Green shoots in the new world order

BY GARETH KENT

The state election has come and gone.

I am now hopeful, as both the federal and state governments are from the same side of the aisle, that some federal funding for infrastructure and spending will complement our state support.

The Avalon Land 400 contract would be a good start!

It’s a changing world, and there have been quite a few things happening globally that signal the turning of that the broader economy.

Bank of Melbourne’s “Snapshot” report released this week indicated that retail spending was down by 0.2 per cent, the first time in 2022 that retail sales declined.

Additionally, the NAB Quarterly Residential Property Survey indicates that the national housing market sentiment has fallen for a second straight quarter, down by a further 9pts.

Melbourne house prices dropped in October by 0.9 per cent, Brisbane 1.9 per cent and Sydney 1.3 per cent.

More broadly, the US inflation rate slowed for the fourth month to 7.7 per cent, the lowest since January.

Another big impact is China relaxing COVID policies, and the Bank of China appears to be rescuing the Chinese property market, a market whose collapse could be catastrophic for the worldwide economy.

In Australia, the new monthly inflation indicator showed that inflationary pressures moderated slightly in October but still remained elevated.

Inflation rose 6.9 per cent in annual terms in October, edging down from 7.3 per cent in September, noting that increased fuel costs make up a large portion of the inflation calculation.

Why are all these negative economic indicators good news?

The global economy was overheated, and governments and central banks worldwide have been doing all they can to cool the economy down via increases in the cash rate, tighter monetary policy, reduced government spending, etc.

The above is evidence that these deflationary strategies are starting to bite.

This means that the likelihood of the cash rate easing in the late part of 2023 and into 2024 is looking good.

So where are the opportunities to invest as the pressure comes down?

As a case study, this week, we saw two similar properties transact in North Geelong.

Both properties are zoned Industrial 1 and are 613sqm in size.

Property 1 has a shed of 400sqm metal deck factory.

Property 2 has a shed of 250sqm metal deck factory.

The properties are within 500 metres of each other in the same precinct but with different selling agents.

Property 1 sold on 2nd December for $1,200,000. Property 2 sold on 1st December for $663,000.

This is a great example of the opportunities that exist in the market now.

The saying that you “make money when you buy, not when you sell” is as true as ever.

These opportunities exist if you do your research know where to look.

From a residential perspective, rentals have never been higher, and the rental vacancy rate is now a further 1.5 per cent in the Geelong region, with both factors pushing renters further out.

Opportunities for investors to buy good solid homes with an immediate positive cash flow are on offer right now in suburbs such as Bell Park, Norlane, North Geelong and further afield.

I lastly note the “Commonwealth Games factor”.

It is estimated that the Games will contribute more than $3 billion to our state economy, with more than 7,500 jobs created in Geelong, Bendigo, Ballarat and Gippsland.

The state government’s hand on infrastructure is about to be forced. With the world tuning in to watch, and the need to run a “perfect Games”, the Geelong region will benefit.

This will create pressure on purchasing demand, hopefully at about the same time as interest rates contract toward the end of 2023 start of 2024.

This will increase the likelihood of capital growth of property investments in the region.

People, I am reading the tea leaves, and they are telling me it’s a good time to think about getting back in!

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