Key takeaways
The price of oil has a strong influence on inflation, impacting transport and manufacturing costs. While oil prices remain volatile due to geopolitical factors, recent easing is positive news for inflation.
The cost of new home construction is rising at a slower rate, which helps ease inflationary pressure.
Rising rents are contributing to inflation, as they are a key factor in the Australian Bureau of Statistics' (ABS) inflation measurement.
Some regional markets have experienced strong price growth, but not all are performing well.
The national auction clearance rate fell to 59.1%, down from 63.0% last week and 65.0% the same time last year.
In this week’s Property Insiders chat, Dr Andrew Wilson, chief economist of My Housing Market, discusses some updates on certain drivers of inflation, including the price of oil, the cost of construction of new homes and rentals.
He also shares the top-performing regional markets around Australia, state by state, and as always, we have an update on what’s happened in our auction markets over the weekend.
Some of the factors that will affect our inflation rate
Watch this week’s Property Insider chat as Dr Andrew Wilson reminds us of the important relationship between the international oil price and inflation.
The following chart shows the close relationship between oil prices and the price of goods because oil prices are not just the price of the browser when we fill up our cars, but also flow through to transportation and manufacturing.
While the price of oil is very volatile, especially considering the current geopolitical environment, easing oil prices are good news for our inflation rate.
Another bit of good news for Australia’s inflation rate is that the cost of construction of new dwellings is rising more slowly than in the past.
However, another factor the ABS takes into account in its basket of goods measuring inflation are rentals, and these are once again rising.
Regional property markets
Watch this week’s Property Insider chat as Dr. Andrew Wilson discusses regional property market performance.
As you can see from the following tables, there have been some areas of very strong price growth.
Of course, there are over 300 regional markets in Australia, and not all have performed strongly, but recently a group of new buyer’s agents have been shoehorning investors into the same regional towns which in general are small markets with the effect of pushing up prices significantly above what local residents would be prepared to pay and above what fundamentals would suggest property prices should be.
That’s what happens when a group of investors looks at a small regional market with not many properties for sale.
Melbourne and Sydney auction activity on the rise
Melbourne and Sydney auction activity increased over the past week with each city reporting higher clearance rates from an increase in listings.
Auction numbers in the other capitals were also significantly higher although clearance rates were lower.
The national weekend auction market reported an average clearance rate of 59.1% over the past week which was well below the 63.0% reported over the previous week – and also again well below the 65.0% recorded over the same week last year.
Melbourne and Sydney have continued to report generally positive auction results so far this year and consistently higher than the same time last year.
The smaller capitals however have underperformed on the annual comparisons.
