Australia: Retail malaise hits the property side - ANZ

Adelaide Timbrell & David Plank, Analysts at Australia and New Zealand (ANZ) Banking Group are out with their take on the impact of the slowing retail spending growth on the Australian property markets.

Key Quotes:

“Retail spending growth is now the slowest it has been in y/y terms since 1991, reflecting squeezed household budgets.

The pressure on retailers from slowing spending growth and increased competition from online sellers is reflected in retail prices, which are going backwards for non-food products on average.

With margins under pressure, retailers are looking to control costs. One result; retail property rents are not growing as fast as they did in the past.

Retail building approvals are relatively weak compared to the growth in retail profits, signalling caution among retail investors. This is reminiscent of the post-GFC period.

We expect a lift in household spending through the second half of this year, as lower interest rates, tax cuts and the removal of uncertainty about the election result all boost spending.

After this ‘pop’ we expect retail growth to normalise to the moderate growth rates seen in the last five years, rather than the very slow rate over the last year.