Last Tuesday, the RBA decided to cut the official cash rate to 0.5% due to the many market indicators, including the increase in national unemployment, decrease in retail spending, low inflation rate and COVID-19’s effect on the economy.
Again, this month we have seen the increase in COVID-19’s effect on international trade, tourism, and international study. We saw nine trillion US dollars wiped from the global stock markets, impacting confidence and sentiment. This uncertainty and fear could see a decrease in business confidence, meaning a decline in business investment and could influence unemployment globally.
As the virus is very new and not much is known about the direct and indirect impacts, markets are in a state of considerable uncertainty. This uncertainty is fostering a significant pullback in discretionary activity and, in some instances engendering panic.
This climate in the short term is working against the momentum of gains in the local market over the last month, including:
- Wage growth has risen 0.5% in December quarter 2019 and 2.2% through the year.
- Increased credit demand – expansion of housing finance commitments by 0.3%, across both owner-occupiers (0.4%) and investors (0.1%), with the latter being the first time since December 2018.
- Increased dwelling approvals – a 2.1% increase in Australian dwelling approvals in the last month which would underwrite higher construction volumes in the middle of the year.
- Rising dwelling prices, including an increase in the last month by 1.1%, with Brisbane’s prices increasing by 0.6%.
- Brisbane’s rental market has also seen a recent uplift in the last 12 months, with rental rates increasing by 3.4% for houses and 0.4% for units, abating fears of oversupply.
While we don’t expect the current situation to resolve itself swiftly (a vaccine is likely to be 18 months away), we do hope that the combination of government intervention and stimulus, steady supply-demand fundamentals, and an even more precise picture of what the virus is and how to manage it, will support market recovery in the medium term.
We may see some limited demand in the short term, but it’s likely that some significant outcomes will emerge around undersupply, changing migration patterns and productivity benefit.
Bluebird Property Partners is a boutique residential development management and advisory company, based in Brisbane. We provide a dedicated and personalised service to developers and landowners who may not have the time, expertise or resources to oversee their projects.
We have extensive experience, networks and the resources to manage all or any part of the development process.
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