Property prices in Perth posted the biggest declines in Australia as an oversupply of homes and a “two-speed economy” take their toll on the capital of the nation’s biggest mining state.
Perth home prices fell a seasonally adjusted 1.9 percent to a median A$465,000 ($461,000) in the three months to December, compared with a 0.4 percent rise in the national capital city median home price, according to a RP Data-Rismark report released today. Perth home values are likely to be little changed for most of this year before bouncing back in 2012, economists at the Australia & New Zealand Banking Group Ltd., National Australia Bank Ltd. and the Real Estate Institute of Western Australia forecast.
Western Australia’s “economy itself seems to be moving ahead very strongly, getting back towards the boom-type conditions in the resources sector,” said Paul Braddick, senior economist at ANZ. “But that’s quite a contrast with the housing market, where it has definitely become a buyers’ market and prices have eased quite considerably.”
The economy of Western Australia, home to the Pilbara region, one of the world’s biggest sources of iron ore and natural gas, grew at an annual rate of 6.5 percent in the quarter ended Sept. 30, more than double the national average, according to the national statistics bureau. In contrast, Perth’s housing market fell by 2.3 percent in the year to December, lagging behind a national growth rate of 4.7 percent, RP Data figures show.
Housing Glut
Property prices more than doubled between 2004 and 2007, spurring an increase in property construction. That created a glut that’s helped push prices down, Braddick said.
This has also made Perth’s apartment rental yields of 4.3 percent the second-lowest in the nation after Melbourne, and compared with a national average of 4.7 percent, according to the RP Data-Rismark figures.
There are about 15,300 properties for sale in Perth, some 3,000 more than demand, according to the state’s Real Estate Institute guaranteed pay day loans. The oversupply — compared with a national shortage of 178,400 dwellings at June 2009, according to the government’s National Housing Supply Council — will take about a year to absorb, REIWA President Alan Bourke estimates.
The story is different about 1,500 kilometers (930 miles) to the north of Perth, where mining projects are causing a housing shortage. Karratha’s median home price in December was about A$830,000, and Port Hedland’s was A$920,000, REIWA figures show.
‘Two-Speed Economy’
“We’ve got a two-speed economy,” Bourke said in a telephone interview. “If you go to the areas where the resources industry is doing well, median prices are close to A$1 million. We in Perth are more indirectly affected, and not bolstered to the same level.”
A 31 percent drop in migration in the year ended June 30 from a year earlier also helps account for a decline in demand, Bourke said. Prime Minister Julia Gillard campaigned before the Aug. 21 election for reduced population gains and dropped her predecessor’s endorsement of a “Big Australia” policy that envisioned a surge of more than 50 percent in citizens in the coming four decades.
Still, Perth prices will overtake the national average next year, rising 5 percent, and climb by 6.5 percent in 2013, assuming a 1 percentage point increase in the central bank’s benchmark interest rate, ANZ’s Braddick said. This compares with a nationwide increase of 3.3 percent in 2012 and 5 percent in 2013, he said.
Mining Projects
Andrew Wilson, economist at Australian Property Monitors, expects growth will be driven by a slew of planned mining projects, he said in a telephone interview. The state has about A$170 billion of mining and petroleum production projects in its five-year investment pipeline, according to the government.
This will mean a jump in the population of “fly in, fly out” workers, — who are based in cities like Perth and travel to mining projects — which will in turn drive up demand for housing, particularly rental accommodation, Wilson said.
“The expected boom will have to draw resources from Perth,” he said. “Perth remains the accommodation and financial hub that connects the mining industry with the resources it requires.”
After three decades in the business, Toronto real estate broker Paul Swartz is still trying to figure out the market.
Mid-sized U.K. companies found finance easier to get this year as the demand outlook for their goods and services improved, the Department for Business, Innovation and Skills said.
Ninety-three percent of mid-sized companies that sought funds in 2010 were able to obtain what they required, the ministry said in a statement on its website today, citing an annual survey. That compared with 82 percent in a 2009 study.
Next year, 58 percent of respondents said they expect sales to be higher than current levels, compared with 54 percent reporting an increase in 2010, the report found. The net balance of companies reporting sales gains rose to 31 percentage points this year from minus 25 points in 2009, indicating a greater number of businesses are growing, BIS said.
A mid-sized business is defined in the report as having annual sales of between 25 million pounds ($39 million) and 500 million pounds. The study was carried out for the ministry by research organization BDRC Continental, which surveyed 401 companies from Sept. 22 to Oct. 21.
European Union leaders agreed to amend the bloc’s treaties to create a permanent debt-crisis mechanism in 2013 as they struggled to bridge divisions over immediate steps to stabilize bond markets.
A day after the European Central Bank armed itself with more capital to resist the crisis, the EU started to discuss measures such as offering shorter-term credits or using the bloc’s main rescue fund to buy bonds of distressed countries.
“My vision is of a Europe that grows ever closer together - - at different speeds in some cases, to be sure,” German Chancellor Angela Merkel told reporters after an EU summit in Brussels today.
For now, Germany ruled out topping up the current 750 billion-euro ($1 trillion) emergency fund or rushing aid to Portugal or Spain, reinforcing skepticism in markets about Europe’s search for the right formula to quell the fiscal contagion that threatens the euro.
The future setup “is to some extent window-dressing as it does not solve the current crisis,” said Carsten Brzeski, an economist at ING Group NV in Brussels. “European leaders failed to address the issue of debt sustainability and possible insolvency problems prior to 2013.”
The euro gained 0.1 percent to $1.3254 at 2:45 p.m. in Brussels, while bonds of Portugal, Spain, Greece and Ireland slipped. Moody’s Investors Service followed up warnings that it may cut the credit ratings of Spain and Greece by announcing today that it downgraded Ireland by five notches to Baa1 from Aa2, with a negative outlook.
Talks Under Way
Luxembourg Prime Minister Jean-Claude Juncker said deliberations are under way over more flexible use of the main 440 billion-euro component of the fund instead of waiting until the last minute to arrange all-or-nothing lifelines like the 85 billion-euro package granted to Ireland on Nov. 28.
Asked whether shorter-term credits or bond purchasing are up for debate, Juncker said measures being considered are “exactly those that you mentioned.”
Such steps would ease strains on the ECB, which has bought 72 billion euros of weaker countries’ debt since May to stabilize markets. Yesterday, the ECB shored up its capital base to guard against losses from the purchases, voting to almost double its capital to 10.76 billion euros.
“Let’s be candid,” International Monetary Fund Managing Director Dominique Strauss-Kahn said in an interview on “Charlie Rose” on PBS. “The European Union needs a little more time, until maybe the beginning of next year, to be able to produce a comprehensive package.”
No ‘Speculation’
Driven by a German public outcry against propping up fiscally reckless countries, Merkel opposed putting more money on the table or further entwining Europe’s economies through joint bond sales. Merkel didn’t rule out more flexible use of the current fund, declining to enter into “speculation.”
In a departure from German insistence that each country determine its own fate, Merkel said today that maintaining national fiscal discipline won’t alone put the 16-nation euro region on a sounder footing online payday loan lenders.
Merkel and French President Nicolas Sarkozy indicated that closer coordination of business tax rates might come back onto the agenda as Europe tries to forge a more unified economy and fix flaws in the euro’s makeup.
In a jab at Ireland’s 12.5 percent corporate tax rate, Sarkozy said “I don’t think you can have the lowest corporate taxes in the euro zone and then transfer your debt.” Spanish Prime Minister Jose Luis Rodriguez Zapatero said the tax discussion is an “important novelty” that will play out over years.
‘Needs to Mature’
Italian Prime Minister Silvio Berlusconi put calls for joint euro-area borrowing in the same category, noting the German opposition “but that the proposal needs to mature. It will be studied more deeply.”
On the summit’s main business, Germany won an EU commitment for a treaty amendment to set up a crisis-resolution system in 2013 that would allow financial aid “if indispensable” to underpin the euro and might force bondholders to bear some of the costs of future rescues.
German insistence on cutting bond values when countries get into trouble in the future triggered the latest phase in the debt crisis, culminating in Ireland’s support package and triggering concern that Portugal and Spain will be next.
While costs for bondholders aren’t mentioned in the two- sentence amendment agreed on last night, the leaders endorsed a Nov. 28 decision by finance ministers that writedowns may take place on a “case by case” basis in accord with IMF practices.
‘Useful Clarification’
ECB President Jean-Claude Trichet called the pledge not to mandate bond writeoffs a “useful clarification.”
Merkel needed the amendment to prevent German high-court challenges to the future aid mechanism, which the EU wants to get up and running when the current rescue package lapses in mid-2013.
The compromise text reads: “The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”
Merkel didn’t get everything she wanted. Germany originally pushed to allow financial aid only as a “last resort,” language that might have ruled out contingency credit lines or given the IMF the lead in sorting out Europe’s economic woes.
Last overhauled a year ago, the treaty is the EU’s equivalent of a constitution, binding on EU institutions in Brussels and on national governments’ handling of European affairs. All 27 countries, including the 11 outside the euro region, must ratify the amendment.
European finance ministers plan to work out details of the future system by March so it can take effect in the middle of 2013.
Australia’s four biggest banks face the prospect of mounting competition after Treasurer Wayne Swan urged customers to turn to credit unions and building societies as he prepares a reform package for the industry.
“Competition from smaller lenders in the banking sector has to be activated by empowering consumers to shop around,” Swan said yesterday in a statement. “I’d encourage every Australian family to check out the range of products on offer.”
Swan has said he’ll issue proposals this month to reduce the dominance of Westpac Banking Corp., Commonwealth Bank of Australia, National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. Calls from politicians to rein in the four lenders have mounted after they last month increased mortgage rates faster than the central bank raised borrowing costs.
According to Swan, many Australians don’t know they can buy financial services from 60 credit unions and building societies, which are institutions owned by their customers, at post offices. He will probably present his proposals, including ways to help them issue more loans, to the Cabinet today and an announcement is likely Dec. 9 or Dec. 10, according to the Melbourne-based Age newspaper.
Public debate on competition in financial-services is increasing as key figures in the industry contribute to a Senate inquiry. Central Bank Governor Glenn Stevens is due to appear before the committee on Dec. 13.
Offshore Funds
Westpac, Australia’s second-largest lender, last week published its submission, saying there are currently 179 entities competing to sell banking services.
Chief Executive Officer Gail Kelly called on the government to introduce measures that reduce major banks’ reliance on offshore funds, which has become more expensive since the global financial crisis. The biggest banks have blamed those costs for driving up mortgage prices guaranteed online payday loans. Kelly also said a “wide-ranging” inquiry should wait as long as four years, until the results of new worldwide rules on liquidity and capital rules become clearer.
In an interview published Dec. 4 in the Australian Financial Review, Kelly said the only way to reduce mortgage prices is to help banks obtain cheaper sources of funding.
Australia’s four largest banks used the global financial crisis to tighten their grip on the home-loan market as smaller bank struggled to access credit. The major banks, dubbed the four pillars after a law preventing takeovers among them, account for about 88 percent of the residential home lending market, according to data from the Australian Prudential Regulatory Authority.
Flat Fee
Credit unions and building societies argue that the country needs more competition and have asked the government to introduce policies to help them access funding.
In a Nov. 30 submission to the senate inquiry, the Association of Building Societies and Credit Unions asked for the introduction of a flat-fee guarantee of wholesale debt funding for smaller lenders.
The government has invested A$16 billion ($15.7 billion) in Triple-A rated residential mortgage-backed securities to support smaller lenders and lower the cost of funds, Swan said yesterday.
Australia’s largest lenders are already poised to face greater competition in other areas.
AMP Ltd., which is buying the Australian and New Zealand units of Axa Asia Pacific Holdings Ltd., plans to use the deal to compete with the wealth-management businesses of the largest banks, AMP Chief Executive Officer Craig Dunn told yesterday’s Inside Business program on the Australian Broadcasting Corp.
Silver Eagle Manufacturing Co. notified the state this week that it will lay off 55 workers by mid-December.
Portland-based Silver Eagle makes military trailers and other truck components out of a manufacturing operation at 5825 N.E. Skyport Way.
On Thursday, Silver Eagle notified the Oregon Dislocated Worker Unit of the layoffs in order to comply with the federal Worker Adjustment and Retraining Notification Act, which requires employers to alert state labor officials of mass layoffs.
In the letter, CEO Jay Wilson said the layoffs are the result of “unfavorable economic conditions.”
The layoffs will begin Dec. 17.
Wilson was not available for further comment Friday.
China’s manufacturing sector picked up pace in September, easing some fears that the world’s third largest economy might be in for a rapid slowdown.
The country’s Purchasing Managers Index, rose to 53.8 in September, from 51.7 in August, China’s Federation of Logistics and Purchasing said Friday morning.
Any figure above 50 indicates growth in the sector.
The global economy has become increasingly dependent on China’s rapid expansion as an engine for growth. Last month, the International Monetary Fund projected China is on track for staggering 10.5% growth in 2010.
That’s compared with 4.5% growth for the global economy in 2010.
Fearing that growth could become unsustainable, Chinese officials have recently implemented policy measures to slam on the brakes in some sectors of the economy, including the real estate market.
Now, some economists are concerned those measures could result in a so-called hard landing. Amid those fears, Friday’s stronger manufacturing was a welcome piece of news.
"PMI growth is signalizing we won’t see more slowing in the next few months. I think the economy will probably grow a little bit faster," said Yingying Xu, an economist with the Manufacturers Alliance payday loan lenders.
While robust manufacturing in China is good for the global economy, some have blamed the country’s undervalued currency for hurting U.S. manufacturers by undercutting their export prices. The United States has been increasingly pressuring Beijing to allow the yuan to rise against the dollar.
Earlier this week, tensions between China and the U.S. heightened, when the House of Representatives passed a bill aimed at helping U.S. companies compete against Chinese exporters.
The legislation would authorize the Commerce Department to impose duties on imports from countries with undervalued currencies.
Some economists doubt the bill will pass the Senate, which has similar legislation pending.
Regardless of legislation, heightened trade tensions between the U.S. and China may be just be a "new normal," said Damien Ma, a China analyst at the Eurasia Group.
The number of first-time filers for unemployment insurance fell more than expected last week, according to a weekly government report released Thursday.
There were 473,000 initial jobless claims filed in the week ended Aug. 21, down 31,000 from an upwardly revised 504,000 the previous week, according to the Labor Department’s weekly report.
Economists surveyed by Briefing.com were expecting new claims to fall to 485,000.
Claims had been stuck in the mid- to upper-400,000 range for about nine months, but spiked above 500,000 for the first time since November in last week’s report.
"The latest numbers provide a sigh of relief to stressed financial markets and at least uphold the possibility that the economy can avoid a double-dip recession," said economist John Lonski, of Moody’s Economy.com. "But we still need to establish a declining trend for jobless claims so we can feel more confident in the economic recovery."
The 4-week moving average of initial claims — a number that tries to smooth out week-to-week volatility — was 486,750, up 3,250 from the previous week.
Lonski said that figure needs to break below 450,000 and set new lows in order to improve the outlook for the job market, which he is optimistic about.
"Given that business sales rebounded in July after two months of decreases, companies may hold on to more employees, if not hire more," he said business card templates. "So it’s conceivable that that latest decline in jobless claims will be the first in a series of such declines."
Continuing claims: The government said 4.46 million people continued to file unemployment claims for their second week or more, during the week ended Aug. 14, the most recent data available. That’s down 62,000 from an upwardly revised 4.52 million the week before.
Continuing claims reflect people who file each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, or people who have exhausted their benefits but are still out of a job.
The 4-week moving average for ongoing claims fell by 28,000 to 4.51 million.
State-by-state: Jobless claims in eight states declined by more than 1,000 in the week ended Aug. 15, which is the most recent state data available. Claims in California dropped the most, by 5,275. The state attributed the drop to fewer layoffs in the service and manufacturing industries.
Claims jumped by more than 1,000 in Wisconsin and Puerto Rico.
Attorney General Andrew Cuomo remains the overwhelming favorite to become New York’s next governor yet voters want to hear more from him on the state’s budget woes.
That message is from a Quinnipiac University poll released Tuesday.
Overall, 64 percent of New York voters, against 21 percent, want the Democratic candidate to weigh in on the protracted fiscal situation. Broken down by party, Republicans say (68-20) percent Cuomo isn’t explaining enough, an opinion shared by Democrats (58-26) percent and independent voters (71-15) percent.
“Imagine that: Voters want to hear more from a politician. Attorney General Andrew Cuomo has been too quiet on how we would solve Albany’s budget mess, which he’ll inherit — if he’s elected,” said Maurice Carroll, director of the Quinnipiac University Polling Institute.
Despite his silence, Cuomo maintains a 72-16 percent approval rating and holds a commanding lead on two Republican challengers. Quinnipiac has Cuomo in front of former Congressman Rick Lazio, 58-26 percent, up from 55-26 percent April 13. When put against Buffalo businessman Carl Paladino, Cuomo’s advantage is 59-23 percent, compared to 60-24 percent in a previous poll.
Lazio, the endorsed GOP candidate, tops Paladino in a Republican primary 46-17 percent, with 28 percent undecided.
The poll results on the governor’s race and other issues, including the U.S. Senate seat held by Kirsten Gillibrand and President Barack Obama’s job performance can be found here.
Microchip Technology Inc. has completed its purchase of Silicon Storage Technology Inc., closing the nearly $300 million deal.
Chandler-based Microchip (Nasdaq:MCHP) finalized is acquisition of SST (Nasdaq:SSTI) after shareholders approved the deal in a special meeting on Thursday.
We are pleased to have completed this transaction,” said Steve Sanghi, Microchip president and CEO, in a prepared statement. “Through this acquisition, we gain access to SST’s SuperFlash technology and extensive patent portfolio, which are critical building blocks for advanced microcontrollers. We expect that SST will also enhance our ability to customize technology variants, thereby adding an advantage over competing technologies.”
Microchip sought SST’s technology as a way to build its presence in the memory market and add to its own patent portfolio. Microchip twice upped its bid for the Sunnyvale, Calif.-based manufacturer after rival bids were submitted to its board.
“We are confident that SST will flourish as a part of Microchip,” said Bing Yeh, co-founder and CEO of SST. “As part of a larger, more diversified company, we believe that SST will be better positioned to deliver the superior service and innovative NOR flash and embedded flash solutions that our customers expect.”
Today will mark the last day that SST’s stock trades. Owners of the stock will receive $3.05 in cash as part of the sale.
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