The end of another financial year

July 4, 2024 BY

Gareth Kent, Director Preston Rowe Paterson on EOFY for the property market.


With another financial year coming to a close, this one means a lot more than others.

For valuers, in more recent years it has become a mad rush to the line, to get out valuation reports on properties for financial reporting purposes: taxation, capital gains, stamp duty, superannuation, plus the new daily enquiry on land tax and windfall gain taxes. I’m writing this with two days to go, noting that it won’t be published until after the EOFY. So a moment of reflection, among the chaos, is refreshing.

Thinking of a word to explain the past 12 months, I have settled on “uncertainty”. Uncertainty about interest rates when we started the year with an inflation rate of circa seven per cent, just below the peak of 7.8 per cent in March 2023. We then endured more interest rate rises, in early 2023, to bring the total number of rises to 13. The standard mortgage variable rate rose by 1.25 per cent across the year, for a total rise of 3.20 per cent. We endured Phillip Lowes’s rate rises until September and then the arrival of the current RBA Governor, Michele Bullock. Thankfully we have seen a change of thinking in the RBA and less inclination for more rises.

In contrast, we finished the year, with inflation back at 3.6 per cent, still slightly above the target level, and unfortunately falling slower than the RBA would like. There remains a lot of uncertainty about the lag in monetary policy impact, this is because 48 per cent of people were on fixed-rate loans after the pandemic. As a result of this, the property market has also been uncertain all year.

This Uncertainty led to lower listings, which in the first half of the year was predominantly in line with the decrease in demand, stabilising the falling property values. After the RBA allowed rates to stabilise for a few months, some confidence came back in the market and in the summer months of 2023/24 we witnessed an increase in listings, this time outstripping demand, and lowering clearance rates. The property market had a few months off before demand again met stock levels, and started moving again, albeit at a slower pace than we are used to. This is mostly driven by immigration and the increase in rental prices, forcing long-term renters into buyers.

As we head into the end of the financial year, we are still in a period of uncertainty. It’s pretty obvious that discretionary spending is down and uncertainty is evident across all sectors. Even online gambling has taken a hit with millions of dollars less gambled this year compared to last. Hospitality strips around the region are struggling. A well-known, long-term hospitality owner in Queenscliff reporting his worst taking in 14 years in the first few weeks of June. I had the joy of dinner at one of Geelong’s top restaurants a few days ago (yes, a date). On a Thursday night the venue was only half booked and we walked straight in – a few months earlier this was no chance without a booking.

A prominent local car sales figure, reported a slow quarter, with numbers well down on the 2021-2022 peaks. Add to this the well-publicised increases in energy bills and household costs, and it’s a pretty bleak picture. It’s clear to me, people are beginning to struggle. However, these ground-level observations will be unlikely to impact an RBA decision for several months, as the data lags the reality.

Interestingly however, the issues of uncertainty have little impact on the top end of the market. As usual, those with cash are largely immune. We have witnessed some amazing sales results at the upper end of the market, residentially and commercially. Industrial sheds of large sizes (greater than 1,000sqm), remain in hot demand, last week a block of industrial land in O’Briens Road Corio sold for $440sqm, nearly double the value it would have been 18 months prior, and setting a new record. Yes, records still seem to be set across several property sectors.

Donna Cross from McGraths, recently spoke of rentals at the high end (above $1,500 per week) being let quickly, as opposed to the rentals at the lower end circa $600 per week, taking a lot longer to lease. Again, even in the residential rental space, the top end of town appears to be unimpacted.

Winter will always bring a slowing to the market, simply, it’s cold. Or maybe I am getting older? This year’s uncertainty will continue to diminish demand, but like lighting the fire to warm up, I am optimistic that all this property market really needs is a spark to get going again. Maybe a rate cut in the mid part of this 24/25 financial year? Hopefully our inflation numbers drop and the RBA gives us an early Christmas present! Whatever it is, we can snuggle into our warm blanket, light the fire, open a bottle of wine and enjoy a slower paced life for a few months. Summer will come. Happy EOFY, everyone.