Construction costs ease across Australia as key materials prices stabilise
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Construction costs ease across Australia as key materials prices stabilise

Following hefty increases in recent years, there’s some relief in sight for home builders – and their clients

By KANEBRIDGE NEWS
Wed, Jul 12, 2023 8:40amGrey Clock < 1 min

Construction cost increases have fallen to their lowest point since the start of the pandemic according to the latest data from CoreLogic.

The property data provider’s Cordell Construction Cost Index (CCCI) shows a growth rate of 0.7 percent over the June quarter, which is the lowest figure recorded since September 2020.

The CCCI tracks the cost of building a typical three-bedroom, two-bathroom new home in Australia.

While there was variation and volatility across building product types, CoreLogic Construction Cost Estimation Manager John Bennett said steel and timber prices had begun to stabilise. It’s a trend he said was likely to continue.

“There’s been a significant drop off in dwelling approvals in the year to April, which will flow through to prices,” Mr Bennett said. “As the level of residential construction work reduces, pressure on material costs and labour supply is likely to reduce further.”

The price of timber has escalated sharply in recent years as local stocks dried up following the 2019 bushfires and demand for materials increased following the Federal Government’s HomeBuilder initiative. It’s a similar story with steel, which has been impacted by the war in Ukraine, the strength of the Australian dollar and supply chain issues.

However, there appears to be some relief on the horizon with the latest national figures well below the 1.2 percent decade average, CoreLogic data shows, representing a further softening from the 0.9 percent growth rate during the first quarter of this year.

CoreLogic head of research, Eliza Owen, said the figures bode well for a further reduction in the rate of inflation.

“The cost of new owner occupier dwelling purchases comprises the largest weighting in the CPI ‘basket’, which means the ongoing reduction in the CCCI is good news, potentially signalling lower inflation numbers,” she said.



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Hong Kong Takes Drastic Action to Avert Property Slump

The city’s real-estate market has been hurt by high interest rates and mainland China’s economic slowdown

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Fri, Mar 1, 2024 3 min

Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.

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