Inflation falls to lowest levels in 17 months
The news comes ahead of the RBA Board meeting on interest rates next Tuesday
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Further interest rate hikes may well be at an end with news that the inflation rate has fallen to its lowest levels in 17 months.
New data from the Australian Bureau of Statistics released today shows the consumer price index (CPI) for July came in at 4.9 percent seasonally adjusted, down from 5.4 percent in June. Markets had widely forecast a CPI of 5.2 percent.
Housing accounted for the most significant rise, up 7.3 percent, followed by food and non-alcoholic beverages, which increased by 5.6 percent. At the other end of the spectrum, the price of automotive fuel fell by -7.6 percent.
While the fall in the rate of inflation rate is good news for borrowers as the RBA approaches its monthly board meeting next week, there was further news for the property market, with the price of new dwellings rising by 5.9 percent, the lowest annual rise since October 2021.
However, rental demand remains strong, with rent prices up 7.6 percent in the 12 months to July 2023.
The RBA expects inflation to reach a more manageable 2-3 percent range by mid 2025.
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2 min
The recent budget has forced a reckoning for property investors.
Negative gearing now restricted to new residential builds, the CGT discount gone and on paper, the numbers look different.
And many investors are responding by pivoting toward yield, prioritising cash flow over capital growth in a way that property strategists say misses the point entirely.
“The debate has shifted to yield versus growth as if they are opposing forces,” says Abdullah Nouh, founder of Melbourne-based buyers’ agency Mecca Property Group. “But that framing is itself the mistake.”
Nouh, who works with high-net-worth families and investors on long-term acquisition strategy, argues that capital growth remains the primary driver of genuine wealth creation and that the post-budget environment has made quality assets more important, not less.
The numbers make his case plainly. An additional $500 per week in rental income is welcome. A prestige asset appreciating by $1 million over a market cycle is transformative.
These are not equivalent outcomes, and portfolios built around yield at the expense of location and land value tend to generate income while wealth stands largely still.
The more nuanced shift Nouh is seeing among sophisticated investors is a move toward assets where both outcomes can be engineered simultaneously – established homes on substantial land in quality locations, where the existing dwelling can be repositioned, rental returns improved, and the underlying land value compounds independent of what sits on it.
For investors with existing equity, commercial property is also entering the conversation in a more serious way.
Prestige industrial assets, medical centres and long-leased essential retail offer income profiles that residential property in most capital city markets cannot currently match: longer lease terms, tenants covering outgoings, and greater predictability than the residential tenancy cycle.
“The investors who build lasting wealth are rarely the ones who chased yield or growth exclusively,” says Nouh.
“They are the ones who built a strategy they could sustain – one that generated enough income to hold quality assets through multiple cycles while those assets compounded in value.”
The budget has changed the settings. It has not changed the fundamentals.
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