606 | How Ownership Mix Could Improve Your Return by 34% - Chat with Gerard Burg

(Upcoming webinar - 7:30pm AEST, Tues, 28th July) New vs Established Property: What should you buy in today’s market? Register here: https://thepropertycouch.com.au/registernow

Do owner-occupier suburbs have better capital growth?

New Cotality research suggests the answer is often yes — particularly when it comes to units.

Between 2010 and 2026, units in owner-occupier-heavy areas grew by 99%, compared with 65% in investor-heavy suburbs. Applied to the national median unit value at the beginning of that period, that represents an estimated $148,000 difference in capital gains.  

But does that mean investors should simply avoid any suburb with a high share of renters? Not quite. 

In this episode, Ben Kingsley is joined by Gerard Burg, Head of Research at Cotality Australia. Gerard brings more than two decades of experience analysing economic and industry trends across government and the private sector, including his previous role as a Senior Economist at NAB.  

Together, they unpack what Cotality’s ownership-composition research really tells us, why the relationship is so much stronger in the unit market, and how liveability, amenity, renovation activity and future housing supply can influence long-term performance. 

They also explore the risks of investor-heavy apartment markets, the potential consequences of pushing more investors towards new builds, and what the latest listings and lending data reveal about Australia’s property market in 2026.

Free Stuff Mentioned

• (LIVE Webinar!) New vs Established Property: What should you buy in today’s market? Have recent tax changes made new property the obvious choice for investors? Join us on Tuesday, 28 July at 7:30 pm AEST as we unpack the real numbers, risks and trade-offs behind buying new versus established property.👉 Register for the free webinar
• Cotality’s Owner-Occupier and Investor Research  👉 Read the research and download the full analysis or learn more about Cotality here
• Moorr’s Suburb Search Feature: Looking for more suburb data? Check our Moorr’s brand new feature: Suburb Search! Research over 30,000 Australian suburbs with just a few clicks. Explore monthly-updated market data, compare locations, uncover hidden opportunities and access suburb-level insights to help you invest with greater confidence. 👉 Learn more

Timestamps 

• 01:23 – Should You Buy New or Established Property After the Tax Changes?
• 02:28 – Meet Gerard Burg, Head of Research at Cotality Australia
• 03:21 – Money Story: Growing Up as the Youngest of Five Children
• 09:19 – How Gerard Found His Way Into Economics and Property Research
• 14:16 – How the Rental Ratio and Ownership Research Was Calculated
• 15:27 – Do Owner-Occupier Suburbs Have Better Capital Growth?
• 17:15 – How Ownership Composition Created a $148,000 Difference
• 20:00 – Why Schools, Transport and Liveability Influence Property Values
• 23:29 – Why New Apartment Supply Can Limit Capital Growth
• 27:00 – How Investors Should Use a Suburb’s Rental Ratio
• 32:23 – How the New Tax Settings Could Change Investor Behaviour
• 37:05 – Could New Housing Estates Become the Next Investor-Heavy Markets?
• 39:29 – Rental Guarantees, Oversupply and Concentration Risk Explained
• 44:27 – The Practical Property Research Lessons Investors Can Apply
• 46:08 – Australia’s Property Market Outlook for the Rest of 2026
• 46:36 – Are Rate Rises or the Federal Budget Driving the Market Slowdown?
• 51:00 – Are Regional Property Markets Still Outperforming the Capitals?
• 53:57 – What Rising Listings Tell Us About Sydney, Melbourne and Brisbane
• 56:31 – Interest Rates, Borrowing Capacity and the Signals to Watch Next

LISTEN TO THE FIRST 20 EPISODES HERE >>

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Transcript

SPEAKER_01 0:00

We're talking about what $148,000 difference.

SPEAKER_02 0:03

Yeah, it's not not pocket change, is it? We bank dollars. We don't bank percentages. Um, so that that is a material difference.

SPEAKER_01 0:11

Capital growth is perhaps more important now than than ever was before.

SPEAKER_00 0:16

You're tuning in to the Property Couch, Australia's number one property, finance, and money podcast. Featuring the titans of the industry since 2015. We're trusted by tens of thousands of investors on their journey to financial peace. This show is powered by more.

SPEAKER_02 0:34

Yes, thanks, Opti. Uh, it is the number one property podcast in the country. We're delighted to have you along for another exciting episode. And this episode, we're double-clicking on the research side of property. I've got a very exciting guest to introduce you to. Uh, we are going to be talking about ownership composition analysis and what Cotality has recently released, which will reinforce some of the important messages that we've been talking about. Yes, since 2015, Bryce and I have been talking about owner-occupier appeal. We talk about human interest and human behavior on the pod in our books and in all the teaching we do, along with economic activity. But we've also talked to you about investment grade versus investment stock. Well, we're going to also challenge that thesis

New vs Established Webinar

SPEAKER_02 1:23

today with my very special guest. Um, and we're just going to basically go deeper into the property market in general because I have a very, very special guest with me today. And that special guest is Gerard Berg, who is the head of research at Cotality Australia. Welcome to the property couch.

SPEAKER_01 1:40

Fantastic to be here. Thanks, Ben.

SPEAKER_02 1:41

Now, I've got a little bit of housekeeping, but we're going to come back to you and I'll introduce you in more detail in a minute. Effectively, we have a webinar coming up. Yes, we've been getting lots of questions from our community in respect to should I buy new versus should I buy established? So that's what we're going to double-click on in our upcoming webinar. That date is set for the 28th of July. That's a Tuesday at 7.30. Uh, you can register for that webinar by going to the propertycouch.com.au forward slash register now, and you'll get all the details on that upcoming webinar. Of course, another reminder about our sponsor, more, the more platform. We've got great new research and data on there as well when it

Meet Gerard Burg (Cotality)

SPEAKER_02 2:28

comes to property. It is the home for your life admin. All of your investment properties can be managed on there. So if you haven't checked it out already, you can do that as well. All right, so again, back to my special guest. So Jared is the head of research at Cotality Australia. Jared has spent more than two decades analysing economic and property trends across both government and in the private sector, most recently as a senior economist at NAB before joining Cotality to lead the Australian research program. If you've read one of Cotality's housing reports or seen commentary explaining what's really driving Australia's property market, there's a good chance that Jared has been behind that research. And today, as I promised, we're diving into the latest study exploring why own occupier suburbs have historically outperformed investment heavy location. What's the methodology is telling us, and most importantly, how investors can apply these insights to their own strategy. Jared, again, welcome to the Property Couch. Great to be here. Okay, so let's get into it. But before we do, um, we always like to learn about uh our new special guests on the podcast. So tell us about your life growing up. So we always want to know what was money like in your household. We think that obviously managing money is the start to obviously future investment and wealth creation off the back of that. So what was what was did you talk about money around the dinner table when you're at home?

SPEAKER_01 4:02

Look, not a lot, but um, you know, I think back at when you sent through this sort of uh idea, I had a had a bit of a think yeah back to my youth. Um and I think you know, there's always that expression the past is a foreign country, isn't it? And I think as I was sitting there thinking about uh my childhood going, how many people would be able to have the kind of uh family situation and and background that uh I had growing up that would be possible now? Um I'm the youngest of five children. Okay. And uh and my mother was a homemaker, and my father was a was a public servant. Um, so there wasn't a lot of money growing up, but uh, you know, certainly we weren't uh living in poverty or or anything like that. But I think there was always a sense that that money was uh an important uh you know attribute or a commodity or something like that, and uh, you know, it was something that had to be valued and and used uh wisely. Uh, but it wasn't really something that we really discussed around the dinner table or anything.

SPEAKER_02 5:02

You can't you can't remember any conversations around or requesting from mum or dad about wanting the uh BMX bike or anything like that, and they're sort of saying, look, at the end of the day, there's not enough money to go around, or what about holidays local, interstate, or international?

SPEAKER_01 5:17

Yeah, so I mean we we'd have um, you know, most most holidays would be at our grandparents. Yep. Um, you know, when we did have uh you know a holiday, it might be at like a caravan park, yeah, you know, down on the coast, something like that. Um, you know, uh and and again, I guess the sense of of not necessarily a lot to go around, you know, there wasn't sort of much extravagance purchases, um, you know, a lot of uh secondhand stuff. Again, being the the youngest of five. Yes, the youngest of five. New clothes weren't something that was particularly common. I suddenly, you know, uh growing up in the 80s, I think I had a lot of uh very 70s vibes uh in the in the clothing I had.

SPEAKER_02 5:53

Fair enough, fair enough. And what about your parents? Did they look at property as an asset that was wealth building? Did they do any investing in property or did you get any exposure to the property market as a young man?

SPEAKER_01 6:05

No, so uh just really the family home. Um and certainly uh I think from the perspective of an owner-occupier, adding value to the family home was the the thing. So again, with the with the number of children, um, you know, the the small home that was initially purchased got bigger uh with extensions. Um, you know, probably one of my earliest men memories was the the extension that was sort of done when I was uh you know three or four. Uh, you know, apparently I I uh religiously followed the builder around the house.

SPEAKER_02 6:35

With the with your own plastic hammer.

SPEAKER_01 6:36

Oh, or or just or the the the little shovel and wanting to dig and all that sort of stuff. So uh yeah, I was was very fascinated by that. But certainly, yeah, it was was about um it was about adding adding value. Uh my my mother recently sold the family home. Okay. Um and uh that was sort of late last year, uh and they they initially built in 1968. So it was certainly a significant change uh to do that. And I recall uh when my my parents did a uh a renovation of the kitchen um after I was the the final child to leave the home, they they renovated the kitchen. And I remember dad complaining that the renovation of the kitchen cost more than the initial build of the house did. So, you know, a bit a bit of a change over time in terms of those things.

SPEAKER_02 7:22

The inflation story kicking in there for sure. Um in in terms of um money habits, so you did you get a part-time job um, you know, as a as a young teenager, and then when you started earning your own money, what was sort of were you a spender or a saver? Did you learn anything along the way, or did you get any advice from your older siblings?

SPEAKER_01 7:44

Yeah, so I I didn't really get a job until uni. Yep. Um I worked as a kitchen hand. Um, so very much uh a hands-on uh hot environment in a in a commercial kitchen really uh taught me a lot. Um and look, I was was very much a saver. Um, you know, I I think the the first thing that I um I purchased with my my money was uh a nice stereo. Uh was definitely into streaming. Still living at home at that time. Still living at home. Yep. Um and um and you know, sort of wanted to have something to play my my CD collection on in its best uh sort of quality. Uh but uh again, you know, I I saved my my income for that one and and made the purchase.

SPEAKER_02 8:23

Yeah, that that was one of my only treats that I gave myself when I was young working um was one CD purchase a week to add to my CD collection. So sounds like we're we're both music lovers as well. Um so when did you move out and and when did you start thinking about the what money delivers you from an independence point of view? You know, do you sort of can you recall the big decisions around that independence and getting out? Did you rent first or yeah, I did, yeah.

SPEAKER_01 8:52

So I I initially moved out at uh 21. Yep. Um, so towards the latter end of my my uni life. Yep. And yeah, it was about independence and a bit of you know, different uh shape of life and everything I share home? Uh no, yeah. I mean it was with uh with a with a mate, um, you know, just a small unit. Yep. Um and yeah, we we just sort of had had that major way through life. Exactly, different life experience. Yeah, yeah. Um so yeah, I I uh you know, I actually grew up in Canberra as the hint of the the public servant um father. Yes. Um and then yeah, so after a brief time as a public servant, I uh you know got the opportunity to move to Melbourne, come and work for NAB. And um, so yeah, made the made the transition to here to here in Melbourne. Um spent a number of years renting um initially by myself and then with my then girlfriend now wife. Yes. Uh and then finally we we made a purchase of our own home.

SPEAKER_02 9:46

And you found your way into um economics uh and your passion for the the social science, the the difficult science to study, which is human interest and human behaviour. Um tell us that story in terms of how you migrated into you know economics and research and became an economist and and now obviously one of Australia's leading um researchers in the property space. Take us through that journey.

SPEAKER_01 10:10

I'd love to say there was some um incredible plan. Yeah. I'd love to say that uh you know I really, really uh it stepped forward and and and achieved all my goals. Um look, you know, why did I choose to become an economist? Uh it was economics was the last subject I chose um as my in my uh year 11 and 12 studies. Um it was sort of a little bit pushed by my older brothers. They sort of that thought that you know this would be something that you'd uh well yeah, I've always been a numbers kind of guy, definitely. Um yeah, and uh, you know, so so I went, yeah, I'll give that a swing. Uh won the school prize for it. Okay. You know, seemed like it was the good choice. Um and look, you know, I I do sort of say, you know, what was my my main inspiration to become an economist was probably that high school uh teacher. You know, I really do have a lot of thanks to him, uh, because he really did distill the the human aspect of it. You know, it is a a very numbers heavy, it's a very theoretical thing, but it comes down to it. What is the economy, but all of us individually living our lives and linking these things together. Um, and so I think that was the sort of thing, and that's where I've always had that kind of passion is the the actual human story behind the numbers and the economy. And so that's that was my um my initial starting point.

SPEAKER_02 11:32

And then so into the residential side in NAB as well, or was that sort of new in terms of your migration across to Cotality?

SPEAKER_01 11:40

That was more than new into migration to Cotality. Working for a major Australian bank, yes, property is always there. Oh yes. So um I think that did give me the crash course initially. Um, but uh I think the understanding that I had of property at the time, which I thought was very good, was incredibly superficial.

SPEAKER_02 12:04

Well So take us through, I mean, how long now have you been with Cotality?

SPEAKER_01 12:08

Uh so since January. Um so it it's a crash course. It was a crash course. And look, uh you're still learning. Yeah, absolutely. But um As we all are. Uh I come at it as an economist, which is what we were after. Um I I come at it, you know, looking at the the numbers in a in an economic framework and what it all means. Um so you know, I spend a huge amount of my time looking at all the indicators that we see coming out each month and trying to piece together the the bigger picture of what it all means for the property sector.

SPEAKER_02 12:43

What a beautiful segue into um this report here that I've got in my hot little hand. Ownership composition, the suburb fundamental investors rarely factor in. So this uh was done by your team. Um and I wanted to just get a bit of a backstory in terms of what prompted the team to undertake this uh investigation into um capital growth performance uh when you're looking at it from a um from a unit point of view or a house point of view, apartments versus houses. And you found some um correlations. Um we don't know the causations, but we know the correlations here in the data. Um so take us through yet what um what inspired the team to to uh analyse this and then we'll talk about the methodology that are used.

SPEAKER_01 13:31

I suppose at the highest point, you know, what is Cotality's mission, but to to really understand what's going on in the property market. Good point. Um so you know that that's sort of at the core of of everything that we do is really having that deep understanding. And I think in the lead up to the budget, even there was all the discussion about you know changes in investor behaviour that they were looking to make, uh, all these sort of policy shifts. We had a fairly good signal that something was was in the works. And so I guess that really inspired the the decision to take a really deep dive into what the performance of investor stock has been over time, where the pockets of strength have been, where things have been weaker, and really provide a bit of a framework for this broader

Rental Ratio Explained

SPEAKER_01 14:16

debate about, you know, what investors will be looking at going forward, um, with a bit of rigor, I guess, rather than just the you know emotional response, I guess, that a lot of people have had in the in the wake of the budget.

SPEAKER_02 14:27

And we are gonna unpack that more um later in this episode. Um, the methodology that was used, can you just sort of give us a brief overview in terms of how you um organized the data and then analyzed it?

SPEAKER_01 15:08

I guess it sort of speaks to the rich data set that we have at our disposal to begin with. The ability to dig into 2,300 individual areas across the country and really analyze those individual trends to a large extent. The real challenge is identifying the heavily owner-occupier versus investor-led areas and do that really digging into the history of the number of rents uh or rental properties advertised in each location over time to try and build up a picture of the the level of um investor-led versus uh owner-occupier parts of these individual.

SPEAKER_02 15:45

And you refer to that as the um the rental ratio um as part of that. Uh and you set the index um at zero from 2000, 2010. 2010. 2010, that's right. Sorry, between 2010 and 2026, um,

Owner-Occupier vs Investor Suburbs

SPEAKER_02 16:01

that's basically what you're looking at. So let's talk about what you found in the data when you uh when you put it all together.

SPEAKER_01 16:07

So at the highest level, you tend to see that the capital return over that time was much stronger in areas that had a very heavy concentration of owner-occupier properties. We split it up into essentially four different groups of um, you know, owner-occupier versus versus rental, yep. And then took the comparison across areas that were or the the properties that were units versus houses in each of these areas.

SPEAKER_02 16:31

And so you broke them down into quartiles? Correct. Yeah, so Q1, Q2, QQ3, QQ four quartiles, um, breaking down that concentration of the rental ratio. Um, and then you you found a really clear, and I'm sure for those watching on video, will pop up the the charts uh now basically showing um the unit story because we saw

Units: 99% vs 65% Growth

SPEAKER_02 16:53

something quite strong in the unit side versus the houser side. So let's unpack units first. So in some of the findings.

SPEAKER_01 17:00

In those areas that had the highest concentration of owner-occupiers, unit capital values across the country rose by about 99% over that um 16-year period. So essentially doubling the value of the units in that time. The highest areas of rental increased by about 64%, if I got my number correctly. 65%. Oh, that's right. Close. That's right, close close enough. Um rounding error there. So we're talking about a 34 percentage point difference. And, you know, again, talking about that idea of human human versus economics, you know, I was speaking very much as an economist there, but if you're talking about the the value perspective and the dollar values, dollars and cents, um, we're talking about what, $148,000 difference. Yeah. It's not not pocket change, is it?

SPEAKER_02 17:51

No, that's right. I mean, I think what I love about in the report is you set the example at $436,000 as the as the starting median national unit price at that time. And if you got in uh the the the higher owner-occupied concentration, you potentially netted out average uh $148,000 in a better or more superior return. And and that's what we get. We we bank dollars, we don't bank percentages. Um so that that is a material difference. Um and then in terms of houses, um, it's a little bit different in respect of um the performance variation. So can you talk to that for us?

SPEAKER_01 18:32

Yeah, so when we saw units, it was a pretty even story across the country. Obviously, some variation from location to location, but a pretty consistent story across the country. In houses, things got a little bit more different when you dug into individual locations. So we saw, you know, again, it there was a clear difference. We're talking about an increase of about 113,000, 133,000 for houses over that uh 16-year period versus 117 or so. So less clear in in the percentage terms, about 83,000, but very location specific. So we did note that in Sydney and Melbourne, for example, almost no difference in houses, depending on whether it was uh a rental heavy or an investor heavy uh or an occupier heavy.

SPEAKER_02 19:16

And that's interesting, isn't it? I mean, because now in reality, um what we do see in those markers, because we talk a lot about agglomeration economies and the land value um in sort of, you know, there's a premium on land value closer in when you get that concentration and accessibility, uh, AMA theory, AMM theory, et cetera. Um, and um, so that's why Bryce and I always used to talk about owner of Kapara Peel and those types of things. But when we are talking about the percentage change, it's relatively consistent. But if you put a 6% compounding return on a million dollars of land value versus a 6% compounding return on a 400,000, the the exponential compounding return is still quite significantly different. But in in relative terms, it's also telling us that um there is a there's a type preference here, which is obviously um there's a focus on land value. Um, but what are some of the other things when we unpacked when the researchers unpacked the data in your team, they were talking about some of the potential reasons why um that we saw this variation. Can you uh can you talk to those for us?

SPEAKER_01 20:24

Yeah, what we came down with ultimately was there are some very different considerations that an owner-occupier is looking for in a in an area versus what an investor is looking at. And let's jump into a very gross simplification of what an investor is after. But essentially what it comes down to at the end of the day is capital growth. That's the number one driver in all of the research that we do as well. That's what they want. We we look at things like you know what what different yields are like, and yields will vary widely, but ultimately at the end of the day, the the capital growth is the number one thing that they're they're after. If you think about what an owner-occupier is looking like at when they're making a purchase, a lot of it's going to come down to much more about the amenity of the area that they're purchasing in. Um we see a huge difference, for example, in school zones. So, you know, you think about the the sort of premier areas for individual schools and it makes a big, big difference. Uh, you know, where I am in the the northern suburbs, you know, I would see I can see uh a line of that where that school boundary is and where one school is highly rated and the next is not, and it it makes a huge difference in property values. Enormous, enormous sort of things. But even then it comes down to even smaller things. What's the what are the parks like? What's the traffic like? What's what are the how how close are you to the train station? All these sort of little things that are going to add up to the enjoyment of living in that property over 10, 20, 30 years that an investor simply is not considering when they make that purchase. Because potentially the renter who is living in that property is not necessarily going to consider those longer-term things because they may be looking to the next place that they're living in rather than uh, you know, those sort of longer-term things. So there's those amenity aspects have a big difference. Then there's also just the change that a suburb might undertake over that time over a longer period when you have a heavy owner occupier thing, because uh owner occupiers might be investing their own money in their property to grow. You know, uh my own personal experience, you know, have being the father of two children, we decided that the home we bought wasn't going to be quite big enough for when they reached their Teenage years, so you know, we added more space. We did an extension to our home, um, make the home more livable for the longer term. Um, those are the sort of things that are less likely to occur in a heavily um uh investor-led area, uh, whereas it's much more likely to happen in that owner-occupier. And all of those sort of additions and transformations to homes add a lot of value over time too. They do.

SPEAKER_02 22:52

Uh look, I mean, that's why we break it down into really simple terms. We're we're very big on the economic activity and the economic engine, which is obviously, you know, the measure of all of the people doing those activities in those locations. But what you've just unpacked there in is the story about livability, house proudness, and we're talking about the next buyer coming into those locations and what they're willing to pay to have that livability, those amenities, the walk scores, the accessibility, the convenience, all of those things that play into that. But there is one other thing that that I wanted to get to because I'm I'm sure our long-term listeners would also be having a big question about well, units, surely supply or the ability to add further supply is gotta impact that overall capital growth performance. So that was also highlighted uh as another point. So let's let's talk to that supply story, Jeremy.

SPEAKER_01 23:51

Yeah, and I guess that comes down to you know, what do we mean by a unit when it comes down to it, doesn't it? Because, you know, there's a I mean, just as there is with houses, but there's an enormous variation in in what a unit actually means. Uh,

Supply Risk in Unit Markets

SPEAKER_01 24:03

you know, if we look out the window there behind us, you know, we can see a number of high-rise thousands of them in the Melbourne CBD. And uh, you know, if you'd made your purchase in uh what about March 20 2017 of one of those ones and watched the capital uh drift away, yeah, um, it really does highlight that the opportunity cost that's been lost in some of those markets. Yes. And so obviously you can add a lot more unit supply very rapidly, particularly if it's a large high-rise. But even just the the sort of uh larger development within suburbia of you know a number of townhouses on a single block can add supply much more quickly in an established area than a new build scenario can of a of an individual house. So there is that aspect that supply has a big impact when it comes to um that story. And particularly, I think, you know, there's you think about the developments that are very investor-led, I guess, when it comes to new building of apartment stock.

SPEAKER_02 25:00

I I think that's an excellent point. And that's why we talk about um, you know, investment grade versus investment stock. Um, you know, what would be uh excellent to do? I mean, you know, you guys went down to SA2 level, which is the suburb level. So that's, you know, for all of those nerds out there, um, SA is basically significant in urban areas that that's broken down by um these geospatial data sets or boundaries. Uh, and that's how you get to that suburb level analysis for the 2,300 suburbs. Um, what would be uh even more interesting if we took this down another layer, if we're thinking about the units, is the small, medium, and high density stuff. Because to your point, um, you know, if I'm a developer and I'm about to build uh 200, 300 units in one development, um, I need sales. And I'm going to be looking for um sales through investors as well as owner occupiers uh in terms of those areas. But what I am doing is adding significant supply uh into that particular market. And I think that's probably, again, one of those barriers. Um, having moved across from NAB into Cotality, how much of an opinion had you formed around uh new builds, um, off-the-plan builds versus maybe some of these smaller boutique builds and their price performance and their capital growth over time? Had you had already a view uh in NAB and you know, has that been solidified or changed in terms of moving across the Cotality?

SPEAKER_01 26:35

Uh look, if I hadn't view it at NAB, it probably would not have been incredibly well informed. Uh I definitely have a stronger sort of view now that I've I've sat in Cotality now and and sat in rooms and and discussed these types of things in a lot more detail. Um and it is interesting the the sort of yeah, the the perception I think that we're we're getting when I'm in a room with investors talking about you know what their intentions are going forward. Um, you know, it it it does become a much more interesting picture what what sort of things that they are looking for, what they're targeting um compared to what may be available or being encouraged right now is is you know sort of two different things.

SPEAKER_02 27:15

So would we talk about, you know, I mean, you know, I've got notes here talking about that, you know, what are the practical takeaways for investors here? This is, you know, the current rental ratio is is somewhat important now. You've you've bought um a metric that we've sort of anecdotally um discussed on the pod for over 10 years. Um, is this a uh a single variable that we should look at and determine on, or is it a directional signal? Um, what where do you where would you see this sitting in terms of if if I'm an investor and I'm doing research, what would you be sort of saying as, you know, do I add this to the mix of variables that I look at, or is this the first thing that I see? Because at the end of the day, supply is going to change, and you know, we've got a census coming up shortly, and we won't get the results. For a little while.

SPEAKER_01 28:07

For a little while, but I think we're all like waiting for it.

SPEAKER_02 28:10

Yeah, yes. So so do you what what do you see this as is a directional signal, or is it more something that we should really be focusing in on when we're making location assessments?

SPEAKER_01 28:20

I don't think it's the be-all and end all, but I think it's an important one to have in the toolkit. Yep. And I think it's probably one that might have been overlooked. But as you say, it's something that perhaps a lot of investors were already had kind of in the back of their mind, not perhaps not necessarily having the the strong data, but having the sense of it. And I think stepping away from or stepping beyond just the sense and actually having some some hard data on it is probably more valuable than a lot of people perhaps have appreciated. And I think now for investors heading forward, there's no doubt that the calculus is changing. Yeah. And so having this kind of sense now where capital growth is perhaps more important now than than ever was before, um, it's something that I think that yeah, the the savvy investor is really going to have um a greater focus on during the process of evaluating.

SPEAKER_02 29:12

And I and obviously, having um spoken with Tim Lawless uh and your team for many, many years, one of the the challenges we've always had is the reliability of the data around rental. Is it a rental? Is it currently still a rental? Um, you know, did they move the renter out and now are family members living in there? So um getting um reliable data in terms of an indication of the listings is also something that we need to take into consideration because um, you know, looking at even just recently um the rental increases that we've seen released with you guys through Cotality versus maybe some of the other operators out there, there was a little bit of a variance uh in terms of the quarterly uh rental increases in the market. So talk to us about um just how important getting access to that really good data is and then you know, relying on quality operations like Cotality for that, for that data as opposed to some tubob operator who who might have you know scraped one website and has loosely framed their opinion on poor data.

SPEAKER_01 30:23

Yeah, I think trust is sort of at the heart of what we do. Yeah. Um, you know, we need to uh to absolutely maintain our level of trust out there because it's that classic thing, isn't it, that it's um it's built over decades, but can be destroyed in in minutes if you get it wrong. Um so yeah, we we really work uh very, very hard. And you know, as this this piece was produced with uh with collaboration with our uh our data team, I'm very thankful for our data team, you know. Uh incredibly smart people who who sit behind us and and really produce this incredible um rich data set that we have access to. Um I mean you you note the challenges that that exist there. Yeah um there's there's always going to be issues around things like accurately identifying rental properties. Um that that happens at a at a regulatory level. I mean, you know, again, speaking to to personal experience of uh of knowing a nearby rental property that uh according to the council that I live in, is it is a clear owner occupier. I'm going, well, that's that's uh not definitely not what we're saying. But yeah, that that just speaks to it. It's it is uh at the end of the day, um, you know, an industry uh no different to any, I guess, but but has its messiness. Yeah, yeah, yeah. But there is imprecision uh with these sort of things.

SPEAKER_02 31:46

But um yeah, our our data team works tirelessly to And I want to give credit to your team because you know, 10 years ago I would be saying, you know, some of the data was directional, um, but it's definitely getting better and better. Um and certainly some of the ways in which you're collecting um intelligence and the relationships you have built in terms of some of your strategic partnerships to allow you to get access to some of that data is going to continue and improve uh the quality of that data. But yeah, if I had my, you know, I put my feet on the soapbox and stood up for 10 seconds, it would be lovely if we can collect that data somewhere and have that, you know, uh known because uh we're making policy decisions based on data uh around rental um, you know, exposures and those types of things. And and sometimes it's frustrating when we when we when the data could be flaky at best in terms of making those decisions. And I've seen that being done many years over the time. I want to pivot now, come back to the to the story at hand. Um we've just seen obviously the most significant tax, I'm not gonna call them reforms,

Tax Changes & Investor Behaviour

SPEAKER_02 32:57

um, tax hikes. I'm allowed to say that, you're not, um, that uh of recent times. And what I really, the timely, the timely message of this is um you are looking at behavioral elements associated with this. So where am I going with this? Obviously, I'm talking about negative gearing capital gains tax uh changes and the fact that the government is trying to change behaviour around buying new properties, yet we're learning a bit about some of the data telling us that there might be risks in associated with that. Can you sort of lean into that conversation a bit for me, Jared, and tell me what you think um, you know, could be risks that might be uh might be exposed from this type of you know unintended consequences around policy reform?

SPEAKER_01 33:49

Yeah, I mean if we think about what the longer term picture has been around investors, there's always been a clear preference for purchasing existing properties over new. And, you know, I think that really just speaks to uh a revealed preference over time. It's what investors uh have been looking for, and the previous tax settings laid out that as being an advantageous decision to make. I think there's an expectation from a lot of people that there'll be a simple pivot that investors will just go, okay, well, the negative gearing is available for new properties, let's jump in over there. And I don't think it's as simple as that. Um, you know, every time I've spoken to someone that's talked about the the prospect of investing in new properties, there are red flashing warning lights that they are saying that you know new builds come with. You're paying a premium straight off the theory.

SPEAKER_02 34:44

I mean, I I've been I've been in this space professionally since 2004. And for the first 10 years, um, I spent a lot of time um trying to analyze the performance of off the plan or house and land packages in that time with limited data, I might add. So a lot of anecdotal evidence in terms of you know seeing resales and and trying to put a picture together. Um and then obviously in 2015 when Bryce and I started the podcast, the data was getting better. And it was really clear at that point that um off-the-plan and house and land packages, you are paying a developer or a or a or a new price tax, let's call it. Um, and you know, a property is only ever sold once. And off the back of that, we'd seen um all of our analysis has shown that that first 10 years of performance is under uh underperformed compared to um established. And I think, you know, what this is also, you know, what this research report also highlights here is the when you do get concentration risk uh like units, um if they're new and you see a lot of supply coming in, you potentially that supply is exceeding demand in that in that time period. But I am interested, um, because we sort of know that for off the plan, um, and and that and that message has got out there. And I should probably finish that um that sort of um note around when I first started, some of the data I was getting out of AFG was telling me it was like a 45-55 split based on because when you put an application into a lender, um you have to classify what the purchase was. So it's newly built off the plan or whatever. And so um my recollections of that data was it was 45% was new, and 55% of investors were buying established. Fast forward to 2015, that sort of got to 6040, and now here we are in 2026. It does, and I I saw some um some stuff on AFR recently um talking around roughly 26% is new stock. Um, so and I was, yeah, my where where our data was at was probably around a third versus two-thirds. So it is still definitely moving towards buying established. And that's obviously part of the reasons why Treasure, I suspect, has put a case forward. Now, there was a lot of misinformation in the 2019 election where um the Grattan Institute came out and said 93% of properties were were established and only 7% were new, which was completely debunked, um, which I had to jump on that political bandwagon and and debunk that. But that is that is the the trend that we're seeing. So when we now, so we know that uh um there's a lot of risk in medium and high density for for units. Let's talk about the concentration risk for house and land. Because ultimately, one of the challenges here, or when we talk about owner-occupier appeal, if we're if we're um in a an established area where a lot of the land is utilized, effectively uh there's not a lot of new freestanding houses you can build. Might be, you know, knockdown duplexes and townhouses that can be built there. But do you see a concentration risk in some of those, you know, new estate areas and subdivisions where the the a property spruker is going to attract the mum and dad investor to come out and because they get the negative gearing and the tax advantages. I can see then, you know, the that sort of spruer re-emerging and giving bad advice around this, and and this data almost supports that.

SPEAKER_01 38:27

Yeah, I can see that. Uh and I think it comes down to, again, that idea that we spoke about before about what is the owner-occupier looking for versus what the investor is looking for. And the new builds in a in a greenfield sort of site simply doesn't have the established amenity, the record of what people are looking for to have that guaranteed um, you know, path over time. You know, they have to hear the sort of nightmare stories of some new developments, the traffic chaos, the you know, the the the distance the that people face in the And also the farmland that's sitting out there, which is future subdividable land, which doesn't create scarcity, does it? And look, I'm not going to suggest that perhaps in the future these might not be fantastic suburbs, but that might be 20, 30 years' time. Um and, you know, are you prepared to hold that investment for that period of time until it comes good? It it does strike me that it is a uh it is a potential risk. And I think also if you do have a large number of investors who are looking at that as an opportunity, well then you do have that concentration risk. Yeah. And it just creates a different environment that um, you know, doesn't, according to our research, really enable that that capital growth.

SPEAKER_02 39:44

And I and I think we can, you know, um overlay the other um oversupply of rental risk as well. So if we if we do have these sprukers who are selling 40, 50 properties in a new estate, um, we've where's the absorption of the rentor who's coming in to do that? So because they're selling them on higher yields, because they're usually cheaper values out wide, so you get that higher yield story and the and the ability to negative gear and and also get the capital gains exemptions associated with that. So it's all sold on a on a tax story, not necessarily on the fundamentals that we're talking about. And if I if I've been promised yields, I might have a uh a rental guarantee for one or two years to just get the sales volume ticking over. But I come out of that and all of a sudden there's 30 or 40 other properties of of my ilk, uh, my my type. And now now basically, you know, there's there's that concentration risk of an oversupply of rental stock in that market as well.

SPEAKER_01 40:47

Yep. And I think this also it speaks to that sort of idea of who is the renter as well. Um, because obviously renters are not a uh a homogeneous group either. There is variation in in who they are. But I think there's a lot of renters who sort of view that idea of um choosing to rent in an area that they can't necessarily afford to buy in. And so, you know, you think of the kind of inner suburban ring suburbs that have that rental appeal, but you know, the the value is so much higher. Um, people will often choose to live in that that area for a period of time and then buy you know a little bit further out. So the common sort of path. It is a common path. And I think that there is a risk to that rental stock um over time. Um tightening. A tightening. Very true. Yeah. So when you speak again of that idea of the unintended consequence, yeah. Do we actually see a hollowing out of that stock over time? Because as an investor

Will Owner-Occupiers Take Over?

SPEAKER_01 41:44

chooses to sell, you know, their time owning a an investment comes to an end eventually and they choose to, it no longer has the immediate opportunity to be sold to another investor with the changes in the policy. Um, you know, it again, I'm sure there will be some investors who will continue to purchase existing stock, but the the calculus has changed. And the most likely seller or the most likely buyer of that that in former investment property has got to be an owner-occupier now.

SPEAKER_02 42:13

Yeah. And look, I mean, at the end of the day, if the market is 7030 or 70, you know, 68, 32 or whatever it might look like, that makes a lot of sense in terms of making sure that you've got that owner-occupier appeal. Who buy, you know, for buyers who buy with their hearts, not their heads, they they'll pay a premium to get to that more convenient location. And and under these tax settings, all of a sudden now, your principal home is a tax haven. So your principal place of residence. So we do see more changing behaviors of stronger demand where people will be pushing in to those better locations for the for the advantage of better capital growth for their own, you know, for their own wallet, because if they downsize in 25 years, they get a nice little tax-free and well, tax-free as we record today. If you're listening to this in 25 years' time, we've introduced a wealth tax or some type of capital gains tax on owner-occupied homes because the governments just love spending because they love your votes. But that that they are the unintended consequences. And so that is, we have been talking about a hollowing out on this very podcast uh in previous episodes and some of the webinars we've done. And um Bryce and I, post-budget, also spoke about um the challenges we or the opportunities that we might see in terms of future productive use, where a single home will be turned into a duplex in those more established areas. And I think that will be a positive story if that plays out. But you know, being able to turn what is an established property into an equally geared property will be an opportunity for some, but it's it's a lot more hands-on. It's not a passive investment. There are 10,000 decisions that need to be made as part of, you know, developing uh uh, you know, new stock um in in the residential space.

SPEAKER_01 43:55

And I think there's a much smaller pool of investors who are able to make that.

SPEAKER_02 43:58

Yeah. I think that's a beautiful, a beautiful finish on that story. If you think about a pyramid and you think about the the ability to act, you know, that's what we always talk about in terms of um supply and demand. Demand is the ability to act, not necessarily people who just love property porn as an example and just keep looking at certain locations and dream. It's those are people's ability to find maybe two, two and a half million dollars to do a duplex development. That's just not not. you know, everyday Australians. So you're going to see a smaller concentration. Another unintended consequence is the rich are going to get richer and the and the people who missed out on the opportunity, uh the Gen Z and the Alphas and all that, you know, that generation miss out on that opportunity. So don't get me started on that. And I know that, you know, we're apolitical here in terms of this conversation. So I want to summarize this because I want to move um to the market outlook. I want to get a brief uh view in terms of what's happening in a market. So let's summarize what we've just learned about. The first thing we've learned about is this is a great directional signal. And it reinforces the concept

Practical Lessons for Investors

SPEAKER_02 45:01

and understanding of owner-occupier appeal and buyers willing to pay a premium, which is ultimately what's happening because these performances are an indication over the 2010 to 2000, so 16 years of that incremental capital growth that's coming through. So it's a another a nut to your point, Jared, another tool that you have in your tool chest that will help with the directional signal in terms of is this a market that has strong amenity, owner Occupy Pio Pill, livability, and are people being house proud and reinventing and reinvesting back into renovating their stock. Obviously the the risk that we have here is still in the unit market predominantly around future supply. So current supply and future supply still delivers downside risk, which is what this report also comes up with a conclusion on as well. So for those of you who are interested in learning more about the report, please make sure go into our show notes, grab access to this, we've got the report available there to download. And of course Cotality also have other great wonderful research. So we'll give you a link so you can also subscribe to their research reports as well if you're a nerd like me and love this type of stuff. Jared, I I I can't let you leave as obviously you know the head of research in the Australian residential market. We're in an interesting stage of the housing cycle. We already have um four um markets in correction territory. We're seeing uh the markets that were still quite strong Perth and Brisbane starting to also slow Darwin I'll put that in that category as well. Can you just take us through the capital city markets and what you're seeing in the data currently and and sort of give us a prediction in terms of where you think we might finish the end of the year, please. Mm-hmm.

SPEAKER_01 46:58

Yeah I think the the interesting story that we're seeing is that I feel like demand is kind of hitting the market reasonably evenly. We've seen a sizable slowdown in demand across the country

Interest Rates vs Budget Changes

SPEAKER_01 47:10

and it's the cumulative effects of all the pressures that we've seen since late last year. So we stress the fact that even late last year affordability was becoming a real constraint across the market. We then saw three rate rises, which I think people are overemphasizing the impact of the budget versus the rate increases because when you compare the um the budget constraint on households from those increases, even Sydney and Melbourne where we've seen some sizable declines in home values over the last couple of months the necessary budget to make a purchase has increased as a result of the increases in interest rates. So um it's almost being forgotten when it's probably the the key driver of of where we are right now. Yep. Sentiment has also been a huge factor. You really feel it in the hip pocket the impact of the Iran conflict we still don't know if that is resolved. Yeah. It's uh it's Schrdinger's um Strait of Hormuz right now. It is both open and closed at the same time. Yes you can go, you can't go.

SPEAKER_02 48:11

Now there's a tariff that the US want to charge so 20%.

SPEAKER_01 48:15

You know having been a long time observer of the oil market um you know it is is simply your guess is as good as mine as to where the where they're headed in the in the near term. So we would love for that obviously to be resolved but um you know the the grim reality is it may be some time before uh things are are actually improving there. And then of course the the changes in the budget. You know investor lending was about 40% of uh the total in in the March quarter um you know where everybody is waiting yeah with patiently patiently for the for the June quarter to release and I have been I've been quietly pitching to some of the banks that perhaps you know if you can give us a little bit of an indication or you know not just us personally but but tell the tell the wider public what is actually going on that would be great because when it comes to data about where the lending is going they're the ones to go to oh look and well we know it we run a business that's quite large in the space and we can tell you that it's at least 50% in terms of the the level of inquiry that's coming in with this uncertainty.

SPEAKER_02 49:17

So to your point around sentiment um and a sentiment shock that's also been the case because I mean I look at those three rate rises but I also look at the 13 that we had before the you know we before now off the initial rate rise cycle we saw a correction in 2324 right or a slowdown. But then as it settled and we had rates or cash rate at 425 and interest rates at six six and a half we were still seeing price growth in those markets. So to get the cash rate back up to those levels didn't really um slow down inquiry or sentiment. In fact I could argue looking at some of the other buyers agency business that I know across the country um they were doing some big volumes uh doing sort of trust lending and a few other exotics in terms of getting access to households and I hope those households are going to be okay because it was driving a lot of price growth in regional markets. But I can tell you right now that um everyone's just sitting on their hands well not I mean lots of people are sitting on their hands I should I should also point out that that what we've also noticed is that um established people who have got one or two and they or always plan to finish off with one more or whatever, they're proceeding because they've you know they understand the cycles they're they're a lot more confident. But first time investors there's they're they're uncertain. So they're the ones who are probably sitting on their hands more than most. So I it wouldn't surprise me if we see um a 30 30% decline in investor lending um in the short term um until we probably see where interest rates finish off um as part of that story because yes I know that um our housing minister is saying it's all got to do with the interest rate rises but I'm not so sure because we were seeing price growth when cash rates and and borrowing are at that level and and I and I do agree with what you and Tim are talking about in respect to housing affordability that was a that certainly in the regional areas I was very concerned about prices in those markets. They did feel like they were being led by investor demand more than what the local people could afford

Regional vs Capital Cities

SPEAKER_02 51:34

uh in that area. So it will be interesting to play out. Any do you have a view on regional versus um metro at this point?

SPEAKER_01 51:42

Yeah I mean we're still seeing regional markets are are outperforming and it has been particularly in more affordable markets. So where previously you know a lot of the performance in regional markets had been the the coastal lifestyle markets. But again you you're in a situation now where the value has increased so far that the pool of buyers who can get into that market has become increasingly limited. What I found quite fascinating when we when I first uh started taking a look at the regional markets for our our regional analysis was the performance of areas quite remote to the capital cities. And so you know here in Victoria uh the strongest performer that we had at the start of the year was was in Mildura. You know it's it is to an extent a lifestyle market. You know the the agricultural region around it is fantastic. There are tourist opportunities and so forth but it's very distant you know it's a six hour drive to Melbourne it's a four hour drive to Adelaide. It's not a commute you'd want to make every day is it no it's not a commutable market.

SPEAKER_02 52:41

No. And so so and I in my analysis and when we're trying to also because we're trying to detect the number of properties that are being turned over to investors versus owner occupiers. Because when when the tide goes out the the value will will will find its equilibrium where the owner occupier lives because they're the you know again investors should be price takers never price makers but we do see that they often chase yield um and they're and in in some cases they're they're being led by buyers agency groups that um have you know are artificially inflating the prices in those markets. So so it is going to be interesting to see how much they correct because I mean one of the important things in your data you're rolling a you you roll a three month and also a 12 month median and so the it's a bit lag in terms of what we get reported. We run a typical value analysis which is three months but we also have a look at the monthly one. Now the monthly one is you know it can be quite variable depending on the number of sales you get but that's the sort of stuff that um that that is going to be interesting in terms of seeing how it plays out.

SPEAKER_01 53:51

So at a time of sizable uh movement you actually want to see that higher frequency um yeah and I I I recognise that quite a bit that we're we're increasingly looking at that at some of our higher frequency ones just because it's providing the the more uh up to date signal. Yeah agreed if I can spruok another thing that we we do is is our listings data because I feel like this is really one of the thing right now that is is showing that supply and demand interaction at its at its height. So um you know I said the idea that demand is kind of hitting broadly evenly it's that immediate supply that is very different still around the country and really sort of explains a lot of the difference between the individual cities. Yeah. So if we look at total listings across the country you know Sydney's sitting about 11% above the five year average Melbourne's four to five percent above average the two markets that have been falling the fastest. The big mover has been Brisbane back in February Brisbane was sitting about 25% below the five year average it's only now just moved above and we're now just seeing Brisbane tip into negative territory. And so it is it's been this fascinating thing to see a market that has been running so hot um you know the values over the past five years have have risen enormously but uh yeah again speaking to affordability um you know the anecdotal stories that we're hearing about people saying that Queensland is now they're now priced out of Queensland and they're looking at Victoria as as an opportunity. Yeah. I think again the path because being an economist I'm not not so interested in in short term I love long term you know the the potential rebalancing that we could see between cities uh just from from affordability and and lifestyle uh opportunities I think could be very interesting over the next few years. Agreed. So perhaps it's not the the upcoming census but it's the five year census in the future that'll be the the big one to watch.

SPEAKER_02 55:43

I think yeah so we're studying absorption rates um you know so the absorption rate is effectively the measure of um you know how quickly sales are happening in a location to to basically how much stock you've got on hand. And one of the things we're we're now looking at because we've definitely seen a spike certainly in those regional markets as well where listings are increasing sales are definitely collapsing in terms of that but we're trying to look at the the withdrawals so the unsold. So we're trying to analyze that now because we're we're noticing that there's definitely a trend in terms of higher listings. But how many of those 90 to 120 day markets have those properties disappeared and we can't find any evidence of sale is telling us well they're just pulling the properties off market. So they're no longer on the on the listing portal. So that's going to be interesting and I think it it it brings us to a to a nice close in terms of um you know what what are you looking for in the short term? I think uh Jared explained it really, really well that it's got everything to do with interest rates um and short term demand and supply that we're seeing in there and and I think the one we we we've covered off recently is also the impact uh uh borrowing capacity so that plays in concert with um interest rates and the ability to borrow more um so that's

What Investors Should Watch Next

SPEAKER_02 57:05

going to put a ceiling on on some markets as well in terms of price performance and Jared highlighted also sentiment um as the other critical element and so with a lot of uncertainty comes a lot of inaction um and we think that this will have a more broader impact in terms of the economic activity across the country because of the wealth effect if I don't feel like my home's doing well um then maybe some of that discretionary spending will also tighten up and so we'll all of us will be looking very closely at unemployment where interest rates are going and of course the inflation data that's coming out um at the end of this month is also going to be closely monitored as well. Jared thank you so much for coming in I'm sure we'll have you on in future episodes as well I love this this one-to-one is really helpful for me because I get to I get to ask all the questions that I'm on asked and and everyone gets to be a fly on the wall at home um listening to our conversation as well. But uh always remember everyone knowledge is empowering but only if you act on it until next week I can hey folks Opti here your Smart Money Sidekick Inside More just one quick thing before we sign off.

SPEAKER_00 58:13

If you're new to the Property Couch community welcome one quick tip to help you get the most value from the show. Our first 20 episodes cover the foundations we build on every week. And yes, listening on one and a half speed is totally acceptable. If you're short on time download our free binge guide. It distills those episodes into one easy read with heaps of visual diagrams alongside free tools inside more, your all-in-one financial home to help you organize your money and plan your next best move. Check out all the links in our show description. And just a quick reminder before you go anything we cover on this podcast is general in nature. It's not considered to be financial advice and we certainly recommend that you seek out professional advice before making any financial decisions. Once again everything mentioned is linked in the show description ready when you are catch you next week