But Lee, will rates go up more?
Well, on a global level, we know that markets in the US are expecting no further rate rises. This should be good news for us moving forward, but our inflation levels are apparently still too high.
The RBA is saying that as we still haven’t beaten inflation are still spending too much money and their rate rises seem to not be working fast enough to slow us down they might need to increase again.
The cost of living is high right now and I still firmly believe there is a lag on the RBA data.
We know that households have used most of their buffers! So… RBA take a chill pill for a few months pretty please and see if I’m right.
You may have watched my recent video (here) explaining how those most affected most are the people who have reigned in their spending already and still in stress.
I also said that as the fixed rate cliff is under way, where fixed rates expiring and people go from under 2% to a 6% rate virtually overnight, that we will see rate pressure become a real tipping point.
Overall I think this means we will see more property listings with stagnant demand at best. The good news? This means lower property prices for those looking to buy! Simple supply and demand. Did you know that Sydney has seen a near 10% rise in property listing vs the same time last year? It is now up 18% on their 5 year average!
Something else that may affect us is the bill for a rent freeze in parliament that the Greens are pushing the Labor party to back. Our Victorian government said they would consider supporting it (not surprised).
I understand trying to protect renters, but knowing that most of our investor clients are just regular folks and not tycoons, it pains me to think they have had to wear the cost of substantially increased interest rates and are limited to being able to pass that on to their tenants. They are providing housing at their own expense and I believe it should be shared.
Nationally we saw building approvals fall 7.7% in June vs a 20% increase in May. This is due to apartments and not houses, which dropped only 1.3% nationally.
NSW is leading the charge at the 44% drop and Victoria is actually gaining – Just remember, when Sydney sneezes Melbourne gets a cold! Sydney has historically been a leading indicator on most things property. So even if you have property in Victoria, you should keep an eye on Sydney’s market from time to time.
Building approvals also indicate that stock is coming on the market in the future.These national numbers show a lack of confidence to build new dwelling, mainly by developers and this could flow on prices in the coming years. At this point, no-one knows the future in property, but lower building approvals means less new properties on the market in the next few years. This will happen as long as we have demand but shrink the supply – then it could lead to improved capital growth.
Until then here’s our takeaway: remember that demand needs to outweigh supply for increased values, and it might take some time before people are lined up with their cheque books to buy investment properties.
We ain’t there yet but keep your eye on it these next few months for sure.
Interesting times indeed…