New construction falling and mortgage arrears rising
Rising interest rates and the skills shortage are keeping new construction at historically low levels and causing home owners to fall behind on their mortgage repayments in increasing numbers, new housing sector data reveals.
But the established housing market is defying the trend, with auction clearances in the eastern state capitals running at their best levels in four years according to new data from Australian Property Monitors reported in The Australian Financial Review today.
A new report by BIS Shrapnel shows that new housing starts are set to drop 9% in New South Wales and 5% in Victoria over the next financial year.
Report author Jason Anderson says the skills shortage helps explain the difference in activity between the new and established housing sectors.
“We’re not seeing any relief on the cost side of things. If you look at Sydney, new commencements are close to a 50-year low, but average building prices aren’t really declining,” Anderson says. “In previous cycles, you did see construction prices drop around 5%. That hasn’t happened in Melbourne or Sydney and it is preventing a quick recovery.”
A further interest rate rise in May would also prompt those thinking of building to re-evaluate, especially in the slowing West Australian property market, Anderson says.
High interest rates are also having an impact on existing home owners, a new report by Standard & Poor’s released today suggests. Prime mortgage arrears are at their highest level in 10 years. The report shows arrears on low-doc loans at 2.33%, while full-doc loan arrears are at 1.1%.
“A tight rental market, high interest rates and a fairly indebted market mean that affordability is low, and a record number of households are in a stressful situation,” Housing Industry Association chief economist Harley Dale says.
Dale says that while mortgage arrears levels are on the increase, Australia’s default rate of around 2% is still well below the double digit levels experienced in the US.
– Mike Preston
Businesses need to change message for Labor
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Business is sniffing a possible Labor Party win, with a large increase in the number of businesses registering for the Labor Party national conference next month.
Apparently business and business lobbyist registrations are up by almost 50% for the conference, with many coming to the event for the first time to build friendly relations.
But according to those close to the party, many businesses will be trying to push their own policy agenda in the wrong way.
Policy advisers to Labor recommend framing any requests in line with the large Labor objectives. One adviser says: “Be careful how you frame requests and agendas. How will your interests add to productivity, which is a big Labor issue at the moment? How will it create exports? Once the resources boom ends, how will your agenda assist Australia develop other industries for Australia?”
Smaller businesses shouldn’t waste their time or money competing with large business for air time with the Labor Party. They should work hard on their local MP or cosy up to the Opposition leader in their specific area. But they too will have to change the way they present the message to suit the new Labor agenda.
– Amanda Gome
Have your say on unfair dismissal
The Coalition has further attacked Labor’s scare campaign on industrial relations claiming plans to wind back WorkChoices will cause a wages blowout and a further rise in interest rates. Treasurer Peter Costello told The Australian that Labor’s plan would lead to a wages explosion across the country and that it was crucial to maintain a decentralised industrial relations framework.
What do you think? Join our online debate on WorkChoices, in particular unfair dismissal. Has WorkChoices helped you employ more people?
Email: [email protected]
Boost Juice begins its British invasion
British entrepreneur Richard O’Sullivan, who founded the highly successful Millie’s Cookies, opened Britain’s first Boost Juice store on the weekend, in a Manchester shopping centre. Another store will be opened this week in Oxford.
Founder Janine Allis says the opening went well. “Sales were fantastic.” The concept has not been altered for the British market at all, but there will be a marketing focus on the “Hotties” range of hot drinks to keep up sales during cooler weather. And all outlets will be in the controlled climates of shopping centres until the brand is very established.
Sullivan, who owns 130 cookie stores across Britain, signed a £750,000 franchise deal with Boost Juice’s Allis in mid-2006. There are now 180 Boost Juice stores in Australia, Chile, New Zealand, Singapore, Kuwait and South Korea.
Britain’s Financial Mail reports the British juice and smoothie market was worth £1 billion last year, up 65% since 2002. A London outlet is planned for next year and a national chain over the next 10 years.
– Jacqui Walker
Easier to list in US
Australian companies could soon find it easier to list on the US stock exchange. The US has agreed to examine setting up common regulations for the US and Australian stock exchanges. This would mean that Australian companies could list using Australian laws and not have to go through the process of having to meet two sets of corporate governance regulations.
It would also allow US and Australian stock brokers to trade on behalf of their clients in each other’s exchanges, says The Australian Financial Review this morning.
Google gobbles DoubleClick
DoubleClick has made a motza specialising in internet display advertising such as banner ads that come up at the top of web pages. Now Google has agreed to buy the giant for $3.7 billion.
Google plans to combine its search advertising technology with DoubleClick’s display advertising technology. Advertisers would therefore have a closer way of monitoring advertising campaigns, and readers of websites would see more ads that were tailored for their interests.
Goodies on the way
It is less than a month to the budget, and probably six months away from an election that looks likely to turf the Coalition out. Yet where are the incentives from the Coalition to shore up support? Apparently, on the way.
Treasurer Peter Costello has given the strongest hints yet that there might be further tax cuts in the marginal tax rate at next month’s budget.
Costello said from Washington that continued progress towards reduction of the tax burden remained a priority. Meanwhile business is also waiting for the industry policy, which should be released in the next week, that should set new policy directions.
DIY super funds need more protection: Labor
A Labor federal government would impose new disclosure requirements on companies seeking investment from the public to protect the growing number of people who rely on self-managed super funds, under a new policy expected to be announced within months.
Opposition superannuation spokesman Nick Sherry says the high profile Fincorp and Westpoint collapses show current laws are insufficient to protect “mum and dad investors,” The Australian reports today.
The roles of the Australian Taxation Office and Australian Securities and Investments Commission will also be reviewed as part of a process designed to afford greater protection to the thousands of people, many SME owners, who manage their own retirement savings through DIY super funds.
All of this raises a familiar question. Will Labor create a much-needed safeguard for DIY super or just more lot of red-tape?
Company profits will start to decline towards the end of this year, but the growth rate of the Australian economy will pick up over the next three years, according to the Access Economics quarterly business outlook released today.
High levels of investment over the last couple of years will result in GDP growth around 3.5% to 4% over the next three years, up from 2.7% last year. But the flood of goods on the market will also cause prices to ease, Access says, taking the edge off profit levels.
The S&P/ASX 200 was up 0.8% at 12.30pm to 6186.4, driven by buying in resources companies after strong commodity price rises overnight.
The Australian dollar is also trading strongly, the US83.37-cent price at 12.30pm up US6 cents on the most recent Sydney close.