Merry Christmas, 2024 & 2025, what to look out for
Merry Christmas and a Happy New Year to you and your families. At The NPR Co, our Christmas break will likely be inspired by Santa.
2024 remained a year of confusion for many, us included when it came to many of the economic indicators. Robust employment conditions but with poor household savings, low consumer confidence and generally weak retail conditions. Inflation remained stickier than we thought with Australia’s monetary policy lagging most of the advanced economies, many of which have now had multiple rate cuts. Inflation for largely all of the world’s advanced economies is now under control. The history of two speed economies in Australia repeated itself with Brisbane, Perth and Adelaide being the standouts, Sydney largely trending sideways and Melbourne having one of the toughest years in memory, well at least since the mid 2000’s.
International population growth continues to prop up the economy and has largely contributed to Australia staying out of recession, but conversely adding additional pressure to an already stretched housing market. This has led the State and Federal Government’s to make statements that are reminiscent of Top Gun Pt1, “Your actions are writing cheques your body can’t cash”. Quite simply we don’t have the skills to solve this problem quickly and no amount of money will cover this or the affordability problem some of our regional plans are also contributing to. The author has often been left scratching his head this year with multiple government announcements not addressing the cause of the problems, but rather triaging the downstream consequences of decades of inaction and indecision.
So what are the key things to watch in 2025?
Net overseas migration and international arrivals and departures. It would appear some expats are returning to work overseas again. Depending on how fast this trend happens will determine how quickly the market comes back into balance. No one is really talking about this, but it will become increasingly important next year.
The RBA will not only be watching inflation carefully, but will have an eye fixed on both household savings and retail spending.
Investors will continue to gain traction, particularly if interest rates fall in the first quarter. With the price gap narrowing between the established apartment market and new apartment product more projects may well start to become viable. Watch for more cranes emerging on the horizon, there is no shortage of D.A Approved projects sitting there waiting for the right time to commence. Should this happen, the edge will arguably be dulled for build to rent.
We are a long way off getting back to a balanced rental market, though vacancy rates are softening…watch this in combination with point 1.
The Government will continue to blame the private sector for not creating supply and land banking and the private sector will continue to respond with elevated construction costs, multiple environmental and other overlays restricting developable land, questionable planning strategies and a lack of flexibility.
Work from home is not going to change, develop accordingly.
If you are banking on interest rate drops stimulating the housing market, perhaps ask yourself why the cash rate is being cut…but therein lies the muddiness in the water. Full employment and cash rates are going down not up, these are the times we live in.
For the cities, watch how the universities respond to housing their international students. Education is worth almost $48 billion to the Australian economy in exports, the government can’t afford to ignore this sector.
For the regions, a low Australian dollar is likely to further demand for our resources and agricultural produce. Barring any unforeseen catastrophic weather events, most regions will likely remain in a position where there is a shortage of housing and because of that, a shortage of labour. Finding builders will be tough, finding viable construction prices will be tougher.
Again Merry Christmas to you all, thank you for your business in 2024 and we look forward to working again with you on your many interesting projects in the New Year.
Matthew Gross | Director | mgross@nprco.com.au
