Breaking Square | 06/09

Spring has sprung in Brisbane, whilst we had a bit of a heat wave last week, this week has been milder and more pleasant. Spring time in Brisbane is when everyone comes out to play; we don’t do cold weather well in Queensland. So now that it is warming up, so too, traditionally does the real estate market; not that it has cooled over winter. So we are expecting a very busy time leading up to Christmas.

New data out this week showed very weak growth in the economy, further fuelling the debate around interest rates and the need to cut them now. However, the RBA is continuing to struggle with inflation and claims higher inflation is worse than higher rates, so they will stay where they are for the time being.

We know spending has tightened and I am seeing it now across many industries. As an example, a very popular restaurant in the Valley is now sending me emails to invite me to visit again, this has never happen prior. Booking accommodation late for Noosa and there was availability, which was not the case for the last several years; I am seeing discounting occurring as well.

All of this will soon, if it hasn’t already, flow into rents, as folks tighten their belts and compromise on what they rent. I wrote a few weeks ago that I sensed we were close to a tipping point. Rents are definitely plateauing and properties are taking longer to rent. This is not good news for investors, as rates stay at higher levels, but rents start to come off. This is exactly what the RBA wants, as rental prices feed into inflation – a real Catch -22.

Typically when we see growth so low, it is expected that governments inject cash into the economy, which they have done with public service wages, health and age care, all of which don’t really support business or tax payers. Furthermore, it would be usual for the RBA to lower rates with growth this low, to try and stimulate the economy. Contrary to what usually happens, the RBA is not lowering rates and the government can’t afford to stimulate the economy too much for fear of being seen as the root cause of continued higher inflation. Remember I said the play book of old no longer applies – it is truly a conundrum for all concerned.

I read with interest an article about the use of flexi-hoses in plumbing, particularly under sinks and in fridges etc. Back when, the use of copper piping and fixed metal pipes were installed and stood the test of time, there has been a big increase in insurance claims with these hoses failing and flooding properties, hence the increase in insurance premiums. I personally have experience one of the hoses failing on our fridge and flooding the whole kitchen.

It is important we keep an eye on such items and perhaps need to discuss with the insurance companies whether or not you are covered should the tenant’s fridge fail?? I understand not all properties are plumbed for fridges with ice and water makers, but should your property have these services, best to ask your insurer as there is no warning when they burst.

Another item that has caught my attention in the past week is air conditioning units. As the temperature rises, so too does the use of the a/c and over the past week I have received several maintenance requests for failing units. As I do the routine inspections, I am being very particular about the a/c units and noting the tenants need to clean the filters and give the units a good wipe over. However, as the units age, so too does the prospect of replacement. Lately we have discovered parts are no longer available for older models and the only choice is costly replacement. Servicing older units may assist in prolonging the life of the machine?

Last, but not least, I have received a number of appraisal requests from owners, keen to learn what the new value of their property is. If you wish to get an updated appraisal, please give me a shout out, we are happy to provide this.

Until next week, stay safe and be kind.