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With the latest quarterly figures indicating a decline in inflation rates, the Real Estate Institute of Australia (REIA) has indicated that an interest rate cut could be on the horizon.
Recent data from the Australian Bureau of Statistics (ABS) has shown that the consumer price index (CPI) increased by 2.7 per cent in the year to August 2024, a decline from the 3.5 per cent and 3.8 per cent growth in the 12 months leading to July and June of this year respectively.
Weighing in on these findings, REIA president Leanne Pilkington noted the “important analytical series of annual trimmed mean also confirmed the downward trend”, with those figures up by just 3.4 per cent in August, a decrease from 3.8 per cent in July and 4.1 per cent in June.
“This means that all three broad measures of inflation are the lowest they have been since 2021 before the RBA started its interest rate increases in May 2022 – the headline inflation is the lowest since August 2021, CPI excluding volatile items is the lowest since December 2021 and the trimmed mean the lowest since January 2021,” Pilkington highlighted.
The most significant increases occurred in housing (up 2.6 per cent), food and non-alcoholic beverages (up 3.4 per cent) and alcohol and tobacco (up 6.6 per cent), according to the ABS.
Pilkington also noted that rents are showing signs of moderation, growing by 6.8 per cent in the 12 months to August 2024, dropping from the 6.9 increase in July and 7.1 per cent in June.
“REIA’s Real Estate Market Facts released earlier this month shows that vacancy rates increased in all capital cities except Melbourne and Hobart, where they remained stable. This suggests that the slowdown in rental increases should continue,” she said.
With the Reserve Bank of Australia (RBA) deciding earlier this week to keep the cash rate at 4.35 per cent, Pilkington stated that the consistent trend across the three measures of CPI mean “we are steadily inching our way to the RBA’s target zone and the anticipation that a rate cut cannot be far away”.
Commenting on ongoing speculation around the elimination of negative gearing, the president cautioned that such a move would “put a halt to this just as we are seeing a pick up in the proportion of housing loans going to investors”.
“Numerous studies have shown that such action would lead to additional rent increases of between 7 and 12 per cent,” she concluded.
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