Volatile few weeks on the Markets.
Last week Stock Market down 2.2%, this week recovered the loss.
Ten year bond under 4% and below cash rate - very positive signal for those with debt.
Reasonable clearance onrespectable median prices andgood volume for winter. Melbourneclearly the market withexceptional opportunity
SQM research advises “Australian capital city asking rents have recorded the largest monthly falls since theoutbreak of COVID with a decline of 0.5% for the capital cities over the past 30 days. Sydney recorded adecrease in combined rents, dropping by 1.0% to $829 per week. Melbourne also recorded declines of 0.6%with combined rents falling to $632 per week. In what will be a surprise to many, Brisbane and Perth alsorecorded falls in rents with Brisbane falling by 0.5% and Perth falling by 0.6%.” Whilst this trend may not lastgiven the continued housing shortfall, it indicates a slowing of rental growth which has been a major factor ininflation.
It also points to growing unaffordability of housing to renters. No matter the economy is officially near fullemployment (at least according to the Treasury Department, the Social Welfare department begs to differ, mostfamilies seem stretched to their limit. This is confirmed by NAB Monthly Data Insights for July, which noted: “nondiscretionary spending was up 0.4% m/m while discretionary spending went down 0.4%.” In other words,people are spending their income on essentials like food and shelter and cutting back on anything discretionaryto balance the budget.
It went on to note: “There is no sign of a surge in consumption post the July tax cuts yet. Our survey data showsthat most people (70%) intend to put their extra money from tax cuts aside to save, pay down debt or investinstead of spending.”
Despite this “Consumer spending is up 0.9% in the past 3 months and 4.8% over the past 12 months.” This isthe real measure of inflation. No matter the price of motor cars that we are not buying fell, the price of food,energy and shelter which we must purchase is significantly higher, hence we are cutting back where we can,spending more where we must and saving to prepare for tough times.
Salvation remains the elusive rate cuts, which are bedevilled by government deficit spending and by moneymarkets factoring in rate cuts like mirages in the desert. The Governor of the Reserve Bank took flak last weekfor suggesting Board debate was on raising rates rather than cutting them. This week her Deputy scoldedeconomists, journalists and money market participants for creating the impression of imminent rate cuts. TheRBA would like to fight inflation with words, rather than rate hikes. If no one believes their words, they may beinclined to raise one more time to shock the market. Heedless, the Money Market continues to price in cuts.
With rates at high levels we are seeing growing demand for higher cash flows strategies such as light industrial or dualincome sites ( two dwellings – one title ) if this is of interest, please don’t hesitate to reach out for more information.
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