Interest rates Australia: Further rate cuts by | Australian Markets
Rising construction prices and rental will increase might show to be hindrances for additional rate cuts from the Reserve Bank.
The latest information from Cotality reveals there are issues for housing inflation and its knock-on results off the back of rental re-acceleration selecting up in state capitals for the primary time in two years.
The capital metropolis rental worth index has elevated by three per cent to July 2025, up from 2.7 per cent a month earlier than, in keeping with Cotality’s August month-to-month housing chart pack.
That has marked the top of 16-straight months of moderating or steady rental growth.
It was a development value maintaining an eye on, Cotality economist Kaytlin Ezzy mentioned.
“The re-acceleration that we’ve seen in rent value growth and construction costs more recently are an indication that maybe the housing component of inflation has sort of hit its floor in terms of the pace of growth,” she informed AAP.
“And that we would see that component of the CPI basket shift higher moving forward.
“If it does continue to trend higher, it could put future rate cuts at jeopardy.”
The shopper price index (CPI) basket is items and providers used to trace modifications in price of residing.
The housing element made up more than one-fifth of the basket and rents accounted for six.6 per cent, Ms Ezzy mentioned.
Another concern for housing inflation is an uptick in construction prices shifting to 2.9 per cent to June 2025, from 2.6 per cent within the 12 months to June 2024.
Labour was a main think about driving elevated construction prices, Ms Ezzy mentioned.
“We recently put out our CCCI Index report, which covers off the increase in construction costs over the June quarter … it does suggest that we are seeing a little bit more pressure in construction costs, particularly residential projects competing for that labour with infrastructure projects,” she mentioned.
Sydney and Brisbane have led the re-acceleration in capital metropolis rental growth with their unit markets driving the uptick.
Annual modifications in dwelling rents within the NSW capital have gone from a current low of 1.8 per cent to 2.4 per cent within the 12 months to July.
Brisbane’s annual rental development has risen by 1.4 proportion factors following lows in February of 3.2 per cent to 4.6 per cent.
Melbourne’s healthy circulation of new housing stock to the market had saved the development in rent growth a little bit decrease lately, Ms Ezzy mentioned.
The Reserve Bank cut curiosity rates for a third time in six months on Tuesday.
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