Peter Koulizos on Why Adelaide's Best Run Is Behind It

In this episode, we're talking with the property professor himself, Peter Koulizos, and we're going to take a deep dive into the Adelaide property market. In September, the median house price in Adelaide beat Melbourne's for the first time in the 40 years since CoreLogic began reporting on prices.

This is despite having a tiny population. of less than $1.5 million versus Melbourne, which is heading towards $5.5 million. In fact, Adelaide's house prices have been climbing steeply since the middle of 2020. But is that all about to come to an end? Are we receiving signals of the end of the Adelaide boom?

Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about.

I'm Veronica Morgan, real estate agent, buyer's agent and buyer's agent mentor, co-host of Foxtel's Location, Location, Location Australia, author of Auction Ready and co-host of Your First Home Buyer Guide.

And I'm Chris Bates, mortgage broker, recently ranked number five in Australia out of over 18,000 brokers in the annual MPA Top 100 Mortgage Broker Awards. Before we get started, I need to let you know that nothing we say here can be taken as personal advice.

We always recommend you engage the services of an appropriate and experienced professional. Our guest today is Peter, the property professor Calizos.

Peter has been teaching in real estate and investment for almost 30 years, and he's recently retired from the position of program director of the Master of Property at Adelaide University, although he continues to teach in the program. Peter also personally invests in and develops property and currently holds several properties.

He researches property markets around the nation, looking for the best suburbs to invest in each capital city. and he's published three books, The Property Professor's Top Australian Suburbs and Property vs. Shares, and most recently, The Diary of a Small Developer.

He's also an Adelaidean, so we're asking him to share his local knowledge whilst taking out his home bias. Thank you so much for joining us, Peter. It's great to see you. Thank you very much for the invitation. Great to see you and Chris again.

Congratulations on being a granddad as well. My boy's three next week. And so you got all the fun just a couple of days ago into the world. But hey, we've known each other for a long, long time. And you've been very bullish on Adelaide for a long time.

And now that the boom has absolutely kicked off all the way back to COVID, has the boom sort of gone exactly as you thought it would? Like the suburbs in Adelaide, who you think the biggest growth is going to be, was there? Or has it surprised you a little bit?

Yeah, well, it's a very good question, Chris, because a lot of us use median price to gauge the growth in the suburb, but median price is not the best indicator because median price is just the middle price of all the property sold.

And so if you go into an area which is undergoing urban renewal, so they're getting rid of all the housing commission homes and building new homes, Well, you know, maybe five years ago, all the homes that were sold were places that were built in the 1950s and 60s.

But five years later, all the new homes that are being sold are brand new townhouses. Well, you know, one would imagine that the house price is going to go up.

But when you have a really close look and compare not just apples with apples, but, you know, Jonathan apples with Jonathan apples and Granny Smith apples with Granny Smith apples, you know, the fundamentals have stayed the same. And that is... Character of period-style homes close to the city have done particularly well.

And what has been surprising, maybe not surprising, lifestyle areas, in particular beachside suburbs, have done amazingly well, especially during COVID.

And... Almost doesn't matter how far they are from the city. Like in Adelaide, compared to say Sydney or Melbourne, we're a bit delicate as to how far we want to travel.

But during COVID, and now working from home, research shows that the less often you have to go to work, the further away you are willing to live from work. And so a lot of people might only be going into the office two or three days a week.

So they're happy to move further out. And in particular, close to the beach or maybe secondary is up to the Adelaide Hills.

Are you finding at all that we're hitting an affordability limit, that the boom's got running out of steam, or are you finding that there's still a lot of capacity to keep pushing out prices from the locals and a lot of money coming back from expats overseas and people moving back to Adelaide, that good old brain drain, which probably Adelaide struggled with before?

Are you finding a lot of the new money or the old Adelaide money that's coming back? Well, one of the big kickers in Adelaide, as is currently the big kicker in Perth, is many Eastern States buyers agents are buying for their investor clients.

And so what you've got is Sydney money going into Adelaide or Sydney money going into Perth. So when a person from Sydney sees how relatively cheap it is in those cities, it just forces price up.

The amount of properties that were bought in Adelaide, say, 12 months ago, sight unseen by either the buyer's agent or by Sydney investors, and what is happening now in Perth is just phenomenal. So yeah, affordability is an issue, but

Are we talking about the Adelaide people's affordability or are we talking about Sydney people's affordability?

It's a good distinction. And you're talking about sort of the distance away from work. I mean, in some cases are we talking, you know, thousands of kilometres, i.e. in other cities? Are we talking about work from home being, you know, true remote work these days? Is that still happening?

Yeah, so my youngest daughter is a classic example. She works for the Federal Department of Health, but she works from home in Adelaide and And so for her, it's fantastic because she's earning a camera salary, but only paying Adelaide expenses.

And that is happening more and more, and not just different states, but different countries. Now, Australia is not so much of an attraction yet for those, what are they called, digital nomads, but certainly there are other countries around the world that are benefiting from that, like Indonesia and Thailand.

So you might have, you know, your work is based in Europe, but you decide to work from Thailand or Bali. Actually, now that I think of it, one of my tenants who happens to live on the Esplanade in a beachside suburb in Adelaide, his work is based in Germany.

And so he has different hours. During the middle of the night, he's working while the rest of us are asleep. But he's loving it. He loves the water, so he's living in a house on the water

I'm not exactly sure what the euro is like to the Australian dollar, but his work is based in Europe, but he's living here in little old Adelaide. So I think, are we going to see more and more of that?

I think working from home is here to stay, but I don't think it'll be five days a week. I think employers will say, no, we'll allow you some flexibility, but but you can't be working remotely the whole time. There are some classic examples here.

I'm pretty sure it's the New South Wales Department of Transport told everyone to go back to the office. And at the other extreme, we've got the Victorian government that's selling office properties because they're not giving that sort of directive, so they've got a lot of empty office buildings, so they're selling them.

Well, they probably need the money more. You know, it's interesting, though, because, you know, certainly in Sydney, and I've heard actually in Melbourne as well, that...

potentially Brisbane, where employers are starting to say, actually, no, we want you in the office more than we want you out of the office.

But even if you are working in Adelaide and you are working remotely where your head office is in Sydney or Melbourne or even Brisbane or even overseas, and you've got to go twice a week as opposed to none a week, well, that's going to make living in Adelaide pretty difficult, isn't it? Mm-hmm.

Yeah. Look, COVID has changed a lot of things. So everything needs to settle down from COVID. Property boom included, working from home, buying online, all of these things affect property, whether it's residential property or commercial property.

Peter, I mean, when I was sort of chatted before around the affordability metric, because you're right, your prices, if a big part of the market's getting driven by interstate investors, for example, and particularly those East Coast buyers agents that don't really know what drives Adelaide long-term.

But at some point, investors are, you know, particularly in Adelaide, you know, they do move to Perth or they do move back to Brisbane or they'll move to Hobart, et cetera. So the investors sort of go wherever the spruikers are sort of selling and telling them to go, right? Yes.

It comes down to the actual affordability of the locals to keep on pushing prices up. What's your sort of take on how the locals are feeling around their job prospects and the local economy and wage growth in the Adelaide market?

Because that'll be where it continues to kick on is really whether they've got the capacity and the ability to keep on taking bigger on mortgages, I guess. Yeah, well, that's a very good point you make there, Chris, about the economy. So...

The last four monthly state of the states, which lets you know in order which states are performing the best, South Australia, and then last month it was Western Australia. So our economies are doing really well. Unemployment?

is relatively low the problem i have with unemployment figures in south australia is they must the abs must use a really small sample size because one month we could be the best in the country and the next month we're in the worst in the country like that that's not really happening so i mean you know i'm not a statistician but i think they need to increase their sample size or do something

But we are all very excited here about the defense industry. Okay. We were excited about that 16 years ago when we got the air warship destroyer contracts, and it didn't do anything.

that much for the South Australian economy, or in particular the suburbs around it, but this seems like a different level. It's not just defense, it's space. We have a base in the CBD, like an incubator space, which is becoming very popular with global corporations.

We, of course, are going to be making the submarines out at near Port Adelaide or outer

Look, I'm apolitical. I'm not saying this because I'm a Labour voter or a Liberal voter, but the current Labour government that we have is very visionary, and we can see some really good things happening in the medium to long term.

Having said that, though, the best of the Adelaide property boom is over.

It doesn't mean Adelaide property prices are going to drop. But instead of 10 people bidding at an auction, we have three. Having said that, the price that you expect is still about the same.

So the people with the deepest pockets are still buying, but there are less people at auctions, less people at open inspections. We've had a fantastic run for over four years. So we started June 2020, and here we are almost the end of 2024. You know, we were...

I've got the figures here in front of me. I think her increased 76% since the start of COVID. We increased 71%. Brisbane, 67%. And everybody else is way down. So, you know, we've had a wonderful time. But those... huge boom times are gone.

You mentioned about median prices though, Pete, around the dangers of doing that. At the start of the podcast, you mentioned it. But if you think about some of the more premium period homes in around Adelaide, what sort of growth rates are you seeing? That quintessential decent block, good aspect, good street.

Are we talking 100 plus percent? Are we saying at least doubled? It'll be close to double. Look, I couldn't put my hand on my heart and say it's more than doubled, but it's the type of property.

So if the property has nothing to do and it's recently been extended and renovated, then what you'll see is the 30-something-year-old couple with mum and dad next to them at the auction bidding...

And it almost doesn't matter how high it'll go because grandma, granddad want to be close to the grandkids.

And so we've really seen character homes that with not another thing to do have been the best performing ones because now what we're seeing is people are starting to balk at buying a character home that needs work. Oh, yeah.

Before when there was all the euphoria, it didn't matter.

But now...

Yeah. Yeah. It's the same in Sydney and I hear the same in Melbourne. It's actually interesting because in recent times, Adelaide, Perth and Brisbane have all been at the top of the leaderboard. I'm interested in your take on what you see as the differences and similarities across each of these three markets. Okay.

So- You talked about bias at the beginning, right, Veronica?

And I'm trying to avoid my bias, but the facts show not only was Adelaide one of the best performers since COVID, but according to the ABS, Adelaide has been the best performing property market over the last 20 years.

And I can send you the Excel spreadsheet and you can share it with the viewers if you like. I'm just stating facts here. Why? Who knows? If I went back 30 years, it might be a different story. But the ABS only started to report on prices rather than their index. from 2002.

And so it only goes back 22 years. But nevertheless, look, Brisbane has some really good medium term prospects.

So I've done the academic research on what happens to property prices in Olympic cities, starting with Sydney in 2000 and working through Athens and Rio and London and so on. McParris is too early to tell yet.

But generally property prices increase at above average rate from the time the games are announced to the time the games are held. So I reckon even though Brisbane's done really well for different reasons, right?

If you remember, I mean, I don't know if you're sporting fans, where was most of the AFL held during COVID? All the games were held in Queensland, right? So they must have done something right during COVID like Adelaide did, right? And that's why a lot of people were migrating it.

So the last four and a half years, property prices have gone crazy in those particular cities for a different reason to why Brisbane is going to continue to do well up until 3031.

If I was looking at timing the market, which I don't think is a good thing to do, by the way, but if I was looking at timing the market, I'd be selling in 2030 or 2031.

Perth, the steam will also come out of the market. You and I were at the PIPA conference a couple of weeks ago, Veronica, and I was speaking to some people who not only buy in Perth, but also from Perth, and there are less...

I mean, auctions are a non-entity in Perth, right? But there are less people going to open inspections, and there are now less inquiries because... not only is Adelaide's dwelling price above Melbourne's, but so is Perth's.

So if you're looking for a more relatively affordable property, well, yeah, Adelaide and Perth were fantastic two or three years ago, but now prices, dwelling prices, are the same as they are in Melbourne. So some contrarian investors are putting their money into Melbourne and Victoria

But I, and we heard some interesting stuff at that conference, Veronica, in particular, the one that sticks in my mind, the state debt of Victoria is more than all the other states and territories put together. They owe a million dollars in interest every hour.

Yeah, it's pretty sobering actually when we're hearing those figures. The other thing too that was interesting that I was moderating, that's what I was doing, I was moderating a panel of economists.

We had Tim Lawless from CoreLogic, we had Vanessa Rader from Ray White, and we also had Anne Flattery.

I can't spell it, pronounce her name, so my apologies. And we are going to get them both on the podcast too soon, from the REA group. Now, all three of them said that for different reasons, or I should say coming from different research sources or sources,

if you want to call it that. All three of them did point to Adelaide being the one city with the biggest headwinds at the minute. They did talk about low population growth. And in fact, I had a quick look before we came on here and Adelaide's population growth

is growing at a lower rate than Melbourne's at the moment and also high supply of stock. So you've got a bit of a disparity that's emerging there. What are your thoughts on those headwinds and what else are challenges that are ahead? So I heard the same thing as you did.

And I caught up with Tim Lawless afterwards for a drink after the conference. And he and I both heard the same thing. And that is, so we spoke to the same major home builder in Adelaide who was called Michael Hickenbotham of Hickenbotham Homes.

And I happened to be on a panel with Michael a month ago, and Tim and Michael must have spoken in between that time, but he said the same thing to us. And that is, normally in a two-year period, they would be bringing on 4,000 allotments per year.

But because of the lack of major water infrastructure, in particular in our northern suburbs, he'll only be bringing on $1,500 a lot. Wow, okay. So it's actually the opposite to what I understood there. We could have another podcast on different sorts of economic indicators we look at.

Housing approvals is one thing and finance approvals is one thing, but housing completions is very different. Yes, yes. And one of the reasons that South Australia was top staked three out of the last four months is for our housing construction.

But that's going to come to a very, not a halt, but that's going to decrease because unfortunately, since SA Water was privatized, they have not been able to keep up with their infrastructure. And so there's no point building a house if you can't connect it to water. Now, that's not all over Adelaide.

That's in our big, expansive northern area. So people, your listeners may have heard of places like Elizabeth and Salisbury and Matapara and Gawler, Virginia, Two Wells. So it's north of Adelaide. The other areas of Adelaide, not so bad.

So I'm not saying all housing supply is going to come to a halt, but people need to keep that in mind.

And the other thing that I've been thinking about, and I haven't come to a conclusion yet because since I semi-retired, the research part of my mind is going into sleep mode, but the recreation and retirement part is coming up. Australia has 11 million homes.

We build about 200,000 new homes a year. A lot of the focus is on the new supply coming in. But COVID has taught me one lesson. It's not necessarily the new homes coming on the market.

It's the existing homes currently on the market. So in a year, we will sell about a half a million homes, 500,000 homes compared to 200,000 new homes. All right.

But even I think more interestingly, and I don't want to bear booze with people with economic terms, but the supply of new homes is relatively inelastic, which means it doesn't change much. Even if you flog all the tradespeople, it's not like they're going to double the amount of homes that they can build.

You can only work so many days a week, so many hours a day.

So we can't really increase it by too much. And we're not decreasing it by too much because the demand is still there.

But when you look at the stats of the amount of properties for sale in a year, so if I look at from the time COVID started, I think the lowest monthly figure was $22,000 a month, which works out to about $250,000 a year.

to $75,000 in one month. Basic economics is the price is a function of demand and supply.

It is very hard to change the supply with new housing, but the amount of houses for sale has a significant impact on price.

And if there is a very close correlation, and I would call it a causation, that is one causes the other, when you look at the best performing cities, you'll see that they'll also have, relatively speaking, the lowest amount of homes for sale. Absolutely.

I think this is, this turnover rate is something that people don't forget about a little bit, right?

And, you know, we average lived in our homes maybe seven years before, but, you know, we went from our, you know, our little, you know, apartment to our villa, to our three bed house, to our full bed, two baths, you know, with carpool, et cetera. So we naturally upgraded, right?

As we, as our wealth increased and, you know, and. we had the means to do it, but it's really hard to do that now, right? And also it's less incentive to downsize and we're living longer, right?

So every year that turnover rate is... And so when you said there's 11 million homes, well, actually every year, the amount that are actually transacting is decreasing because not just the additional debt that you've got to take on, can you even do that? Do you even want to?

And so people are getting stuck in their homes more and more. I mean, I just brought up Adelaide for an example, like You're getting 15,000, 20,000 listings on the market back 2015, 2012, and now you're getting 11,000 or 10,000 on the market, right?

So a half amount of properties are coming on the market, or let's say 50%, 60% down. So your supply is tight in 50%, 60%. It's a big difference, right? Yeah.

Yeah, I actually had the opportunity to speak to our state treasurer because I said, well, we've got some wonderful things going here so far as home ownership incentives are concerned. And I said to him, you know, you've got a first homeowner's incentive. What about a final homeowner's incentive?

For me to sell my home and downsize, I'm not downgrading. Like many of us baby boomers, I'm not downgrading. I'm going to pay stamp duty on another home and plus pay the agent to sell mine.

You know, happy to pay the agent to sell mine, but why don't you give us one final stamp duty free purchase, just like you're giving first-time buyers, and then that frees up my big home for somebody else, and then I can supply a new home.

So I'm increasing the supply of property, and more importantly, I'm increasing the appropriateness of the supply of property. We had four kids. We got very big house here. I've only got one kid left in my home. It's logical for us to shift home into a smaller home.

It's going to cost me a fortune in transaction fees. Just stay here. Well, that's right. And if you think about, okay, why are we giving the baby boomers another free kick? That's what the younger generation would say. But ultimately, the person who buys your home is paying stamp duty, right?

So rather than you not transacting and getting no money, right, for stamping some papers, really. What they're going to get is the standard on the sale of your home, and maybe they don't get it on your purchase, right?

But they obviously get it on yours, and so it does make sense if you think about it like that, and it does reallocate our housing supply, right? Like our people per dwellings would go up, right?

And 11 million homes would be better utilized to what our actual population needs rather than all these spare bedrooms. Have you had any luck with that argument, though? I reckon people would want to shoot it down because they just think you guys are looking for another winch.

Well, and I can understand that, but providing that incentive is there for them when their time comes. Because we got first-home buyer incentives as well, right, many decades ago. But I think a first-home and a final-home incentive would balance it up.

And as you mentioned, it's a more efficient use of our properties.

Right.

I mean, that's sort of interesting in the sense that, yes, this has been talked about by quite a lot of people, but it doesn't seem to be that any government has any appetite for that.

But I'm looking at, you know, I've never really considered that sort of roughly half a million properties that transact every year because I look at that and the CoreLogic brings out its monthly data pack and you look at that number and it's actually been slightly increasing every month, you know, the 12th month.

Talley's been increasing by a couple of thousand every month for the last few months. So it's slowly increasing. Certainly in Sydney, we've noticed a rapid increase in terms of the amount of properties listed for sale in the last, say, month.

But so of that, those 200,000 new dwellings that are created every year, is that included in that? Okay. Yeah. So here's my contrarian opinion of the supply of housing, right? The majority of new housing is a result of demand.

So the reason a developer builds 200 apartments is because they've already had 170 sold. Right? Yep. And unlike when I was growing up, you would get the major home builders would buy a large block of land. They'd build 100 houses because they knew they were going to sell 100 houses. No problem.

But now they buy a large block of land. They chop it up into stages. We're going to build one display home and we could have another 15 here, right? So the other 14 that we're going to build are a result of demand. And then when that stage ends, we do the next one.

So I think we need to do some serious thinking about is the supply of housing exactly the same as the supply of other commodities or is the supply of housing driven by demand?

And in my opinion, it's driven by demand.

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Well, Cameron Murray talks about this. He talks about the fact that it's one and the same thing, you know, and that's exactly it. It's just two sides of the same coin. And I think this is the issue with why a lot of people, all the politicians are saying supply, supply, supply.

That's a positive thing. That's something really positive to talk about. But the bottom line is freeing up zoning, you know, Whatever you do, it's not resulting in more supply, is it? And I think that comes back to exactly what you're talking about.

And amongst other things, the developer's got one shot to maximize their return on their investment. So that's one piece of capital that once it's developed, it's gone. That's your shot.

So for that reason, there are other forces at play that are stymieing that. But still, and hence the federal government's 1.5, I can't remember, was it 1.2 million dwellings over five years? We've all forgotten that target now. No, I think everyone accepts that that's not going to happen.

Because 1.2 is almost 250,000 dwellings.

a year. Yeah. And as I said to you before, we're averaging 220, but they're including the COVID years when we were building that many. And you can't catch up. You can't whip these tradies and go faster. It's just not going to happen.

So back to Adelaide, what actually drives the Adelaide property market? Well, well, well, I'm glad you asked that question. Nice. I thought you might be.

One of my students did a wonderful thesis on property markets and factors associated with increase in property price. So here, I want to distinguish between correlation and causation. Correlation is where two things happen at the same time.

but you don't know why it's happening, right? I was about to say interest rate rises and mortgage repayments, they go up at the same time. Let's say when the sales of sunblock cream increase, so do the sales of barbecue sausages, right?

Big umbrellas. So is it?

When people buy more barbecue sausages, they want to buy more sunscreen magically or the other way around, or is there something else? No, it's obviously the increase in daylight hours and the increase in temperature, right? So those two things are correlated, but there are other things that one causes the other, causation.

So my student just did some research. on what economic factors are correlated with property price increases.

And in Adelaide, it's something, well, in Adelaide and most of the other states, it's called state final demand, which is the amount of spending capacity in the state. So people have probably heard of GDP, gross domestic product.

Well, that's how much the whole country produces, right? But this is based on the state, and not how much we produce, but how much we spend. So really, it's how much money do people have, which will then determine what they spend it on. And housing is one of them.

Whereas in Sydney, the most important factor was the money supply.

Yeah. Which makes sense, because Sydney is arguably Australia's finance capital. And so the more, you know, and interest rates have a very direct correlation to money supply as do many other things.

So when you ask me, you know, what factors drive the property market in economic terms, it's state final demand. In very simple English terms, international students are our number one export.

Agriculture and wine, they are the three big things. And one of the reasons I was saying South Australia is not going to do as well is the whole country. A lot of the country is experiencing a drought.

So that's going to have a significant impact on our crops. And in South Australia, a lot of it is barley and wheat. So our yields are going to be lower.

Our Premier Peter Malinowskis was able to argue successfully with the Prime Minister not to decrease our international student numbers, because he was saying, we need lots of people working in the defence industry.

Not the international students will be working in the defense industry, but people, Australian citizens that are working in the defense industry or associated industries, they'll be soaked up by the new demand. And then international students will fill those engineering positions, project management positions.

So our international student numbers are not going to be chopped like the rest of the country. And so we finished quarreling with China and they're going to be taking more of our wine again.

So, you know, there are some things that are looking good for South Australia, some things that are looking not so good.

But, you know, the extra boom from COVID and young kids moving back to South Australia and getting a greater portion of overseas migrants during COVID, you know, those boom times are over.

There's a lot of the mining industry, the Olympic Dam and everything. What's your thoughts on that in Adelaide? I remember when I was writing my first book, I thought, you know, Roxby Downs or Olympic Dam is going to be the saviour.

Here we are 16 years later. I mean, it's good. Yeah, it's good for us. And, you know, we are blessed with a large copper deposits here in South Australia. And, you know, the more computers, cameras, phones, the more copper we need.

And we're going, you know, very green. We're looking at more hydrogen rather than...

electric energy produced from uh batteries and so on um and so look the future is promising but you know again i'm going to try and keep my bias out if we just if we just look at the facts you know property prices are significantly influenced by property cycles you know we've had a great four and a half years i've never known a property cycle to be so long and so good

in maybe any city or state, right? So COVID was probably once in a lifetime thing, and not so much Perth, because they were a latecomer to the party, but Brisbane and Adelaide, you know, you've done really well.

Brisbane, yeah, you'll continue for the Olympics, but Adelaide, you're going back to normal, which means we'll probably just keep pace with inflation or a little bit more for the next up to 10 years.

I can only speak anecdotally on this. I've got no evidence. And it really is to, you know, my thoughts come from conversations with, you know, Brisbaneians and Adelaideans.

And that is that both cities have had quite a lot of return to them from, you know, people that grew up there and would have loved to have lived there, but because of the jobs there. had gone to either overseas or to the bigger capital, the bigger cities such as Sydney and Melbourne.

And so COVID gave them that opportunity to be able to relocate and still earn good money. And so that doesn't appear to be changing. And so...

How sustainable is that? Or do you argue that because once those people have returned, that's only one cohort and they're done? Or do you argue that then people are able to continue so the next generation is able to actually stay there rather than leave, whereas previous generations have had to leave?

And so that will actually continue to fuel ongoing confidence, economy, wages, all that sort of stuff.

So this is personal experience. Having four kids who all have professional jobs, and a number of them, especially if they're in business or finance, look for the bright lights in Sydney and not to so much the same extent Melbourne, but certainly Sydney. And three out of the four kids went into stay.

One came back. And the reason they go there is because there's a better chance of a job and a better chance of a higher salary. But with low unemployment throughout the country,

Not only can you stay in Adelaide and have a full-time job, you know what, if you want to earn extra money, you can go get a second job. But that's not just Adelaide, that's anywhere.

I think the story will change back to the way it used to be when unemployment evens itself out and traditionally South Australia lags in unemployment. Like if you had a premiership table, we'd be near the bottom with generally higher unemployment than the rest of the country. But at the moment...

Things are pretty good. It'll be interesting to see what the defence industry does.

But during COVID, for the first time in a long time, we had more people moving in from other states than going into state. Chris mentioned the brain drain, right? During COVID, that stopped, but now that started again.

So we are having a negative relationship where we are having more people leaving South Australia than are coming into South Australia. Yeah.

Yep. Peter, do you worry a little bit around, you mentioned the East Coast Buyers Agents, right? And it's not just East Coast, right? It's probably also when there's affordability challenge with investors, right? And interest rates are higher. It's a pretty easy pitch to sort of spend a bit less.

You get a bit better yield. You mentioned very early on around the median prices, not really reflecting true values. When you look, when you know the Adelaide market better than pretty much anyone, right?

Are you sort of worried what the buyers' agents have been buying over there and when that's going to turn around the other way? Well, you know, I've been in this game for a long time and

Veronica and I, when it comes to property professional ethics, not are we on the same page, we're on the same word, on the same light, on the same page. You would think that these buyer's agents would be, sorry, not buyer's agents, the spruikers would be exposed, right?

But providing property prices go up, People don't realize, what's that term? A rising tide lifts all boats, but when the tide goes out, it's a different story. Back in the late 90s, there was a big issue. What was that fella's name in Victoria?

which is one of the main reasons I got involved with Pippa is because he was exposed as being a charlatan, but when property prices are going up, nobody knows.

It's when the market's not so good and the sort of properties that he recommended are dropping very significantly, but everybody else is okay. Yeah. Look, people that have bought...

stuff that's not going to perform well wouldn't know because basically, except for Victoria, property prices have gone up all over the country. Yeah.

And look, you know, while I was chairperson of PIPA, I tried for years to try and get, we have our own professional standards and ethics, but I wanted them in legislation.

You know, if this property sprig does something wrong, I would love for the law to say, you know what, you've done something wrong, here is your penalty. But it's not like giving financial advice, which has all the rules and regulations under the sun.

So that's been quite disappointing.

Yeah, and you know, Peter, in recent times, I've sort of had some stark reminders as to the fact that we have no national oversight of property professionals in this country, so even real estate agents.

And one of the things I've realized is that, and look, I knew this, but it sort of suddenly became quite clear to me because there were some players in the space, some buyers agents, in fact, who buy interstate and are not appropriately licensed in all the states in which they buy.

Now, I think their clients probably would be shocked to find that out. But, you know, as long as you're licensed in the state in which you dwell, no one seems to care. that you are buying in Perth or Adelaide or Brisbane or Timbuktu, no one seems to pay any attention.

And it's interesting, actually, I've been talking to a lot of Melbourne buyers agents of late who were saying that Sydney buyers agents are buying sight unseen in Melbourne, which is just hilarious. And you think...

Clients, there are enough buyer's agents on the ground with local knowledge in Melbourne who are able to identify for you really good assets and good opportunities in a depressed market.

If you want to be a contrarian investor, don't choose a buyer's agent who buys via the desk from a different state. It's just insane. I'm just astounded at people that actually pay money for that type of, in inverted commas, advice.

And Veronica, there are many things that I admire about you, but one significant point, point of difference for you, is you only buy in Sydney, right? Whereas, as you're mentioning, there are people sitting at their desk in Sydney buying stuff in Melbourne that nobody's seen. Yeah.

Local knowledge is so important in property. Location is not everything in property, but it's the most important thing. And the word local comes from the word location, right? So you really need to understand the suburb you're buying and even the street. One side of the street is zoned for that high school.

The other side of the street is zoned for the other high school that nobody wants to go to. So you should be on the other side of the street. But if you're not a local, you don't know that.

uh look i mean i um as a client came to us just a few weeks ago maybe a couple of months to be honest and um he's he's already had a buyer's agent locked in and they've come to us for finance and he's like oh i've got this um you know it's one of the it's one of these ones that absolutely pretty prolific right now they'd be buying 50 plus properties a month like these are they're doing very well um

And, you know, he sent me the address and it was the worst, like it was a very regional location. It was up starting with a T. And it was pretty much the worst property in the suburb they were recommending to buy. It'd been on the market a long time.

It was a triangle block. It was back and onto the freeway. The house was in a weird position because it was a triangle block. And it was just, and it just, I was like, this is a dog's breakfast. They're recommending this because yeah. Okay. You might agree with the suburb. Yeah.

You might agree with the locate the city. But you have put zero due diligence into actually picking a good property in this suburb. Because how could you say that this is a good property when as soon as you get on the satellite, in 10 seconds, you realize that it's an absolute dud.

Do you think that's been happening a lot in Adelaide? Because I absolutely have that same fear. I think in Perth as well that a lot of these, even these people online who aren't buyers agents, but they're property education people, right? And they're just saying, get in to the market.

And they are buying in the lower quintile part of the market, which has been performing really well because higher interest rates. But I don't know whether they're absolutely doing a lot of DD on the property per se. Do you think that's been happening a lot in Adelaide?

Do you think that it's- And that's why property prices went up everywhere. And in particular- In areas that I would certainly not recommend, but I don't run a buyer's agency business, but I would think 50 sales a month is a lot. So you just need to turn them over.

And as you said before, Chris, there's not as many listings now as there were, so there's not many you can pick from. And unless you have fantastic relationships with real estate agents to buy off the market, you're going to buy... whatever's on the market. So.

Well, even with the off-market stuff, you're buying whatever they shovel your way. And, you know, I've spoken to a lot of regional sales agents who have been laughing at what they're selling to, you know, mostly eastern states buyers agents, if we're real about it.

you know, the junk that they can't offload locally and for more money, you know, than anybody locally would pay as well. And I think that that's a real issue. The simple fact is that there's only a small proportion of properties that are any good at any given time available to buy.

And if you are in the volume business and you are engaging a buyer's agent who, you know, basically –

claims to buy a huge volume of property, you've got to, the first thing you've got to realise is that they're going to be buying garbage because there's just not that much good stuff available every given month, you know.

Yeah, you need, you know, the best way to make money on property is to buy and hold for the long term. So don't rush. If you buy a good asset. Yeah, if you buy a good, that's true. So if it takes you six months, that's okay, especially in this market.

To find it, not to make it instant equity uplift.

Now, so what do you, what suburbs do you, I mean, we talked earlier about what's been going up particularly and what surprised you, I guess, in Adelaide.

But, you know, in terms of a long-term play rather than, you know, what's had the short-term increase due to the whole change of behaviours around COVID, post-COVID, what sort of suburbs in Adelaide would you be providing if you were going to upgrade it

So they'd be suburbs next door to the ones that I put in my book. And so suburbs like, if we're looking at... Right, the next door. Yeah.

So suburbs like Underdale, Brooklyn Park, Richmond, Kilkenny, they're in a western suburbs down south that's more Seaford, Moana. But

I don't profess to know everything about property, but I'm one of those few people that if I make a forecast, I go back to see how good or bad it was. Yeah, I do appreciate that about you. And I wrote the book 16 years ago. Last year was the 15th anniversary.

So I went back and look, I didn't score 100%, but if I was at uni, I would have given myself a high distinction because I got over 90%. And on average, the suburbs that I picked, more than outperform the capital city average based on the methodology that I use.

So some of it's stats, right? You can sit at your computer and do this, but a lot of it is doing your due diligence and driving around, but knowing what you're looking for. You know, like,

I think we've talked about gentrification on the show before, so that's one thing that I'm a big fan of. It's like a hot yoga studio pops up, a gin bar pops up, a beer distillery, what do you call it, craft beer distillery.

So these are the sorts of things that I look for, and I'm happy to continue to use that methodology because even though it hasn't been proven to be 100% right, It's far more right than wrong.

I think what's interesting about that, Peter, is it looks at human behavior. And I think that's where a lot of data and a lot of data-driven property decisions, they really miss that.

And it was funny, I was actually listening to an economist podcast only this week, and he was interviewing another economist who was sort of defending, or not so much defending, but was reviewing his forecast around certain things.

And as the guy was talking, you know, he was sort of justifying why he should have been right but wasn't. You know, and sort of what became really obvious to me is that he wasn't talking about how humans behave.

He was talking about shapes of curves and trends and all that sort of stuff. And because this is trending that way, then that surely should be what follows. And I went, yeah, but humans don't necessarily behave in the way that you would imagine.

I think you'd always need to understand behavior underneath the numbers. I agree. And then you can sort of test. Many overseas economists get the Australian property market wrong because they focus too much on investment or finance principles.

Now, I'm not exactly sure what happens in their country, but most of our property is bought with the heart and not the head because most of our property is bought as a home, not as an investment. So, you know, let's not worry about what the yield might be, for example.

Is it in the zone for a highly sought after high school? Is it within walking distance of the local cafe? Well, are there too big ticks for many people? Yeah. And so, yeah, I think because of Australia's obsession with home ownership,

We're talking about human behavior. The last thing we are going to do is sell our own home. We'll cut back spending on many other areas, as has happened during the last couple of years with interest rates gone up. People are still paying off their mortgage.

Some of them have had to go and get a second job.

but they may not be doing as much of the other things that they wanted to do because they just don't have as much spare money to spend. I mean, on that point, Peter, I think the rental crisis that we've seen particularly over the last few years has really lifted the lid on that.

A lot of people that

yeah we want to buy a home we want to buy a home but yeah we're still happy to rent we're still happy to rent but then bang you can't rent rents have gone through the roof kids are starting to arrive hang on a sec you've been kicked out of one rental um we want to buy our appetite to buy has gone through the roof have you seen that as well behind the adelaide market where you know you've just been ah we can just rent and actually no no we can't rent hang on a sec we've got to buy

Yeah, yeah, certainly. And that's where the back of mum and dad are coming in to help out. We see, you know, I've seen a lot of mums and dads either standing next to their adult children or maybe dad's doing the bidding for them. Yeah.

I mean, as you probably know, I'm a very big fan of home ownership, you know, because unfortunately you get a pay rate the day you die. But even though a mortgage is a big thing, you know, a big cross to bear, 30 years.

Reality is it's less than that because your wages have gone up so much over that 30-year period. What you thought was a huge monthly mortgage repayment 30 years ago is nothing 20 years on.

Yeah, it is. I mean, on your first homebuyer guide, we often get questions from people who are really worried about the burden of the mortgage. And we're not encouraging people ever to commit themselves to something that they can't afford.

But when you haven't had a mortgage, it does feel like it is an overwhelming commitment. But you do get used to it. And then over time, it absolutely diminishes in terms of its value. its size compared to what rent you'd be paying, that's for sure.

Generally speaking, a property manager won't let you rent a property if it's more than 35% of your income. Well, a mortgage on average, well, in the early years is about 40%. I mean, it might be a bit more at the beginning.

So the money that you're spending, yes, it's more on the mortgage, right, than that is on the rent. Then you've got council rights and water rights and all of that stuff. But you fast track 10 years and then you compare the pair, as they say.

Like that rent has gone up over a 10-year period. Yeah. But assuming interest rates haven't gone up, what you were paying 10 years ago, you're still paying now.

Yeah. How you doing? Can you give us a property dumbo?

Having taught in property and investment for so many years, I've seen it time and time again where... People talk about it, talk about it, talk about it, but just don't commit. It's analysis paralysis. They do so much research. They're looking for the perfect property.

Man, I've been around for a long time. I haven't found the perfect property yet.

But it's not 100%, but again, we use university jargon, it's pretty good. It's a high distinction. So providing it ticks most of your boxes, especially if it's an investment, just focus on the investment fundamental. Home is a different thing, right?

But if you're looking at an investment property, Get your location right. In my opinion, you should be buying a house rather than an apartment, right?

And ideally, either character or period, I know they're more expensive, or something with a nice view, whether it's a view of the sea or a view of the city or a view of the hills or a view of the park. Three O's, location, land and looks.

That's what I've been teaching for almost 30 years.

I mean, on the home buy, it absolutely is the case. No, it's about for first.

I mean, first of all, I absolutely get a bit of analysis paralysis, but I find that the market teaches them pretty quick and they get sick of going to open homes and they all of a sudden meet the market at some point.

Some of them absolutely don't enter, but a lot of them do buy. I find it really hard with the upgraders. They've got a property and it just gets really complex. It's so stressful to buy, maybe do bridging, maybe they have to sell their property. And they call their jets, life takes over.

And then it comes back six, 12 months later, we're having the same conversation. And they are looking for that perfect property because they don't really hate where they live. They just want something better and something that's going to suit. And the years tick by and then all of a sudden,

The kids get to 10, 11, 12. Hang on a sec. We probably could have done this five, six years ago. And actually, they're out of the home in five or six years. So I remember we're not going to do it. And then they just waste another six or seven years.

And then they can't justify doing it because they go, oh, look, the jump was 500 grand back in 2016. Now the jump's a nil, right? And then they, so it really hurts upgraders, I find.

And you're right, a lot of investors, if they do give, I think they go and get help, to be honest. I think a lot of them, they go look around, they can't figure it out, and they go and get some buyers agents to help them because they are a little bit more commercial.

So yeah, that's a good one, that one, Pete.

Thank you so much, Peter. And congratulations on becoming a grandfather and also on your semi-retirement. Thank you very much. You're just a few years ahead of me, right? No, I mean, I'm a little bit more than that. In the end, you've got to enjoy doing. whatever it is.

And if people love working, then you can delay retirement for a long time. But I love property. That's why I more than happily accepted the opportunity to come onto your property podcast. But I just, you know, I didn't want to manage people. I didn't want to manage budgets.

I didn't want to do timetables. And I certainly didn't want to go to staff meetings. You know, they're not directly property related, but the opportunity to sit face to face with a person or a group of young people and help them along, you know, that's the most gratifying thing.

And whether it's listening to your podcast or, you know, the odd seminar I might do, I still teach one day a week. For me... I've got the right balance. But it was the property that allowed me to semi-retire at the age that I am.

I was about to say that, Peter, and that's the benefit of making decisions early in life and investing in property, good property, and being careful about it and all the above, and that gives you the freedom and flexibility when you're older, and that's exactly what I believe your success looks like.

So well done on that. Thank you very much. If you have a question that you'd like us to answer in an upcoming Q&A episode, you can send us a voicemail or written question via the website theelephantintheroom.com.au or you can email us directly at questions at theelephantintheroom.com.au.

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