In Brief: House Pricing, Construction, Inflation

Weekly Reports | May 06 2022

Weekly Broker Wrap: house prices set to soften, construction faces further collapse, inflation impacts grocery prices.

-House prices remain steady as the rental market further tightens
-Experts warn to watch for warning signs of further collapses in the construction industry
-Inflation hits grocery shelves in the quarter, grocery retailers likely to gain margin improvement

By Danielle Austin

House prices to soften as rate hikes take hold

While house prices largely remained steady through April, increasing just 0.3% nationally for a third consecutive month, ahead of the cash rate rise announced this week the Morgan Stanley experts warned rate hikes would accelerate softening in house pricing.

The soft month sees the annual price growth slide to 14.6%, while geographically, growth was strongest in Brisbane at 1.7%, while the Sydney market slipped -0.2% during the month. On surveying the market, Morgan Stanley found the sentiment that now is the right time to buy has declined to a 14-year low.

Comparatively, not only does the rental market remain tight, but vacancies fell to 2.8% during the month, the lowest level seen post-covid, while half of the capital cities retain vacancy rates below 1%. The tight market is encouraging the continuation of rental price rises, with asking rents up 14% nationally compared to a year ago, and Morgan Stanley analysts expect the rental market to remain strong as immigration recovers.

Threat of construction insolvencies looms

The combination of labour constraints and cost inflation is proving untenable for a number of high-profile Australian construction companies as the industry attempts to recover from covid, and industry experts warn not only that further insolvencies in the sector are likely in the coming year, but that collapses in the construction sector could have widespread flow-on impacts. The cash rate hike announced just this week could cause further pain, with construction companies inevitably exposed to lending rates.

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