Cup Day rate rise is an each-way bet

Just when you thought rate rises were behind us, the 1.2% jump in trimmed mean inflation for the September quarter has sufficiently spooked the central bank into raising the table stakes for a rate rise on Cup Day (7 November).

The Reserve Bank (RBA) governor Michele Bullock made her intentions crystal clear ahead of the inflation numbers when she said:

The 2025 target was “sort of at the end of our tolerance” and the board “would not hesitate” to raise rates if there was a material upside change to the inflation outlook.

Bullock’s comments follow her notes to a recent Senate estimates hearing in which she flagged annual rent inflation peaking at a 34-year high of 10% in the next six months.

Following Bullock’s comments, the money market is now pricing in a two-in-three odds of a rate rise on Cup Day with a 0.25 percentage point increase (to 4.35%) fully priced in by December.

House prices nudge new record highs

Revelations that consecutive interest rate hikes have done little to temper housing prices will not sit well with the RBA governor.

Adding to her angst will be revelations within Domain’s House Price Report for the September quarter that house and unit prices are tracking towards record highs across the combined capitals by the end of 2023.

While the recovery moved through its third quarter of growth for houses and second for units, up by 1.9% and 1.8% respectively, Domain data suggests the pace of quarterly growth has eased by a third compared to the previous quarter.

Sydney, which has a median house price of $1,578,099, and Brisbane ($848,752) are tracking towards record highs, while Perth ($713,811) and Adelaide ($844,654) have already witnessed record-high house prices.

Meanwhile, Brisbane ($495,143) and Adelaide ($466,379) are the only cities with record-high unit prices.

Dr Nicola Powell, Domain’s chief of research and economics points out that the pace of growth is currently being somewhat contained by stretched affordability.

“If mortgage rates weren’t as high as they currently are (5.98% for a new owner-occupied home loan), price growth would be faster with the current housing undersupply,” she said.

“So for buyers who are in the position of considering purchasing, it is important to weigh up the pros and cons of delaying their purchasing timing along with financial planning. For sellers, with the market recovers, it is about pricing the home correctly ahead of the increasing competition.”

StoreLocal reveals major expansion plans

Following a recent $100 million equity capital partnership, national self-storage company, Brisbane-based StoreLocal has revealed plans to have around 40 properties under its umbrella in 2023-24.

The company’s CEO and cofounder Hans Pearson attributes the evolution of self-storage into a multibillion-dollar sector to changing workplace dynamics and the gravitation towards smaller living spaces.

“The sector will grow in line with population growth and smaller residential units which we know are long-term demographic trends,” noted Pearson who is also a property valuer.

Acute shortage of tradies

The HIA Trades Availability Index deteriorated marginally in the September quarter to -0.65 compared to -0.62 June Quarter 2023.

By trade, the most acute shortages of skilled tradespeople in the September Quarter 2023 remained in bricklaying (Index reading of -1.17), roofing (-0.91), carpentry (-0.88), and ceramic tiling (-0.82).

The most acute shortages of skilled tradespeople in the September Quarter 2023 were in Queensland (-0.85 in the capital, -0.94 in the regions), South Australia (-0.75, -0.92) and Western Australia (-0.71, -0.77), compared to New South Wales (-0.62, 0.60) and Victoria (-0.59, -0.57).

Future Fund to offload Lakeside Joondalup

In an attempt to further trim its exposure to the local retail property market, the sovereign wealth fund has expressed interest in selling its 50% stake in Lakeside Joondalup, a shopping centre north of Perth.

Future Fund co-owns the $900 million 100,000sq m retail complex with the Lendlease-operated Australian Prime Property Fund Retail.

It’s understood Future Fund’s interests in Lakeside are being brought to market by CBRE’s Simon Rooney.

Given that the Future Fund brought the asset to market in 2018 with future potential of around $600 million, the (Lakeside) sale is likely to reflect a downgrade in market expectations.

Interestingly, the sovereign wealth fund’s latest annual report points to a rerating of property valuations.

Overseas searches spike

According to new data from PropTrack, searches on realestate.com.au for Australian properties from overseas property seekers have continued to increase in the past three months, with buy searches rising 11.5% and rent searches up 7.8%.

While Kiwi property seekers remain the number one fan of Aussie homes, Melbourne was the top destination for overseas property seekers looking to rent and buy in the past quarter.

Image: Events Travel