Welcome to the September edition of Month in Review
Since our last report, confronting events that have unfolded in Israel and the Gaza Strip could result in a protracted conflict in the Middle East. The human toll has been devastating and like so many others, we hope that a peaceful resolution can be found quickly.
Australia is geographically removed from the conflict, but the ramifications of what’s occurring will be felt by the people of our country in myriad ways, and that includes economically. A run on the price of oil has already seen a spike at the petrol pump which could be a precursor to protracted high energy prices, with relief unlikely until a resolution to the battle is found.
This has all occurred as we had arguably been entering a period of relative stability around interest rates. I suspect the RBA was feeling quietly confident that it had found the right settings for easing inflation back towards desirable levels, with many commentators even suggesting we could be in for rate cuts come 2024. After the events of this past month however, there is a case to be made that we could well see another increase or two, with some speculating it could be as soon as November.
This leads me to this month’s edition of Month in Review, in which our residential teams discuss first home buyer markets. The overarching opinion is that this purchaser cohort is eager to buy but continues to face challenges. While a swathe of investors has looked to offload their assets, listing numbers are still relatively tight. This is somewhat unexpected. In August it appeared we were in for a bumper uptick in listings, but the rate of increase has eased. In hindsight, it appears the certainty around interest rates coupled with a more general trepidation about future economic conditions simply brought forward many vendors’ decisions to sell. We may well discover that the total volume of listings between August and December will track closer to long-term averages than first thought.
The other challenge for first home buyers is construction costs. Most first homeowner grants are maximised for those building or buying new property. Unfortunately, elevated construction costs along with building delays have reduced the power of those subsidies. As such, many first home buyers are choosing more reasonably priced established housing. There’s also increased demand for attached housing given it’s generally a more affordable option.
Our commercial valuers discuss office property this month. Investment in this sector has struggled in the pandemic’s wake. A look across our submissions reveals many office markets have reached a new price equilibrium. While there remain challenges, both tenants and property owners are adapting to employee needs. As such, rental agreements are being negotiated with certainty and assets are being priced more consistently.
Turning to rural and we discuss what economic drivers are impacting the industry and how that’s manifesting in property prices. The consensus is that good quality rural assets are still in demand, however “price boom” momentum has slowed.
There are fewer places in the world right now that you’d rather be living and investing in than Australia. That said, proceeding without expert advice is fraught with risk. Uncertainty will continue to play a huge part in the national and international conversation. Having experienced, independent, professional guidance will be essential to navigating what lies ahead.
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