Property Hub - Investment Insights & Inspiration - Realty Talk Vault: Does property double in value in 10 years?

Episode Date: February 21, 2023

We bring you another classic Realty Talk episode from the vault, which was originally published on May 16, 2022, but is still just as relevant today. Tim Lawless is one of the property experts who has added so much to the show since its inception and bought us a level of experience unmatched in property data information and its use to determine future trends.  Tim’s view on a number of issues might change how you look at property investing in the next 10 years..   RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media.  Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome back to the show, and as I said in the opening there with Bushy, our first guest is Tim Lawless from CoreLogic, and it's a delight always to talk to you. How are you doing, Tim? Really well, thank you, Kevin, and thanks for inviting me on. And Bushy, g'day. How are you doing? It's been a little while, I think, since we've had a chat, probably a few weeks at least, but I can't believe it's been so long.

Yeah, well, we've been doing this show for well over a decade, and I think I met you you even before you were at core logic tim yeah i was just thinking i mean uh i started at rp data back then back in 2007 and we'd had a long relationship well before then when i was at colliers and pid so and uh um yeah interesting to see how things have evolved though from you know i don't know was zoom even a thing back then probably i don't think it was it wasn't But because in those days, those early days, the show was audio, it wasn't video. And that's when Zoom came along and that was brilliant.

I wanted to ask you right up front, what are your early memories of some of our times together? What are the things that occur to you now? Well, I think that the one thing that's always been a constant is Kevin Turner, obviously. You've been there through the rainy days and the sunny ones as well. So, yeah, absolutely, there's been some consistency in the Kevin Turner side of things, but it's great to see that expanding out now as well. But I think more broadly, it's always, the thing that's always struck me is just, you know, the show is just so regular and high frequency.

It's been able to move with the twists and turns in the market. You know, it's very on trend. And that's been the most valuable thing for me, just being able to tune in and know exactly what's going on in the marketplace. And I think there's, I can't think of any examples, but there's been so many times where I've tuned in and got to know about something I didn't really know too much about that was already happening in the market. Thanks to the fact that there are so many people joining the program, so many experts that have joined, you know, really providing an on-the-ground, right-of-the-cold-face perspective of what's happening in the housing market. Yeah, interesting. Sorry, Bushy. No, you're all right, mate.

I think I mentioned last week in the show that we've done about 5,000 interviews and going back over some of the early ones, there's still some really great lessons in those that are current today too, Tim. Absolutely. And a lot of the, I guess, the anecdotes and the strategies and property don't change. You know, even though we've seen a lot of change in technology and the market's been through plenty of cycles over this time, I think the fundamentals of investing and buying and selling really don't change sure there's going to be some different tactics and taking

advantage of some of the new technologies uh and the way we're seeing even a lot more properties moving to online auctions for example and a lot of the uh the virtual tours that have become so i guess normal now at the end of the day you know you really want to make sure that you're you're positioning your property the best you possibly can in the market when you're selling And when you're buying, you're getting the best possible price. And I think just year in, year out, that doesn't really change at all. Well, you've been at the forefront of some major change in terms of the way data is now helping everyone in the property industry make much better and more informed decisions, Tim. So what else have you seen that's changed in property investment over the last decade?

And what do you think has influenced those changes? Well, it's such a good point. I mean, the quality and the depth and the timeliness of the data has been just a fundamental shift over the past 10, 15, even 20 years. I think going back to the early days of RP Data, you know, RP Data was founded by Ray Catlin back in the early to mid 90s. And back then, it was simply a resource used by real estate agents that gave them access to data about what properties were selling for. And you might recall one of the first big projects we did was we took a photo of every single property around the country. Essentially, guys on one guy driving a motorbike, another guy in the back taking a photo and geotagging it. That was revolutionary for its time, like a decade before Google Street View.

But since then, we've seen companies like CoreLogic and a lot of competitors springing out of the ground as well, just adding so much value to that base level of data. So the government obviously collects all the transactional data, but the real value comes in adding to the timeliness of it, adding context from, say, spatial overlays, adding aerial imagery, adding elevations, looking at zoning and town planning. And then, of course, overlaying all the different AI and machine learning are the most recent examples of how data quality is being improved and then estimating the value and so forth. You know, so I think there's still a long way to go for data quality to still continue to improve. But looking back to where it was 10 years ago, it's absolutely been a significant change in how we can analyze property markets. And along the way, we've also seen a lot more methodologies introduced. 10 years ago, we were just starting to move out of the mainstream usage of property data was deriving a median price. Really simplistic way of looking at the market.

all the way through to now where we have hedonic regressions we have stratified medians we have repeat sales indices all really useful for different purposes so i think for anybody investing or selling or active in the market anyway there's been this real improvement of the way we can actually estimate the value of properties and get a bit of a guide for what we should be or shouldn't be paying for a property in the marketplace yeah those early days that you you mentioned there Tim about how revolutionary what that was and we're going around taking photographs and so on I do recall when the internet really started to gather pace real estate agents lost that power of the information you know there was so much information there and they were the

gatekeepers of that and then RP Data sort of opened all that up because I remember when I first started in real estate we have to do title searches and things like just to get information so we could actually do a listing. But the internet certainly opened it up. And I think full marks to you and your organisation too in the way that you've involved the consumer in keeping that data alive, you know, giving them the opportunity to go in

and how have you improved your property? And that's got to have a real key influence on the value as well, Tim. Yeah, absolutely. I think transparency is really important in housing. And to have the real estate industry empowered empowered to see all that data was certainly a good thing. It helped real estate agents really when they're listing a property to really get the best value and provide a benchmark to the

prospective vendor about what a property was going to be listed for. But for a consumer not being able to see the same side of things, I think they were quite disempowered in many ways. And as you say, the internet and a lot of consumer websites where you can actually get a lot of this information for free has really empowered the consumer side of things but it's also made their decision making a lot more complex there's a lot of data to choose from and uh and quite often it can be uh showing different uh different things in the market as well so definitely what my advice to consumers would be find the source that you're confident with and comfortable with and stick to it because uh you can get a little bit overwhelmed by the amount of information that's out there now

it's gone full full uh other other end of the spectrum yeah i totally agree it's the curation and the interpretation of that data that is the real art and skill these days, Tim. But tell us, what have been your top property takeaways and learnings over the last 10 years or so? Yeah, man, there's so many. I'm trying to cast my mind back a couple of years ago. It was hard, to be honest, Bushy.

But over the last 10 years, I think the most important thing is to remember that time heals all wounds. Even in some of these extreme housing markets we've seen over the past decade, like the mining town boom and then the spectacular crash of mining regions, we're just starting to see some of these regions finally move into a nominal recovery now, like more than nearly 10 years

after the peak in those markets. So the market is very cyclical. I think it's probably the most important thing to remember. And a lot of people try to time their purchasing with the cycles of the market, which is notoriously hard. Easy in retrospect, but I think for anybody buying to the marketplace

over the last 10 years, if you've bought into the marketplace on your own timeframes and just working to your own budget, chances are if you've held on to that property long enough, you've probably done pretty well out of it. So probably time is the most important thing. And time in the market rather than trying to time the market is critical, I think, for anybody looking to get in. No doubt, people who have timed the market well and intentionally done so, hats off to them. You You can really make a lot of money doing buying at the bottom and buying at the top. And so to Warren Buffett's words of being greedy when others are cautious is probably has got a lot to do with it. But there is a bit of risk in that as well.

So I think most people just simply you're not going to be able to time the market as well as what everybody would like to be able to. The other thing I think over the past 10 years or so is just looking at the different performance of the markets. I was having a look at some of the data just before we came onto the call to see which markets have actually doubled in value over the past 10 years, because a lot of people still have this, I guess, this rule of thumb in the back of their mind that they should see their property value double every 10 years. Generally, that's more the exception rather than the norm, at least over the past 10 years. It's only been Sydney and Hobart where, on average, we've seen housing prices rise more than 100% in a 10-year period of time. In fact, look at somewhere like Perth. You can see Perth housing values are only up about 15% over the past 10 years. Go to regional WA and they're still a little bit down on where they were over 10 years. Go to somewhere like a Brisbane, which has generally been a really strong market, but over 10 years, housing values are up about 71%.

So, yeah, there is a lot of diversity in the market. And my guess looking forward is a lot of these markets that have underperformed over the past, say, 10 years might be the markets to actually look at over the next 10 years because they generally tend to show very good value and higher yields, much more affordable entry price as well. That is a nice segue into our next question of you, Tim, and I want you to take the crystal ball out now, have a look at the next five to ten years. You gave us a great example there of what's happened over the last ten and how that may not happen in the next ten or it might be totally the reverse.

What do you think are the big influences over the next decade? Yeah, I think that the biggest one is going to be affordability. We know even over the past ten years, housing affordability has been front and centre and affordability has become very challenging in markets like Sydney and Melbourne, not necessarily in paying down your mortgage. That's generally been pretty straightforward. When I talk about affordability, it's more about getting your foot in the door, being able to fund your deposit and your transactional costs. And thanks to very

low interest rates, once you're in the market, servicing the mortgage has generally been pretty straightforward for most. In fact, we've typically seen mortgage arrears in Australia over the past 10 years, holding well below the 1% mark, which is quite phenomenal. Going forward, I think affordability will still be some focus. We probably will be moving through a bit of a down phase over the next, say, 12 to 18 months. So affordability will naturally improve through that time. We'll also see higher wages growth as well coming through, which will help to improve people's ability to get into the market. And of course, from a government policy side of things, we are starting to see the government really focusing on improving home ownership. Maybe

that's just as we lead into a federal election, but I think there is some seriousness there from both sides of the political fence to help more people get into the market. But the underlying issues around housing affordability, there's a lot more to be done rather than just giving people a leg up into the market. On the supply side of things, I wouldn't be surprised if we do start to see a lot more focus on town planning, trying to bring in more densities, for example, along the transport spines especially in the most expensive cities like sydney and melbourne seeing some of those areas densified not necessarily high rise although i think there will be a lot of that but a lot more focus on medium rise townhomes that type of thing really

just trying to get better usage of a better you know the highest and best use of land along those major infrastructure nodes where people are getting in and out of the cities i think the other thing to look for the next 10 years is going to be the role of technology we've already seen that ramping up over the last few years with a lot more people utilizing things like virtual virtual tours of homes using drones a lot more even using technology to to map out the internals of a home producing floor plan floor plans and so forth using a lot more of that drone photography to provide indications around the position of a property, the roofing materials, the overall layout of a property

on the block itself, its orientation. And then even going forward even further from the data side of things, we are expecting there's going to be a lot more focus in things like machine learning and AI, providing an even better focus on estimating values and understanding where housing trends are going and taking those methodologies to the next level harnessing all this new computer power and storage ability that we're seeing from the cloud as well yeah tell me uh we've covered really shaken up the way we live and work over the last couple of years uh project projecting forward

are you seeing other other changes and trends in the way we actually uh live and and work and and and do the way we do, and what's likely to impact on this as you see it moving forward in the way property is going to be bought and sold in the future, Tim? It's been remarkable, hasn't it, just through COVID and how we've really seen that change in living environments and working environments fast-tracked. In many ways, we've seen a real improvement

in housing affordability because people have been empowered and enabled to move a little bit further from where they work. you know regional population i think is going to be something original population growth is going to be something that's at least semi-permanent as we see more and more employers enabling their staff to work remotely at least part of the time i know at core logic we've formalized our hybrid working policy we expect staff to be in the office a couple days a week but they can work remotely the rest of it and inherently that's going to be flexible so for those industry sectors where where people can work remotely, obviously, it doesn't work for every industry. And I think we

are going to see some permanency to people being able to live in the outer fringes of the cities or the regional markets. That probably puts a lot of these commutable regional areas in a really good position. So if you're within, say, a two-hour commute of one of the major capitals, be it Newcastle or Wollongong or the Blue Mountains inside of Sydney or the Gold Coast and Sunshine coast or Toowoomba and southeast Queensland I think these markets have structurally changed the demand in these markets have structurally changed we will see more people looking for those lifestyle qualities but also the commutability along with the livability driving demand into these areas the affordability of these a lot of these regions has also you know been diminished

because of that higher demand no longer can we say that a lot of these really popular lifestyle markets provide an affordability advantage because quite often they're on par with some of the blue chip areas of the capital city counterparts now. Based on those thoughts Tim what do you think the lessons will be here for people who aren't in the market right now but are planning to get in either principal place of residence or maybe start to build a portfolio what do you see those influences how will that impact them? Yeah it's you know a lot of people talk about it's more and more components of the market are being blocked from access to the market which i don't really agree with you know people's attitudes and preferences on housing is going to

have to adapt and not everybody can afford to buy a detached house so that's kind of back to my point a bit earlier on around densification and different types of housing options i think a lot more first home buyers for example will be choosing to densify rather than maybe buying into the outer fringes for example especially if they if they need to commute to work every day so buying into a town home or an apartment and then building up some equity in that initial purchase to then upgrade into an attached home or somewhere closer to the city or closer to the water is sounds like of the logical way that people will engage with the marketplace, at least initially in combat affordability constraints. I think also, when you look at, say, people engaging with the marketplace,

I wouldn't be surprised if we see more and more people buying sight unseen. And this is something that we've obviously seen through COVID. And it's again, been enabled by technology, people were able to actually physically, sorry, virtually tour a property and get probably just as much detail from a virtual inspection, maybe with somebody there who could be doing their building inspection and the pest inspection on behalf of them, of course, but getting a probably just as good a feel for the quality of the property and the nuances of a property without even being there. So I wouldn't be surprised if we see that even taken to the next level as we see more and more technologies enabling people to inspect the property without having to actually be there. Of course, we probably will see more foreign buyers coming back into Australia as well.

We're already seeing a trend towards more foreign buying activity, still a little bit less than what it was pre-COVID, but I wouldn't be surprised as overseas borders reopen and we start to see foreign students returning and migration picking up again. we do start to see some renewed interest from from overseas buying as well and of course being able to virtually inspect the property is going to go a long way to supporting that yeah brilliant now kevin has certainly been right at the center of what's been happening in in property over the last 10 years but how do you see realty talk helping to enable the future that you're talking about as a trusted voice of property in the days of the next 10 years tim it's exactly the same Like, I'd be really surprised if you guys could do anything better. So it's, you know, just just staying on the cutting edge of trends, engaging with all the various experts in the marketplace, be it if they're real estate agents or buyers agents or data experts or economists, policymakers, it's you've done all that. And I think it's the most important thing is just staying on trends, keeping the marketplace informed about what's happening with property trends and different changes in policy, in technology.

You know, I think you guys have done that extraordinarily well. And it's kind of why I try to fix something that isn't broken, if you know what I mean. So, yeah, I'd see it, the trend or the future of real estate talk really emulating the past. It's really just doing exactly the same things that you're doing. Well, mate, I've got to say we wouldn't be where we are if it wasn't for people like you who've so willingly given us so much wonderful commentary over the years. So, Tim, personally, thank you very much. I appreciate that and I look forward to us working, you know, even closer with you in the years to come. So, Tim, all the best, mate, and thanks again for your support.

Thank you, Kevin. Thanks, Bushy. And I look forward to this conversation in 10 years' time, eh? Yeah, indeed. Well, we just have less hair in 10 years' time. Yeah, that's right. Good on you, mate. Thank you.

Hey, stay with us because straight after this very short break, Bushy and I will be back with Margaret Lomas. See you then. Thank you.