The housing bubble in Australia has popped but the biggest declines are still ahead. Meanwhile other problems have surfaced, as expected in this corner, namely Insolvencies hit record levels in January
A total of 628 firms collapsed in January, the highest-ever for what is a traditionally quiet month and a 21.2 per cent increase from the previous year, accounting company Taylor Woodings said in a report released on Wednesday.
NSW recorded the highest number of collapses among the states, with 189 insolvencies, although it was 2.6 per cent lower than the previous corresponding period. In contrast, insolvencies doubled in Western Australia from 29 in January 2012, to 58 this year.
In the first seven months of the 2013 financial year, ASIC reported 6053 company insolvencies, the second-largest recorded and 0.2 per cent lower than last year.
The high number of collapses came despite a recent increase in consumer sentiment.
Mr Schwarz [Taylor Woodings’ Melbourne partner Andrew Schwarz] said construction activity remained low, with housing starts well down from their trend and high point. “Having said that, property prices have started to rebound a little bit, so whether that increase in property prices and in consumer confidence will lead into new housing starts, time will tell,” he said.
Optimism is hardly warranted. Australia’s fundamentals (a housing-bust economy, a slowdown in mining with falling Chinese demand, overpriced rents, and high labor costs) are simply horrendous.
Mike “Mish” Shedlock