A lag in interest rise pain will likely mean a big Christmas for the retail industry before rate rises catch up and sting consumers.
Brookfield Managing Partner, real estate Sophie Fallman said the current situation we find ourselves in differs from the global financial crisis, but said we are heading towards either a slowdown, downturn or recession.
“By and large, the REIT sector and the economy more broadly is in a good shape to go into that environment,” she said at the Property Congress.
Darren Steinberg, Dexus CEO, said the country has more fixed mortgage rates than we have ever had.
A consequence of this is that the monetary policy changes, including rate rises, that would usually impact mortgage holders straight away, is not happening.
“Look out for the middle of the next year when the consumer is really going to start getting impacted,” he said.
“I’ve been analysing our data… a big bounce off two lockdown years, but the sales still aren’t back to 2019 levels in the portfolios I’m looking at, which are pretty large,” he said.
Australian retail turnover rose 0.6 per cent in August 2022, according to Retail Trade figures released by the Australian Bureau of Statistics (ABS).
The August increase was the eighth consecutive rise and follows a 1.3 per cent rise in July 2022, and a 0.2 per cent rise in June 2022.
Department stores rose by 2.8 per cent to a new record level, while household goods retailing had its largest rise since March 2022, up 2.6 per cent, having recorded three falls in the previous four months.
Charter Hall office CEO Carmel Hourigan said the country is exposed to variable mortgage rates, despite the increase of fixed rates, which are going to roll off in the next 12 months.
“Then there’s probably another third of the population that have investment properties, or they’re being impacted by rent.
“So it won’t take much of a lag to actually see this space impact come through to the consumer and we’ll start to move into consumers pushing and pulling back, and then we’ll go into potential recession.”
QIC Real Estate Managing Director Michael O’Brien said everyone is trying to find out where the rate cycle is going.
“We’re seeing extraordinary sales growth coming through our shopping centres, some of the strongest sales records we’ve seen in decades,” he said.
“That’s great at an operational level, but a little bit worrying in [that] these rate rises don’t seem to be having the desired effect on spending.
“It feels like we’re going to have a really good Christmas within the retailing industry, but maybe next year, it’s time to find a little bit harder.”