Rental growth stalls & Nvidia's record run

Hi everyone, it is Thursday, the 10th of July 2025. Welcome to the SBS on the Money podcast where we're bringing you consumer finance and markets news you can use without all the fluff. Starting with the Australian share market, which rose today, the S&P/ASX 200 up 0.

Ricardo Gonçalves

6%, 8,589. We'll have the details with Darren Thompson from Equity Trustees in a few moments, including what he's telling his clients, and what happens now to Nvidia after it reached a record market cap of $4 trillion US dollars.

Ricardo Gonçalves

But first to Australia's rental market, which is losing steam. For the first time since 2019, combined capital city house prices remain stable for four consecutive quarters, with annual growth also steady for the first time in five years. Still, rents remain at record highs in every capital except Darwin. So to find out where to next, and also details about the apartment market, Stephanie Yousef spoke with Nicola Powell from Domain.

Nicola Powell

It really does showcase that rental growth is losing momentum. What we've got across our combined capitals is house rents flatlined for 4 consecutive quarters now, which is the first time that we've seen that occur since 2019. And we also saw unit rents hold steady over the quarter, which is the first time that we've seen this in a number of years. So I think it really does showcase that rental conditions are shifting, and we're certainly seeing a slowdown in rental price growth.

Stephanie Yousef

Annual growth for both units and houses has slicked to multi-year lows, what's driving that

Stephanie Yousef

slowdown?

Nicola Powell

We have seen annual growth for house rents set to multi-year lows pretty much across every single capital city. Ultimately, we are starting to see vacancy rates improve, and that is because investors are trickling back into the housing market, and that is helping to boost overall supply.

Nicola Powell

I think as well we're seeing some of those demand pressures ease, we're seeing population growth move away from the heated and high levels of population increases that we were previously seeing, and I think those two factors together are really helping to slow down rental price growth.

Nicola Powell

I think what we are seeing is the momentum loss is really being driven by an affordability ceiling being reached by tenants. Budgets just can't stretch as far as what we have seen in terms of the escalation of rents over recent years.

Nicola Powell

And that affordability ceiling means tenants are looking for affordable alternatives. They're shifting to units or they're shifting to more affordable property types. And that's really coming out in the data as well, because we have seen across many capital cities that unit rents are now rising at a faster rate than house rents.

Stephanie Yousef

Which capital city saw the most and least growth, and did it come as a surprise?

Nicola Powell

We saw the strongest rates of growth in Sydney and Perth for houses, and the strongest rates of unit growth are seen in kind of Sydney, Perth and Adelaide. These are markets that are still very challenged. They still have low vacancy rates, and some of the weaker conditions were coming out of markets like Darwin and also Melbourne. Melbourne rents were also

Nicola Powell

Steady, I think what it showcased is that we do have a diverse array of rental conditions across our different capital cities. We still have very competitive rental conditions in Adelaide and Perth, and those low vacancy rates continue to put pressure on asking rents. We have to remember that across all of our major capital cities we do have vacancy rates.

Nicola Powell

That are still technically a landlord's market. They are below 2% and some of them 0.4% vacancy rates, which really does highlight the extreme conditions that we still have across those vacancy rates. But what we are seeing is those vacancy rates are moving away from the record lows that were previously being recorded.

Stephanie Yousef

Regional markets continue to outperform some of those major markets. Can you explain the performance between regional rental markets compared to the capitals?

Nicola Powell

I think it really comes down to investment activity, and I think investors are really

Nicola Powell

honing in on our major capital cities to purchase their investment property, and that's probably helping to alleviate some of the supply pressures that we've got in some of our major capital cities. I think in regional markets, I think investors are really focusing in on capitals rather than

Nicola Powell

Those regional markets, that's purely for capital growth potential. We are expecting prices to rise and we know that investors do chase capital growth and that capital growth is expected to be stronger in our major capital cities relative to our regional markets.

Stephanie Yousef

As you explained earlier, vacancy rates remain so low across the country. Do you foresee any immediate relief in the rental availability, or will the market continue to be tight for the unforeseeable future?

Nicola Powell

The rental market is seeing a slow change and those vacancy rates are starting to nudge marginally higher, but we are still technically in a landlord's market across Australia, so that means the pressure is still there for asking rents. I think moving forward our expectation is the outlook is going to be better for the rental market. We are expecting those vacancy rates

Nicola Powell

Slowly move higher, providing that much needed supply for tenants and helping to slow down rental price gains.

Stephanie Yousef

What impact do you anticipate federal government programmes like the Help to Buy scheme will have on the rental market in the longer term, especially in easing the pressure on tenants?

Nicola Powell

It is critical that we have the right first home buyer incentives to help tenants transition to being homeowners. There are many tenants out there that are just locked into the rental market because purchasing prices are escalating and they remain high. I think initiatives like the expanded Help to Buy will help many tenants transition to being homeowners, and that should alleviate some element of demand pressure in the rental market.

Ricardo Gonçalves

Stephanie Youssef there speaking with Nicola Powell from Domain.

Ricardo Gonçalves

Now, market day on the SBS on the Money podcast. Good day for the Australian share market, the S&P ASX 200 up 0.6% to 8,589. 7 of 11 sectors ended higher, materials, the best performing sector gaining 1.24%, and rebounding from its recent decline, industrials, property,

Ricardo Gonçalves

Bank stocks also doing well, but healthcare stocks and IT, the laggards. For more on the day's market action, including Nvidia's record and CSL's response to Donald Trump's tariffs, I spoke with Darren Thompson, he's the chief investment officer at Equity Trustees.

Darren Thompson

Ricardo, look, I think it's essentially, there hasn't been a lot of news in our local markets, so we've essentially followed the offshore lead, and so, in the US overnight, markets were up.

Darren Thompson

Largely on the back of that continuing AI, Mag 7, Nvidia theme. Also, the FOMC minutes were out, and, probably a little bit of dovish tone, like a little bit of debate within the committee members, leading interest rate, some views that interest rates might, come back a little bit more over the course of the year. So that meant interest rate sensitive sectors like the home builders were quite strong. So we've sort of, in the absence of any news flow here, we've sort of followed that lead domestically.

Ricardo Gonçalves

I guess what's still catching the headlines are anything to do with US tariffs, right, whether they be pharmaceuticals, copper, you know, what's going to happen in a few weeks' time. How worried are you as an investor about the ongoing changes in US tariff policy and what does it mean for you and the way you invest?

Darren Thompson

Yeah, so, look, we are endeavouring to have investments which we intend to hold for the long term. So, I guess we're trying to differentiate between the long-term prospects and the noise around tariffs and other shorter term issues, but certainly it creates volatility, and it creates uncertainty. That's generally not a good thing for markets, uncertain environments, and it's difficult for boards and management to make capital allocation decisions and to invest for the medium to long-term. So, certainly,

Darren Thompson

The volatility is a bit of a concern there, but it's also an opportunity because certainly some stocks and sectors we think get disproportionately damaged by short-term noise and they're good long-term businesses, and we might touch on a couple of those in a minute, but,

Darren Thompson

I guess the reason why the recent tariff news overnight hasn't really impacted markets is that they were generally lower, they were probably smaller markets, probably not that impactful in terms of real GDP issues for the broader market and for the bigger sectors.

Ricardo Gonçalves

Yesterday we spoke a lot about the impact the copper tariffs, so potential copper tariffs could have on local companies, right? We also now heard from CSL because there's this potential 200% tariff on pharmaceutical products. CSL is

Ricardo Gonçalves

Essentially calling for an exemption given its contribution to the US economy and the role it plays in access to life-saving therapies. I mean, how does this all play out and how do companies operate in this kind of environment do you think, and what do you think this means, what will happen

Darren Thompson

with CSL?

Darren Thompson

Yeah, I think it's a perfect example. And CSL is a company that we own in our portfolios, and we like long-term. And we've actually met with company management over recent months, a number of times. And as you'd expect them to say, they've got a plan A, B, and C, depending on what will happen. I think at the outset, they've got a few levers that they can play, so they can, they've got a reasonable amount of manufacturing already in the states, and they already collect a lot of plasma in the states. So they've got significant operations there.

Darren Thompson

And they probably can retime some of their capital allocation decisions to skew towards the US in the short-term. But I guess in an overall perspective, what it means is they've got to consider all these issues and it's probably not optimal. It's probably not an optimal allocation of capital. So it is a little inefficient, so.

Darren Thompson

When you think about the broader concept of what's happening with tariffs, it's making the world a little less efficient. So that essentially means that earnings are compromised and that therefore should flow through to valuations. Companies like CSL are probably better placed because they have very good management teams, a very broad and diversified business and probably can pull levers to adjust. And the 200% that was referenced, I think that was a throwaway comment. Unfortunately, a throwaway comment,

Darren Thompson

But it gets headlines. We don't think it'll be anywhere near that, because I do think they've got a really strong case. They do, you know, the plasma they collect is used for life saving promotion, and you would think that they would, the US would like to protect access to that and for their community.

Ricardo Gonçalves

The other interesting thing with tariffs and this discussion about global uncertainties, right, it's not stopping other parts of the market, like tech stocks, NASDAQ hit a record overnight, Nvidia, $4 trillion US dollars, Bitcoin at a record. Why?

Darren Thompson

So again, look, there are strong, so within an overall uncertain environment, there are probably areas which are seen as being relatively certain. And the spend on AI and the growth in AI is probably, I think has a high degree of certainty, certainly cashed up companies like Microsoft and,

Darren Thompson

And Amazon and the big tech names are going to be spending tens of billions of dollars on AI and certainly the use cases for it are going to explode, so certainly.

Darren Thompson

I think that's an area where there is a very compelling case for growth, and companies like Nvidia clearly are incredibly well placed to capture that. I think that the thing that tipped Nvidia of the 4 trillion mark was certainly a little bit of news around them potentially accessing the China market to grow that market even further. So I think there's certainly areas globally that are growing very strongly, and the tech sector is a clear one of that.

Darren Thompson

Other areas are probably, are less have less structural growth themes and are more are going to be more whipped around by policy changes and geopolitical factors.

Ricardo Gonçalves

And finally, you touched on it a bit earlier, but what are you telling your clients right now and where do you see the opportunities for investors?

Darren Thompson

So we're telling our clients like we always do, think about the medium to long-term, think about value and think about, and we're looking to access good quality companies that grow over time, and valuations will reflect that over time. So try and tune out some of the noise, but take opportunities where that noise gives good opportunities to buy quality stocks at good prices. So that's, so we're telling our clients, be patient.

Darren Thompson

The volatility in news flow and the volatility in prices doesn't reflect the underlying stability of the businesses we're invested in. And essentially, but also I guess, don't get, the recent double digit returns that we've had over the last year and 2 years.

Darren Thompson

Don't necessarily think that they're just going to be replicated easily because a lot of that has come without earnings growth, and so just be, you might need to recognise that the next year probably won't be as strong as the one we've just had. That's

Ricardo Gonçalves

Darren Thompson there from Equity Trustees. That ends the podcast for this Thursday. Don't forget if you enjoy it, give it a like and a review on Apple Podcasts and Spotify and to click subscribe.

Speaker 1

This SBS on the Money podcast is provided for informational purposes only. The content on this podcast should not be understood as constituting advice or a recommendation. It is not personal advice and does not consider your personal circumstances or objectives. You should contact a licensed professional before making any financial decision.

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