[Podcast] Where are our economy and our housing markets headed? With Dr Andrew Wilson

We know that housing affordability is a real issue, with many Aussies now finding it harder to buy their dream home as 8 consecutive interest rate rises have cut many buyers borrowing capacity by up to 20%.

But what about rental affordability?

With more and more people renting for longer at a time when the number of advertised dwellings for rent has plummeted, vacancy rates are record lows, and rents have shot up at the fastest rate in decades, what does this do to rental affordability and how will this affect rental increases moving forward?

I also get his views on the strength of Australia’s economy, the latest monthly inflation figures and what’s ahead for interest rates, and where our housing markets are headed.

Temporary Rent Relief Ends – House rents resume their upward surge

The recent pause in monthly house rent increases has predictably ended, with asking rents for both units and houses rising sharply over November.

All capitals reported higher house rents over the month except for Hobart, where monthly rents were steady.

Most capitals have reported significant rises in house rents over the year ending November, with Perth the top performer, higher by 20.2%, followed by Brisbane up 18.1% and Sydney rising by 16.8% over the year.

Unit rental markets also again reported higher rents over November, apart from Brisbane, where rents were steady.

Booming Economy?

Despite this year’s steep rise in interest rates, Aussies keep spending, and this consumer cash splash continued driving robust growth in the national economy.

Household spending rose 1.1 per cent for the quarter, contributing 0.6 percentage points to GDP.

Growth was driven by spending on hotels, cafes, and restaurants (up 5.5 per cent), transport services (up 13.9 percent), and purchases of vehicles (up 10.1 per cent).

Households continued to increase spending on domestic and international travel as COVID-19 travel restrictions continued to ease.

Spending on new vehicle purchases increased as international supply chain constraints eased, enabling an increase in vehicle imports.

Spending on hotels, cafes, and restaurants has exceeded pre-pandemic levels for the past two quarters.

The interest rate outlook is improving

The RBA increased interest rates by 0.25% to 3.1% in December.

The RBA is wary of creating an economic downturn from higher rates but is committed to controlling inflation.

This means there's a balancing act involved, but more rate increases are likely to come.

What’s ahead for interest rates?

The Reserve Bank, which was slow in its efforts to start tackling inflation in Australia, fully intends to do everything to get on top of it.

Economists looking for signs of an interest rate pause after a widely expected 25 basis point cash rate hike in December didn’t find any.

Instead, there was a strong message that rates would keep moving higher into the new year until inflation is put back in the box.

Links and Resources:

Michael Yardney

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Dr. Andrew Wilson, Chief Economist My Housing Market

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Some of our favourite quotes from the show:

“Households continue to increase their discretionary spending, as opposed to essential spending.” –Michael Yardney

“I think the world is starting to realize that we are near the peak of interest rates; we are near the peak of inflation.” – Michael Yardney

“Financial well-being can’t be measured merely by looking at how much you earn.” – Michael Yardney

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