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Tuesday, 3 August 2021

Rents rise; iron ore doesn't

Rental shortage bites

Here's another reason I don't think regulatory intervention is likely to be targeted at property investors this time around. 

Rental price growth has now lifted to 7.7 per cent year-on-year in July, the fastest pace in 13 years, according to CoreLogic. 

The market needs more investors, not fewer.

Source: CoreLogic

With rental yields now higher than mortgage rates across most of Australia outside Sydney and Melbourne, property investor activity is at least expected to lift over the coming year, according to CoreLogic. 

Although that may not be enough to slow rents when the international borders reopen, given that the apartment pipeline in Sydney is now drying up. 

There's not a lot of property being listed for sale, either, so expect price gains to continue in H2.

Stock listings are now more than 25 per cent below their 5-year average.

Source: CoreLogic


The iron ore price cycle looks to be cooked now, which will naturally put downwards pressure on some of the Aussie resources stocks.

The overall stock market environment looks to be exceedingly toppy, in any case, with Afterpay (ASX: APT) looking set to be acquired by Square for a rip-snorting $39 billion, it was announced on Monday.

While every cycle is different by its very nature, the environment all feels a bit like a curious, slow-motion re-run of 2000.

Of course, nobody can predict the monthly machinations of markets, but how many times recently have we heard that we're in some kind of 'new normal' environment for stock valuations? 

That's never previously proven to be the case - and, indeed, it won't be this time either - which is why it's so hard to get excited about the returns from stocks from these valuations.

The RBA's confirming of the continuation of quantitative easing today could, however, see stocks holding up at around record highs this week.