Welcome to this weeks Property News.
The devastating floods that have ripped through Brisbane, the Northern Rivers and parts of North Western Sydney are a reminder that natural elements can wreak havoc to property but also to people and whole communities. The immense clean up and restoration of peoples homes, lives and livelihood will take years and the ongoing support of all levels of government as well as individuals and businesses who are unaffected.
There are a number of listed and unlisted funds with commercial assets in the affected areas. The physical & financial impacts to those assets is yet to be understood as the long term viability of the businesses within those assets is obviously in doubt. We hope for good news,
At a macro level, the Australian economy will expand further following the floods as communities are re-built, however the floods have come at a time when the economy is already facing labour and material constraints and the work load will inevitably lead to higher costs across a wide range of industries.
The cost pressures will continue to place pressure on Builders margins and may, as we saw with ProBuild, lead to administrators being appointed to a range of building companies. Development projects are therefore at an elevated risk and projects should adopt higher contingencies, longer construction periods and closer monitoring of contractor and sub contractor viability.
The RBA’s decision on Tuesday to leave interest rates on hold is a patient approach to a range of opposing indicators. Consumer spending has picked up the following the unlocking after Omicron; household and business investment intentions remain high; and major infrastructure projects continue at full steam across VIC, NSW & QLD. But the uncertainty from the recent floods on top of the war in Ukraine and the flow on affects to oil prices and global inflation has left the market nervous with ten-year government bond yields now 100Bps higher than in August 2021, sitting around 2.1%.
So it is also necessary for investment models to factor in the prospects higher interest rates and higher inflation.
If you have any news, information or research reports you’d like us to share with the market, please feel free to send me an email at info@propertymarkets.news or simply submit an article for us to review here.
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