Surging electricity spot prices in the east coast market have also contributed to profits in the first six months of the calendar year, with EBITDA from Australian solar jumping to €27.9 million, up from €17.7 million, and earnings from Australian wind farms increasing to € 38.5 million from €27.2 million.
Xavier Barbaro, Neoen’s chairman and chief executive, said after the release the battery business was “really mutually beneficial when we make good money because we provide great service”.
Valuable service to the grid
“The good money that we make in Australia is well deserved because we provide very valuable and innovative services to the grid compared to what they had to pay in the past to get the same services from diesel generators.
“There are many things that we do with storage. I mean, we can provide backup to the grid. We can stabilize the frequency of the grid. We can provide inertia, that’s something that we launched very recently,” Mr Barbaro said, referring to the Hornsdale battery generating world-first “inertia” which is normally provided by coal power stations to stabilize the grid.
Neoen’s worldwide group earnings surged 39 per cent to €175 million in the first six months of the year, and it lifted earnings guidance.
“The upward adjustments reflect the performance observed in the second quarter, in particular for the storage business, notably in Australia; the pace of progress of the projects under construction; and a favorable market price environment,” Mr Barbaro said.
Neoen stock has jumped 5 per cent over the last week to €42.87, as the results spurred French bank BNP Paribas to raise its target price to €42.5 from €37.8, and US investment bank Stifel to raise its target price to €36 from € 32.
Shopping centers
Separately, Westfield owner Scentre Group has inked a long-term green power supply agreement with Queensland’s state-owned utility to cut the shopping center behemoth’s carbon footprint.
The agreement with CleanCo will electrify six shopping centers in the sunshine state from 2025 through to 2030. The agreement set to start in 2024 with the supply of non-renewable energy.
Scentre Group CEO-elect Elliott Rusanow said the power purchase agreement (PPA) would help it meet its 50 per cent emission reduction target by 2025 and was a key plank of its plan to reach net zero by 2030.
Queensland malls set to be powered by green electricity include Westfield Coomera, Westfield Chermside, Westfield Garden City, Westfield Northlakes, and Westfield Carindale. In 2021, these centers attracted 66.5 million customer visits.
Renewable electricity will be provided for Scentre Group primarily from the Western Downs Green Power Hub, Kaban Green Power Hub, and the Dulacca Wind Farm, where CleanCo has power purchase agreements in place.
Mick de Brenni, Queensland minister for energy, and Mr Rusanow agreed to CleanCo’s unique remit as a government-owned corporation helped the duo strike a deal.
“This is a great example of how government and private enterprise can actually work together to transition energy needs or energy usage towards green renewable sources,” Mr Rusanow said.
“We were taking a synthetic position to get exposure to Canva and the best way to do it was through multiple Blackbird funds,” he said.
“When a fund is revalued, we’ll reflect that value.
“So the returns we’ve shown to date will reduce, but our internal rate of return was near triple digits. While it’ll have settled back now [after Blackbird marking down its funds]it’ll have only gone back 5 per cent to 10 per cent… we’re comfortably up in a short amount of time.”
The founders who were honest with themselves and are genuine business people, must have realized that at some point, they’ve got to be able to produce a profit.
— Paul Wilson, Dancer.
As well as marking down Canva by 36 per cent, Blackbird cut the value of some of their funds by 30 per cent compared to the prior quarter.
But, Mr Jasper said the position in Blackbird was an exception, and SecondQuarter was comfortable with the valuations of its other investments. SecondQuarter’s portfolio includes Edrolo and Go1, both of which have raised new rounds in the last two months, but also Culture Amp and SafetyCulture – two unicorns whose valuations have yet to be tested in the current climate.
“We’re investing in high-growth companies. In most cases… we understate the values because if a round was done a year or two ago, the companies are then far bigger than when we invested,” he said.
“We’re not paying crazy multiples, and even if there is some multiple compression, the growth has outweighed it.”
AirTree Ventures will write to its investors this week to update them on portfolio valuations. Jeremy Piper
AirTree Ventures co-founder and managing partner Craig Blair would not comment on the fund’s revaluation intentions ahead of sending its investor letter this week.
However, he said there’s no argument that the tech market “got too hot for a couple of years”.
“It’s just a statement of fact,” he said. “It’s a healthy reset and a reset that we had to have. Valuations got too high, investors underpriced risk, and in some ways it’s a return to what the venture was like for 20 years before the peak.
“But, it changes nothing for companies. And what matters for most investors is what happens in the next five to 10 years, not now, except for super funds.”
The revaluation of start-ups has relevance outside the VC funds themselves, as the biggest local players are backed by superannuation funds including Hostplus, AustralianSuper, Sunsuper, TelstraSuper and Statewide Super.
Hostplus in particular has come under pressure to provide more clarity about the valuations of its unlisted assets.
Dean Dorrell, co-founder and partner at Sydney-based VC fund Carthona Capital, which counts Hostplus among its backers, said his fund conducts valuations of its portfolio companies on a monthly basis, using International Private Equity and Venture Capital Valuation (IPEV) guidelines .
These guidelines are endorsed by the Australian Investment Council, and were last amended in March 2020 to account for impacts from COVID-19 on the market. Revised guidelines are expected by the end of this year.
Carthona has digital debt collector Indebted, payments firm Paytron, New York-based property tech firm Cherre, car financing fintech Driva and carbon accounting and reporting start-up Pathzero among its portfolio companies. Mr Dorrell said its most recent valuation had declined.
“It’s inevitable that the technology industry will have ups and downs. Lower valuations will happen from time to time, but this is a very long-term game and most funds have 10-year lifetimes,” Mr Dorrell said.
Not all doom and gloom
“We have seen some down rounds in our portfolio, but equally there are companies that are raising at higher valuations. It’s not all doom and gloom out there – especially for companies dealing with ESG and especially carbon – and there are companies that have made significant progress but are getting reduced multiples which equates to flat rounds.”
Mr Dorrell said it was important to note that VC firms like Carthona usually hold preference shares that protect their investment.
This means that a $1 reduction in company valuation does not necessarily lead to a proportionate reduction in the value of a fund’s holding.
“Listed companies aren’t allowed to have different preferences, so this makes a comparison between listed and unlisted companies not ‘apples for apples’,” he said.
Citing a report into “megatrends” released by the CSIRO last week, which predicted the next wave of digital innovation would generate between $10-15 trillion globally, Mr Dorrell said he remained convinced that Australian investments in tech start-ups would pay off.
“Australia is in a unique position to invest for the long term through our superannuation system. The industry super funds are really leading the way on this – especially Hostplus,” he said.
Unlike many of the large VC funds, seed-stage investor Rampsersand does not have any superannuation fund LPs, meaning it has less pressure to regularly disclose valuations.
However, his co-founder Paul Naphtali said the fund still does quarterly revaluations to be transparent with its high net worth backers.
The fund also follows AIC standards. It has reviewed its entire portfolio in the last few months and identified companies that are more vulnerable.
“It doesn’t necessarily result in a formal mark down, but we’re honest with investors about where we’re vulnerable, and we’re glad there aren’t many,” Mr Naphtali said.
Bailador Technology Investment is unique in Australia as a publicly listed venture capital fund and its listed status gives it more obligations than other funds to disclose its portfolio valuations.
Bailador had a strong 2021 with a $14.6 million realization in the initial public offering of travel tech firm Siteminder, while retaining a significant stake; a $118.4 million exit from the sale of Instaclustr; and $19.9 million for the sale of its holding in Standard Media Index.
In its most recent review of its portfolio, completed at the end of June, it wrote down the value of e-commerce platform Nosto and Access Telehealth by 20 per cent and 24 per cent respectively, while leaving the valuations of InstantScripts, Mosh, Brosa and Rezdy untouched.
Last week it invested another $5 million in InstantScripts, an online digital healthcare platform, in a deal that raised the company’s valuation by 10 per cent.
Bailador co-founder and managing partner Paul Wilson said his fund had kept its foot off the gas in terms of private company investments in the two years before June 30, with only $48.3 million deployed because valuations were over-cooked.
The recent market downturn, he said, was providing a “necessary correction” in the private tech company market, which presented opportunities for better deals on the horizon.
“Last year our reaction to the market was to say ‘let’s see what we can sell and get cash for at these valuations,’ and we made some investments at good prices,” Mr Wilson said.
“We’ve currently got more than 50 per cent of our NTA (net tangible assets) in cash, and we couldn’t be happier with that because we are seeing more reasonable valuation expectations in the private rounds.”
Bucking the trend
While most venture capital firms are making some valuation markdowns, OneVentures stands out against the pack. Managing partner Dr Michelle Deaker said the fund had no intention of writing down any investments.
“OneVentures took a pretty cautious approach to tech valuations last year. Our auditors saw no reason to bring in external valuers as our portfolio was already conservatively held. We’ve had no write-downs as a result,” she said.
“The auditors said if we wanted to bring in an external valuer for two companies we could do so to potentially write them up (ie too conservatively held) but we felt this was unnecessary.
“Most of our companies are [profitable]or have a path to profitability, and decent cash runways, so there is also limited risk on funding with us also having reserved capital available to support future rounds.”
But with profitability still a long way off for most start-ups, Bailador’s Paul Wilson said founders needed to shift their focus to operating in a “new normal” for a potentially lengthy period of time.
He said quality companies – like Canva – would be able to grow back into their previous valuations by demonstrating performance and continuing to grow sustainably.
“Previously the market was rewarding founders for just trying to grow as fast as they could, and I think it was always going to happen that we would have this correction and an adjustment back towards good unit economics,” Mr Wilson said.
“The founders who were honest with themselves and are genuine business people, must have realized that at some point, they’ve got to be able to produce a profit. And if they weren’t thinking that way, then it probably was not going to end that well.”
Canvas’s response
After its valuation was written down last week, Canva said it was confident that it would work its way back to its higher price, and saw opportunities to grow due to its large cash reserves.
When asked to elaborate on how it intended to grow, and how staff were handling the changing value of their stock options, a Canva spokesman said attitudes remained overwhelmingly positive.
“We’re using this period to continue to double down on efforts like internationalisation, new product offerings and the incredible opportunities ahead as we accelerate our efforts in teams and workplaces,” the spokesman said.
“We’re also seeing more interest than ever before from candidates, and in the last six months, received more than 200,000 job applications and have added over 700 people to our team with plans to continue growing throughout the year.
“Ultimately, we’re not distracted by short-term changes in the market. Instead, our team is hyperfocused on continuing to deliver new products and category expansion opportunities that will grow and strengthen our long-term value. Companies with strong fundamentals will emerge from this period stronger than before.”
The Australian Petroleum Production & Exploration Association (APPEA) acting chief executive Damian Dwyer said the industry was already acting to cover supply next year. “There has never been an actual shortfall and there will not be one next year,” he said.
But the move by the Albanese government puts gas producers on notice that export controls could be in place by the start of 2023 for LNG shipments from Gladstone – one of China’s biggest LNG supply sources – unless the industry can guarantee enough uncontracted gas will be diverted to avoid a domestic shortfall.
Electricity futures fell after Ms King’s announcement, sending benchmark prices in NSW for the June quarter of 2023 down towards $200 a megawatt-hour, from about $230/MWh.
Also known as the gas trigger, the ADGSM starts with the issuance of a “notice of intent”, which Ms King indicated could occur at the end of August.
If the minister carries out her threat, exporters would then be subject to government intervention next year to prevent uncontracted gas being shipped to customers in Asia.
Once the notice of intent is issued in coming weeks, gas producers will have the opportunity to provide information on gas production, plant export volumes and the market outlook.
“This is their opportunity to demonstrate that there won’t be a domestic shortfall next year,” Ms King said in Canberra.
Her move follows the release on Monday by Treasurer Jim Chalmers of a damning ACCC report that warned next year could see a 10 per cent gas shortfall if all the industry’s uncontracted gas is shipped offshore instead.
‘Safeguard supplies’
Other changes announced by Ms King in response to the report include extending the ADGSM trigger from January next year to 2030, and renegotiating a heads of agreement with the industry that is due to expire at the start of 2023. Among changes the government will consider is the potential for the trigger to be price-based rather than volumetric.
“These measures announced today will safeguard Australia’s energy supplies,” she said.
“The Albanese government will do whatever is needed to make sure Australians have ongoing access to the gas and energy sources that belong to the people of Australia.”
Opposition resources spokeswoman Susan McDonald said Ms King’s hands were “tied behind her back” and that the crisis was driven by a lack of new supply.
”She knows the answer is more supply, but she’s not supported by her cabinet colleagues. The Labor government must put aside their politics and support projects like the Beetaloo Strategic Basin Plan introduced by the Coalition,” Ms McDonald said, referring to the undeveloped Beetaloo Basin in the Northern Territory.
“Short-sighted bans on developing unconventional onshore gas are coming home to roost.”
The step towards triggering the ADGSM was welcomed by large energy users, manufacturers and trade unions.
“Australia cannot allow our economy to be hollowed out, our manufacturing sector to be savaged, our transition to cleaner energy stalled and our household energy bills to skyrocket because of the planning and market failures of Australia’s gas export industry,” said Ben Eade, chief Executive of Manufacturing Australia.
“Intervention is now urgent and necessary.”
However, one of the nation’s biggest manufacturing bodies, the Australian Industry Group, cautioned the government against holding back gas from international markets, saying that “it will increase global economic pain and worsen the perils facing our allies”.
“Australia must safeguard our energy security but the less we need to rely on export cuts, the better,” said AiG chief executive Innes Willox.
“Prices are likely to be high despite these policy responses, and gas demand reduction will take time and be unevenly distributed. In the short term especially, vulnerable business and household energy users will need financial help.”
windfall tax
Australian Workers Union national secretary Daniel Walton urged the Albanese government to look at a UK-style windfall tax “to capture some of the extraordinary profit gouging that the gas exporters are enjoying as a result of Putin’s aggression in Ukraine”. Prime Minister Anthony Albanese has ruled out such a tax.
The government seized on the ACCC’s report, which it said had set out patterns of behavior that were unacceptable.
Industry Minister Ed Husic slammed the gas giants, effectively accusing them of appropriating unearned profits after spot prices jumped from $8 per gigajoule to $44.
“That is a huge increase and the reality is we have multinational companies extracting an Australian resource to sell to international clients at a price that is squeezing Australian industry and jobs. Something has to be done.”
Ms King urged state and territory governments to step up and “look at what is available to them” to boost supply.
She added that Australia would not have the gas industry were it not for international partners that built the industry with foreign capital and on the basis of long-term supply guarantees.
“We have to respect the investment they have made, the commitment they have made to our country, the jobs they have created in this country,” she said. “By the same token, we have to be assured that Australians will have access to gas.”
Gas industry sources said they expected a revised voluntary agreement to be finalized within the next several weeks that would involve a renewed commitment by Queensland’s three LNG exporters to keep the domestic market supplied.
Ms King outlined seven key principles that would drive the ADGSM changes, including sufficient supply for domestic manufacturers, downward pressure on domestic prices, supporting the energy transition and, maintaining Australia’s position as a “leading contributor to global energy security”.
“Australia needs to be very mindful of any signals sent by any policy changes to our longstanding trade and investment partners around the world who have invested in the Australian economy because of our stability,” said the APPEA’S Mr Dwyer.
“It is even more important to demonstrate consistency, certainty and market stability for the cleaner energy future given these same trading partners are those Australia will work with to build our future hydrogen export industry.”
Damage reputation
Concerns are growing that any move to cap LNG exports would damage Australia’s reputation as a destination for foreign investment, given the reliance on Australian LNG by significant investors and customers in the Gladstone LNG projects from China, South Korea and Malaysia.
That would overshadow the individual financial hit to Queensland LNG players such as Santos and Origin Energy, said MST Marquee analyst Mark Samter.
“As a country the downside risks of haphazard intervention are almost unlimited, but from a corporate perspective, whilst not ideal, they are relatively immaterial in my view,” he said in a note.
A spokeswoman for Australia Pacific LNG, one of the three Queensland exporters which is partly owned by Origin Energy, said that broader actions are needed to solve the east coast’s energy crisis.
“We need to look beyond LNG producers, who invested billions of dollars to develop the LNG industry underpinned by long-term LNG offtake commitments to overseas buyers,” she said.
“To solve energy challenges on the east coast of Australia, it remains important to take steps to encourage investment in new supplies near southern markets closer to demand centres.”
Credit Suisse energy analyst Saul Kavonic pointed to “a noticeable deterioration in the objective quality of the ACCC report” which he also said “appears to be written with more of an attempt to provide ammunition for greater regulatory intervention, rather than to inform market participants” .
A chance encounter has propelled a young woman into a career in the automotive industry.
Key points:
A program is encouraging young women and girls to get involved in the automotive industry
The program has connected a 21-year-old woman with a job
Women are under-represented in STEM studies and in the automotive industry
Tarli Goss was pulling apart her car in a car park at La Trobe University’s Bendigo campus when the director of the Bendigo Tech School, Graeme Wiggins, spotted her.
“We found her one hot summer’s day with her car disassembled over three parking bays and went over to find out what she was up to,” Mr Wiggins said.
“We ended up saying there’s a project you should really come and have a look at.”
I have invited Ms Goss to get involved in Girls in STEAM Electric Car program, which immerses young women in the automotive industry.
That program has now led the 21-year-old to work at a Bendigo auto repair business.
‘I wanted to service my own car’
Ms Goss says she thought it would “be cool” to have general knowledge about cars.(ABC Central Victoria: Emma D’Agostino)
Ms Goss said she had not considered a career in the automotive industry until she got her car and license.
Music was one of her passions growing up, and she played the violin at a level that provided her with opportunities to travel to learn and perform.
Ms Goss became interested in a new set of instruments when she introduced a 1994 Toyota Corolla.
“I wanted to service my own car,” she said.
“I thought it would just be cool to have general knowledge about cars.
“That way, I could help some of my friends because I know it’s not a very common thing for people of our age or even in this generation to actually know about even changing a tire.”
She was already completing an automotive course at TAFE when she met Mr Wiggins.
Studies were part of the reason she was pulling apart her car that summer’s day.
“I kind of just wanted to look more into my car and build a relationship with it,” Ms Goss said.
Connecting need with interest
Mr Wiggins says the project is about investing in young people.(ABC Central Victoria: Emma D’Agostino)
It was through her involvement with the Bendigo Tech School that Ms Goss connected with her employer.
She was part of the team working on the Girls in STEAM Electric Car — an aspirational technology project that aims to help educate the community about the future of transport.
“The concept was to convert an old four-wheel-drive — in this case, a Range Rover — into a Tesla-powered electric car,” Mr Wiggins said.
The project, which started in April 2021, is ongoing, with work expected to be 90 per cent complete by the end of the year.
Ms Goss said she was involved in a couple of sessions, including some hands-on work on the car.
“And then Graeme reached out and said he’d been talking to Bendigo Accident Repair Centre,” she said.
Mr Wiggins said Ms Goss was well positioned to walk straight into an industry of interest to her because she was already engaged in pre-apprenticeship training.
“It was just a way that we could connect need with interest,” Ms Wiggins said.
Women under-represented in STEM
Ms Goss (right) celebrates rebuilding the front axle.(Supplied: Bendigo Tech School)
Community and industry connections have been integral to the program’s development and delivery.
Such was the support that Mr Wiggins said the initiative had no permanent home.
“We just keep moving it around depending on who we need to work with,” he said.
In addition to providing the community with opportunities to experience the possibilities of electric cars, Mr Wiggins said the project was about investing in young people and their futures.
“Women are under-represented in the STEM sector,” he said.
“If you exclude allied health, only 11 per cent of tertiary STEM enrollments are women, and even fewer than that are represented in trades.
“Of those that are represented in trades, not all of them have hands-on trades roles.
“So, it was important to me, understanding the employment needs of the region, that I wanted to encourage as many young women into engineering and trades pathways as possible.”
Program participant Della uses compressed air to remove garnet residue.(Supplied: Bendigo Tech School)
Ms Goss said she was older than most of the young women in the program, who were still in high school.
“It’s good to see that young women have actual interest in what’s always been considered as a man’s job, which I think is really important in our society,” she said.
Ms Goss said she was glad young women were being encouraged to enter the industry.
Most of the young women in the program are still in high school.
More than three-quarters of automotive repair and maintenance employees from organizations reporting to the Workplace Gender Equality Agency are men.
Ms Goss is the only woman in the workshop at the repair centre.
She has only been in the job a couple of months but says she is enjoying the experience.
“I’m looking forward to keep working here in the future,” Ms Goss said.
“Particularly in Victoria, it’s largely unregulated,” he said.
Munro said caps would encourage owners to seek greater financial security in the long-term rental market.
In NSW, 180-day caps over the course of a year have been introduced across many coastal and regional centers and much of Sydney.
However, Byron Shire Council this year moved to introduce a 90-day maximum on non-hosted short-stay accommodation over a year.
The Accommodation Association, which represents caravan parks, regional motels and hotel chains, is also pushing for the short-stay sector to meet similar safety standards to commercial operators, including large hotels.
This would include hardwired smoke detection systems, fire hose reels every 20 meters and fire rated doors.
The Byron Shire Council has limited the number of days properties can be listed on Airbnb to increase long-term housing. Credit:stock
Munro said some councils, including Brisbane, were also seeking to introduce higher rates for short-stay providers in recognition of their commercial purpose. I have encouraged the Victorian government to consider similar measures.
Victorian Tourism Industry Council chief executive Felicia Mariani said the state government needed to assert greater control over the short-stay sector, which included imposing caps.
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“The lack of regulation in this space has led to this crisis we’ve now seen with a proliferation of short-stay across regional Victoria,” she said.
Mariani said the shortage of affordable rental properties was damaging the social fabric of regional areas because many people working in hospitality, education and health were unable to live in their communities because rental homes were unavailable or too expensive.
Rents have soared by up to 20 per cent in some regional towns over the past year, Domain data revealed.
A spokeswoman for the state government said it had already brought in laws regulating the short-stay sector and cracking down on unruly behaviour.
She said a review of existing laws would investigate whether further adjustments were needed.
This year Noosa Council introduced registration fees and tougher new local laws to regulate short-stay letting that would require owners to gain approval before renting out their homes.
Queensland University human geography associate professor Thomas Sigler said Airbnb-style arrangements may be reducing the number of long-term rental properties in tourism towns such as Lorne and Portsea.
He said there were just over 60,500 short-stay listings in Victoria in 2021, compared to about 85,500 in 2019.
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However, Sigler said the number of nights offered had increased despite the drop in properties listed for short-stay accommodation. “Fewer properties are getting used more often,” he said.
Sigler said there was limited evidence to suggest short-stay platforms were eroding housing affordability more broadly across Victoria.
“There are many reasons that housing affordability has diminished, but it’s mainly to do with demand exceeding supply.”
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Property prices may be dropping but that doesn’t mean that wannabe home owners are suddenly celebrating.
Key points:
The Reserve Bank is set to hike the cash rate again today
Banks are already winding back mortgage limits as interest rates and inflation rise
Mortgage brokers say a ‘feedback loop’ is emerging in the property market
Lenders are simultaneously winding back how many people can borrow for mortgages as they factor in higher interest rate repayments and cost of living pressures.
Corey Chamberlain and his partner were just told by their mortgage broker that their borrowing capacity with a smaller lender has dropped by more than 20 per cent.
That’s compared with a national property price drop of just 2 per cent in the last three months.
The couple with a young child were first approved for a mortgage of around $975,000 in late 2021, and then again when they went back for pre-approval earlier this year.
That’s when Australia’s official cash rate was still at 0.1 per cent.
Since May, the Reserve Bank has been raising the cash rate to tackle emerging inflation that’s hitting the Australian economy.
Today, the RBA is expected to hike the cash rate again to take it to 1.85 per cent.
Banks are passing the higher cash rate onto borrowers in the form of lending rates, which is impacting the head repayments on people’s loans.
In October, the regulator APRA also told the banks to raise the minimum interest rate buffer on loans from 2.5 per cent to 3 per cent.
Despite the new lending environment, the Chamberlains weren’t expecting their estimated loan amount to drop down from $975,000 to below $750,000 when they went back to their broker last month.
The couple’s deposit hasn’t changed since late 2021 and Mr Chamberlain actually received a slight pay raise recently.
“(Our broker) was pretty open with us about saying it was all down to interest rates,” Mr Chamberlain said.
“One hundred per cent, it’s down to the interest rates.”
The couple sold their house in the New South Wales regional city Newcastle at the end of last year, after Mr Chamberlain’s job was transferred three hours drive south to Wollongong.
They’ve been renting there all year as they’ve struggled to buy a new house on their original approved limit of $975,000.
“It’s just the constant battle of everything’s overpriced and everything that’s in the price bracket needs work done,” Mr Chamberlain said.
The couple were hoping to buy a house with enough bedrooms so that they can expand their young family further. Now their loan amount is reduced, they feel even more dismayed.
“There’s just nothing in our area that we can afford now,” Mr Chamberlain said.
“Maybe a little shack.”
They’re now considering going to a different lender to see if they can get more money, or they’ll consider holding off buying a bit longer to see if property prices in their area go down.
Corey Chamberlain and his partner are trying to buy a new property in Wollongong. (Supplied: Corey Chamberlain)
Rising interest rates are the main factor being credited for the property market’s recent downturn.
CoreLogic’s latest housing price data this week showed that property values nationally have gone down 2 per cent in three months.
That’s the fastest rate of decline since the 2008 global financial crisis.
“Clearly, higher interest rates are eroding borrowing capacity,” CoreLogic’s Tim Lawless told ABC News.
Prices nationally would need to drop by 28 per cent to take the market back to where it was before the pre-pandemic boom.
Currently, CoreLogic is forecasting a drop of 12 to 15 per cent at a maximum by sometime next year.
Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume.
Australian house prices dropping at ‘fastest rate’ since 2008(Emilia Terzon)
Mortgage broker Bruce Carr describes the current property market situation as a “feedback loop” where it is not necessarily easier for people to buy a home as their borrowing capacity diminishes.
“You get the feedback loop on the way up, and you get the feedback loop on the way down,” mortgage broker Bruce Carr told ABC News.
“And that’s where the clashing boom and bust cycles come from.”
He hasn’t had any clients have their borrowing capacity wound back yet but he’s expecting this to start happening soon.
Using borrowing calculators, Mr Carr estimates that his clients are now able to borrow 11 per cent less today than they could one year ago.
He believes this is not just because banks are factoring in higher interest rates, but also because a rising cost of living is being factored into people’s household budgets and therefore their ability to repay mortgages.
Annual inflation is currently at a 21-year high of 6.1 per cent in Australia.
“We all know that inflation is feeding into this,” Mr Carr said.
In a statement, APRA acknowledged that borrowing capacity is dropping.
“The recent reduction in borrowing capacity has largely been driven by the increase in official interest rates,” a spokesperson told ABC News.
“All else constant, an increase in interest rates will mean that the maximum amount that households can borrow against their income will decline.
In a statement, the Australian Banking Association said many factors were being taken into account by lenders.
“Every new borrower is assessed on a case-by-case basis due to a wide range of factors including total amount of loan, total amount of deposit, the loan to value ratio or LVR, whether a borrower is an owner-occupier or investor , and an assessment of a borrower’s revenue and expenditure,” an ABA spokesperson said.
“Banks make their own commercial decisions but ultimately competition is strong between banks, and borrowers should regularly review their arrangements and shop around for the best deal.”
Two clinical psychologists have accused Community Corrections Tasmania of incorrectly applying a sexual offender risk assessment tool to determine whether or not a Nepalese man is likely to reoffend — and say the tool has likely been misused in other cases.
Key points:
A Nepalese man caught masturbating in his car at a public reserve was reported by council workers
The man, who moved to Australia in 2015, faces deportation if he’s placed on the sex offender’s register
The man’s lawyer is arguing the man has been placed into a category of offender that is beyond the level of offending
The man, who moved to Australia in 2015, faces being placed on the sex offenders register, which his lawyer says could lead to him being deported.
The 26-year-old Nepalese man was working as a food delivery driver in Hobart in 2021 when the offense occurred.
Hobart Magistrates Court heard earlier that on the day in question, the man had finished his early morning delivery shift and headed to Rosny Park.
Assuming no one was around, he began to masturbate in his car.
The court heard a council worker then approached the car to let the man know he could not park there. When he knocked on the window he realized the man was masturbating and the council worker told him to leave.
The man immediately drove away — he was later charged with one count of prohibited behavior to which he pleaded guilty.
As part of the court case, Community Corrections Tasmania (CCT) was asked to undertake a risk assessment to determine whether or not he was at risk of reoffending, which could then be used by the court to determine whether or not he should be placed on the sex offenders register.
CCT found he had a medium risk of reoffending.
That finding was challenged by the man’s lawyer, Dinesh Loganathan.
CCT ‘applying tool incorrectly’
Mr Loganathan commissioned reports from two separate clinical psychologists — Dr Grant Blake and Dr Emma Collins — who both refuted CCT’s assessment, finding the man had a very low-risk of reoffending.
Dr Blake even described the man’s risk of future offending as “far-fetched” and “fanciful”.
In court on Monday, Mr Loganathan told Magistrate Andrew McKee that despite the reports, CCT would not shift its position.
“We have two certified trained clinical psychologists who have provided a report to the court that Static-99R [the risk assessment tool] should have never be administered to [the man] and the administration was flawed,” he told the court.
“We have Community Corrections who have provided a recommendation that [he is at] medium risk of offending.
“On the other hand, there’s Dr Blake, who quite forcefully provides a view that Community Corrections has been wrongly administrating [assessments] for however long they’ve been doing it.”
Magistrate McKee then questioned the claim that CCT had “wrongly” administered assessments beyond the current case, to which Mr Loganathan responded by reading out some of Dr Blake’s report.
“Community Corrections must be informed they are continuing to use risk assessment tools incorrectly,” he read to the court.
“It is unethical, unacceptable practice. It cannot continue.”
Mr Loganathan said Dr Blake’s position was that the risk assessment should never have been applied to the man and CCT “continue to use it for people within Category B”.
The court heard Dr Collins’s report also stated it was wrong to use Static-99R to assess Category B offenders.
Tool developed by Canadian, UK researchers
According to the manual for Static-99R, Category B offenses include “sexting”, “consenting sex in public places” and “indecent behavior without a sexual motive”.
Static-99R was developed by researchers in Canada and the United Kingdom and is meant to apply in “cases where an actual sex offense has occurred with an identifiable victim”.
Community Corrections representative Emily Drysdale, who did not undertake the assessment, said it had been applied “based on the fact there had been sexual offending.”
“My communication with senior management is that it was correctly applied,” she told the court.
She said CCT did not have a position on whether or not the man should be placed on the register and that was up to the court.
When Magistrate McKee asked her if she accepted that the assessment had been applied incorrectly, Ms Drysdale deferred to her manager’s advice.
“In their understanding it was applied correctly,” she told the court.
Magistrate McKee said Community Corrections had assessed the man was at a “higher risk than a routine sample of offenders”.
“[Based on that] I would need to give significant consideration to the register,” he said.
When asked about what CCT thought of the psychologists’ opinions that the assessment tool was being used incorrectly, Ms Drysdale said she had passed on their feedback.
“I have submitted that to that particular manager and haven’t received a particularly favorable response,” she told the court.
While Ms Drysdale did not say that she was challenging the psychologists’ reports, Magistrate McKee said that by standing by CCT’s assertion it had applied the risk assessment tool correctly, she effectively was.
“Your manager has told you ‘we were right’, therefore, the only inference is that Dr Blake and Dr Collins are incorrect and I’ve got to sort it out,” he said.
The case has been adjourned and will potentially lead to a disputed facts hearing.
With news that house prices are falling sharply in several capital cities, millions of renters may be looking forward to paying the landlord a bit less.
Key points:
Though house prices are dropping nationally, rents are tipped to go up as much as 10 per cent over the next year
Reasons for this include rising interest rates, returning students and more holiday homes for the wealthy
Rents may “hit a ceiling” and become too much for households to pay, experts say
CoreLogic data released this week shows house prices in Australia are dropping at their fastest pace since the global financial crisis.
The median price in Sydney saw the sharpest value falls in almost 40 years, while values in Melbourne, Hobart, Brisbane and regional Australia also dropped last month.
So rents should fall too, right?
Wrong. For most of the 2.4 million households renting from private landlords, rents will go up at a historically rapid clip over the next year.
Here’s why.
Prices go down, but rents keep going up
Rents have jumped about 2.8 per cent in the past quarter, and are expected to rise further still, said CoreLogic’s research director Tim Lawless.
“We’ve already seen rents up 9.8 per cent over 12 months to July,” he said.
“By this time next year I wouldn’t be surprised if there’s been a similar increase of around 10 per cent.”
The chart below shows the relationship between dwelling (houses and apartment) values and weekly rents from 2010 to 2022.
As you can see, for most of the past decade, rents have trudged upwards while housing values have fluctuated more wildly.
Basically, there’s no short-term relationship between the change in house prices and the amount tents pay their landlords.
Since August 2020, the fairly flat and predictable trajectory of rental payment increases has taken a sharp upwards turn.
In fact, the increase has been so sharp that Mr Lawless expects we’re approaching a “ceiling” on what renters are “able to pay”.
“Rental affordability is already challenging, and it’s going to become worse,” he said.
“I think a time will come when renters can’t fathom higher rents.”
Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume.
House prices decline at fastest rate since GFC as building costs climb
Interest rates, returning students and COVID getaways for the wealthy
The reason rental payments will increase as house prices fall is due to a combination of factors, from rising interest rates, returning international students, and housing market changes wrought by COVID.
Higher interest rates means larger mortgage payments, which landlords are simply handballing to their tenants.
The return of international students with the opening of Australia’s borders will increase demand for rental accommodation.
Since the 1990s, house prices have risen from 2.5 times annual household income, to over six times today.(Supplied: ACT Environment, Planning and Sustainable Development Directorate)
The resumption of tourism will also have an impact, said Chris Martin, a researcher at UNSW’s City Futures Research Centre.
“There’s probably been properties that have moved out of the rental sector to Airbnb and the tourism sector,” he said.
The pandemic has also seen more people with higher incomes owning a holiday home that they do not rent out, he said.
“If that happens often enough that would affect rental supply and could make rents even more expensive for people,” he said.
This increase in demand and reduction in supply will be counteracted by more tenants moving back into sharehouses, said CoreLogic’s Tim Lawless.
“Rental households became smaller during the pandemic as tenants looked for space,” he said.
That is, couples and individuals in sharehouses moved into places of their own, which meant they were paying more for rent.
This was highlighted in a recent speech by the Reserve Bank’s Luci Ellis, who noted, “On the question of who you would rather be locked down with, at least some Australians have voted with their removalists’ van, by moving out of their share house and in with their partner.”
This trend will likely be reversed as rents increase and the sharehouses reform out of mutual financial benefit, said Mr Lawless.
“Renters may need to occupy the room they’ve used as a home office,” he said.
The rental market’s shifting ‘bulge’
But there’s another, longer term trend that’s also driving up rents.
Because the cost of buying a house is unaffordable for many, Australians are renting longer in their lives, and into what Dr Martin calls the “prime income years”.
“There’s been more households who would have otherwise in previous generations have been owning, but they’re renting,” he said.
“They are higher income houses and can spend that higher income on rental housing.”
This change is captured in the chart below, which shows the number of houses available for rent at various prices, from 1996 to 2016 (this is in 2016 dollar values, so inflation isn’t a factor).
Today’s unaffordable rental market is a battle of the “bulge”.(Supplied: AHURI Final Report No. 323, Australian Housing and Urban Research Institute Limited.)
In 1996, there was a big bulge in properties around the $200 a week mark.
By 2016, it had shifted to $500.
Renters who could have never afforded $500 a week when they were studying 20 years ago now have careers and can stump up the money (even if they’d prefer to pay much less).
“The rental market has changed shape and the big driver has been the increasing presence of higher income tenant households priced out of home ownership,” Dr Martin said.
So, what’s the outlook?
For renters, the outlook isn’t great for at least the next 12 months, said Mr Lawless.
So long as interest rates go up and the borders stay open, rents will probably keep increasing, even if house prices fall.
For rents to eventually go down, housing prices would have to keep falling for a long period, while interest rates stayed low.
And that’s unlikely to happen on a national scale, said Mr Lawless.
“If we want to see an alleviation, we need to see government take a more active role in delivering rental accommodation,” he said.
That included more social and community housing initiatives for low and moderate Australian incomes, he said.
Dr Martin agreed.
“The way I’d like to see rents go down is if we actually had a rental sector with abundant rental housing for not for profits,” he said.
It may be a bumper season for many Queensland cattle breeders due to good rains, but one farm has seen an increase in twins as well.
Key points:
A south-east Queensland grazier finds two sets of twin calves within the space of a week
A leading veterinarian says the chance of beef cattle having multiple births is less than 1 per cent
Producing twin calves puts extra pressure on their mother to produce enough milk
Grazier Sue Harrison said she was shocked to find two of her breeders had given birth to twins over the past week on her Darlington property in the state’s south-east.
“I go around and check the cows because they are all calving at the moment,” she said.
“I saw this cow laying in the grass, which is quite long, and I saw one calf pop up to have a drink, and I looked and had to do a double take, because there was another one on the other side.
“It was a bit of a surprise.”
Three days later Ms Harrison was checking the stock again and saw another cow had given birth to twins.
The sixth generation grazier said they had previously only ever seen one set of twins.
“One of the calves was born backwards so we lost him,” Ms Harrison said.
Both twins were conceived naturally from Brangus mothers and Speckle Park bulls.
Veterinarian Ben Wood says it is very rare to see two sets of twin calves on the one farm.(Supplied: Sue Harrison)
A rare event
University of Queensland veterinarian Ben Wood said the chance of beef cattle having multiple births was less than 1 per cent.
“It’s in that half a per cent [range] for those beef cows, so if they’ve got 100 breeders, they’re going to get that one every two or three years,” he said.
“Two sets is an even rarer chance.
“I bet those cows are really doing quite well, so that will increase their chance of ovulating twice at the same time, so it increases their fertility.”
Dr Wood said it had been a “particularly good season” for Queensland graziers due to a lot of rain producing good grass.
But he said twin calves put a huge strain on their mother, who had to produce large quantities of milk.
“That cow, the following season, probably has less of a chance of getting in calf because raising twins takes a lot out,” he said.
Vet Ben Wood says twin calves put a lot of strain on their mother’s milk supply.(Supplied: Sue Harrison)
Sue Harrison said they were supplementing the two mothers’ diet with lucerne hay.
“Both calves were having a drink so we’ve just got to hope that each of them gets enough to drink,” she said.
“Being winter when there’s not much green feed for them, it’s a bit hard for them to make up the extra milk.”
fertility problems
Dr Wood said twin calves of a different sex could struggle to reproduce.
“If they are sharing that placenta and they are a different sex, then the sharing of those hormones, that testosterone … that has a big effect on that female calf,” he said.
“They’ll have smaller ovaries and their reproductive tract just won’t develop.
“The male calf will be a little bit less reproductively fit, but not to the same extent as the female.”
The veterinarian said dairy cows were more likely to give birth to twins.
“Typically a dairy cow will have more twins on average,” Dr Wood said.
“They’re in that 2 to 4 per cent range.”
Dr Wood said cows could have difficulty delivering twin calves naturally because their legs could become tangled during birthing.
The Reserve Bank is expected to make history today by handing down a fourth consecutive interest rate rise.
The cash rate is predicted to rise by another half a percentage point to 1.85 per cent.
This increase will mean a mortgage holder with a $750,000 loan will face a monthly increase of $211.
Interest rates are set to rise yet again. (A Current Affair)
Since May, that hypothetical homeowner has had an extra $708 tacked on to their repayments.
Another increase would see interest rates rise to the highest level in six years.
And there are fears the RBA could lift rates even higher than predicted.
Experts say the more rate hikes we see and the bigger they are, the more downward pressure it will place on the property market, after national housing prices fell for their third month in a row in July.
RBA Governor Philip Lowe, is facing fresh criticism for remarks he made last year when he said it was likely the cash rate would remain at 0.1 per cent until at least 2024, and the rising cost of living is causing a political fight.
Prime Minister Anthony Albanese says members of the Coalition are kidding themselves if they argue that rates would not have risen under them.
Buzz Aldrin’s moon mission jacket sells for nearly $4 million
