EP. 11 | New South Wales – State of Investment | Property Market Outlook 2026

Parag Dixit

Hi guys evening. How are you good?

Mudit

Okay, Parag, not, not too bad. Given what's happening around the world, it's not been one of the best times, especially what what's happening with the Iran and Middle East area. I was talking to one of my friends, who's a couple of my friends were from there. So of course, everybody has kind of mixed feelings about it, and anxious. Not much communication going in in, going in and out. So people are watching very closely. Some have families, extended families, living there. So tough times, tough times.

Parag Dixit

I know this is one of one of our colleagues. He talking about it that eventually they finally about, after a week or something, they got some Starlink connection, and then you can know about your parents and family and what's happening and what's not happening. That's, that's the side, sad side of the story, right? That's that kind of puts a lot of pressure on to you and but yeah, that's, it's the very different part of the story. We don't hear about all of these things, how normal people get impacted by everyday people get impacted by a war when which are none of the sides, and they, they really don't know how to

Julius

deal with it right stressful and frustrating time, and when the media is also censored, we don't know what's happening there.

Parag Dixit

Know what's happening there. We don't know. We know we've had people under good old days. We would have people who would go out to work, and they were, they've been good oil countries and a lot of employments used to be there. A lot of stuff used to be there, but it's a different phase right now. It's a different phase right now. But back again in Australia, it's again, even a more weird stage right back six months back, rate cuts. Now, rate rises. And can you believe it? I was reading today an article which said that if obviously the oil holds around 100, 120 130 $140 then we are talking of of an inflation scenario. And all this bit will be happening, which means that there will be aggressive rate rises. And there's another guy who's talking about, if the oil reaches $200 then we are talking of a recession. Which is, which is recession means that we are now going to go backward on the rate. So it's, it's such a yo yo. It's such a such a thing, which bewildered at what's happening. It's so amazing that people can just oscillate from one end to the other end within months. That's the kind of world we are living in, very, very different, very challenging and very difficult. Maybe, I don't know what these last few years has been different, right? Yes, absolutely,

Mudit

it's been different. I mean, both on the personal front, economic front, so personal front, like you said, especially when we talk about in Australia this, it's a very heavy immigrant country, right? So a lot of migrants have come in, and when something happens in one of the countries back home, then everything shakes for people who have come from the from from that country here. So tough times for them, but economically, absolutely right? The uncertainty about what's going to happen, how long is it going to prolong for, and what impact it definitely the cost of a lot of goods. Moment oil rises, everything, the cost of everything changes, logistic changes. So not, not, not A, not a very good state to be in from that angle, and it is causing a lot of uncertainty for people who are even looking for investment or thinking about that. A lot of questions that people are asking nowadays, should I stall my plan? Should I think about I was thinking about now? Should I do it now or not? And at the same time, there are people who are saying that, Oh, this is the opportunity, because there's more confusion in the market, maybe this is the right time. It is,

Parag Dixit

it is, it's varying thoughts, varying risk capabilities, varying varying risk profiles, and how you take it, how you analyze it, how your family takes it, what's your family situation? How secure you're in employment? All of this drives what you think, right?

Julius

It's, yeah, yeah, it is. And then I can see the impact of the fuel prices in most of the places towards the regional town centers, the petrol is $3.20 now, wow. All right? It's already

Parag Dixit

gone up. It's already gone up. Yeah, it's a it's a situation, which I hope, and I really, really believe that maybe in a few months, a few weeks, sorry, it will all come back to normal, and we will all be talking of barbecue evenings, rather than on what's happening on this. But, yeah, we love to wait for that. But coming back to it, coming back to where we are. I think today we are going to talk about impact, the next step in our state of investment series, and we are going to talk about the state of NSW. Today we will talk a bit about into breaking it down into Sydney and rest of NSW. We will talk about purchase affordability. We will talk about Rental Affordability. We'll talk about the outlook for both rent and purchase in 2026 we look forward to. What do we look forward to in this state, and the state of investment positioning and where, and whether we think that this is the market to where people will be looking at investment, everything goes well. And I. What can we look forward to, and how does it fare across in the various parts of the of the state? So that's what we are going to discuss, gentlemen, and I hope we'll do a lot of justice to it. But before we go forward, we'll follow at the same index. We let's talk about 25 okay, now Sydney, and if let's start from Sydney. Sydney. This. This is the market which is so amazing. It's the market where we did, like they say, the under supply is stopping a crash from happening, but affordability is stopping a rally from happening. So it's like caught midfield devil in the deep blue sea. It's in that position where it's nothing is there, and you're you're just stuck in a zone, not in a trans zone, but in a uncertain zone where it's going to go. We don't know how it is. We don't know Correct.

Julius

Sydney is a classic example of affordability indexes. Yeah, yeah. So you still have extremely low supply available. Yeah, you don't have any supply, low inventory, no houses coming up, but

Speaker 1

still you can't afford it. You still can't afford still you can't afford it because median prices are close to $1.6 million

Parag Dixit

that's right, houses median prices. I don't remember the other states, but I'm very sure there is none which is more than Sydney median price for houses,

Julius

yes, 1.6 million. But when we compare it with the unit, there's a large gap. Oh, really, yes, the units, median prices are close to $905,000 so good 80% or something. Gap is this extremely high, gap between the houses and the unit, and that's a segment they might feel a lot of pressure, yeah, because of the affordability crisis.

Mudit

Yeah. And which is, which is which, which is quite different from how it is across a lot of other states, where the gap between house prices and unit prices, not so much. So Sydney stands very different in terms of the affordability of different kinds of assets, different kind of properties. Sydney, it's very, very different compared to other places. I know, and I

Parag Dixit

know and I understand. And this is pretty weird, right? We were talking about state of Queensland last time, and when we're talking about Brisbane there, we don't have such a large gap between houses and apartments,

Unknown Speaker

just 20% Yeah, 20%

Parag Dixit

we don't have such a large gap in the rest of Queensland area. When we were talking, we'll be talking about other states. Most of them don't have such a massive, crazy gap. What does that point up to? We really don't know. There's a large over supply of apartments coming in as well, but there is, that's the segment. And we'll let's talk more and more, when we get more and more into what's, what's happening in, what happened in 2025 or the whole year till now, about what was the state? You know, we've seen that it's not that houses or apartments have not grown. They've grown, right? You've had more than six 7% growth in houses there. We've had more than 4% growth in apartments, despite what the number of apartments being there, despite the gap between houses and apartments being so large, the growth in the apartments are still falling behind the growth in the houses. Despite houses being at a 1.6 million and for median value, that's, that's, that's a very, that's a very different phenomena. So the houses are huge in demand. Apartments are not that much in demand. Still rising. But I'm i It's anybody's get guess. You know, such a large gap, what it's going to lead into, it surely will lead into some kind of positive thing in future. When future, no, no, absolutely.

Mudit

And and despite the prices being that high, like you rightly said, in five years, the prices of properties in Sydney have gone up by 50% which is which is not small, given that the property values already have been a little on the higher side. Yeah, 50% in five years, although five years other places have gone probably by higher value, but they were also sitting at a lower property prices, right? So that was 50% in five years. Still a huge growth.

Parag Dixit

Oh, yeah, over the base of, say, if you've reached 1.6 million median value of a house in the last five years. And that's 50% growth over the previous one, which is mostly 1.1 it was one was 1.1 or two, which has gone up to 1.4 million increase in the last five years. And the capital increase itself is large over that kind of a large base. And still Perth and Queensland and Brisbane and Melbourne are just about a million ish in their average values. From there, rising 50% is phenomenally high. Apartments still, they've got a lot of way to go, but high. But again, of what I've seen February, Jan, Feb, the dwellings growth has been pretty, pretty flat, right? It's pretty, pretty flat, which means market is there at its kind of a ceiling. It's not that it's jumping around and it's moving around from there. It's surprising, with such a large gap that the market has not moved houses, you can understand it's kind of stable there. It's there, but apartments still being kind of there, kind of being there. No much movement, about zero percentage, flattish, kind. Know that means that the market really feels that we are kind of stressed everywhere, even with the apartments, we are kind of stretched everywhere. Which brings a good question. You know, in terms of real income, the income profile of people in Sydney, particularly in Sydney, what does it look like? What do you see

Mudit

in that, in terms of real income profile. I think one interesting fact there is that because of such high property values, and mostly, of course, everybody owns a mortgage, 45% of the income goes into servicing the mortgage. Which is, which is, which is massive, huge, absolutely, absolutely. So the debt to income ratio that ways, goes pretty high. And most people who are, like, modest incomes, they are just a large part of income. They have to kind of look at their living expenses that what should they spend on? Because almost, like, close to half the income is straight away going there. So yeah.

Parag Dixit

And whenever we used to calculate, whenever, you know, when we used to study and we would calculate how much percentage of I remember those good old times, you know, we would say, okay, 30, 35% of your income goes into paying mortgages or repayments and all that, and the rest is available for you. So you have 10, 20% kind of something of that sort of savings, and the rest is your expense is divided into half paid with close to 45 50% money going into mortgages is you practice? I don't think people are, like, pretty thin on savings, becoming worse for the newer guys who won't, who have to, who are forced to buy at that high level. They know they won't have a capital growth, but that's what they need to. They want to live there, and so you pay so much for that. Yeah, and that's

Mudit

why it's in terms of pure mathematical calculation, it's like, roughly, on an average, 85 years to own a property in Sydney. Now, yeah, that's a lifetime. How many of us will live 85 years? Yeah, I know.

Parag Dixit

Then, you know some, some, some European countries, they have generational mortgages there. So maybe 100 years and 200 year. Kind of loan terms. It goes on, right? Yeah, it goes operations, keep on, maybe, and we're going to reach there or something. But that's the condition of Sydney, where the incomes are, though they are growing, but it's still like that. But again, the other part is the below one and a half mill segment that still is having a demand that's still rising the fastest, because that's, that's where the growth is. That's where people think that I, you know, that's something which I can afford, and a lot of people are trying to go there. But as soon as it goes beyond, the growth is less than 1% more than one and a half to two mil growth is less than 1% it's, it's, it's in some parts, in some price bands. It's even down. It's even down by 1% in some part of the areas, which is surprising, because, if not surprising, in fact, to an extent, it's that's the way ceilings work, right? It's not going to happen that people will have perpetually rising income. It's not rising that fast. And RBA rate, cash rate, prices, is going to make it first. It's not going to make it easy. It's going to keep on making it worse. One rate rise in Feb has kind of brought some confusion among people. Another one expected in March, another one expected in May. With that may add even more confusion in Sydney, or may just start bringing it down a bit. And I think I was reading an article a few days ago which said the same thing, that Sydney and Melbourne, prices may remain softer or may go a bit backward in this

Julius

year, right? Yes, stock levels are pretty low. Are like point two, 5.26% and then if you compare the liquidity disco, which is days on market, which is around 28 days, but the most of the demand is towards up to 1.5 million, because investors still can afford. Those who can afford it, a bit of negative gearing, plus the owner occupied demand because of the first time buying scheme. So in the segment, which is above 1.5 million, yeah, it is taking more time to sell properties.

Parag Dixit

It is taking more time. It's not so easy for an owner occupy maybe an upgrader can still give around. And that may be a thing which is happening in Sydney till now in the last, say, 1286, 1516, months that people are upgrading. So their one and a half mill properties taken in by people, maybe upgrading from an apartment or that kind, or maybe straight going from rental to that bit. Because, and if you and this, that's, again, a calculation there, if you're paying a rent of six, 700 808 50, and we'll talk about rental values. If you're paying an 808 5900, kind of a rent, then you are close to about $505,000 a month on the rental thing. That's about a million dollar mortgage. So there will be a tipping point, which must be putting people to move there. And that's why the movement is coming in that bit. But again, if you're looking at a higher price range, it kind of is there. But, you know, because of this, or maybe because people are wanting to cash out and move out because you're not able to afford and we'll talk about rental affordabilities as well in some time, still a. About the average listings running in Sydney is 10% higher than the average last five years, or something, or that, right? And that's an interesting one, because when it's so high, it is it's means that vendors are really looking at moving out of the properties and a largely investment driven city, which Sydney has been traditionally, may move more towards being being more owner occupied, and people having ownership of their properties. But still, it's it's still the demand is still, as we said, along the lower levels, right? We still have

Julius

a lower stock on market, yeah, but that's this is the time when we can see the inventory is piling up because Gazan markets are going up, the new stock is not coming up. We don't see a lot of construction which is happening or not lot of land supply. So stock and market generally, when we see stock and market because of the new development applications, pretty low. But those who are selling, and then upper, upper segment of the property prices, they might few properties are taking around 45 to 60 days. Auction clearance rate is okay. It's not dropped severely, but still, it's not that high. In Sydney, what I can see is there is variety in every suburb. So there are suburbs where you could see a price segmentation is varies a lot. Like for an example, if you look at Hills Council, a few sub if you pick up a few suburbs in hills Council, you could see a property prices are in between 1.5 to 2 million, where around 30 to 35% of selling is happening. There are a lot of properties which are selling in between three and a half 5 million also. So because of that segmentation of the price variation, when we look at the data, the days on market. So the liquidity is pretty high in that segment, all right, and that kind of inventory is still piling up. So when we see number, amount of inventory which is rising in Sydney, in that kind in that

Parag Dixit

price pie, all right, Oh, that's right. And, and it's, it's, it's also, because maybe the entry point available is the only apartments, right? You know, you don't have too much of an option available for anyone to move into the houses and to buy because of the affordability section, which you are trying to say, right? And that brings us to the purchase affordability segment only. You see Julius in the purchase affordability bit there in respect to the two rest of NSW, we've talked about Sydney already, but what is happening in rest of NSW there?

Julius

It's much better. So when we cross Sydney, go towards the central coast, or when you go towards the Newcastle or South Coast, or when we go towards the little inland, the medial house prices in combines around $860,000 versus the unit prices million houses are in between 670 to 680 so that means the gap between the houses in the unit is not extremely higher, yeah. Plus the buying affordability is not extremely high too. So rental yields are still better. The lot of places where we can see rentals are in between four and 5% all right, stock is very low. Not much inventory remaining in the market. There's enough demand by an owner, occupiers and investors both. And then buying affordability is still much below 40 years.

Parag Dixit

Buying affordability is still much below 40 years, which means in regional NSW, if I am living there, I'm still, I have a chance of having ownership, right? I am. I have a option of having ownership. Yeah, I the real income profile there of people is, I can say it's stressed, but it's kind of, you know, I'm really pushed, but I'm still not given up, you know, yeah, I'm still there. I'm it's going away from me, but it's still not gone away. And that's why I think the affordability is this advantage in regional or rest of NSW, not regional. That's this other part of NSW, Sydney, where affordability advantage is there. And that's why you will have net migration moving out of Sydney into the other part of NSW, right?

Mudit

Yeah. No, just, just another metric on that. Like we said, that in Sydney, it's roughly 85 years to own a property. Yeah, the contrasting metrics in rest of NSW is roughly 3738 years. Much, much better. So that kind of, that one number, kind of shows very clearly that affordability is far better there. Yes, in last five years, probably prices have gone up by almost 45% in rest of NSW as well. Although Sydney has gone up by 50% rest of NSW overall is 45% but of course, there is a lot of variation in rest of NSW also. There are areas. It's a large landmass, right? So there's huge variation across different regions there. And I'm sure Jules will cover that later, absolutely right.

Parag Dixit

And but how do yields look like in both of these segments, houses,

Julius

apartment and houses, yields are in between 3.9 to 4.5% there are locations where we could reach up to five and a half percent, also, especially when we go towards the central coast. Or Newcastle, there are a lot of combinations of house and grannies, or the dual income potential properties, where the yields can go up to 6.6 point 5% as well. So yields are much better when you look at the renting affordability, it's much below 33% of income. Yeah. So it's easy to rent houses as well as it easy to buy houses as well. So for the investors, they can get a good rental because yields are still very close to 5% there are a lot of opportunities in dual income, kind of potential properties where you can enhance your yield in terms of the buying Yes, as we talk, the affordability is very close to 40, up to 40, around in between 30 to 40 years, it's much better outlook.

Parag Dixit

All right? And how does when we're looking at this, there's always a factor of demand and supply which comes in there. So if we are looking at the other part of other than Sydney, part of NSW, obviously, that it's really supported by the lifestyle which it offers. You know, if you're looking at North Coast down to South Coast and Sydney. It's this, this whole coastal LGAs offer a phenomenal lifestyle. It's really lifestyle to envy, and that's that's driving the migration from SUNY to those areas, especially if you can work from home, or if you can have you know, you can work from a remote area, or you can find work there. People are moving out because, again, it provides them a much better option, and that's sustaining the demand in the rest of NSW, in belts. And I think we will talk about, maybe we'll pick your brains Julius on the five clusters in NSW at a later stage. But right, right now, how does the supply and demand and all these factors look like in this part of NSW?

Julius

Yeah. So at this stage, I could see lot of interest is been generated, but towards the central coast first, when we talk about Sydney, where you go around one hour outside of the Sydney, you can still reach Sydney, CBD, if you're working in Sydney in one hour. Property prices are much below 1.5 million mark. So there is lot of demand by owner occupiers as well. Also, there are very good lot of goods above where you can buy properties are in between 900 to $1.1 million and your rental income is very close to nine $50 a week. So we could see there is lots of interest generated in the Central Coast region, if you go a little cheaper and then in affordable segments, then there is lots of interest is being generated towards the inner side, which is when you go towards the hunter upper Hunter Hunter region and upper Hunter region, yes, there could be potential of getting more supply, but still not in the pipeline. Over there, the yields are very close to 5% in your income properties, and the property prices are lying in between 608 $100,000 and then quality of the construction is pretty good. When we go towards little inland, towards Albury or Tamworth, double their property prices are varies in between mid 500 till up to $750,000 where the yields are in between 4.5 to 5.2% so in that segment, in all the segment they when you look at the stock and market is much below 3% and then inventory is not more than four months. So lot of difference between demand and supply,

Parag Dixit

two speed in two speed kind of a market and coastal LGAs and inland. So different, different kind of a speed and inventory is different there as well. And all that demand is different there as well. And that's, I think that's creates more competition towards the coastal LGs. Coastal LGs, there

Julius

are a lot of upgrades, and then there are a lot of opportunities for the lifestyle. There are different kind of properties for the Airbnb, the lot of retirees also moving there. So yeah, property prices are little bit expensive there, yeah. But still, there is a lot of demand when you go towards a little inline side that that side, basically no investors are interested. So there is lot of investor movement. But even though the investors proportion is much below 40%

Parag Dixit

and in fact, one thing which I've noticed here in the rest of NSW bit is units are still doing better. Unlike Sydney, Sydney is a different animal with respect to apartments, but rest of NSW, along coastal NSW, right up from the top to the bottom, we found that apartments are a very growing, easy entry level alternative people are willing to take up versus houses. If the houses are becoming too expensive, they're not really they're considering apartments pretty well. So the units are doing very well. They're much and they are a great entry point right now for people who want to jump in, people who want to buy and want to get whether into their first home or whether as an investment, they are serving as an opportunity for people to buy into and to occupy, right? Yeah, especially towards

Julius

the coastal LGAs, you can still afford apartments in sub million where sub $1 million where you can have water views, where in Sydney, you have to spend at least three and three to $4 million so that's the difference. So that's why, over there, there is a lot of demand towards. Departments, Airbnb, income for those apartments is also very high, especially when you look at the units towards the regional part of the New South Wales. There are a lot of concepts of block of units which is on very, very high yield, yeah, and then availability of those type of properties are extremely higher.

Parag Dixit

Yeah, that's true. That's true. And that that's a good point. And but again, when you're looking at a block of apartments. And we're looking at all these specialized properties. People are looking at rental yields which are able to cover the costs, and then you're looking at a good control over strata. And that's a very complex investment, which not everybody does, but that's a pretty complex investment scheme which people get into and own, and they are able to hold on to it and make that that's a good wealth creator, speaking about Rental Affordability, let's jump back to Sydney. Yeah. Okay, what? What is, what do you see in Sydney? How does it look like in in the last 12 months? What? What did it work and what did not work in Sydney for the respect to Rental Affordability? Yeah.

Julius

So rental vacancies are tight, rental turnover is extremely higher. I could see there is a rental price in entire 2025 rentals were grown by around five and a half to 6% okay, but they are tightening now, even though you are very tight vacancies, but the renting affordability is at the peak. Yeah. So median rentals in between 850, to $900 a week. There are few locations where the rentals are more than $1,000 also, Oh, yeah. So they are very less property available for in market for rentals, but because of the renting affordability, because people are paying around more than 40% of the income towards the rental in most of the places, that's why market is tight. But rental rental growth is slowing down. Similarly, when you look at the houses, the rental yields. Cross rental yield is very close to 2.6% in apartment, it's little better. So for six to $700,000 apartment, the rentals are in between 650 to $700 a week. So on an average, the rental yields for the apartment is around 4.1% so in terms of the rental proposition. If investor would like to get into the property market in houses, it's very difficult, because your gross is very close to 2.6% your net will be very close to 2% so there will be wider out of pocket expenses because of the dollar value. But you look at the apartment section, then the gap is not widened as well as the dollar value is less. That's so

Mudit

that's the only play left for investors in company that ways, right? So at least it will be more controlled cash outflow on a monthly basis, versus houses, a lot of people will will just bleed. I know of people who have investment properties here, and they're like, I want to sell the investment house because it's just not affordable at the at the current interest rates, being on the higher side, the rental gone so low, it's

Parag Dixit

not again for a lot of look at think on this other side, okay, from a renter side, even a renter, if you paying 808 50,000 bucks a week on rent, even for a rent, they would be paying a large share of their income, of their, you know, into into into rent as well, right? And that's, that's post tax income, you know, that's, that's a lot of money people are paying, whether they're paying for rent or whether they're looking at paying for buying the their own house. But that Rental Affordability is in terms of Sydney, is still being a bit of a thing because you're not able, it's a lot of money which you're paying through that. I know the rental demand. I think it's it's sustained because we are having net migration of students which are coming in, of skilled migrants which are coming in. That is really helping keep the underlying tenant demand in in Sydney. But again, it's it's moderated, obviously, it's moderated from where it was in 23 just after covid, when it all opened up and there was like, boom, there's no house available, and you just can't do anything. And you're looking for that. Education is a massive segment in Sydney. Students come here, and I think a large part of students which come across in Australia, come into Sydney and Melbourne and all the other cities. Sydney has its large share of students coming in, and that has also kept the rental demand up for a long period of time, right? And, yeah, absolutely.

Mudit

And combine it with the supply constraint, because not a lot of new constructions, I mean, at the demand has softened a bit, but it is still a number of people who are looking for rental properties. Is increasing, and the supply is still short of the demand. Of the increased demand, which is what, what is keeping the rental still high and still growing? Yes, so both increasing demand and controlled supply, less supply. That's the market we are living in.

Parag Dixit

And yeah, that must be impacting the inventory levels as well. Right? Inventory levels must be what do you see there?

Julius

Much below. So potential rental demand for an apartment or houses are extremely higher. So there is increment in that because of the limited supply of properties which is coming into the market. So. At this stage, if you look at the inventory, is below three months for housing. And when we look at this constraint of the supply, it's a structural constraint. It's not

Parag Dixit

like cyclical, yeah, correct, yeah. It's a structural constraint. It's not just because of for some time it's going it's not temporary. It's permanent. It is going to

Julius

there for long time, unless you release a lot of properties in the market, which is not coming so soon, so basically it is going to remain there. So affordability is a concern, and supply is

Parag Dixit

also concerned. Affordability and supply both are both of the concerns. And I think construction is also not keeping up already well in Sydney, so the cost of construction is so high poor guys in other it's tough to construct at the value which it will sell, when it doesn't sell, at that value, a builder is not able to really afford the construction, or does don't want to do that. So even though there are a large construction approvals which are coming into Sydney, but because of either the rental affordabilities Or because of either the purchase affordabilities, they are constrained. They're constrained about what do they do, but how and how does it look like? See, let's if it's about Sydney, then what is it about the rest of NSW? How does it look like in rest of NSW area?

Julius

The supply wise is still the similar. So at this stage, not much houses are remaining in the market. The vacancies, on an average, vacancies are 1.5% but that is scattered the pockets where the vacancies are below 1% as well. We are investing in a pocket where the vacancies are below it's around 0.07% at this stage. Days on market to sell properties around 40 to 50 days depends on which market you get into, but housing gross yields are very close to 4% four to 4.5% all right, depends on the combination of the property, if it is dual income, property is much higher. Put on an average is around 4% unit yields are much better, like unit yields around 4.5 to 4.5%

Parag Dixit

Yeah, that's good. Four and a half percent is a good

Julius

unit yield when you look at the affordability indexes, better indexes than a Sydney market income. Yeah, income. So basically, Rental Affordability is very close to 27% of your income.

Mudit

And I think the rents are also still rising there, because there's Yes, the rest of NSW is living on the demand which is coming out of Sydney, overflow, overflow of overflow from Sydney. So that's keeping the economy going. That keeping the rentals still increasing there.

Parag Dixit

Yeah, absolutely right. And I think a large part of the Sydney from the coast, I think Wollongong till the Central Coast, till till even going inside a bit on all the sites in Sydney, Richmond and all of these areas, they are still now kind of practically Sydney. You just can be reaching, yeah, you call it Greater Sydney or something. But yeah, people can still reach there. It's about an hour's distance, and you can work there and go back and something. So rentals are spilling over into the other parts, and people are able to do that in terms of there. So, and how does rental demand look like? Rental demand in the rest of the NSW area? Do you see something different in rental demand?

Julius

Yeah, there's there's good amount of net internal migration from Sydney towards the original side. Yeah. So rental demand is extremely higher. That is impacting on rental prices as well. That's why, as Modi said rightly, that rentals are rising. So when we see last year, there is a significant amount of rental have been risen in entire regional NSW, which is impacting onto the yields. Renting affordability side is much better. That is allowing the yields to be improved, and that is improving, so that is impacting on the property prices as well. So at this stage, rental demand is extremely stronger, and there are lots and lots of investors who are investing into the market. And I

Parag Dixit

think also because I think rental demand would also be there. Obviously it's causing the investors to invest there. But I think rental demand is also there because I think work from home is pretty prevalent in the Sydney and you can do that right so, and if I am priced out of rent, and if I'm having $1,000 rent in Sydney for a normal house, and I can have a maybe 600 ish kind of a rent in a remoter area, and I can still work from home, and I can have a better lifestyle. Coastal LGAs and across NSW offer phenomenal lifestyle. Some of the areas like chiamas and all are like wonderful areas to live in. What will I do to not live in there? You know, beautiful areas to live in, right? So it's a structural and a cycle, rather than a cyclical bid, that the demand is rental. Demand is being pushed out, and it's, it's permanent, right? It's going to be permanently going out Sydney's is can't go anywhere, and it's pretty land and water locked. So it's not going to go anywhere. Go anywhere. And people are going to keep on migrating there and and when you come out of Sydney, you realize that it's the demand that the rent until demand with respect to the income levels, which are there. It's pretty okay. It's pretty okay. I'm not so stressed. I'm not paying 45 50% What I'm paying in the Sydney market, I'm much better off, like we said, 3335 odd percent, 40 odd percent. 30 35% kind of a stuff, which makes it better for me. So it is. It is allowing the sustainability of rental demand in those areas. And I think that must be also driving the rental inventory in these areas, rental stock is is thin because it's, it's going away. People are wanting to come out of Sydney and wanting to live there, and that's, that's what's driving there. So because, again, like you rightly said, investors are going there because they are finding capital appreciation. They are going to the pockets, where you can find capital appreciation. And you are you, are you? You know that the rental demand is anyways, there, I'm going to get the renters coming in there. I'm going to have a decent amount of rental supply, a renter supply, which is going to come here. So I don't really think there. But again, when you look at this strata or apartments or houses, similar, is it?

Julius

Yeah, similar. So there are not many apartments or strata units available towards the regional site or rest of the NSW. So the stock of that kind of property is very low. So there is enough demand for the strata properties as well as units and apartments, when we look at the inventory for renting, is very low in both the segments, and then prices are still affordable for buying, okay? Because of the affordability, because of the Affordable segment into the pricing, lots and lots of investor demand, and there is good owner occupied demand as well.

Parag Dixit

Yeah, that's nice. That's nice. So that gives a full overall picture of what has happened in 25 till maybe the entire year of 25 and the first month or two in 26 in terms of economic outlook. Okay, when before? So that we can go ahead and move ahead and start working on the 26 market in terms of economic outlook. What do you see mudit? How does it look like in terms of NSW versus the entire country, Australia,

Mudit

picture, yeah, that's an interesting one. And especially like we were, we was discussing in the beginning that there's so much more to when we talk about inflation. I mean, there are multiple things there, right? Inflation, and the corresponding impact on the rate rises. So the global scenario has is impacting directly. So what was an outlook six months ago versus now? It's a lot different than how the world, how the economic outlook on for Australia, for states was. So that's a direct impact. So if the war continues, things global events continuing, will continue to impact. If that goes for longer, then the inflation is going to go up. And that is a direct impact on on the the costs of purchasing, cost of everything in Sydney, although Sydney and NSW, the outlook is that it probably will be a little lower than how the overall country's averages. But definitely inflation is very, very eminent and looks like that. It's going to impact our daily, daily lifestyle.

Parag Dixit

You're right. So Sydney has, has always been marginally lower versus the other cities, like a Brisbane or a Perth, which have always had, what do you call the inflation levels, higher than the than the national levels. So if you look at the 3.8 ish percent, which was there in for entire country in in 2620 years on, sorry, Jan or February, 26 but Sydney has been a bit lower. Three, 3.2 3.25 and we look at Treasury figures and but if you if which is which is slightly lower, I think that's it's a bit better for Australia. But if you look at the other cities, Brisbane and per, they've been all four pluses per close to five. And when it comes to CPI index, and that's that's driven that again, housing drives it. Again. Same thing, renters are driving it. Same thing, electricity costs are driving it. So it's, it's similar there. But when you look at Sydney inflation, sorry, NSW inflation in particular, I think the Treasury forecast is that it's going to go down to 2.75 and three ish percent, which, which means that cost of living is is going to be a bit better off in the future in Sydney. And though, you know, the prices are pretty sticky. You know, rental vacancies are low, construction cost pressures are phenomenal. But, and the house prices are, as we discussed, in the thin zone, very thin zone. They're just lying there. It's, it's tough, you know, I don't think so. Next year or two, at least, for the whole of NSW, not much is going to be moving to towards, you know, positively towards the RBA target of coming between two and 3% here in terms of inflation. So if Sydney, if NSW in particular, doesn't come below 3% and or maybe substantially below 3% it's not going to be easily be able to balance out the higher positives of of a Queensland and a wa market, which is very. Which is a bit of a, not a great situation to be in. But if you're looking if, I think, if it's in NSW, in particular, 25 to right now has been, has been a bit better off versus the other states, and it's been nicer. But this is clear impact on interest rates, right and in when it happens, in absolutely

Mudit

a direct impact, because the moment there's inflation, the first thing and the one of the important measures RBA takes is that increase the cash rate, which is expected to go back up to 4.35 which is like, what was long ago? I mean, not long ago, 2424

Parag Dixit

long ago.

Mudit

Yeah. So that's going to go there. And if you look at the the moment the interest rate, cash rate was increased, most of the banks increased their home loan interest rates. Passed it on to the consumers. Fixed rates for one year and even two years have gone up already. The fixed rates are touching 6% with most banks plus minus delta there not only one year, but two years. The two years means that it's a forward looking rate, right? So that means that next one year to two years, most of the major banks, economists are not expecting the rates to come down much. That's why the fixing rates have already gone up. So from a from a purely from a somebody who owns an asset, your mortgage, is going to expect it to go up further from where it is that has to be included in your cash flow calculations as a part of your as overall strategy,

Parag Dixit

as whatever is an owner occupier whenever I'm going to buy and and I think the RBA governors was pretty, pretty straight and pretty just clearly saying that, okay, all my meetings are live. Like all my meetings are live, means I am looking at increasing the rates in every meeting, if, unless there is a positive surprise, you're in for in for a rise or something. Maybe that's what's there and and it's going to keep on pushing serviceability, it's going to keep on pushing borrowing capacity. It's going to keep on pushing the cost of servicing a loan. And worse than that, I think, now that there's an APRA cap which is coming in on investments. Banks are not going to lend more than six times. It's already live now, since first of February, more than six times of their book is, I think 20, 20% of those books, or something, is the cap which has been put in. There are more restrictions towards towards the the investment cap which is going in. And that's why, if we look at an Outlook, Outlook, so what's going to happen in 26 and the rest part of 26 I think, I think NSW will have an impact on the GDP growth which is going to come in. It is, NSW is, I think, for some reason, underperforming the both Queensland and WA market. But still, there will be NSW, though it's going to be in line, but still it's a bit it's a bit it's going to still have a one and a half percent kind of a forecasted growth which is going to be there. There will be stress. Okay, there will be stress. In large parts of Sydney. People will have a mortgage stress in this in the year 26 because of the way, if you're already sitting at a 45 50% ratio of your income versus the repayments which you're doing, or the rents which you're paying, there is going to be a problem. Unemployment is going to be as a as a outcome of this going to be a bit higher. It's expected to be similar to national average, but on the higher side of the national average, wages will be okay in real term. And the good part is because wages are going to be okay in real term, and the inflation is lower in the state, the cost of living pressures are not going to be as high, but still tighter. Financial conditions are going to be there. And the more it goes beyond it, the more it is, the worse it's going to be, the more tighter it's going to be. So it's going to be a pretty, pretty tight rope walk for the year 26 calendar year 26 in there. But I think it is. It's the way the NSW is. The state is there. It's one of the largest states in the country and one of the it has its own share of things and all it it also has its own share of what we've been talking population and the migration increase. How does the outlook look like chavias In terms of migration and population, how does it look like it's going to happen in 26