The following transcript was AI-generated.
Manny Anton: Good morning and welcome to this week's edition of Winston's Weekly, covering all things property. I'm Manny Anton, your host for today's property chat. Winston, welcome back.
Winston Sammut: Thank you.
Manny Anton: Okay, let's get straight into it. And as usual, let's start with the US markets. We continue to see US markets trading around any data or sentiment driven by inflation and, you know, and any potential impact that might have, in terms of, fed moves. This week we've seen a number of labor market, data points. So that seems to have, dominated the headlines a fair bit. We also got some manufacturing numbers out of the US, which were little bit softer. And together with those softer labor data points and a softer manufacturing numbers, we've seen, yields in in ten years – two years – they've started to come down a little bit. They went early in the week below 4 / 4.5%.
They now slightly below 4.3 I think the last time I looked. So they're continuing to trend down, and that's been a reaction to those sort of those data points. We should probably also add that the Bank of Canada, came out two days ago and also cut their benchmark rate. And that was followed last night by the European Central Bank, which also cut the rate for the first time since 2019, I think, by 25 basis points. So it's all happening! What are your thoughts on this?
Winston Sammut: Okay. well, you've got to look back maybe a couple of weeks ago when the ten year bond, right in the US got as high as 455 / 458. Since then, it's come back quite a bit. Expectations have sort of mellowed a bit in terms of, when the rate cuts are going to start. And remembering again that we've got an election in the US in November, so this timing issues around that. The issue with the Canadian Central Bank cutting rates wasn't so much because inflation was brought down within their target band, but it is heading in that direction. And they've effectively, decided that their view is that inflation will continue to fall.
So it wasn't the case of it's within the band will now cut rates. It's a positive view on the outlook going forward. I think that's the same situation in Europe, positive thinking about inflation continuing to come down. The US is a little bit different in that, the US economy is very strong, and judging by the talk from the fed, they still want to see a number of movements in inflation moving down, not just the one. So whether or not the US is going to reduce rates at its next meeting, not sure. The issue is, though, that after the next meeting, there isn't another meeting until August. So if they if they don't cut rates this meeting, it will be a long time before they have another look at it.
Now, that might be a positive, because more data will be coming out. But obviously there's been a rally both in the US and in Australia, in the bond market. And that's also helped the property sector here. The REIT's were up, just under 2% for the month of of May. And so far this month, even though it was still early days, it's up about 3%. So there is a positive skew at the moment towards lower rates and and the REIT's doing well.
Manny Anton: Yeah, that's certainly what's coming through. There is we should also highlight there is a big number coming out tonight in the US, which is the US non-farm payrolls. So that is a number that the US guys are very focused on. Be interesting to see what happens tonight. But if it's surprises one way or the other, you could get some big moves off the back of that tonight as well. So I think everyone will be watching that one. Alright. Well, you commented a little bit already on domestic market, so let's talk about the domestic market and property, domestically, specifically. We had some GDP numbers out this week, which we're looking pretty anemic. They surprised; a few people thought, this isn't looking very good at the moment for the underlying economy. What's your take on that?
Winston Sammut: There's talk or suggestions that Australia could be heading towards a recession, on the back of those numbers. I think it's a pretty, tall order to, to sort of suggest at this point in time, but it is something that's obviously going to keep the RBA, the central banks, thinking about things going forward. But as I said, the sector itself has done exceptionally well. We had this week, Goodman break into to a new high, and that's basically the gauge for the proxy for REIT's.
Manny Anton: – for the general. So they all go to Goodman. Yep. You've pointed that out in the past. Okay. well, let's stay with the domestic sector. One issue that has been raised during the week, which I've noticed has been discussed quite a bit in the in the financial press has been some of the movement in the apartment market. And what we're seeing there in terms of demand and the movement in prices up. This seems to be a lot of interest at the moment in that apartment space. Is that shifting from from housing? What's happening there?
Winston Sammut: Well, apartments: it's an issue of supply and demand. There hasn't been a hell of a lot of supply, over the last 12 months or so. So demand is still there. We're getting some ongoing interest from offshore buyers as well. So, prices are holding up and are doing okay. I mean, but in general, residential is looking a fairly positive as far as pricing is concerned. There's also talk of some players coming into the build to rent market. But that's more to do with, affordability, in terms of providing units that are within people's price points.
Manny Anton: Okay. Alright. And is there any way to play that apartment thematic in the listed space in Australia? How could you do it?
Winston Sammut: Well, you could go to some of the straight out developers. Mirvac is the, I suppose, the go to, in terms of the apartment market. They've got a very good reputation. They build, quality apartments. Mind you they are priced accordingly. So the way to play that is probably through Mirvac. Stockland, whilst it's residential, is more land then than apartments. Even though they do so some dwellings, it's not their main source of revenue, it's more land sales. So Mirvac would be the way to play if you wanted to be positive and feel positive about the apartment market. Mirvac would be the one.
Manny Anton: Okay, is that bid moving?
Winston Sammut: No. In fact, it's it's come off a little bit, over recent times. It traded below $2. it's just got back up above $2 in the last couple of days. So there would be an opportunity there, but again, the main driver has been Goodman's. Primarily because of the positive view, it's global, it's looking to to do a lot more on the data center front, and –
Manny Anton: – and that it it builds on the AI thematic as well, I've noticed. So that's something that they are focused on. Alright, one other thing. In other property news, US private equity giant Blackstone has agreed to acquire a raft of new homes across the UK. As it looks to cash in, on soaring rents. So I believe they've they've bought up to 1750 homes. They paid 580 million pounds for it, and it was a deal that they did with Vistry in the UK. What are your thoughts on that? What's the movement?
Winston Sammut: They've got a lot of cash to deploy in property, globally. And this is just one of the the steps they're taking in terms of deploying that cash that they've got to invest. Now, that market in the US is quite large. And it's in favor in terms of people who are looking to buy or move into these apartments, these dwellings.
Manny Anton: So, is this a part of the build to rent thematic?
Winston Sammut: Well, it's not built to rent. It's what they call family apartments. And they come along in very different price ranges. From lower price range up to the top. So you've got a very good choice. I mean, you've got to remember, Americans are much more willing to move for work. So, you know, there is demand, ongoing demand from as they move from one place to another and they buy another property or to live in. So it's a very, strong market in the US. We don't have that market at this stage. But build to rent here is, I suppose, going along the same lines. But, there's nothing really that's listed, in a big way, in the build to rent sector. A couple of the players, Mirvac as well. Looking to expand in that area. But there's nothing meaningful. There isn't a single player that's available on the ASX to invest in in that sector.
Manny Anton: Okay, alright. Well, looking forward to next week, and the next couple of weeks, in terms of domestically, anything we should be looking for? Anything due? Any material news due to come out on the property space?
Winston Sammut: Well, in the next couple of weeks we'll start to hear about distributions for the June quarter. So that's going to be something to focus on. And I guess, the thing to watch out there is whether there's going to be any cutbacks or increases in distributions. I don't think they will be. So I think it'll continue to be relatively positive for this sector. But don't expect the hell of a lot of news in the meantime. There was one other piece of news from from Lendlease in that, they have looked to sell one of their US construction businesses. I haven't seen the price, but it is a start of their looking to move away from offshore markets and deploy the money into the Australian market.
Manny Anton: Shrink to greatness.
Winston Sammut: Shrink to greatness, yes.
Manny Anton: Yes. Alright. Okay, well, just before we wrap it up, though, we do need to clarify a couple of things. You know I, for one, and a lot of my colleagues in the office, have been shocked and and disappointed, to find that it turns out that you're a Queensland supporter during Origin. So I think we need to understand what you what your rationale is behind that, given that you're a a diehard Sydney Swans fan and a long time Sydney resident who's lived in the in the warmth and and comfort that that Sydney's provided you, over all these years. And yet you've turned around and essentially dropped us like a bad habit, and supported Queensland. So I think it's fair to ask the question. Please explain yourself.
Winston Sammut: Well, I wasn't born in New South Wales, so I don't have the passion that you New South Wales people have. I was born in Egypt, but I did grow up in Melbourne, in Victoria. So I'm not a New South Wales man. And as a Melbournian, I regard myself more of being on the "other side".
Manny Anton: Fine. Well, I guess it's an explanation. I think it's an unsatisfactory one, but we'll move on. So, Winston, thank you for your time today and all of your insights. As always we will be back with another edition of Winston's Weekly next Friday. Have a great day. Until then.
Winston Sammut: Bye.
Disclaimer: Sequoia Financial Group (ASX:SEQ), the parent company of Finance News Network, owns a 20 per cent interest in Euree Asset Management.
