The Rental Specialists

Annual rental growth at lowest level since 2021 Rental growth is slowing, but property investing activity is growing sharply. Australia's median rent rose 0.2% in October, which was higher than the increase recorded the month before (0.1%) but lower than the increase in the previous three Octobers (which was 0.7% each time), according to CoreLogic. Meanwhile, over the year to October, the median rent rose 5.8%, which was the lowest figure since April 2021. “Softening rental conditions are likely symptoms of slowing net overseas migration, which peaked through the first quarter of 2023, as well as changes in household formation, as the average household size gradually increases following the pandemic ‘shrink’,” CoreLogic said. Despite this reduction in rental growth, “investing in housing remains popular”, with investor borrowing growing sharply over the past year – and more than twice as fast as owned-occupier borrowing. #property #realestate #homeloans #therentalspecialists

Residential construction market starting to normalise Good news for anyone who wants to see an increase in the nation’s housing supply, with the number of homebuilding approvals now clearly trending upwards. A total of 14,842 approvals were issued in September, which was 6.8% higher than the year before, according to the Australian Bureau of Statistics. During that time, approvals for houses increased 16.7% (see blue line in graph), although approvals for other dwellings fell 12.2% (orange line). Housing Industry Association economist Maurice Tapang said the residential construction market was starting to normalise, with building costs “growing at a more normal pace” and build times for houses back to pre-pandemic levels. “It has been a year since the RBA last raised interest rates. Unchanged cash rate settings, supported by strong population growth, low unemployment levels and acute housing shortages, have helped lift consumer sentiment,” he said. “The result seen in house approvals data continues to confirm that the market is past its trough, and more buyers are building a new home, especially in those markets outside of Sydney.” #property #realestate #homeloans #therentalspecialists

RBA remains cautious about inflation The Reserve Bank of Australia (RBA) board has left the cash rate at 4.35% – and delivered three key messages in the statement explaining its decision. 1. Underlying inflation “remains too high”. While the headline inflation rate recently fell to 2.8% (putting it within the RBA's target range of 2-3%), the ‘core’ inflation rate was still 3.5%. 2. The RBA’s “highest priority” is to sustainably return inflation to target. Interest rates will need to be “sufficiently restrictive” until the RBA believes inflation is under control. 3. The economic outlook remains “highly uncertain”, so it's unclear what will happen with inflation and the broader economy in the months ahead. Based on this statement, the RBA doesn’t appear to have any plans to reduce the cash rate anytime soon. #property #realestate #homeloans #therentalspecialists

Borrowing declines 0.3% After increasing for seven consecutive months, home loan borrowing activity has now declined. Between January and August, monthly borrowing steadily rose from $26.208 billion to $30.308 billion. However, in September, it declined to $30.210 billion, a reduction of 0.3%, according to the Australian Bureau of Statistics. Time will tell whether this is an aberration or the start of a downward trend. Either way, borrowing activity has increased strongly over the past year: * Total borrowing = 18.9% higher (compared to September 2023) * Owner-occupier borrowing = 13.1% higher * Investor borrowing = 29.5% higher #property #realestate #homeloans #therentalspecialists

State gets top ranking for first time since 2014 Which state has the nation’s best-performing economy? The answer is Western Australia, according to CommSec’s quarterly State of the States ranking. * Western Australia scored highest on three of the eight economic indicators – unemployment, retail spending and population growth. * South Australia scored highest on two of the eight economic indicators – economic growth and home building starts. * Queensland (home lending), Victoria (construction work) and Tasmania (equipment investment) topped the other three indicators. CommSec ranks the states/territories by comparing their current performances on the eight key indicators with their long-term averages. This is the first time in 10 years that WA has taken top spot. “WA is well positioned for sustained future performance; however, the competition remains intense, particularly among the top three states, with Queensland moving quickly up the rankings,” according to CommSec chief economist Ryan Felsman. #economy #jobs #homeloans #therentalspecialists

Inflation falls to 2.8% There were two good pieces of news in the latest inflation data from the Australian Bureau of Statistics. First, the consumer price index (CPI), which measures inflation, fell from an annualised rate of 3.8% in the June quarter to 2.8% in the September quarter, bringing it back to within the Reserve Bank's target range of 2-3%. Second, inflation rose just 0.2% in quarterly terms between June and September (after rising 1.0% in each of the previous two quarters), suggesting the rate of price growth in the economy has dramatically slowed. The sooner the Reserve Bank believes that inflation has fallen – sustainably – to low levels, the sooner it will reduce the cash rate. Once that happens, mortgage rates will also fall. #economy #homeloans #money #therentalspecialists

First home buyer snapshot What are the main reasons first home buyers want to enter the property market? The number one reason, according to the Realestate.com.au Property Seekers Survey, is to stop renting, which was mentioned by 36% of respondents. First home buyers also want to build wealth (24%) and to attain a better quality of life (23%). But there are obstacles, including cost of living (56%), property prices (53%) and the economy (49%). If you’d like to buy your first home, there are ways you might be able to enter the market sooner than you realise. They include accessing the federal government’s First Home Guarantee, using a guarantor home loan, using a low-deposit loan, or buying with a partner, relative or friend. #property #realestate #homeloans #therentalspecialists

Vendor discounting largely unchanged over past year Properties typically sell for a discount compared to their original listing prices. Across Australia, the median vendor discount in the September quarter was 3.7%, according to CoreLogic. That included median discounts of 3.4% in the combined capital cities and 4.0% in the combined regions (see graph). Interestingly, these figures have recorded little movement in the past 12 months. During that time: * National discounting has ranged from 3.5% to 3.8% * Capital city discounting has ranged from 3.1% to 3.5% * Regional discounting has ranged from 3.8% to 4.1% Discounting trends tell you how a market is moving – an increase in discounting means the balance of power is shifting from sellers to buyers, while a decrease means it’s shifting from buyers to sellers. The fact discounting has remained largely unchanged over the past 12 months suggests the market has been quite steady during that time. #property #realestate #homeloans #therentalspecialists

Why homebuilding activity is weak Australia’s residential construction industry is facing pricing and productivity challenges, which is limiting the amount of new housing that is being built. The Cordell Construction Cost Index, which tracks the change in the cost of labour and materials to construct a lowset detached house, rose 1.0% in the September quarter. This was up from 0.5% in the June quarter, but well below the peak of 4.7% in the September 2022 quarter (see graph). Nevertheless, challenges remain for new housing supply, according to CoreLogic's head of residential research, Eliza Owen. “The stickiness in construction costs without an offset in increased productivity is likely to lead to less project feasibility and low approvals. The particularly low levels of apartment development will also mean a higher ratio of demolitions to dwellings completed, and lower net completions than in the 2010s,” she said. “There are some signs of capacity easing at the early stages of construction, such as in commencement times for detached houses, but more must be done to increase the capacity and productivity of the sector.” #property #realestate #homeloans #therentalspecialists

Research finds only minor link between interest rates and rents Many people assume that when interest rates rise, property investors automatically pass on these extra costs to tenants. But is that true? Not really, according to a research report published by the Reserve Bank of Australia (RBA). “On average, we find that for every dollar increase in their mortgage interest costs, investors increase their rents by one cent,” the report said. “To put this effect in context, the median monthly interest payment for leveraged investors increased by around $850 between April 2022 and January 2024. Our estimate suggests that this $850 increase in interest costs would have raised rents by less than $10 per month, or just over $2 per week.” The “key driver of rents” is actually “housing demand relative to the stock of properties available” – in other words, supply and demand (see graph). “Indeed, the RBA’s assessment is that high rent growth in recent years reflects this fundamental force. Housing demand has been strong, supported by high population growth and increased preference for more space, while supply has been hampered by ongoing capacity constraints and increases in construction costs.” #property #realestate #homeloans #therentalspecialists