Under pressure: where interest rate rises are starting to bite

There’s no end in sight for mortgage holder pain, with some parts of the country set for a worse time than others, new analysis suggests.

While economists from the major banks are predicting rates to rise at least another 25 basis points from the current level of 4.1 percent to 4.35 percent, data from CoreLogic reveals it’s the outer suburbs of the country’s capitals most likely to feel the pressure.

Head of research at CoreLogic, Eliza Owen, said repayments on a $750,000 loan have risen by about $1,550 per month since rate hikes began in May 2022, forcing many households to dig deep.

“Households in some regions will feel the pinch more than others,” Ms Owen said. 

“The number of mortgaged, owner occupier households are generally highest in outer regions of major cities, particularly Melbourne.
“Looking at SA3 regional boundaries at the time of the 2021 Census, the highest number of mortgaged owner occupiers were in Wyndham (43,807, or around 48 percent of households), Casey –South (38,614, or 56.2 percent of households), and Wanneroo in Perth (38,320, or 54 percent of households).”

Adding further pressure on the ability of mortgage holders in those areas to service their loans, 16 of the 25 regions identified had a weekly median income lower than that of their greater capital city.

Ms Owen noted that Blacktown – North has seen a steady rise in the number of listings in  the past four weeks, while the amount of time on the market has been increasing since February. This points to more available properties on the market and greater uncertainty amongst would-be buyers.

Other parts of the market, such as mining towns and inner city areas where there are fewer owner occupier mortgages, may also be under stress, Ms Owen said. Capital gains in some areas have also clouded the impact of higher interest rates on investment mortgage holders.

“It is noticeable that new listings volumes are climbing in some of these markets, where the national trend is seeing a seasonal slowdown,” she said. “This could make it more difficult for recent buyers to make a capital gain if they are struggling to meet mortgage repayments.”

I Screamed and Ran, Called 911.’ Three Home Showings That Went South Real Fast

Q: Have you ever feared for your life while showing a home?

Elizabeth Thompson, real-estate agent, The Agency Los Altos, Los Altos, Calif.

I was representing the seller of a townhome under contract for $1.2 million. A day before the closing, he called to tell me a window was missing. When I arrived, I found that a small sliding window was completely gone, both frame and glass. I thought that my stager had accidentally broken it and took the frame out in order to have the glass repaired. But the seller also mentioned that there was a stain on the carpet in one of the bedrooms. We went upstairs and saw a bright yellow stain next to the closet. I got on my hands and knees to smell the stain. It was not the colour of urine and didn’t smell that way. We went downstairs to discuss a solution for the missing window and then heard a bang upstairs. We went up to check, going from room to room. We finally got to the bedroom with the stain, and when I slid the closet door open, I saw an aluminium container on the floor, like the kind takeout food comes in. I looked to my left, and there was a man standing in the closet. My client and I screamed and ran, called 911 and the intruder was ultimately arrested after he climbed down the balcony to escape. He turned out to be a homeless guy with a 20-page rap sheet, but the scariest part is that when I was kneeling on the ground smelling the stain, he was about 6 inches away from me on the other side of the closet door. To this day, when I open a closet, I still have a gut reaction.

Lindsay Jackman, real-estate agent, Century 21 North Homes Realty, Gig Harbor, Wash.

I am a policeman’s daughter, and now a policeman’s wife, so I have a very thorough process to vet buyers. I never meet a stranger at a vacant house, for example, and always perform public records searches on sellers before going to a listing appointment. But I was about to take a listing on an older four-bedroom home that was used as a rental property, and the sellers were acquaintances of mine. The house had the potential to be listed for upward of $1 million, and I was fairly new in the industry, so it was exciting. I was meeting the sellers at the house for a walk-through to determine its value and whether any updates were needed prior to listing it. During the tour, I learned that the tenant was an ex-police officer with substance abuse issues and a mental-health problem. He also wasn’t paying rent. When we got to the primary bedroom, the door was closed. The seller knocked and opened it, and the tenant, wearing just underwear and a tee shirt, was standing inside the doorway, holding a gun and demanding that we leave. The seller at first tried to calm him down, but then he pulled out a gun from his waistband. The situation was unraveling, and I was petrified. I bolted for the door. I can still remember the pounding in my chest as I fumbled for my car keys. The seller came out a few minutes later, and we all drove to the nearest public place. The seller had known it would be a volatile situation, but he put me in danger and never apologised or gave me the listing. Now I have a new rule for safety: No tenants present in the house, ever.

Eli Faitelson, real-estate agent, Compass Florida, Miami Beach

About three years ago, I was working with the sellers of a single-family home on the water in Miami Beach that was listed for about $1.5 million. I got to the home an hour early to set up for a showing, and I noticed that the ceiling near the kitchen had a huge bubble in it. There was water all over the floor. The air conditioner was up on the roof, and it was leaking, so it had rotted all the wood. The sellers had been in Spain for about a month, so they had no idea what was going on in the house. I started cleaning up, and I was also playing with the AC, trying to figure it out, when I heard the water start to drip a little faster. Then the whole ceiling collapsed on my head. There was wood and AC equipment all over the floor. I was pretty close to getting really injured. I was terrified. I had debris all over me, and I was freaking out. My arm was injured, and I was in shock, but I was still able to cancel the showing.

—Edited from interviews by Robyn A. Friedman

Why Inflation Around the World Just Won’t Go Away

FRANKFURT—The world’s central banks underestimated inflation last year. They are trying not to make the same mistake twice.

Across affluent countries, central bankers are sharply lifting inflation forecasts, penciling in further interest-rate increases and warning investors that interest rates will stay high for some time. Some have set aside plans to keep interest rates on hold.

Roughly a year into their campaign against high inflation, policy makers are some way from being able to declare victory. In the U.S. and Europe, underlying inflation is still around 5% or higher even as last year’s heady increases in energy and food prices fade from view. On both sides of the Atlantic, wage growth has stabilised at high levels and shows few signs of steady declines.

Indeed, the impact of the past year’s aggressive interest-rate increases seems to be ebbing in places, with signs that housing markets are stabilising and unemployment is resuming its decline. Growth softened in the eurozone, which has entered a technical recession, but the economic bloc still added nearly a million new jobs in the first three months of the year, while the U.S. economy has recently added some 300,000 jobs a month. Canada, Sweden, Japan and the U.K skirted recessions after growth unexpectedly rebounded. Business surveys suggest a relatively buoyant outlook.

All that puts major central banks in a tricky spot. They need to decide if inflation has stalled way above their 2% target, which could require much higher interest rates to fix, or if inflation’s decline is only delayed.

Get the call wrong, and they could push the rich world into a deep recession or force it to endure years of high inflation.

“It’s not an enviable situation that central banks are in,” said Stefan Gerlach, a former deputy governor of Ireland’s central bank. “You could make a major mistake either way.”

The difficulty is compounded by central banks having missed the rise of inflation in the first place, he said. These so-called policy errors hurt the standing of officials and might lead them to second-guess their decisions, as both sides of the inflation debate battle over why economists have been so wrong-footed on inflation.

The Federal Reserve last week held interest rates steady but signalled two more increases this year, which would lift U.S. rates to a 22-year high. Price inflation in core services excluding housing, a closely watched gauge of underlying price pressures, “remains elevated and has not shown signs of easing,” the Fed wrote in its semiannual monetary policy report last week.

Central banks in Australia and Canada recently surprised investors with interest-rate increases, the latter after a months-long pause. The European Central Bank last week increased interest rates by a quarter percentage point and indicated it would continue to push them higher at least through the summer. “We are not thinking about pausing,” ECB President Christine Lagarde said.

The Bank of England showed a readiness to pause its long series of interest rate rises since the start of the year, but it is now expected to raise its key interest rate for a 13th consecutive time this week as wage and consumer-price growth prove sticky. Investors anticipate five further rate increases that would take the bank’s key rate to 5.75%.

“We’ve still been going up, the ECB is still going up, everybody’s still going up, and the U.S. economy is still ripping along for the most part,” Fed Governor Christopher Waller said on Friday in a moderated discussion in Oslo.

British lawmakers have been running low on patience. The committee of lawmakers responsible for scrutinising the central bank Tuesday called for an independent review of its inflation forecasts, with a view to finding out what went wrong.

With economic signals mixed, central banks are entering a new phase: They need to wait long enough for past rate rises to filter through the economy without underestimating inflation again.

There are good reasons to wait. For one thing, the savings accumulated by households and businesses during the pandemic might have supported spending and countered the impact of rising borrowing costs. Businesses are highly profitable, which has enabled them to retain workers in a tough economy. As savings are depleted, spending will fall and inflation might resume its decline.

Interest-rate increases might also only just be starting to bite. Businesses and households might not respond when borrowing costs increase from zero to 1%, but they might cut spending more when rates rise to 5%. “It might be highly nonlinear,” said Gerlach.

Crucially, economies are still recovering from the pandemic. The delayed reopening of China’s economy supported growth around the world and might get a boost with fresh stimulus measures.

Many close-contact services such as restaurants and retail still have room to rebound following their huge plunge during the period of lockdowns and social distancing, according to Holger Schmieding, chief economist at Berenberg Bank. In the U.K., output of consumer-facing services is still 8.7% short of its prepandemic level, while the output of all other sectors is 1.7% higher.

Stronger spending on consumer-facing services will damp the impact of interest-rate rises for a time. But those effects won’t last long if economic growth continues to soften, which should reduce incomes and spending.

“The main point now is the transmission of our past monetary decisions, which are strongly reflected in financial conditions, but whose economic effects could take up to two years to be fully felt,” said François Villeroy de Galhau, who sits on the ECB’s rate-setting committee as Bank of France governor, on Friday.

Other considerations, however, suggest that inflation could remain sticky.

Some Fed officials believe that interest rates are hitting the economy more quickly than in the past, meaning that previous increases may already have worked through the system—and even more are needed.

Why might that be? Central bankers now state clearly what they are doing and what they intend to do in future, enabling investors to react immediately, Waller argued on Friday. In rate-hiking cycles as recently as the 1990s, the Fed didn’t even inform investors of its latest policy decisions. As a result, the yield on 2-year U.S. Treasury notes had increased by 200 basis points in March 2022, before the Fed increased rates at all, Waller said.

Moreover, new central-bank policies might damp the impact of interest-rate increases. Bundesbank economists argued in a recent paper that as rates rise, banks are earning more on their large stock of excess reserves parked with central banks, which reflect central banks’ large-scale asset-purchase programs. That helps banks to continue to extend loans.

Crucially, businesses and households might have adjusted to a new world of soaring prices by permanently changing their behaviour. If so, it could be very costly to return to the old world of low and stable inflation, requiring much higher interest rates, said Joerg Kraemer, chief economist at Commerzbank in Frankfurt.

Households and businesses need to respond aggressively or risk deep losses in purchasing power. Businesses can easily justify increasing their prices further if everyone else is doing the same. Trade unions are fighting to compensate employees in ways not seen in decades and attracting new members.

These changes mean that central banks will need to act more forcefully, pushing economies into a deeper downturn to break the new inflationary mind-set, Kraemer said. The ECB, for example, might need to increase its policy rate to 5% from the current level of 3.5%, he said.

For now, investors appear to doubt the hawkish tone emanating from central banks. Stock markets are resilient on both sides of the Atlantic, and investors are pricing in interest-rate cuts in the U.S. and Europe next year. That may be a mistake, according to some economists.

“The bottom line is that inflation at 5% remains too high, and it is clear that markets are under appreciating the Fed’s commitment to get inflation back to 2%,” said Torsten Slok, chief economist at Apollo Global Management.

Finding your financial feet after a fall in fortunes

Floods, bushfires, a pandemic, a cost of living crisis and even a mouse plague — there has been a lot to contend with in the past few years which has rocked our financial stability.  And that’s before we add in the human elements of relationship and health breakdowns.

But while it may feel like there is no recovering from a bankruptcy, the loss of your home or the closure of your business, the experts want you to know one thing – you can survive a financial setback.

For more stories like this, order the winter 2023 issue of Kanebridge Quarterly here.

Sandra Blake has spent decades counselling Australians who have faced every type of financial strain and setback. And since March 2020 — when the Small Business Debt Helpline was established following the 2019 floods in Queensland and the 2019-20 Black Summer bushfires in NSW — Blake has turned to helping small business owners.

“Many of our (small business) clients have been affected by multiple disasters — mouse plague, bushfires and drought — but also changes in their personal relationships which can lead to health or mental health problems,” Blake says. “Also, changes in the economy, which has meant their consumer clients have less income to spend, has affected them.

“We speak to suicidal people regularly and unfortunately that seems to be happening more frequently. 

“But I want people to take away one message: sometimes it may seem like there are no good options available to get you out of your situation, but there is always a pathway out — always.”

The rate of personal insolvencies — a legal agreement you reach with your creditors to pay an agreed amount of your debt over a period of time if you can no longer afford to pay the full debt — increased in January, according to the Australian Financial Security Authority. There were 772 new personal insolvencies in January, up from 612 in December 2022. Of those, 414 were bankruptcies and 344 were debt agreements.

Mortgage stress, which is considered to occur when 30 to 35 per cent of your household income goes towards the mortgage, is also on the increase. With more than 10 interest rate hikes since April 2022, it is estimated more than 1.3 million Australians face mortgage stress, according to financial services company, Octivo.

A survey by comparison site Finder also reported four in five people were stressed about their financial situation in March.

So, what can you do if you find yourself suffering from debt or facing a financial setback? Finder’s money expert Sarah Megginson says you need to first know exactly where you stand financially before you can find a way out.

1) What is the state of play: “Drawing up a budget can help you prioritise your expenses and allocate your resources effectively,” Megginson says.

2) Ask the tough questions: “Can you negotiate your way out of this by offering to make part-payments or establish payment plans,” she asks. “Are you looking at bankruptcy and if so, what does that look like and what impact will it have on your lifestyle?”

Sarah Megginson says making an honest assessment of your financial position is the starting point

But even those two starting points sound a little easier said than done. Blake says you don’t have to do this all yourself. A financial counsellor can offer free and completely anonymous help and they are highly qualified in the area of financial recovery.

“There are lots of ways we can help; we can help you create a payment plan with your creditor or even enter into an informal debt agreement which in most instances comes with a debt reduction,” she says. “For example, you can negotiate with your creditor to pay $12,000 out of the $20,000 debt in a payment plan.”

She says this is where it’s handy to have a financial counsellor who can negotiate on your behalf. 

“A utilities or telco company may not accept a debt reduction plan from an individual, but they may accept one from a financial counsellor because enlisting the help of a counsellor shows that person has a genuine commitment to getting out of debt,” she says.

Jane Monica-Jones is a financial therapist who helps people get back on their feet mentally

Jane Monica-Jones is a finance therapist, so she’s a mental health practitioner rather than a financial counsellor, and often works with people who face chronic financial problems. She says the psychological recovery is key.

“A significant hit not only ruptures your financial situation but ruptures your mental health,” the co-founder of the Financial Wellbeing Company says. 

“As circumstances change externally, like with your finances, it can wobble your sense of resilience and confidence,” Monica-Jones says.

“I help people fight chronic financial strain, not crisis strain. I try to stabilise them, to help them once they have weathered the immediate crisis, but may find that they’re still not thriving. We build on what is working in their life; I tell them ‘you got on this call today, you got the kids to school – all of that is working.’” 

She says it can help to focus on the small picture, not the big one.

“The work I do operates hand in hand with a financial counsellor, we assist different parts of the person’s financial setback.”

Starting afresh

Espen Harbitz’s boutique hotel, restaurant and bar, The Oriana Orange, was open for three years when Covid hit. Like thousands of regional business owners, Harbitz took a financial hit when he had to close his doors for a three-month shut down — not once, but twice.

But the savvy businessman from central NSW, who credits himself with always looking for the positive, took the closure as a chance to     re-evaluate his business.

“Having to close the doors gave me the opportunity to re-evaluate my business structure and create a very clear plan for the opportunities ahead of us,” he says. “It gave me the chance to do things that would otherwise have been too difficult to do.

“I had the hotel bathrooms re-tiled and renovated and the outdoor bar space incorporated into the indoor bar area, doubling the space.

“It also gave me the chance to look at how best to celebrate the seasons in Orange and incorporate that into the business, like outdoor fire pits for the garden in winter.”

The downtime risks paid off.

Harbitz was able to expand his business — which includes the 50-room hotel, a bar with two saloons, a 90-seat indoor restaurant and a 200-seat outdoor eatery — and his staff grew from 35 to 50 since Covid. 

New Grads Have No Idea How to Behave in the Office. Help Is on the Way.

Recent graduates might be great at accounting or coding, but they need a little help when it comes to dinner parties and dress codes.

Many members of the class of 2023 were freshmen in college in the spring of 2020, when campuses shuttered due to the Covid-19 pandemic. They spent the rest of their college years partially in virtual mode with hybrid internships and virtual classes. Students didn’t learn some of the so-called soft skills they might have in the past by osmosis on the job, from mentors and by practicing on campus.

To address deficiencies in everything from elevator chitchat to presentation skills, companies, universities and recruiters are coming up with ways to train new hires and give them clear advice. They are eating it up.

Recent graduate Joslynn Odom had her first hybrid internship after her junior year and found working in person to be draining thanks to wearing professional attire and staying energetic consistently. It made her realise that she needed to sharpen her communication and networking skills.

Programming arranged by her college, Miami University in Ohio, has since helped. Just before graduation she attended an etiquette dinner where she learned to follow the lead of more senior leaders over dinner: Eat at their pace, discuss neutral topics and avoid personal questions. When buttering bread, it is best to put a slab on one’s own bread plate before applying it to a roll, and when cutting food, holding the fork hump-side up is best, she said.

“Knowing that, I feel more confident,” she said.

William Lopez-Gudiel, 23 years old, interned last year for Warner Bros. Discovery and found a presentation on office dynamics especially helpful. It covered dress codes, navigating interpersonal relationships and what working in person is like, he said.

The company said it has offered similar guidance in the past. Some of it felt like common sense to Lopez-Gudiel, who graduated in December from George Mason University and is a self-described extrovert.

But Lopez-Gudiel ultimately appreciated the information, realising that the pandemic may have limited what soft skills he might have learned at past work experiences. He will be working at the company full time as a software developer.

Many soon-to-be graduates are itching to get rid of Zoom and work face-to-face with co-workers where their interpersonal skills will be quickly tested. In an April survey of about 700 Class of 2023 graduates from the virtual student-health company TimelyCare, 53% said they wanted a fully in-person work environment, while 21% said they wanted to be fully remote.

Graduates’ disrupted college experience might mean they struggle with the basics reading colleagues’ cues or navigating a meeting, said Heidi Brooks, a senior lecturer in organizational behavior at Yale University’s School of Management. In class, when students didn’t have cameras on, that was harder to determine.

New hires will need to learn “those nuances of, how do you actually create enough connection, visibility, ability to manoeuvre,” she said.

The missing piece for young professionals who have graduated since 2020, in fact, has been no real proximity to mentorship and leadership, recruiters say.

“This is so much more important today,” said Sandy Torchia, vice chair of talent and culture at KPMG, whose full-time hires this summer and fall will go to the firm’s training facility in Florida where they’ll get new presentation training.

They’ll practice scenarios involving conflict within teams, plus the basics of talking in person—as simple as how to introduce yourself to a client or colleague. Key tips include maintaining eye contact, taking pauses and avoiding jargon. It is also best to listen carefully to others, and to adjust your introduction to highlight pieces of your background that will be most interesting to them.

The company has found that some young professionals are stiff, talk too fast, or rely too much on filler words like “um,” as they presented. Some of the employees said they wanted to feel more comfortable, too.

Allan Rubio, 21 years old was a freshman at Dartmouth College in the spring of 2020. Online classes continued all through his sophomore year, which Rubio completed from his family’s home in Bangkok. Course sessions stretched to 11 p.m. or sometimes 2 a.m. local time, he said.

Professors were far more flexible on deadlines during the pandemic, amenable to extensions if students asked, he said. When Rubio had an in-person internship last summer, he realised his manager, team or client depended on him meeting deadlines.

Presentation skills are also something Rubio needs to learn better, he said. He had presented virtually in academic classes, and often kept a few thoughts and scripted language in a Notes file on screen—or on a separate device nearby. Once on a video call, he said, he blamed an internet delay while he stopped talking mid sentence and collected his thoughts.

None of those aids could help him through presenting in-person on stage at a hackathon on campus. It was more difficult than he expected, he said.

Since then Rubio, who graduated this month, has rehearsed extensively before live presentations. He lays out key points and slims a longer script into bullet points before memorising key areas.

Though new hires are digital natives, today’s graduates’ professional email skills need improvement, said Jialan Wang, an assistant professor of finance at the University of Illinois at Urbana-Champaign.

Many won’t acknowledge important messages but will expect a response from professors immediately, even over holidays, she said.

Michigan State University’s business-school career centre has urged companies to be explicit about what students should expect at work, to over-communicate details about how a first day will play out, what to wear and what people typically do for lunch.

The school last year began requiring many business students to take classes on soft skills in the workplace, after observing that students are more awkward and unsure when they network than they used to be, said Marla McGraw, director of career management.

The program goes step by step through an in-person networking conversation. In one handout, the centre instructs students to introduce themselves by their first and last name. “STOP! Let them tell you their name,” it reads.

Later it urges the students to share that they are interested in hearing about opportunities at the company and share that they follow the company closely, are familiar with its products or services or know someone who interned there, among other options.

“STOP! Pause for only a few seconds to see if they offer any questions or input on your above comments. They may ask you for your resume.”

Students should keep an eye out for signs that a person is trying to end a conversation, McGraw added. Someone might begin to gather their things, or look around the room, signalling they need to talk to another person. Often, one can facilitate a smooth exit by saying, “Well, thanks so much. It’s been a pleasure.”

Professional-services firms PricewaterhouseCoopers and Protiviti have had to tell some young workers what types of clothes are appropriate, including for client-site visits.

Many people are dressing less formally, said Scott Redfearn, Protiviti’s executive vice president of global human resources.

Now the company defines what it means by business casual—including slacks, tailored denim, sport jackets, dresses, skirts, collared shirts, blouses, sweaters and professional footwear—and explains why it’s important to maintain a serious professional image. The company also relays that when it is appropriate to wear bluejeans, darker hues without rips are best, he said.

The company has tried to be proactive when it shares broad guidance about attire, but when a worker shows up in athleisure or flip-flops, that is best handled with a one-on-one conversation.

“Working hybrid brings a lot more decisions to the individual employee,” Redfearn said.

During the pandemic, the firm extended its onboarding process to a series of small-group virtual meetings that took place over a full year. One topic includes making conversation as a social skill, he said. It includes an improv-based public-speaking workshop, where in one prompt, participants need to describe themselves in three words quickly, going with their first impulse. The company said the sessions help workers to find their authentic communication styles.

Protiviti hosts social gatherings around in-person meetings so that workers can practice.

Redfearn said he gives a pep talk to new graduates, urging them to introduce themselves around the office, stick their hand out and smile. Another tip: Have a prepared question ready to ask if needed.

—Ray A. Smith contributed to this article.

China’s Small Businesses Are Hit Hard as Economic Recovery Falters

China’s small businesses are cutting staff, struggling to pay off debt and nervous about the future. Their plight paints a grim picture of the country’s flagging recovery.

The country’s small and medium-size enterprises are crucial to the economy; they employed around 233 million people by the end of 2018, which was the last time this data was made public. But official data, recent disclosures from lenders and interviews with small-business owners show that many of these companies are suffering.

“The biggest problem for small and micro enterprises now is survival,” said Ji Shaofeng, the founder of a micro loan trade association based in China’s eastern Jiangsu province.

The struggles of China’s small businesses make clear how far the country has to go before it fully recovers from a series of lockdowns, which were part of Beijing’s strict response to the coronavirus.

When the government finally brought an end to its strict zero-Covid policy late last year, many economists expected a strong recovery. It hasn’t arrived. Consumer spending, factory orders and exports are among many indicators showing signs that the recovery is losing steam.

A recent survey of manufacturing purchasing managers in China showed a second consecutive month of contraction for small companies. China’s small-enterprise purchasing managers index is now at 47.9; a reading below 50 shows business activity is slowing.

Scott Yang, a wine and tea seller in Wenzhou, a city in China’s wealthy Zhejiang province, said many local business owners he knows are laying off employees and trying to cut costs, in response to a drop in factory orders.

Small enterprises started to add jobs at the end of the first quarter, when there was still some optimism about a recovery. But a PMI subindex showed employment at small enterprises was 48.7 in May, meaning these companies are either cutting staff or not replacing those who leave.

Huang Yiwen, who sells furniture online in Foshan, in southern China’s Guangdong province, said his business has been hurt by the weak property market, since new-home buyers are a reliable source of demand for furniture makers. Annual home sales fell to a six-year low in 2022, after a slump in the property sector that also led to debt defaults by some of China’s largest developers.

“It’s so hard to sell,” said Huang, regarding furniture.

Less than 40% of small and medium-size enterprises are operating at full capacity, which means producing all of the goods they can, according to the latest survey conducted by the China Association of Small and Medium Enterprises, which sends questionnaires to 3,000 SMEs in the country every month.

Economists warn that the problems facing small businesses can’t be isolated from the wider economy. Because small businesses are such a major source of employment, particularly in large cities, their struggles reflect—and could worsen—wider economic strains.

“If SMEs do not recover, it will be difficult for urban areas to create enough employment and income, which will have a significant impact on low- and middle-income families,” said Dan Wang, chief economist of Hang Seng Bank (China).

Chinese government officials are becoming uneasy about the economy and are planning a series of moves to stimulate growth, The Wall Street Journal recently reported. That could include billions of dollars of infrastructure spending and a loosening of rules in the property sector.

So far, Beijing’s attempts to prop up small businesses have focused mainly on making it easier for them to get funding. That has had limited success.

Since early 2020, Chinese regulators have pushed banks and other financial institutions to extend loans to small businesses that were hurt by the pandemic. In some parts of the country, local divisions of China’s central bank have sought to help small businesses by establishing teams to answer funding-related questions, as well as visiting factories and farms to assess their needs. The government has provided other targeted-relief measures such as tax exemptions and temporary rent reductions.

The total outstanding balance of loans to small and micro enterprises has been climbing, reaching the equivalent of $9 trillion at the end of March, according to data from China’s banking regulator.

Many small businesses in China don’t want to secure new financing unless it helps them clear previous debts. Yang, the wine seller, said that while financing is relatively cheap and easy to get, most local businesses he knows are borrowing only to stay afloat and not to expand.

Lufax, a Chinese internet-lending platform that caters mostly to small-business owners, said last month that about 5.7% of the total loans it facilitated were more than 30 days past due at the end of March. Its loan-delinquency rates, which are higher for unsecured loans, have risen for six consecutive quarters.

MYbank, an internet lender that serves small businesses, said in its latest annual report that the balance of its loans that were more than 30 days past due more than doubled last year. The company, an affiliate of the Chinese fintech giant Ant Group, said the impact of the pandemic and weak consumption last year caused many small- and micro-business owners to face continuous pressure.

Many commercial banks have given borrowers more time to repay their loans, extending their forbearance for small businesses to this year. Small businesses whose loans were due in the fourth quarter of 2022 will have until the end of this month to repay, according to a notice from the central bank and a group of regulators.

Chinese banks have allowed some small businesses to roll over their loans, but if these small businesses are unable to repay in the future, they will eventually have to be recognized as bad loans, said Jay Guo, a former banker and current dean at the Ningbo China Institute for Supply Chain Innovation.

“It only makes sense to extend loans if the economy rebounds and SMEs are able to sell their goods,” said Guo.

Ji, of the micro loan trade association, said that while some sectors such as tourism and catering have rebounded in the past few months, small businesses in manufacturing, trade and other industries are still under pressure as demand remains well below where it used to be.

Small businesses are falling victim to a vicious cycle that is affecting the wider economy, said Xiangrong Yu, chief China economist at Citigroup. The poor performance of some private companies is leading to a loss of confidence, and that low confidence is making it hard for those companies to do better, he said.

“Lack of confidence is both a symptom of the problem and the root cause of the problem,” said Yu.

This Restored 89 Porsche 911 Could be Yours

OUR TEST CAR cannot be bought for love or money. This 1991 Porsche 911 reimagined by Singer Vehicle Design—called the “Hollywood Commission,” in Bahama Yellow—is one of only 450 examples that the Torrance, Calif.-based fantasy factory will build, all of which are spoken for, with average costs in the high six figures, not including the donor car. Which is a pity. I was this close.

Some might ask why even bother driving Mr. Hollywood here, since Singer’s “Classic Study” cars are basically unobtainable. People ask silly questions, don’t they? For Porsche fanatics, such a car lives at the end of an impossible, aspirational rainbow, right next to their pot of FU gold. Imagine, a fully modern, daily driveable vintage 911, with a flat-six engine rapping and wailing at over 7,000 revs, meshed with the perfect five-speed (or six) stick shifter—a car with all the charisma of the classic design but twice the performance, rebuilt to standards of precision that make those schlubs back in Stuttgart look like cave dwellers.

I suppose one could consider this a preview of coming attractions. Singer is now taking orders for its Turbo Study, based on turbocharged versions of the same car, known as the 964 series. The Turbo Study starts at $1.2 million, before options and personalisation. If you call in the next 15 minutes, yours could be rushed to you by 2027, says the company.

Singer is building an even more bat-guano crazy, nth-degree restomod: the Dynamics and Lightweighting Study. Developed with F1 technology house WAE, the DLS gets the full Singer treatment, including a motorsports-tuned rebuild of the naturally aspirated flat-six engine. Prices start just shy of $2 million. Only 75 will be built. At last count, more than 50 commissions had been completed.

Founded in 2009 by musician Rob Dickinson, Singer started humbly, and relatably, as one guy getting in way over his head restoring an old car. But he had game. “Pretty soon, people were asking Rob to do another, and another,” said Mazen Fawaz, Singer’s chief executive. This was fortuitous inasmuch as Dickinson had once trained as an industrial designer.

WHEELS OF FORTUNE Founded in 2009 by musician and industrial designer Rob Dickinson (formerly the frontman of Catherine Wheel), Singer has built just over 300 of its ‘Classic Study’ cars, based on the naturally aspirated cars, with some commissions exceeding $1.5 million. Singer will limit production to 450 copies and is no longer accepting commissions. PHOTO: SINGER VEHICLE DESIGN

Dickinson is by no means the first to slam and tune a 911, but it’s fair to say no one has ever gone quite so far, at such a high level of precision, with such impeccable taste and with so little regard for propriety.

It only takes a couple blocks in the “Hollywood Commission” to tell that it’s a drastically better car than the donor ever could be. For one thing, it borrows from its technical near future, using the steering rack and brake package of the 993-chassis GT3, with ABS and rotors the size of Saxon shield bosses. The motorsports-evolved front end is one reason the test car corners with the smartness of a modern track car instead of gently obsolescing junk.

In back, under the engine cover—watch that you don’t klonk yourself on the big spoiler—you will find a beautiful ceramic-finish plenum, also nicked from the 996-series GT3, wrapped in braided stainless steel. When they see it, dudes make a face like pirates opening a treasure chest.

Before my visit, I winced at the word “reimagined,” but it kind of works as a last option. You can’t call what Singer does restoration because so much of the donor gets binned, starting with the steel fenders, which get swapped out for luridly flared, flawlessly finished carbon-fiber hips. In our car, the doors and monocoque frame remained in the original German steel.

It’s not re-manufacturing, either, since what’s left is not returned to original. Every widget has been breathed upon, updated or mutated for motorsports.

Nor might you call it tuned. What Singer does is more invasive than that. While the suspension layout (upper wishbone and lower A arms in front, and trailing arm in the rear) is faithful in principle, the geometry is radically different. The front and rear track are much broader, wheels are wider, the ride height lower, the stance vastly slinkier.

NOSE JOB While the front of the Porsche 911 reimagined by Singer ‘Hollywood Commission’ looks familiar, many details depart from being period-correct. The carbon-fiber hood is slightly longer, extending to meet the slightly reprofiled bumper, also painted carbon fiber. PHOTO: SINGER VEHICLE DESIGN

The componentry is state-of-tomorrow hot-rodding, including fully adjustable Öhlins suspensions, heavy-duty bushings, forged aluminum links and bars and heim-joint adjustable cross-strut brace up front. Note: All of this can be ordered, a la carte or prix fixe, according to the client’s wishes, la-tee-dah.

The traditional 40%/60% front/rear weight balance remains intact, but the handling is unrecognizable. Oversteer, schmoversteer. Hunkered over fat Michelins, the car’s grip on the street is unshakeable.

Glory be, listen to that engine. Typically, the donor’s flat-six gets bored and stroked to 4.0 litres displacement, around 390 hp. It then gets a motorsports makeover from top to bottom, with lightened valvetrain, titanium conrods and forged pistons, forged crankshaft, lightweight flywheel—the proverbial works, if your proverbs include bratty Shanghai billionaires.

At full song, over 5,000 rpm or so, the free-breathing six snarls and snare drums, on and off throttle, with a titanium-piped resonance that is thrilling, tromboning, outrageous. In the driver’s footwell: three small pedals, perfectly positioned for heel-and-toe footwork.
In contast to all the high-tech hot-rodding, the 964’s steel frame needs little to no additional bracing, I was told. Singer will seam-weld a car’s monocoque if asked, but it’s considered unnecessary. For one thing, the car emerging from the process weighs 150-200kg less than it did going in.

Which brings us to my takeaway: Among all the wonders of Singer’s fabrication, the haute-couture upholsteries and the horological obsession with precision, the most astonishing bit of kit remains the 911’s monocoque structure, a design that dates back almost unchanged to Ferry Porsche’s original in 1963. Of all the liberties taken it’s practically the only thing that remains sacrosanct.

Hallelujah.

1991 Porsche 911 reimagined by Singer ‘Hollywood Commission’

Price: $1.5 million

Powertrain: Naturally aspirated 4.0-litre DOHC flat-six engine; six-speed manual gearbox; rear-drive with mechanically limited-slip rear differential

Power/torque: 390 hp at 7,200 rpm/432 Nm at 5,900 rpm

Curb weight: 1,242 pounds

0-100 km/h: 3.3 seconds

Corrections & Amplifications
The price of the Porsche 911 reimagined by Singer ‘Hollywood Commission’ test car is $1 million, including the cost of the donor car, and its front/rear weight balance is 40%/60%. A previous version of this article mistakenly referred to the $1 million figure as the “base price” and stated that the front/rear weight balance is 60%/40%. (Corrected on June 9.) The Dynamics and Lightweighting Study model of the Porsche 911 reimagined by Singer includes a naturally aspirated engine. A previous version of this article incorrectly stated that it has a turbocharged engine. (Corrected on June 12.)

The mancave mainstay that became a kitchen must-have

World health events have always made an impact on the domestic front. From the introduction of indoor plumbing to deal with water borne diseases in Victorian times to the rise of seaside resorts as a panacea for respiratory ailments like tuberculosis, architectural design has always risen to the challenges and demands of modern living. 

So while the recent pandemic has elevated the importance of domestic design ranging from bigger and better bathrooms to fully equipped home offices, there are quieter but no less significant changes afoot in the kitchen.

For more stories like this, order your copy of the latest issue of Kanebridge Quarterly here

As lockdowns kept all but the most essential workers at home, many began looking at ways to replicate restaurant and bar experiences within their own four walls. Although some people already had dedicated bar areas, others gathered in communal areas like the kitchen to try their hand at making their favourite drink. As restrictions eased, it’s a trend that has continued to gather pace.

Whiskey ambassador, James Buntin, says often it simply makes good sense to make drinks at home.

“When you’re paying between $22 and $25 for a cocktail and you have four of those, that’s $100,” he says. “It becomes quite expensive and so during COVID a lot of people started to create their own drinks instead.” 

For connoisseurs with a particular preference for spirits like whiskey, vodka or gin, Buntin says perfecting your favourite cocktail at home can be a more satisfying experience than ordering it at a bar.

“The home bar is not usually set up for making lots of different drinks — you won’t get a menu,” he says. “Generally, it’s one or two drinks that are the owners’ favourites. It’s about simplicity, so it’s your space and you have everything within reach and it becomes a pleasure.”

Kitchen designer and director of Minosa, Darren Genner, says a built-in bar has become a popular must-have among his clients.

“During COVID, the kitchen became the headmaster’s station where mum or dad sat while the kids did their school work,” Genner says. “Then it became more about  entertaining at home.”

Rather than the freestanding, mobile drinks trolley that gained popularity among millennials in recent years, the new look bar is curated and integrated, with the occasional touch of glamour. 

“It used to be we had the drinks trolley with bottles of whiskey and vodka but now we don’t want to see it all the time,” he says. “We have clients, for example, that love their gin and collect the bottles and they want a place to store them.”

Most recently, Genner created a pop-up bar in a kitchen in Sydney’s Alexandria that emerges from the kitchen benchtop, James Bond-style, at the touch of a button.

“Home automation is the next step,” he says. “We are fitting voice activation now so that you can say ‘hey Alexa, I’m thirsty’.” 

This bar designed by Darren Genner and Simona Castagna at Minosa emerges from the island benchtop at the touch of a button.

The concealed nature of this new style of in-kitchen bar is also about increasing the functionality of the space within an open plan area over the course of the day.

“There is a touch of the nightclub about them,” Genner says. “When you are sitting in the lounge, you don’t want to see a kitchen — you want to see a beautiful piece of joinery. Materials are metallics, marble and smokey glass with LED lights with sensors that are really positioned to illuminate bottles. 

“All those kinds of things make it special.”

Architect Carla Middleton says as footprints shrink, it just makes sense to create spaces with dual functionalities. She has created several spaces on tight sites for clients that are dedicated to easy drinks preparation, including an area under the stairs in her own home at Tamarama.  

Architect Carla Middleton designed a home bar and coffee station under the stairs in her own home. Image: Tom Ferguson. Styling: Anna Delprat

“It’s a combined coffee and bar area and it was the only thing my husband really wanted,” Middleton says. “We couldn’t do a cellar and this is central to the living and entertaining area that you can seal off when you are not entertaining. 

“It’s a nice area when friends come over to set up and let your guests help themselves.”

Rather than creating a separate bar or mancave, a luxe mini version in a shared space like the kitchen also ensures that everyone feels welcome, including the cook. Whether it is concealed or not, for it to be successful, Middleton says a drinks station needs a few essentials.

“You want a good open benchtop, when you are entertaining, to serve as a cocktail station and then a sink big enough to have some ice in it,” she says. “A wine and beer fridge is also good, perhaps one of those under bench wine fridges, and then a separate fridge for soft drinks.”

While the materials and technology might have changed, Middleton points out that the idea of having a cocktail bar at home goes back some way.

“It’s not a new thing. We used to have a drinks trolley in my grandmother’s house,” she says. “It’s just transforming in its style and location.”

Here’s cheers to that.

The Rush for Hotel Suites and Connecting Rooms Is On

The most in-demand hotel room for travelLers right now is the room right next to theirs.

Hotel and resort managers say requests for connecting rooms and suites have increased recently as multigenerational families and large groups of friends gather. Continued flexibility from hybrid work and travelLers bringing family members along on business trips have also contributed, hotel managers say.

Some hotels have reported a more than 20% increase in demand for these types of rooms.

The jump means more competition for connecting rooms, which families already struggle to book due to outdated room-assignment technology and limited supply. Some hotels are adding the ability to connect more rooms. Others are adding suites or upselling larger rooms with living space to groups.

“It amazes me every time I book a hotel that we can send people to space but can’t figure out connecting rooms,” says Lindsay Bowling, a full-time mom from Danville, Calif., who has traveled internationally with her husband, mom and kids, ages 8, 6 and 1.

Bowling, 40, says the family used to stay in Airbnbs, but says she needs more predictable lodging these days. She has run into booking issues where hotel rooms are adjoining, meaning next to each other, but not connecting.

Now, she watches travelLers’ YouTube videos to see what rooms look like. She also started using a travel agent who has helped book guaranteed connecting rooms. Sometimes she ponies up for a villa or a suite.

“You end up paying at least three times the amount to get something that works for families,” she says.

Family-style hotels

Vacation rentals and timeshares have long been popular options for families. These options got a boost earlier in the pandemic as people looked to spend more time in a destination. Families also booked more short-term rental stays to allow grandparents, parents and kids to stay under one roof. Short-term rentals remain popular this summer, too.

Some traveLlers are bringing those preferences to hotels, and asking for more than the so-called suite that’s an open space between a bedroom and a foldout couch.

At most hotels, connecting rooms aren’t a guarantee. Hotels have a limited number, and room-booking technology doesn’t always present connecting rooms to guests who search for them. Last-minute issues with rooms, such as broken toilets, can also jettison plans for connecting rooms.

Guests are staying longer at resort properties, which means connecting rooms might not open up simultaneously, says Cate Farmer, senior vice president of hotels and resorts at the hospitality company Margaritaville. Options are more scarce on weekends, she says.

In the two years since launching its confirmed connecting rooms program, Hilton says the average monthly booking rates for connecting rooms increased by about 10% year-over-year. Hyatt says it is beta testing a feature that lets people book guaranteed connecting rooms.

“Before two years ago, connecting room doors were mostly about having an annoying neighbour that you don’t know that’s too loud,” says Kyle Killion, founder of Suiteness, a travel company that helps people book suites and connecting hotel rooms. “What’s nice about booking the connectors is that the person on the other side can be annoying, but they’re probably your family.”

At the five-star Alila Napa Valley in California, children under 18 aren’t permitted. But requests for connecting rooms have increased by 23% since last year as parents travel with adult family members and loved ones, general manager Heidi Miersemann says.

The 68-room hotel plans to add at least one more set of connecting rooms to meet demand, she says.

Connecting rooms in a renovation isn’t as easy as it sounds, says Warren Feldman, chief executive officer of Nehmer, a hospitality design and architecture firm. Hotels must consider factors like rewiring before knocking a new space in a wall.

Pair of king rooms

Nicole Rathsam is a 40-year-old executive for an insurance company from San Diego. She recently booked connecting rooms at the Wynn Encore in Las Vegas. She was in town for an event, and her husband and three kids tagged along.

Rathsam says the only option was for two connecting king rooms—less than ideal for her, but better than having five people crammed into one room.

A Wynn spokeswoman says that, if asked, the hotel could have accommodated connecting rooms with different bed sizes.

To get a suite at some of the other high-end properties would cost more than $2,000 a night—more than four times the rate for connecting rooms. If hotels can figure out a better apartment-style experience for families, “they’re going to have a big edge,” Rathsam says.

Hotel prices have remained high this summer, especially in Europe. In Paris, prices are 50% above 2019 levels, Sébastien Bazin, chairman and chief executive officer of the hospitality company Accor, said at a recent lodging conference.

But a certain subset of travellers aren’t looking at the price. “They are saying ‘Give me your best suite,’” he said, adding that the company doesn’t have enough suites to meet demand.

Suite bookings at Marriott properties have risen 10% from 2022 to 2023, a spokeswoman says. About 31% of Marriott hotels in development are all-suite properties, says Eric Jacobs, senior vice president for select brands.

Designers are putting more of an emphasis on creating separate workspaces in rooms, including through junior suites, which Feldman of Nehmer says can be used for both business and leisure travellers.

During the holidays, travellers requested more connecting suites than the newly opened Tower hotel at the Boca Raton resort could accommodate. Rates start at $799 for a one-bedroom suite with a living room this summer. The top six floors offer the option to connect one-, two- and three-bedroom suites, which President Daniel Hostettler says he thought would suffice.

This summer, the hotel is renovating 15 other floors so that the entire building can accommodate connecting suites.

Mid century style hits the market in one of Sydney’s most desirable property pockets

There are parts of Sydney enjoyed by locals but much lesser known by those outside the neighbourhood. Putney is technically a northern suburb of Sydney but is uniquely placed between Gladesville and Ryde, with the inner west within easy reach across the Ryde Bridge. 

Which makes this property at 27 Delange Road, Putney just a couple of streets back from Parramatta River, high on the list of desirable addresses. 

Positioned on a generous 673.5sqm block, it offers three bedrooms, two bathrooms and parking for two cars. With strong mid century vibes, the house has been carefully renovated to retain original features while offering the sort of facilities that win families’ hearts.

Central to the appeal of the property is an expansive outdoor  entertaining area, including a spacious deck and circular plunge pool. Gardens are beautifully maintained to frame the house and maintain privacy from neighbours.

Those with regular overseas visitors will appreciate the separate accommodation at the rear of the property, which includes a full bar for use all year round.

The well-lit stainless steel kitchen is compact, but skilfully laid out, with a spacious wine rack, breakfast bar and plentiful storage options.

Made for entertaining, there are multiple living options within the open plan design but if you’d rather dine out, the property is within easy reach of cafes, Putney village shops and the Kissing Point ferry wharf.

 

Address: 27 Delange Road, Putney

Auction: 24th June 2023 1:00pm

Open for inspection: Saturday 17th June from 1:00pm to 1:30pm

Agent: Stephanie O’Sullivan, The Agency Hunters Hill, stephanieosullivan@theagency.com.au 0419 485 504

 

The Beyoncé Effect: Sweden’s Inflation Feels the Hit

Call it Bey-flation.

Sweden’s higher-than-expected inflation in May was due in part to Beyoncé launching her Renaissance World Tour in Stockholm, according to an economist at Danske Bank.

Fans flocking to Sweden’s capital city sent hotel prices soaring, said economist Michael Grahn. Calling it a “Beyoncé blip,” he estimates that Beyoncé’s tour contributed about 0.2 percentage point to inflation.

“This is very rare,” Grahn said about the effect that Beyoncé’s Stockholm performances on May 10 and 11 had. “Basically, her fans vacuumed hotels around Stockholm with a radius of some 40 miles,” bidding up hotel rates.

Inflation in Sweden was at 9.7% in May, falling from 10.5% the month before, according to Sweden’s government. Economists surveyed by FactSet were expecting inflation to drop to 9.2% last month. Statistics Sweden, which puts out the country’s inflation and other economic reports, said hotel and restaurant prices rose 3.3% in May from the month before.

“Beyoncé probably had an effect on hotel prices in Stockholm the week she performed here,” said Carl Mårtensson, a price statistician at Statistics Sweden, “but it should not have had any significant impact” on Sweden’s inflation.

The Renaissance tour, named after Beyoncé’s most recent album, is making its way around Europe before coming to the U.S. next month. The superstar’s first tour in seven years is playing in soccer and football stadiums, where fans watch her dance with robots and sing while riding a mirrored horse that floats in the air.

Beyoncé, whose hits include “Crazy in Love” and “Formation,” broke the record for most Grammy wins in February after “Renaissance” won best dance/electronic music album. She’s had 32 Grammy wins over her career, the most of any person.

When Renaissance tour tickets went on sale earlier this year, Beyoncé superfans, who call themselves the BeyHive, tried to buy tickets in several cities, fearing they would go quickly. A day after tour dates were announced, Ticketmaster said fan demand for the first round of tickets exceeded the number of tickets available by more than 800%.

Grahn said Sweden’s currency, the krona, is weak, which means tickets and other costs are likely cheaper for fans outside the country.

Other superstars touring this year after a long break have also made an economic impact on the cities they have visited.

Taylor Swift, who is in the midst of her Eras Tour, helped Las Vegas nearly match pre pandemic visitor levels when she performed there in March, the Las Vegas tourism authority said. Cities have been going all out to welcome Swifties in town for the Eras Tour, lighting up monuments in her signature colours and temporarily renaming streets after her.

Wealthy Buyers Are Turning This Region Into One of Italy’s Hottest Home Markets

In a shaded spot near his new swimming pool, Northern Italian architect Paolo Genta is taking stock of his Southern Italian dream project—a luxurious vacation compound, serving three generations of his extended Turin family, that he created in Puglia, the region running down the heel of Italy’s boot.

On a hot spring day, over a glass of local rosé wine and tomato-and-pasta canapés, Genta, 64, remembers his initial encounter over a decade ago with the sunbaked property, which he bought in stages between 2012 and 2015, for $537,400, and then restored up through 2022.

“A friend took me here,” he says, of the 2/3-acre estate, then in ruins. “But it immediately felt familiar to me—as if I already knew it.”

He has gone on to spend around $1.075 million to realise his vision by renovating three adjacent structures, dating back to at least the 18 century, as well as $236,400 on the lavish landscaping. He and the Genta clan plan to use the compound’s seven bedrooms, spread over two buildings, up to a few months a year. The third building, a deconsecrated Baroque chapel, is the perfect place to have a cool lunch on a hot day.

Genta is one of a growing number of luxury-minded homeowners who are transforming Puglia, once a remote and impoverished corner of Italy, into an outpost of upscale living. Historical stone farmhouses, called masserie, are getting high-tech upgrades, while Puglia’s traditional cone-topped rural structures, called trulli, are being converted into high-end primary suites.

Puglia is one of the few areas of mainland Southern Italy—along with the Campania region, home to Naples and the Amalfi Coast—to develop a reliable luxury real-estate sector. According to Idealista.it, the Italian residential real-estate site, home prices here now average about $121 per square foot, which is higher than in nearby Basilicata, Calabria and Abruzzo.

Luxury properties are clustered in two areas. One, Valle d’Itria, is an agricultural valley between Bari, Puglia’s largest city, and Ostuni, an old, atmospheric hilltop town. This is ground zero for Puglia’s trulli legacy. Thousands of the structures, large and small, mark the hilly countryside, creating a distinctive, rustic skyline. Further south, around the Baroque city of Lecce, lies Salento, where Genta has his compound. Flatter and hotter, with simultaneous access to both Adriatic and Ionian beaches, Salento offers more seclusion.

Many residential buildings in Valle d’Itria, a Puglia area increasingly known for upscale homes and luxury resorts, are topped with cone-shaped trulli.

According to Idealista, Puglia’s Brindisi province, which includes much of Valle d’Itria, is seeing the region’s strongest price increases, up 9.2% between May 2022 and May 2023. The most expensive sale in 2022 was a 6,500-square-foot Salento masseria, not far from the Genta compound, which sold for $3.78 million.

Valle d’Itria is known for its white-stone towns and exclusive hotels, such as Borgo Egnazia, a 40-acre coastal resort, where high-season prices can reach $26,585 a night. Near Ostuni, a restored, trulli-topped stone house dating back several centuries has an asking price of $1.72 million; the five-bedroom home sits on a roughly 7.5-acre lot.

Valle d’Itria appeals to design royalty, such as Milan’s MariaCristina Buccellati, who works with her family’s luxury jewellery label, now owned by Richemont. Salento, meanwhile, attracts Hollywood royalty; local homeowners include actress Helen Mirren and her husband, director Taylor Hackford. In Salento, near the very bottom of the heel, a restored 12-bedroom castle, with a large enclosed garden, has an asking price of $3.56 million.

Canadian couple Alper Ozdemir and Cynthia Liu, who arrived in Puglia from Toronto in late 2021, have bought in the heart of Valle d’Itria. The active retirees, both in their early 50s, left behind Ontario’s cold climate for Puglia’s good food, warm weather and close-to-nature lifestyle, says Ozdemir.

In February 2022, they closed on a 7.5-acre farm with a trulli-topped ruin. They paid $247,000 for the property, and plan to spend about $860,000 to turn the 3,850-square-foot structure into a two-story, three-bedroom home, built around a new swimming pool.

Like many luxury buyers in the area, the couple narrowed their choice between Valle d’Itria and Salento, settling on the former. “Salento is nice in the summer,” says Ozdemir, “but people live around here year round.”

Puglia overall has become increasingly accessible. It is now part of Italy’s high-speed train network, and it has two international airports. Staying in a local rental to oversee their renovation, Ozdemir and Liu plan to use their new home, set to be completed in 2024, as a base for exploring the country.

A new set of buyers from the San Francisco Bay Area, brothers Mark and Peter Alwast, also regard their 2-acre Valle d’Itria homestead, purchased for $355,000 in September 2022, as a convenient toehold, with plans to explore Europe. The brothers, along with Peter Alwast’s life partner and Mark Alwast’s husband, expect to spend about $322,000 to renovate a 3,000-square-foot house for their retirement.

Meanwhile, they will use it as a vacation home. Despite the far longer travel time, the foursome view it as an alternative to Northern California wine country. “In Puglia you get a lot more for your money,” says Mark Alwast, 60, a designer.

Patience is often required from buyers in Puglia. Genta needed to piece together his compound from eight different owners, with some holding out for years. Retired New York attorney Ellen Bonaventura, 62, has spent the past nine years putting back together a Salento palazzo, a 30-minute drive south of Lecce, from a cluster of disparate buildings. “It was always my dream to have a house in Italy,” says the full-time Puglia resident, who estimates that she has spent $495,000 on real estate, about $3.22 million on renovation costs and around $537,000 on furniture and art, including Neapolitan and Sicilian antiques.

To-do lists tend to grow for this new round of Puglia homeowners. In 2021, Paolo Colombo, an architect based in Lugano, Switzerland, paid $1.94 million to buy two multi trulli structures on a 3.7-acre hilltop Valle d’Itria property, and then spent $2.16 million to renovate the two buildings—which required disassembling, cleaning and reassembling the massive stonework. Completed this June, the renovation will be followed soon, says Colombo, by a free-standing, latticework yoga studio and new outdoor sleeping areas, which will give his family of five a total of eight bedrooms in the main house.

Swiss-based Italian architect Paolo Colombo celebrated his birthday at his trulli-topped compound in Valle d’Itria.

Rula Al Amad and James Woods, a Milan-based, Palestinian-American couple, have expanded their Puglia portfolio. Valle d’Itria pioneers, they started in 2006, when they paid a mere $129,000 to buy a derelict set of trulli, then spent $295,000 over the following several years to create a 2,000-square-foot vacation home.

Sensing it had become too small for their family of four, the couple paid $537,000 in 2018 for a nearby derelict masseria. They then spent about $1.57 million on a gut renovation, which wrapped up this spring. The finished compound can comfortably sleep up to 10.

Speaking in her new living room, which emphasizes the 500-year-old masseria’s use of historic local limestone, Al Amad, who first stayed in the house this past Easter, is looking ahead to winter. “We go to Michigan at Christmas but come back to Italy for New Year’s,” she says of the routine of her Midwest-born husband and their two teenage boys. “I can see doing a big New Year’s Eve party here.”

What’s Killing Productivity? Some Think It’s the Banks

LONDON—The birthplace of the industrial revolution is in dire need of innovation. Standing in the way: Britain’s mortgage-laden banks.

The U.K.—inventor of the factory system, steam engine and passenger rail—is at the forefront of a 21st-century global productivity slowdown. Growth in U.K. productivity, or output per hour worked, has halved since the financial crisis, leading some policy makers to call this era Britain’s lost decade. Among the world’s seven largest developed economies, only Italy has fared worse.

The causes are hotly debated, and include an ageing population, tighter regulation and the U.K.’s departure from the European Union. But a factor that has gained special attention: the way U.K. banks have tilted lending to the booming housing market.

Bank lending for projects that boost economic output, such as machinery and software, has stagnated. Research and regulators say the two trends are linked: As real-estate prices soared, banks shifted more capital toward housing, viewed as less risky because the loans were backed by tangible assets with rising values.

“The banking system is increasingly becoming a brake on the economy,” said Jonathan Haskel, a member of the Bank of England’s Monetary Policy Committee.

The U.K. is an extreme example of what’s happened in big economies around the world for the better part of this century. Central banks cut interest rates in the 2010s through early 2022 to make it cheaper for businesses to borrow and invest. But while debt rose sharply, most of it went toward real estate.

The world’s total assets—including those held by households, businesses and banks—more than tripled from 2000 to 2020, according to a report from the McKinsey Global Institute, a research group. Two-thirds are stored in real estate; only a fifth are in productivity-boosting assets such as factories, equipment and infrastructure, McKinsey said. “The historic link between the growth of net worth and the growth of GDP no longer holds,” the report said.

Among the world’s 10 biggest economies, the U.K. is tied with France for having the lowest share of net worth in assets that boost economic growth. Meanwhile, the U.K.’s home values and mortgage debt have exploded.

U.K. banks added £400 billion, equivalent to about $500 billion, to home lending in the decade through this February, Bank of England data show. Debt extended to businesses grew by only one-tenth of that amount.

The U.K.’s big banks “pulled back in the financial crisis and never really came back” in terms of business lending, said Richard Davies, a former regional head for Barclays’s U.K. business banking operations who now leads Allica Bank, a London startup that lends to small and midsize businesses. “The big banks are obsessed with residential mortgages.”

The obsession with mortgages leaves some businesses feeling sidelined.

Geometric Manufacturing, based in Tewkesbury, England, makes defence and cybersecurity products. Several years ago the firm asked a U.K. bank for a loan to design and manufacture a robotic arm to load its machines, an investment that would allow the factory to produce more with fewer workers, Managing Director Paul Wenham said.

Despite the option for a government guarantee through a U.K. program to help small businesses, the bank declined to participate, Wenham said. The company eventually received a small loan from a London-based startup lender. The loan came with a high interest rate and was smaller than what the company had sought.

His inability to get a bigger loan delayed the project by years, Wenham said. “We could have been reaping the rewards and benefits so much sooner,” Wenham said.

Dozens of startup lenders have stepped in to fill the void created by the retrenchment of big banks. They provided about half of all new loans to small and midsize businesses last year, government figures show. But they charge high interest rates on business loans, said Mike Conroy, director of commercial finance at UK Finance, the banking industry’s main trade group.

Conroy said the biggest factor behind weak business investment is a lack of demand, not supply. Many entrepreneurs are reluctant to take on debt, or simply don’t aspire to grow, he said. “The U.K. has many small businesses making a great contribution to the U.K. economy and local communities, even though they don’t aspire to be the next Microsoft or Google,” Conroy said.

Research in the U.S. and Australia shows that banks respond to rising home values by shifting capital away from businesses. U.S. banks located in areas with robust housing markets in the early 2000s bubble boosted mortgage lending while cutting business lending, according to a 2018 research paper in the Review of Financial Studies.

In the U.K., rules put in place after the financial crisis force banks to hold higher levels of capital for business loans, which are deemed riskier, than for mortgages.

Matt Hammerstein, CEO of Barclays’s U.K. operations, said banks have increasingly required all borrowers—whether homeowners or businesses—to put up physical assets that the lenders could sell if the borrowers fail to repay. Many business owners refuse to put up their assets, such as homes, as collateral and thus don’t win approval for loans, he said.

“What banks have done over time in order to be able to underpin their risk appetite is to expect entrepreneurs to put more of their own equity at risk,” Hammerstein said. “If you’re lending to a small business, particularly one that has intangible assets, you’re going to want some collateral.”

Default rates among established small and midsize businesses is low—about one in 50 will default in a given year, said Davies of Allica Bank. But determining each company’s risk—and thus what interest rate to charge and how much capital to hold—is less accurate and more time-consuming for big banks, which have instead shifted resources to mortgages.

In 2018, Jurga Zilinskiene wanted financing to develop software to expand her London-based language-translation business, Guildhawk. The 40-employee company translates documents for companies around the globe.

She asked a big U.K. bank for a seven-figure loan; they lent her a fraction of that, citing her lack of tangible assets that could back the loan if she defaulted. Many of her assets are intangible, such as intellectual property.

She worries that banks are too focused on making a quick profit rather than supporting the long-term health of the economy. “How can I compete with global enterprises in the United States, China?” she asks.

First It Was Quiet Quitting, Now Workers Are Facing Off With Their Bosses

More and more Americans aren’t feeling great at work.

Half of workers aren’t engaged on the job, putting in minimal effort to get by, according to research by Gallup released Tuesday. Employee engagement in the U.S. declined for the second year in a row. There is also a growing share of the workforce that is disengaged, or resentful that their needs aren’t being met. In some cases, these workers are disgruntled over low pay and long hours, or they have lost trust in their employers.

“Employers are just not as in touch with employees,” said Jim Harter, chief workplace scientist at Gallup and lead author on the report. Some of the recent shift in attitude stems from workers having unclear expectations from their managers.

Workers’ frustrations have been building since 2021, after Gallup-measured U.S. worker-engagement levels hit their highest level on record in 2020. In the spring and summer of 2020, as Covid-19 spread and there was social unrest in the wake of George Floyd’s murder, executives at many companies had town halls and listening sessions with employees, communicating organisational mission and keeping workplace relationships strong.

This year, more companies are trying to bring workers back to offices as bosses fret about worker productivity and loyalty.

Gallup surveyed more than 60,000 people in the U.S. to compile the report, which has tracked Americans’ sentiment about their jobs since 2000, and says engaged workers are more productive and tend to stay at their jobs for longer.

“If you feel like your employer isn’t giving you what you need to do your work, you’re going to be much less loyal—and looking for other work,” said Harter.

The remote work divide

Gallup’s findings come amid backlash from workers, many of whom have recently stepped up protests against in-office requirements as companies change pandemic-era policies.

Workers at insurer Farmers Group called to unionise, and some pledged to quit after a new chief executive said he would require most workers to be in-office three days a week. Amazon.com workers demonstrated at lunch recently against a hybrid-work policy with three days in the office a week.

An employee’s relationship with a direct boss is more important to engagement than where people work, said Harter. One way to build these connections is for managers to have meaningful conversations with their employees, preferably at least once a week.

Working on trust

Many employees see shifts away from flexible schedules and remote work options as a signal that executives don’t trust them to do their jobs outside of the office. Others say benefits to remote work they experienced during the pandemic, including more time with family and cutting back commutes, are now critical to their happiness.

The employers making more in-office work a requirement are, in part, motivated by trying to bolster workers’ loyalty, which they correlate with longer retention, said Katy George, a senior partner and chief people officer at McKinsey & Co.

Kyle Pflueger, 34 years old, was hired in 2020 to work remotely as a product manager. He met his co-workers in person just a few times over the years and never felt fully connected to his work or colleagues, but as the breadwinner for his family, he needed the pay, retirement benefits and health insurance.

Pflueger left his full-time job this month to focus on his independent projects.

“I wasn’t feeling particularly happy with the work that I was doing,” he said. He now works full time for himself, building and maintaining websites for businesses.

Looking for less stress

Workers also said they were more stressed this year than last, according to Gallup’s survey. American workers are among the most stressed, tied with workers in Canada and parts of East Asia.

Workplace stressors include low salaries, long hours and a lack of opportunity for advancement, according to an October report from the U.S. Surgeon General. The report also warned that workplace stress can be bad for mental health, disrupt sleep and raise one’s vulnerability to infection.

Michele Spilberg Hart, who directs marketing for a Boston-area health nonprofit, said that she has told her staff to take time off when they aren’t feeling well mentally or physically. Their work isn’t life-or-death, and taking breaks can help people come back with more energy and better ideas, she said.

“They cannot do good work and be healthy if they’re not taking care of themselves first,” she said. “If you don’t take care of yourself, nobody else will.”

Why Melbourne’s property market is suddenly so appealing

Potential homebuyers may be best placed to set their sights on Melbourne, with new data revealing Australia’s largest city recorded significantly less growth than other capitals since the pandemic began.

Figures from CoreLogic show  that house values rose by just 1.6 percent between March 2020 and May 2023 compared with a stronger 16.5 percent gain in Sydney prices and a whopping 45.2 percent surge in Adelaide.

The increases have started to close the value gaps between Melbourne and the smaller capitals such as Brisbane, Adelaide and Perth, said CoreLogic Asia Pacific research director Tim Lawless.

“Every capital city other than Canberra – the country’s second most expensive capital for houses – has significantly closed the house value gap to Melbourne,” he said. “At the onset of COVID, Brisbane houses were 47 percent cheaper than Melbourne. That affordability gap has closed to just 15 percent.

“Melbourne was 85 percent more expensive than Adelaide at the start of COVID but the gap has narrowed to just 29 percent and in Perth, where the gap was 88 percent, Melbourne house values are now 50 percent higher.”

Like most Australian capitals, Melbourne’s values fell at the start of COVID. During 2020, values declined by -6.7 percent according to CoreLogic, followed by substantial growth of 20.6 percent. This preceded  another decline of -11.7 percent, with the market finding the floor in February this year. Since then, prices have grown 1.7 percent to May this year.

Melbourne is consistently ranked Australia’s most liveable city and was last year named the third most liveable city in the world by the Economist Intelligence Unit’s Global 2022 Liveability Index.

Mr Lawless said the latest data would likely make Melbourne a more attractive option for homebuyers and investors.

“With housing affordability remaining stretched, this improvement in Melbourne’s value proposition could place Australia’s second largest city in a more competitive position to attract a greater share of housing market participants,” he said. 

“The city’s advertised supply level is trending lower and is -13.4 percent below levels at the same time last year and -7.0 percent below the previous five-year average.  

“Melbourne’s rental vacancy rate of 0.8 percent in May is also one of the lowest in the country and yet another potential factor supporting purchasing demand for those with the financial capacity to enter the market.”