Rates will have to come down eventually...

4 months ago 2

Dwelling starts under 40k (again)

Dwelling starts were a fairly miserable 39,715 in the first quarter of 2024, down -14 per cent from a year earlier, and the third quarter in a row under 40,000.

This is likely be at least a third below where commencements need to be in order for the government to hit its target of 1.2 million well-located homes over 5 years.

There was one bright spot in Perth, where a boom in prices has teed off a spurt of new house building.

Dwelling completions were similarly slow at only 41,329, with many developers collapsing into administration, although the number of dwellings officially under construction remains fairly elevated.

While Melbourne seems to be faring reasonably well given the prevailing conditions, in New South Wales new attached dwelling commencements have plunged to the lowest level in around a dozen years, suggesting a major dwelling shortage as the pipeline thins out.

There is, on the other hand, a healthy level of unit construction activity happening at Gold Coast and other parts of coastal south-east Queensland.

Dwellings approved but not commenced in New South Wales rose to above 16,000.

The wrap

Overall, lacklustre activity, pointing to a major shortage of dwellings in Sydney over the next few years.

Perth has a construction boom now underway, and with rising prices in Brisbane meaning that Brissie will likely be next cab off the rank.

At the macro level, we're not going to get anyway near enough dwelling supply with interest rates at these levels.

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Inflation in New Zealand came in at only +0.4 per cent in Q2 2024, taking annual inflation down to a 3-year low of 3.3 per cent.

Canada's inflation rate fell to 2.7 per cent, lower than expected, while in the UK headline inflation was flat at 2 per cent.

Services inflation looked a bit stickier than desired in the UK, but all of these countries will be seeing interest rate cuts soon.

In Australia, job ads fell another -10,000 in June to be -18 per cent lower than a year ago at 227,000, for a 34-month low.

Source: Jobs and Skills Australia

Monetary policy is working to slow the interest-rate sensitive sectors of the Aussie economy, but there's a way to go yet before inflation is assuredly contained.

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