In this week’s Property Insider chat with Dr Andrew Wilson, I explore a topic that’s on the mind of every property investor, homeowner, and economic enthusiast: the role of the Reserve Bank of Australia in our dynamic property market.
Throughout 2023 our housing markets were a major focus for our media.
And it was not just the surprising strength of house prices in the face of rising interest rates, but also because Australia found itself in the throes of an unprecedented rental crisis, a situation that is shaping the housing landscape in profound ways.
This crisis, characterized by skyrocketing rents and a supply that stubbornly lags behind demand, has been a pivotal issue for property investors, policymakers, and, most significantly, millions of Australians grappling with housing affordability.
In today’s Property Insider chat, we unpack the latest Rental Market report from my Housing Market and I ask Dr. Andrew Wilson how the latest monthly inflation figure and the recently released retail spending numbers may influence the Reserve Bank as it decides what to do with interest rates.
Rents rise but vacancies ease a little over November
Watch this week’s Property Insider video as Dr Andrew Wilson explains how capital city home rental markets have continued to report higher rents generally over November, although there are some early signs of an easing in what are nonetheless record-low vacancy rates in most markets.
With continued strong migration, and little new supply of accommodation being built, this rental crisis is likely to be with this for some time and rents are likely to continue to rise strongly in 2024.
In response to the rental shortage, there is a suggestion that household sizes have begun to increase again in both capital cities and regional areas, but that shift back to larger households (reducing rental demand) is being offset by strong population growth which is forecast to continue.
Data released by the Australian Bureau of Statistics shows Australia’s population grew by 2.2% in the year to March 2023 – the fastest pace since late 2008.
At the same time, the pipeline of new supply remains constrained, with overall approvals running at near-decade lows and construction activity having slowed, worsening the cumulative housing shortfall.
In other words, growth in the supply of new housing is limited at a time when there is already a shortage.
As you can see from the table below, the apartment markets in our four big capital cities had rental growth of more than 20% pa over the last year.
October Inflation lower
Watch this week’s Property Insider chat and hear Dr. Andrew Wilson discuss:
- Headline annual inflation was down from 5.6% to 4.9.6% pa over the month. This follows an annual rise from 5.2% to 5.6% over the previous month. As this was for the month of October, this decrease in inflation had nothing to do with the November RBA interest rate rise that came last month
- However, the more important underlying inflation (which excludes volatile items) was also lower at 5.3%.
- Significant contributors to the inflation figures were again housing +6.1%, food +5.3% and transport +5.9%
- The decrease in the latest inflation numbers is good news, but we must remember that underlying inflation is still well ahead of the RBA target range of 2-3%.
The goods components of inflation continue to do their part in reducing inflation, and the data suggest some outright falls in certain goods categories that are providing additional downward pressure on overall inflation.
The following chart shows how inflation, though still elevated, has slowed across a range of categories.
October retail sales down
Retail sales fell 0.2% month on month in October.
Watch this week’s Property Insiders chat as Dr Andrew Wilson explains the shifting seasonal spending trend due to the growing popularity of November’s Black Friday/Cyber Monday sales.
It looks like consumers hit the pause button on some discretionary spending in October, likely waiting to take advantage of discounts during Black Friday sales events in November.
This is a pattern we have seen develop in recent years as Black Friday sales grow in popularity”.
However, the outcome was not as soft as some economists had feared, which suggests consumer resilience.
Auction clearance results December 2nd – generally steady results on another big day of auctions
Capital city weekend auction markets have commenced December with generally steady results despite another big day of late-year auctions in most capitals.
Adelaide had the strongest auction clearance rate of 70.3%.
Auction clearance results for the other capitals were:- Melbourne – 65.2%; Sydney – 69.6%; Brisbane – 53.1% and Canberra – 540.%.
The national auction market reported a clearance rate of 62.4% at the weekend which was higher than the 60.1% reported over the previous weekend – and also higher than the 61.8% recorded over the same weekend last year.
National auction numbers were slightly higher at the weekend with 2234 listings compared to the previous weekend’s 2215 but remained well above 1997 listed over the same weekend last year.
