Brisbane rental vacancy rates tighten

Vacancies steady

Brisbane's rental vacancy rate fell to 0.6 per cent in June, way down from 1.3 per cent a year earlier. 

Rents in the Queensland capital are now up 20 per cent over the year, as we discussed further in this Courier Mail article.

There was some respite elsewhere, keeping the national rental vacancy rate steady, perhaps reflecting completions from the very large volume of homes still in the pipeline. 

The trend for rental vacancies in the three largest capital cities has been down for some time now, reflecting record high employment and a buoyant economy.  

Asking rents continued to rise in June, to be 16 per cent higher over the year, with larger increases recorded in Sydney and Brisbane. 

Inflation...9.1pc

Inflation overshoots (again)

Hotter than expected result for US inflation once again at 9.1 per cent (versus 8.8 per cent expected).

This is the highest inflation print in 40 years, and compounds the ongoing Biden malaise. 

Core CPI is at last on the way down, at 5.9 per cent, but this figure too was higher than the expected result of 5.7 per cent. 

Markets are now pricing for 150 basis points of hikes over the next two Federal Reserve meetings, and risk assets face a further shellacking.

Inflation expectations have barely budged, however, so there will be light at the end of the tunnel...one day!

Recession risks and market impacts

Recession risks

I joined the legendary Owen Rask to discuss on the Rask podcast to discuss recession risks and what this means for investors.

Tune in here. 

Or you can watch on Youtube here:

Dwelling starts on the way back down

Record pipeline

Dwelling commencements fell, perhaps as might have been expected, to around 49,000 in the first quarter of 2022, while the value of building work done in the quarter also ticked lower.

There was some weather disruption early in the year, from flooding, as well as staff shortages, which may have stymied dwelling starts to some extent.

Despite the downturn in dwelling starts, there were still some 240,000 dwellings under construction, a record high driven by the preceding HomeBuilder stimulus (some 80 per cent above pre-COVID levels).

Even as at March there were still more than 100,000 new detached homes being built, although this number will likely now decline from here.

There was also a bit of a lift in the number of attached dwellings under construction, large driven by a few major apartment developments in Melbourne.

Overall, we should expect commencements to be lower than at their peak from here, but plenty of completions to flow through over the coming months, in turn keeping builders busy until 2023.  

---

Bloomberg's commodities indices have dropped for an 8th consecutive week, for the first time in nearly a quarter of a century.

While this week's official inflation figures from the US are likely to be high - and perhaps very high - 1-year breakevens are cascading lower very quickly now (as the last 'hot' headline figure is about to wash through). 

The Fed may be cutting interest rates again by 2023.

The 4 key property questions right now

Property Pod

This week on the Pod, I asked Michael Yardney about the 4 key property market questions he is being asked right now.

Tune in here (or click on the image below):

You can also tune in at Spotify, Apple, and wherever else you get your podcast fix.

And, you can listen at Youtube here:

Consumer confidence shattered

Confidence in tatter

Consumer confidence fell 2.5 per cent and is in an absolute two-and-eight, according to the latest index from ANZ- Roy Morgan.

And the outlook for household financial conditions is now every bit as bleak as it was in the early days of the pandemic.

This isn't a dynamic unique to Australia, with consumer sentiment plunging all around the world in response to monetary tightening and cost of living pressures. 

NAB's survey also showed business confidence dropping to a reading of 1 (down from 10 only two months ago). 

With construction costs and rents still rising, and the next official inflation figure expected to be a strong one, there will be a further interest rate hike to follow in August. 

It will be a tough judgement call for the Reserve Bank to judge when to step back from tightening policy given the limited availability of timely data.

---

Housing prices are on the way down in Sydney and Melbourne, according to CoreLogic's daily home value index (which itself is probably some way behind the reality).

Coal and gas exports mooning

Coal and gas super-boom

Australia recorded an absurdly large seasonally adjusted trade surplus in May of A$16 billion (!), by far the largest ever figure as exports ballooned to a massive $58 billion. 

Over the past three months coal and natural gas export figures have rocketed to record highs, to the extent that coal is on the cusp of becoming Australia's most powerful export commodity (only a few short years after many commentators had sounded a death knell for the industry).

Tourism services credits are rising strongly now, which is great to see, although still they remain at only around 45 per cent of pre-COVID levels. 

At the moment the figures don't appear to suggest much of a rush of outbound tourism, but I sense this may begin to change in the June or July figures given how many Aussies seem to be Europe-bound at the moment. 

My gut feel is that there is a large pent-up demand for overseas travel right now, and Australia's population in the country might go through a lull, before rebounding very hard in the summer months, which are also traditionally far more popular months for both tourism and permanent arrivals.  

Overall these were extraordinarily strong merchandise export figures, underscoring the depth of Australia's natural resources. 

Investor webinar

Cooler market

On July 21 we'll be running a webinar to discuss exactly where property investors are looking and what they are buying in these cooler market climes.

Register here (or click on the image below):