Collier Homes collapses
Another major builder collapsed in Australia today.
This time it was Collier Homes, a 60-year old business founded in the 1950s, and another huge scalp for this increasingly devasting market cycle for the sector.
That's now 2,349 construction and development firms that have collapsed over the past year - some of which were to be expected, of course, especially after the effective moratorium on insolvencies through the pandemic period - but this one was a shock to the sector, being such a large and generally well-managed industry player.
In other economic news, inflation came in at 1 per cent for the March 2024 quarter, which was a bit higher than market and economist expectations.
Over the year the inflation rate was 3.6 per cent, some way down from 4.1 per cent at the end of December 2023, which is at least heartening, but also a bit above the Reserve Bank's latest SOMP forecasts.
Interest rates have largely worked as expected on the interest-rate sensitive sectors of the economy - prices actually fell for clothing and footwear, and furnishings and household equipment, for example - however as we'll explore below there are inflationary pressures on some of the non-discretionary items.
Unfortunately, inflation was higher than expected largely due to sectors which have come under pressure from extremely high population growth.
There were large price increases in secondary education (+6.1 per cent), tertiary education (+6.5 per cent), and medical and hospital services (+2.3 per cent).
Rents also appeared to reaccelerate in the March 2024 quarter, though as Ben Phillips of ANU (and Peter Tulip of the CIS) pointed out to me on the socials there was some distortion in the second half of 2023 due to the Commonwealth Rent Assistance package.
The brighter news is that PropTrack sees
annual rental
price growth gradually easing, although there's not too much sign of this yet in SQM Research's asking rent figures...and overall rents are expected to keep rising.
Over the very long run (i.e. 50 plus years) Sydney seems to have experienced the most constrained market for the supply of rentals and perhaps the highest growth in household wealth, but lately rents have been increasing just about everywhere as record population growth meets 2,350 construction company failures head-on.
Unfortunately in the short run higher interest rates can do little useful to help with the rental shortage (if anything it might even the opposite in the immediate term), and as I discussed
on 2GB last night, the smarter route to a fix here could be to cool the rate of population growth, to the extent that's practicable.
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