After a relentless run of rate rises, the Reserve Bank finally took its foot off the brake at June’s meeting, holding the cash rate steady at 4.35 per cent. It’s the first pause we’ve seen this year, and a welcome one. Whether it marks the top of the cycle or merely a breather is the question most stakeholders are grappling with.
The decision was helped along by a shift in the global backdrop. A Memorandum of Understanding in the Middle East has raised hope that the fighting will cease and the Strait of Hormuz will reopen. If that holds, the eventual easing in energy, fuel and fertiliser prices removes one of the more stubborn sources of imported inflation and gives the Reserve Bank room to keep its powder dry.
Closer to home, the federal budget continues to dominate the conversation, and not in the way the government would have hoped. While the changes to the capital gains tax discount and negative gearing on established residential property remain untouched, the government has already softened its CGT position for small business and start-ups in response to the pushback. It’s a telling concession, and one worth watching. While reversing any of the proposed established-housing settings will prove more challenging, they look set to be a key platform on which the opposition parties will campaign both now and into the next election in two years.
For property investors, that uncertainty is real, and it lands on a market already short of rental stock. Any policy that dampens the after-tax return on residential property risks tightening rental supply precisely when the nation can least afford it.
Against this backdrop, the June edition of Month in Review gets to the heart of what your money can secure as an investor or homebuyer.
Our report includes the first economic update from Herron Todd White’s recently appointed chief economist, Cameron Kusher. His read on the state of the economy and property market, particularly the National Accounts, inflation and the labour data, makes for compelling reading.
Our residential section reaches a genuine milestone. For more than a decade, we’ve examined the “lazy money” theme, progressively ratcheting up our benchmark figure as markets across Australia recalibrated. This month, for the first time, it becomes the lazy $1 million. That alone tells you how far the goalposts have moved. A seven-figure budget is now the baseline for a standard family home across much of the country, and our teams reveal exactly where a million dollars buys a trophy, where it buys genuine value, and where the smart money is heading.
Our commercial specialists turn to new construction and refurbishment in the retail sector. With construction costs high and tenant incentives heavy, feasibility is the watchword, yet population growth in our outer corridors continues to demand new convenience retail, and owners are refurbishing to lift building grade and hold quality tenants.
Our rural teams examine the grazing sector where, for example, drought across New South Wales has driven record cattle turnoff and a clear two-tier market. Prime, well-watered holdings continue to attract competitive interest, while secondary country sits longer on the market.
As always, it’s our national network that turns these macro forces into ground-level intelligence. Please enjoy the June edition of Month in Review.
Peter Maloney
CEO
Herron Todd White
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