of put up there as the ones that people should be focusing on to or keeping an eye on?

Nicola 1:27
So I think it does depend upon what city you’re in.

Nicola 1:30
Clearance rates are a really timely market indicator, but I would say clearance rates are only important in Sydney, Melbourne, Adelaide, and Canberra.

Nicola 1:39
All of the other cities are not as auction centric, so clearance rates are a really good indication of market health.

Nicola 1:46
They’re weekly, so they’re really high frequency stat.

Nicola 1:50
And the thing with the property market.

Nicola 1:51
It’s swamped with lags lagged statistics.

Nicola 1:54
We’re actually what we want is a forward view, you know, what do we think is going to happen, particularly if people are making a decision on when to purchase?

Nicola 2:03
I think clearance rates do give that good.

Nicola 2:05
I call it Heartbeat of the property market.

Nicola 2:07
It’s a really good indication each week.

Nicola 2:10
Supply is also one of my other favourite ones, but it’s also being cross house price reports.

Nicola 2:15
So price dynamics overall in terms of our prices rising.

Nicola 2:20
That is a lang stat, though, which is really important to consider.

Nicola 2:24
But what it gives you is a base of where are we currently in the property cycle?

Nicola 2:29
We know property markets are cyclical.

Nicola 2:31
They go through periods of rising.

Nicola 2:33
They go then through periods of either sidelining growth or they fall.

Nicola 2:37
But this is the natural dynamics of a property market.

Michael 2:40
They’re important factors then to consider that lag.

Michael 2:43
How long is that lag?

Michael 2:43
So when you see those price, you know variances and you’re you’re looking at those particular stats.

Michael 2:47
What’s the lag time?

Nicola 2:49
It’s very timely market indicator, but what I’m saying is it’s already happened.

Nicola 2:53
So the sale has happened in the past.

Nicola 2:55
There are leading indicators which are more behavioural, so we have lots of behavioural stats on domain.

Nicola 3:01
So this is what people are looking at, where they’re searching for, and that’s actually a leading indicator of transactional activity and levels of demand in the market.

Nicola 3:09
where is it going to be concentrated on and can help you then kind of predict and forecast.

Nicola 3:14
And our price forecasting model, as an example, uses these unique behavioural statistics to help us get that throw forward.

Nicola 3:22
And I think that throw forward is really important for a first time buyer.

Nicola 3:25
So we do quarterly house price reports.

Nicola 3:28
I highly recommend it becomes a quarterly read for all your listeners, so we base them.

Nicola 3:34
So for the June quarter, we’re about to do our House Price report in about 10 days, so they’re quite timely.

Nicola 3:41
You know, there’s about a four-week lag, but you’ve got to remember the sales have already happened.

Nicola 3:45
So we’re reporting on the transactions that have already happened in the market.

Michael 3:49
And I guess using those leading indicators that you guys get to see from engagement with the domain website and all that sort of stuff, how do you see the property market evolving for the remainder of 2023?

Michael 4:00
And you know, for the beginning of next year now, like, what are your stats and facts and figures saying For that look.

Nicola 4:08
There are risks and there are positives that could influence our housing market. So the next financial year we released very recently our forecast report another great read for anybody that wants to educate themselves on some of those kind of push pull factors that happen within our housing markets.

Nicola 4:23
Largely speaking, we are expecting prices to continue to rise over this financial year.

Nicola 4:29
I would say it’s a much more subdued rate of growth.

Nicola 4:31
That recovery is going to continue to be led by Sydney and generally speaking across most of our capital city markets.

Nicola 4:37
House prices are going to see greater rates of growth and unit prices, but again, context is always really important.

Nicola 4:44
We saw house prices decline deeper during the downturn, so in a sense they have more to recover.

Nicola 4:51
So I think that’s also an important aspect to consider.

Nicola 4:54
We’ve got to remember we’ve got supply chain issues in terms of construction.

Nicola 4:58
Construction costs are very elevated.

Nicola 5:00
Still, we generally have an undersupply and haven’t built enough houses.

Nicola 5:04
There’s blowout in terms of construction costs.

Nicola 5:07
They’re some of the factors that can help to boost property prices.

Nicola 5:10
We’ve also got population growth strong last financial year in terms of net overseas migration.

Nicola 5:16
It’s expected to be strong again this financial year, so population growth is actually one of the biggest drivers for demand for housing.

Michael 5:23
What are some of the factors that influence the affordability and accessibility of housing for first home buyers?

Nicola 5:29
Supply?

Nicola 5:29
Definitely.

Nicola 5:30
You know, we spoke about the definition of supply earlier, but I also think it’s not just about supply.

Nicola 5:35
It’s about affordable supply in the right areas.

Nicola 5:38
Here’s a stat for you.

Nicola 5:40
So Australia has some of the least dense cities in the world, so Sydney is up there being one of the least dense cities globally.

Nicola 5:47
So what that means is I do think that we need to increase densification in our major capital cities.

Nicola 5:53
And by that, I’m not actually saying Let’s stick a load of high rise in Sydney.

Nicola 5:58
What I’m saying is, we need to look at those inner city and those middle ring suburbs and actually consider some of those medium density housing.

Nicola 6:05
So townhouses, terraced homes, low-rise blocks of 4 to 6 stories.

Nicola 6:12
I think that that could be a game changer.

Nicola 6:15
I think supply is definitely one of the issues that Australia has, and I think that we could start to see some fundamental change.

Nicola 6:22
So local governments look after development applications, and I think what we need moving forward is accountability and strong accountability of meeting housing targets.

Nicola 6:32
We need not only the infiel.

Nicola 6:34
We also need urban sprawl, too.

Nicola 6:37
But the challenge comes with cities like Sydney, where it’s really contained by the Blue Mountains and the ocean, the other side, so that sprawl is almost capturing Southern highlands at the moment.

Nicola 6:47
So there are things to consider.

Nicola 6:49
I think as well.

Nicola 6:51
Consider other things like modular homes.

Nicola 6:54
I highly recommend people having a look at grand designs recently did a segment on modular homes, and it was a bespoke modular home.

Nicola 7:02
But the concept of a modular home where you’ve got a module built in a facility so the standards of these modules because they’re built in a warehouse are high and they are so quick to produce.

Nicola 7:16
So I do think we need to think about what are we supplying?

Nicola 7:19
Where are we supplying it?

Nicola 7:20
How are we supplying it?

Nicola 7:22
And I also think in terms of affordability that affects first home buyers, is the rental market rental dynamics, because what you get are people who are locked in the rental market longer because they cannot afford to purchase.

Nicola 7:37
But then they’re also battling at the moment a landlord’s market and very tight rental conditions.

Nicola 7:42
So their ability to actually save and squirrel away that deposit has become more and more challenging.

Nicola 7:49
Because not only are they battling higher mortgage costs, they’re battling rising prices.

Nicola 7:54
They’re also battling a very, distorted rental market that just doesn’t have enough rental supply.

Michael 8:00
Definitely sounds like there are a lot of challenges there for affordability.

Michael 8:03
And and I agree with you from the point of view that that high density notion of high rise apartments is not.

Michael 8:10
It doesn’t seem to be the way that we wanna go as a as a society.

Michael 8:13
I feel like there’s a lot of push back against that, and you see that in the media with, and rightly so with these, you know, development companies that are building units that perhaps aren’t of the quality they should be.

Michael 8:22
And so there’s a real shift in terms of sentiment for those high rises, the 30 40 story units blocks and focusing on those more townhouses and duplexes, and that more medium density is definitely a good way that that can be addressed.

Michael 8:36
And you mentioned the Southwest Corridor.

Michael 8:37
You know, Southern Highlands is really picking up as well, but I guess the challenge with that is a lot of people want to be close to the city or within a closer proximity to the city, too.

Michael 8:44
So it depends on your lifestyle challenges and or your lifestyle in particular, but all all important points to consider there.

Michael 8:50
And when it comes to how we can address affordability, it’s definitely a challenging issue.

Nicola 8:54
It absolutely is.

Nicola 8:55
And I think there is no one answer as well.

Nicola 8:58
I.

Nicola 8:58
I do think housing affordability is going to be high on the agenda.

Nicola 9:02
I think for government it seems like as well that the rise of short term leasing, where you’ve got holiday homes that are maybe only used two weeks in a year where people have secondary homes, short term leasing as well.

Nicola 9:15
I think what we might start to see is a little got a crackdown from government to help address scenarios like that where you’ve got a home that is essentially empty for the large portion of the year and is either not rented out and not lived in.

Nicola 9:29
We will see changes.

Michael 9:32
And we had tackled one of those challenges. I thought when we had that property tax which we spoke about earlier and that New South Wales in particular.

Michael 9:37
And that really helped alleviate one of the biggest costs potentially of purchasing, because the stamp duty concession, obviously in New South Wales, has recently been increased.

Michael 9:46
But the reality of the purchase is most people aren’t purchasing under that threshold.

Michael 9:50
So the property tax model was quite good in terms of tackling affordability when it comes to the stamp duty component, because that yearly premium was a lot easier to tackle.

Michael 9:59
But that’s changed, and with that there are other, perhaps incentives that may kick in and assist that affordability component as well.

Nicola 10:05
Absolutely.

Nicola 10:06
And I think it was great.

Nicola 10:07
Actually, there was a period of time that it gave first home buyers choice in New South Wales and I think choice is important.

Nicola 10:14
But I think what we tend to see is lots of demand-driven policies that help people get into the market quicker or they help activate first time buyer activity and what we also need to think through as we said earlier, is that supply side demand is very elastic.

Nicola 10:28
It can ping back very quickly, and supply is very inelastic.

Nicola 10:32
And we really need to be thinking about what is the supply.

Nicola 10:35
Where is it?

Nicola 10:36
How affordable is it if we can continue to do governments love demand-driven policies when we actually really need to?

Nicola 10:42
The answer needs to also incorporate supply.

Michael 10:48
In terms of the stats that you look at. Is there any particular stat for first-home buyers that’s glaring out to you that would be insightful to our listeners?

Michael 10:53
Is there you seeing activity in a certain area region or anything like that that you could share?

Nicola 10:59
You know, I think first home buyers, they’re always in those affordable Heartlands of our cities.

Nicola 11:04
My advice for first home buyers, though really overall, is to just do as much reading and understanding of the overall property market as you can to help you make a better judgement.

Nicola 11:16
I also think that it’s very hard to time a market, and I think for a first time buyer try to forget about timing the market because it is so hard to pick a price bottom or a price peak, and I think you need to focus on its time spent in the market that really counts.

Nicola 11:36
And we have done historical analysis of 30 years of price cycle data across our combined capitals into our different cities.

Nicola 11:44
And it all tells us that it is all about the amount of time that you own your dwelling.

Nicola 11:49
For that is the big game changer.

Nicola 11:51
You wanna ride the ways of a as many property cycles as you can and actually own a home.

Michael 11:56
What would be the one number one tip you’d have for a first time buyer that’s trying to get into the market now?

Nicola 12:02
Do you know when the conversations I’ve had with first time buyers is they’re always confused of when to buy, and it sounds harsh, but the best time to buy was yesterday.

Nicola 12:13
If you are in a financial position to be out of buy and you found the dwelling that you want to live or the area in which you want to live, I think that try not to focus on market dynamics and really just focus on that.

Nicola 12:27
It is all about the time that’s spent in the market accounts and that your first home is not your forever home.

Nicola 12:34
It is your journey on the property ladder and is your first step.

Michael 12:39
So something else I want to ask you was about the dream of home ownership from your perspective.

Michael 12:43
Do you still think this is achievable for the average person?

Michael 12:46
That dream of home ownership, which is coming back to where we started, the love of property in Australia and all that sort of stuff?

Michael 12:52
Is this dream that the majority of us have?

Michael 12:54
Is that still possible for someone looking to get into the market?

Nicola 12:57
It’s undeniable that it is challenging, and I think whenever you talk about first home buyers and the challenges that they face, it is hard.

Nicola 13:07
But I think if you spoke to any generation, they would all say that their first home was such a hard financial leap.

Nicola 13:15
When you look at interest rates, you know, 20 odd years ago they were in a very different state to what they were today.

Nicola 13:22
So it is challenging, and I think that that Australian dream of owning a home is still very much alive.

Nicola 13:29
But what I think that we’ve seen over recent years is a real disruption of what the perception of a first home is.

Nicola 13:38
It’s seen as success, and it used to be seen as detached house with a garden hills hoist in the backyard.

Nicola 13:47
But that’s disrupted.

Nicola 13:48
That is changed.

Nicola 13:49
And that’s why I go back to that point we made before where we were talking about your first home is that stepping stone onto the property ladder, and I think it’s really important that that remains front of mind.

Nicola 13:59
But I also think that we need to consider changing preferences so people are renting, Australians are renting for longer and there are more of us renting now.

Nicola 14:12
Some of us it might not be out of choice, you know, they want to own their own home and they actually cannot afford to.

Nicola 14:18
But I think there is a portion of Australians where it is out of choice.

Nicola 14:22
They want to rent.

Nicola 14:23
They want to have that more transient nature within their lifestyle.

Nicola 14:26
They want to be able to move from here to, you know, relocate easily for work.

Nicola 14:30
And I also think that part of this conversation I wanted to highlight in terms of we need to think about those people who are renting for longer and really have a shake up of that rental market because I do think that we’re renting for longer.

Nicola 14:44
More of us are renting.

Nicola 14:46
What we need to do is actually give security of tenure to people who are renting and enable them to make their tenant to dwelling their actual home and offer things like longer-term leases like they do in Europe.

Nicola 15:00
We’re very much stuck to these 12-month leases in Australia, and I think that we need to reevaluate that and look towards offering those longer-term leases for people who obviously want to have that security.

Michael 15:11
Can you expand on that?

Michael 15:12
Because that’s a pretty com, a foreign concept to me.

Michael 15:14
What’s it like in Europe?

Michael 15:15
I mean, are they longer generally or I mean, yeah, we’re used to 12 months or even six months sometimes.

Michael 15:20
But it’s not much in Europe.

Michael 15:22
Is that not the standard or and what is over there just out of interest?

Nicola 15:25
So obviously there are 12 month leases, but you also get longer term leases, so that can be years.

Nicola 15:33
I’ve heard them of four year leases, you know, they’re longer term leases, so I know somebody that’s lived in a rental property for like 10 years, and this is in Australia and they’re lucky they haven’t been kicked out of their rental, but they had a 12 month.

Michael 15:46
That’s almost unheard of.

Nicola 15:48
I know totally, but you know, that was a 12 month recycling lease every year.

Nicola 15:53
But I do think that the concept of giving it’s about the security of tenure and that is an important aspect to make somebody feel secure, make them feel that they can live in this home for longer than 12 months.

Nicola 16:07
12 months is a very short period of time, and I think that there would be a portion of Australians that would want to take up a much longer-term lease.

Michael 16:15
And that’s almost shifting the concepts of what we know homeownership to be.

Michael 16:18
So it’s changing that paradigm a little bit to saying OK, well, as a renter, you’ve got this place for an extremely long time, so it’s almost like home ownership, but it’s a it’s like a pseudo homeownership for a long period of time, which alleviates the problem in some capacity as well and and that’s definitely not something that that’s a foreign concept for me to start thinking about it, but I could certainly see how that could work potentially so.

Michael 16:38
So I really an interesting idea, and it’s definitely one that we need to think about as well.

Michael 16:42
I think a lot more So you’ve mentioned a whole heap of reports and different tools there and readings that our listeners could get access to.

Michael 16:49
Can you, I guess, give us a bit of a rundown as to where our listeners can find these items, and also where they can learn and find more about yourself.

Michael 16:55
If they, you know, want to follow you and read your insights.

Michael 16:58
I guess on a more regular basis.

Nicola 17:02
Absolutely so on the domain website. We actually have a section that is research, So just hop on to domain.com.au forward slash research, and it would take you to a landing page.

Nicola 17:10
That is where all of our research pieces sit.

Nicola 17:12
Anybody that is an avid LinkedIn user, I am a lover of LinkedIn and are constantly sharing graphs and various snippets of what I’m observing in the Australian property market.

Nicola 17:24
So give me a follow on LinkedIn too.

Michael 17:26
And we’ll have all those links as well in the show notes for people if they want to check that out and they can access that nice and easily.

Michael 17:32
Nichola, thank you so much for joining me on the show today.

Michael 17:35
Your insights have been so appreciated and definitely I think, are gonna help a lot of listeners in terms of understanding the sort of things that they should be looking at.

Michael 17:42
So thank you so much for your time today.

Nicola 17:43
Thanks for having me.

Nicola 17:45
It’s been fun.

Michael 17:49
You’ve been listening to the home run your Guide for Buying your first Home in Australia.

Michael 17:53
This podcast was produced by Lendstreet.

Michael 17:55
Lendstreet is a mortgage broker and home loan specialist that helps first-home buyers find the right loan to meet their needs.

Michael 18:01
We know applying for a loan can be overwhelming and complex, so we help guide and support first home buyers through the process from start to finish.

Michael 18:08
To find out more, head to our website lendstreet.com.au.

Michael 18:12
We’ve also put a link in the show notes to make sure you don’t miss an episode of the home run.

Michael 18:17
Be sure to subscribe to or follow the show in your podcast app, and while you’re there, please leave us a five-star review.

Michael 18:24
It really helps others find the show.

Michael 18:27
I’m Michael Nasser, and we’ll be back next episode, covering another step on the journey to owning your first home.