How Falling Inflation Benefits Property Investors

How Falling Inflation Benefits Property Investors

Posted on February 5, 2024 by Mirren Property Investment

In the ever-evolving landscape of property investment, staying informed about economic indicators is crucial. Mirren Investment Properties, committed to providing valuable insights, delves into the latest inflation data and its implications for property investors. CoreLogic’s Head of Research Eliza Owen breaks down the numbers, revealing a potential wave of opportunities for savvy investors.

The Good News on Falling Inflation
The recent Consumer Price Index (CPI) results for the December quarter bring optimistic news for property investors. Inflation has fallen once again, from 5.4% in September to 4.1%, marking the fourth consecutive quarter of decline. This trend indicates softer demand in the economy, with impacts observed in retail trade, job vacancies, and a slight rise in unemployment.

Implications for Monetary Policy
The silver lining in falling inflation lies in its positive implications for monetary policy. A decrease in inflation strengthens the case for interest rates remaining steady in the short term and potentially coming down later this year. A reduction in interest rates is expected to boost housing demand, offering an exciting prospect for property investors.

Housing’s Impact on Inflation
Housing, comprising around 22% of the CPI basket, plays a significant role in inflation calculations. The CPI measure for the purchase of new homes has eased to 5.1%, down from 5.2% in the previous quarter, indicating a favorable direction for property prices. Despite easing, residential construction remains a substantial contributor to inflation, influenced by high labor and material costs.

Rent Component of CPI
The annual growth in the rent component of CPI was 7.3% in the December quarter, showing signs of easing from the previous quarter. While still above the pre-COVID decade average, the slowing rate of increase suggests hope for tenants. CoreLogic rent measures further support this outlook, indicating a potential turnaround in the rental market in 2024.

The Takeaway for Property Investors
Although inflation remains above the Reserve Bank of Australia’s target range of 2-3%, the positive trajectory and faster-than-anticipated decline signal potential relief for property investors. As the economic landscape adjusts, Mirren Investment Properties anticipates a favorable environment for investors with the easing of living costs and a growing expectation of rate cuts later this year.

At Mirren Investment Properties, we are committed to helping you navigate the dynamic world of property investment. If you’re looking to capitalize on the potential opportunities presented by falling inflation, contact us today. Our team of experts is ready to guide you through strategic investment decisions that align with your financial goals. Don’t miss out on the wave – seize the opportunity for growth with Mirren Investment Properties.

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