The Australian Bureau of Statistics has released new data on the Consumer Price Index (CPI), providing crucial insights into current household inflation and the cost of living. For first home buyers and property investors, understanding these trends can assist in making informed decisions. Here’s a property perspective from the team at Teach Me About Property.
Electricity Prices and Food Inflation
Electricity prices have been a point of concern, rising 2.1% in the June quarter and 6.0% over the past year. The Energy Bill Relief Fund rebates introduced in July 2023 has provided some relief. In fact, without these rebates, electricity prices would have seen a staggering 14.6% increase. For first home buyers, this is an important factor to consider when budgeting for homeownership expenses, including utility costs.
Annual food inflation has been easing for the sixth consecutive quarter, settling at 3.3% in the June quarter. This is a notable decrease from the 9.2% peak in December 2022. For property investors, particularly those involved in the rental market, these changes could affect tenants’ disposable income and spending behaviour.
New Dwellings and Rental Price Growth
The national annual price growth for new dwellings remained steady at 5.1% in the June quarter. However, the growth was not uniform across all cities. Sydney and Melbourne saw moderate increases of 3.5%, while Perth and Adelaide experienced significant jumps of 18.1% and 7.4%, respectively. These differences highlight the varying demand and construction costs in different regions. For first home buyers, understanding these regional differences can help in choosing a location that fits their budget and investment goals. For investors already in the construction phase, this could signal a fair increase in equity available upon completion.
Rental prices have risen by 7.3% over the past year, reflecting a tight rental market with low vacancy rates. Although this growth is slightly down from the previous quarter, the market remains challenging for renters. The Commonwealth Rent Assistance (CRA) adjustments have somewhat mitigated the rent increases, but without these changes, the rise would have been 9.1%. For property investors, this persistent growth in rental prices could mean higher rental yields, making investments even more lucrative.
Implications
The annual CPI inflation increased to 3.8% in the June quarter, marking the first rise since December 2022. The Trimmed Mean, a measure of underlying inflation, fell slightly to 3.9%, continuing a downward trend from the peak of 6.8% in December 2022. This data suggests that while headline inflation is rising, the underlying inflation pressures are easing. For those buying property, this information influences interest rates, borrowing costs, and overall economic stability.
