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2-Sense: Business insolvencies at 15-year highs, office towers take a major hit & population surge drives rental vacancies to a new low

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Welcome to this week’s edition of 2 Sense on The Australian Property Podcast, where we take a look at the week’s most interesting news headlines and break down what this means for you.

Mortgage Broker Chris Bates and Buyer’s Agent Pete Wargent are discussing business insolvencies hitting a 15-year high, why office towers are taking a major hit & Australian population surge driving rental vacancies to a new low.

Story 1: Business Insolvencies Hitting a 15-year High

  • Firms are starting to fail as the cost of capital rises
  • Why is this happening? The business cycle has been unusual, stimulus could have papered over the cracks
  • Big surge in small business failures, rising unemployment, and a fall in employment, particularly in the retail segment
  • What does it mean for property?
  • Distressed sales are still low for now. The unemployment rate is still 3.7%

Story 2: Office towers to take a major hit (according to a recent Morgan Stanley report)

  • ABS value of dwelling stock rose $325bn in the June quarter to over $10 trillion, driven mainly by increases in the mean dwelling price in NSW (+$32k) and QLD (+$26k)
  • However, Morgan Stanley reports office tower valuations could fall another 10-15%
  • Why is this happening? Working from home phenomenon has persisted, at least for 3 days per week
  • What does it mean? This could be interesting news for REITs and super funds
  • What does it mean for property? Commercial office prices to fall

Story 3: Record low rental vacancies

  • Record high population growth, and record low rental vacancy rates.
  • International arrivals in January hit 1.7m, the highest since January 2020
  • Why is this happening? Temp visas are at a record high of 2.55m, including a record 650,000 international students, with population growth at 2.4%.
  • What does it mean? Despite this, the rental market seems to be a bit steadier and less panicked
  • What does it mean for property? Ongoing rental shortages and pressures to continue for the next 2-3 years?

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