This month the RBA held the cash rate steady again. The market had begun to price in a rate cut, with the Big 4 all expecting a 25bps reduction in the cash rate target.

Now, all eyes turn to the next meeting on the 8th of August, where softening inflation, unemployment and geopolitical tension are adding weight to the case for the easing cycle to push forward.

Market sentiment is shifting. Recent inflation data for the March quarter came in at 2.9% (trimmed mean), within the RBA’s target range of 2-3% and last week unemployment unexpectedly increased to 4.3%. With the next quarterly inflation figures due on the 30th of July, and labour force data released, the futures market is pricing in a 98% chance of an August rate cut.

What does this mean for investors?

• Cost of debt is still high but expected to ease. For buyers, even a 25bps cut could improve borrowing capacity and asset pricing.
• Yield expectations remain elevated, but we’re seeing compression in some sectors, particularly where there are long leases in defensive sectors.

Geopolitical tensions add complexity. Trump’s global reciprocal tariffs and proposed 200% tariffs on Australian pharmaceuticals have caused great uncertainty. International risks could dampen Australia’s export economy - indirectly strengthening the RBA’s case to stimulate domestic demand.

Investor demand remains strong in key sectors:

• Industrial continues to lead, particularly in land-constrained metro markets.
• Retail is performing, with high-performing neighbourhood and convenience assets drawing attention.
• Childcare and medical are seen as defensive. With strong lease covenants and long WALEs, they are considered as an asset safe haven.
• Office transaction volumes are increasing with face rents rising and softening interest rates, likely to bring more Core and Core-Plus investors back into the market.

Looking ahead:

• The next quarterly CPI data (due end of July) and unemployment figures released last week will be critical to the RBA’s decision in August.
• If current trends hold, expect the market to price in a 25bps rate cut by the August meeting - potentially greater if geopolitical shocks accelerate.

For further information contact:

Hugh Menck MRICS

Head of Capital Transactions

hmenck@bne.mcgees.com.au

+61432560589

Archer Halliday

Analyst | Capital Transactions

ahalliday@bne.mcgees.com.au

+61497599959

For a complete list of weekly commercial transactions in Queensland, visit McGees Wrap Up | McGees Property Brisbane

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