For the 16th consecutive month, property prices across the capital cities have risen, with CoreLogic's Home Value Index reporting a 0.8% increase for the month of May, the largest monthly gain since October 2023. The regions also continue to experience growth, with a combined 0.6% increase.

Perth continues to be the highest performing market, increasing by a whopping 2% for the month, with Adelaide and Brisbane also recording strong growth of 1.8% and 1.4% respectively. Sydney, Canberra and Melbourne also experienced growth for the month, increasing by 0.6%, 0.5% and 0.1% respectively, whilst only Hobart and Darwin recorded a reduction in dwelling values, of 0.5% and 0.3% respectively.

The RBA is scheduled to next meet on the 18th of June. Whilst we believe a further increase to interest rates is unlikely, the undersupply of new housing and low tenancy vacancy rates should, in our view, ensure property prices remain strong regardless of the RBA decision.

Clearance Rates & Auctions week of 2^nd of June 2024

Property Values as at 1^st of June 2024

Median Dwelling Values as at 1^st of June 2024

Quick Insights

Investor's Rush

Loans in the investment property market spiked in April, new home loan commitments to investors jumped 5.60% from March, the fastest rate of gain since November 2021.

Commonwealth Bank senior economist Belinda Allen said,

"There's no end to price impacts from the lack of supply and strong demand. It's economics 101″.

Source: Australian Financial Review

Australian Apartments Up Again

There has been a 26% national increase in apartment selling prices, primarily benefiting higher-end developments, this surge alone is driving the rise in new home completions to 28,000 this calendar year. This figure marks the highest in four years, compared to the previous total of 32,000.

However, Urbis director Mark Dawson emphasized that without a corresponding decrease in borrowing or materials costs to make lower-priced unit projects financially feasible, the current spike in completions might taper off in the future.

Source: Australian Financial Review

Author: Filippo Sciacca, Director - Investor Relations, Asset Management and Compliance

Despite the predictions of exit polls and contrary to market expectations, the 2024 Indian parliamentary elections saw Prime Minister Narendra Modi's Bhartiya Janta Party (BJP) secure only 239 seats, falling short of the 272 needed for a majority. This was a significant decline from the 303 seats the BJP won in the previous 2019 elections. The National Democratic Alliance (NDA), the political coalition led by Prime Minister Modi's BJP, still managed to secure 291 seats.

With crucial support from pre-alliance partners in the states of Andhra Pradesh and Bihar, the NDA is set to lead the government. However, it will be a coalition government with a smaller margin. On the other hand, the opposition Indian National Developmental Inclusive Alliance (INDIA) has made unexpected gains, securing 234 seats, while the Indian National Congress (INC) nearly doubled its seat count to 100.

The BJP's allies will now have greater bargaining power, which could extend to cabinet decisions and crucial reforms. This means the BJP will need to include its allies in important decision-making processes. Prime Minister Modi's government may now have a reduced majority but Indians have voted for his government for a third term, signalling a desire for policy continuity and continued reform momentum.

Election outcome indicates rural distress, need for large-scale job creation

The post-result analysis suggests that voters are discontent with issues like unemployment and inflation, and a more populist manifesto may have carried greater appeal. India's growth story remains resilient, but there seems to be a disparity between household consumption growth and real GDP growth. In the post-pandemic period, India has been witnessing a K-shaped consumption recovery, with demand from the affluent or premium segment doing well and with demand for entry-level and mass-market goods remaining subdued.

The lower end of the income pyramid has struggled following the pandemic and limited fiscal support has amplified the situation. To widen benefits from economic growth and reduce income disparities, India, in our view, will need a broad-based recovery in the capex cycle as construction is the largest generator of jobs outside of agriculture. We believe that the government will have to focus more on job creation and expanding the manufacturing sector while maintaining its focus on infrastructure development and digitalisation.

Government spending may change, but fiscal situation unlikely to deteriorate

The Indian economy has seen growth led by investments, partially encouraged by government initiatives, while consumption has lagged. The election outcome could result in a partial reorientation of government spending. However, we still believe that the government will maintain its focus on macroeconomic prudence.

There could be a shift towards subsidies at the expense of some capex, but we do not see a significant impact in the near term nor any deviation from the interim fiscal deficit target of 5.1% of GDP. If government reflationary policies are enacted as a result of political necessity, this could result in slower fiscal consolidation. Supply-side reforms are likely to continue, while factor market reforms may prove difficult to implement.

India's fundamentals remain strong

India's economic fundamentals remain robust. Reforms in India have generally survived political challenges, and we expect the government to maintain the pace of governance and administrative reforms. However, the more complex reforms involving land and labour need greater consensus building.

Therefore, while near-term uncertainty is high and the political backdrop is slightly different, the broad direction of reforms and macroeconomic factors remains unchanged. We continue to remain very positive on the longer-term potential of the India equity markets.

With Prime Minister Modi sworn in on 9 June, the immediate focus is on government formation and the political jostling between and among parties. The cabinet now has some new members from coalition partners. We will focus on the final budget, which is most likely to be put together early in July, to assess the policy direction.

The first 125-day agenda of the new government will be a key event that will set the direction of economic reforms. We believe that the agenda will focus on digitalisation, infrastructure, industrialisation and governance-related reforms.

Focus on companies with sustainable returns undergoing positive fundamental change

In the short term, the Indian equity markets are likely to be volatile. However, now that the election uncertainty has been resolved, we believe that over the medium term, there will be a strong corporate capex and credit cycle. In addition, a multi-year buildup in domestic savings is expected to funnel into equities and potentially provide a further boost for consumption.

From a longer-term perspective, this could be an opportune time to assess quality business franchises in India. We continue to focus on companies with high free cash flows, low balance sheet leverage and high return on capital. Currently, we have a favourable view on sectors such as financials via large private sector banks, consumer discretionary via the automobile sector and communication services.

Important disclaimer information
Please note that much of the content which appears on this page is intended for the use of professional investors only.