Covid-Driven Home Buying Drives Global Home Prices Up
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Covid-Driven Home Buying Drives Global Home Prices Up

Australia recorded its highest rate of annual price growth since 2003, according to Knight Frank.

By V.L Hendrickson
Wed, Sep 15, 2021 10:28amGrey Clock 2 min

The ongoing boom in home buying during the Covid-19 pandemic pushed average property prices up 9.2% in the second quarter of the year, according to Knight Frank’s Global House Price Index, released Tuesday.

About one-third of markets, or 18 countries, saw double-digit increases in the second quarter, according to the report, which looked at 55 countries and territories. That’s up from seven at the same time in 2020 and 13 in the first three months of this year.

The index is rising faster than it has since the first quarter of 2005, well before the global financial crisis of 2008-09, according to Knight Frank, although not every region is experiencing a boom.

“A breakdown by developed and developing economies, however, reveals a more nuanced picture,” Kate Everett-Allen, Knight Frank’s head of international residential research, said in the report. “Ten of the world’s developed economies averaged price growth of 12% in the 12 months to June, double that seen in key developing markets (4.7%).”

Turkey remained at the top of the index, registering a 29.2% year-over-year rise in average home prices in the second quarter, the data showed. New Zealand ranked second, where prices jumped nearly 26% and the U.S. had the third strongest growth at 18.6%. 

Australia (16.4%), Canada (16%) and Russia (14.4%) also made the top 10, the report found. Indeed, Australia recorded its highest rate of annual price growth since 2003.

“Only two markets saw prices decline in the year to June 2021—India and Spain,” Ms. Everett-Allen said. “This is the lowest proportion of markets registering a decline in prices since the Global House Price Index commenced in 2008.”

Spain saw a 0.9% year-over-year fall in average prices in the second quarter, the index showed. In India, they were down 0.5% in the same time period.

Despite the overall gains, some markets may be close to peaking, according to Knight Frank.

“In the U.S., mortgage applications have dipped and the share of households thinking now is a good time to buy hit a decade low of 28% in June,” Ms. Everett-Allen continued in the report. “The prospect of interest rate rises in markets such as New Zealand, the U.S. and the U.K. is also likely to weigh on buyer sentiment in the medium term. But conversely, recent tighter restrictions in South East Asia, New Zealand and Australia may yet spark renewed activity as lockdowns shine a light on homes and lifestyles.”

Reprinted by permission of Mansion Global. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication:  September 14, 2021



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Thousands of Australian companies on the brink of going into administration as EOFY nears

Along with high inflation and weak consumer spending, there’s another key factor pushing a record number of businesses to the edge

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More than 10,000 companies are expected to have entered external administration by the end of the 2024 financial year, a level not seen for more than a decade. Data just released by the Australian Securities & Investments Commission (ASIC) shows 1,245 companies became insolvent in May, the highest monthly number this financial year. At present, a total of 9,988 businesses have gone bust in FY24 with data from June yet to be finalised.

Deloitte Access Economics Partner David Rumbens said the surge in business insolvencies this year was a “clear sign of economic distress”.

He commented: “[ASIC] predicts that by the end of the financial year, the number of companies entering external administration will likely exceed 10,000 – a level not seen since 2012-13, in the aftermath of the Global Financial Crisis (GFC).”

Mr Rumbens said the elements contributing to this year’s surge in insolvencies include high inflation and interest rates, weak consumer spending, and the commencement of more proactive tax debt collection activities by the Australian Taxation Office (ATO).

“One of the key factors contributing to this surge in insolvencies is the [ATO] pursuing debts that were previously put on hold during the COVID-19 pandemic,” he said.

Mr Rumbens cited ATO figures showing collectable debt rose 89 percent in the four years to June 2023. This has particularly impacted small businesses, which account for approximately 65 percent of the total debt owed at about $33 billion. “But more strictly enforced debt collection is coming at a time of tough economic conditions. High interest rates and cost-of-living pressures have weakened consumer spending, particularly in more discretionary components of spending.”

The construction sector has seen the highest number of insolvencies by far in FY24, mirroring the trend of FY23. Of the 9,988 insolvencies to date, 2,711 of them are in the building sector, which faces several challenges. These include a substantial lift in the cost of construction materials that is well above inflation and has made many fixed-price contracts signed within the past few years unprofitable. There is also a significant labour shortage that is delaying new home completions and new project starts, and also adding higher costs to projects.

“The construction sector has been hit particularly hard, with construction firms leading industry insolvencies in every quarter since mid-2021,” Mr Rumbens said. “They have accounted for approximately 25 percent of all insolvencies during this period. The residential construction sector is already facing a backlog of projects to complete as a result of skills and material shortages in recent years, and increased insolvencies in the sector may only exacerbate the problem of housing shortages.”

The ASIC data shows the next biggest industry affected is ‘other services’, which includes a broad range of personal care services such as hair, beauty, dietary, and death care services. The sector has seen 939 insolvencies in FY24. Retail trade is next with 687 insolvencies, followed by professional, scientific and technical services with 585 insolvencies.

“The food & accommodation sector has also experienced a wave of insolvencies. High input costs, worker shortages, and weak consumer sentiment have put pressure on businesses. Specifically, in March, cafés, restaurants, and takeaway businesses accounted for 5.5 percent of total business insolvencies, the highest proportion in the last three years.”

Mr Rumbens pointed out that while the number of insolvencies was high, it represents a lower share of the business sector at 0.33 percent than it did in FY13 when it was 0.53 percent. “This reflects the increase of registered companies in Australia, which has risen from just over two million to 3.3 million since 2012-13. Even so, the continued lift in insolvencies since 2021 highlights the difficult conditions many businesses face at present.”

 

 

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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