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The Australian Building Industry: where are we and where to? PowerPoint PPT Presentation


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The Australian Building Industry: where are we and where to?. Harley Dale HIA Chief Economist Plumbing Supply Forum Sydney May 2012. It’s (apparently) all about Europe. An Economic Health Check – Australia. The question is who is feeling the love?.

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The australian building industry where are we and where to l.jpg

The Australian Building Industry: where are we and where to?

Harley Dale

HIA Chief Economist

Plumbing Supply Forum

Sydney

May 2012


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It’s (apparently) all about Europe


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An Economic Health Check – Australia

  • The question is who is feeling the love?


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An Economic Health Check – interest rates


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The Australian Consumer

  • Consumer confidence has been battered around and …

  • …never sustainably recovered post GFC.

  • People don’t ‘feel’ like we’re the strongest economy in the world.

  • So what needs to change?


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The Australian Consumer

  • During the GFC, the unemployment rate peaked at less than 6 per cent because ....

  • … we have a more flexible labour market than in decades up to the 2000’s and …

  • … we reduced the number of hours worked as well as laying people off.

  • What about this time?


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The Housing Industry


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Sector 1: New Homes

  • New housing starts have fallen heavily since the GFC-related stimulus ended.

  • Annualised level of around 134,600 on last count.

  • Underlying demographic demand of around 167,000 per annum.

  • We last built 180,000 homes in a year in the mid 1990’s.


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Sector 1: New Homes

  • Dwelling Approvals – the heartbeat indicator of the new home industry.

  • Approvals have headed back to GFC-like levels.

  • HIA began warning of this in late 2010 and …

  • … began dialogue with the Federal government in early 2011.


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Sector 1: HIA New Home Sales

  • HIA’s new house sales is based on a survey of Australia’s 100 largest volume builders.

  • Sales have just bounced from a multi-decade low and …

  • … the share of large volume builders in total construction is falling.


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Sector 1: New Homes

  • New home lending appears to have bottomed out and, encouragingly …

  • … may be ticking slightly higher.

  • There is a long way to go, but it’s a start.


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Sector 1: New Homes (and existing)

  • Total loans for both first time and trade-up owner occupiers are on the rise.

  • The recovery is from a low starting point, especially for FHB’s, but ...

  • … the signs are encouraging.

  • We need both these markets firing.


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Sector 2: Renovations activity

  • Total renovations activity hit a record high in 2011.

  • Renovation jobs are perceived to be not as popular when home values aren’t rising, but …

  • … is the dynamic changing?


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Sector 2: Renovations activity

  • Major ‘alts and adds’ are trending down.

  • They make up around 20% of total renovations.

  • These can be very big jobs, but there are now fewer of them.


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Sector 2: Renovations activity


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Sector 3: The Established Real Estate Market

  • The recovery in lending for established property petered out at the end of last year and …

  • … the number of property transactions remain historically low amidst …

  • … what remains a buyers market.


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Sector 3: The Established Real Estate Market


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Sector 3: The Established Real Estate Market


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Sector 4: The Rental Market

  • The real casualty of the current housing squeeze.

  • Vacancy rates are at tight levels and have been for many years.

  • This is a social and economic problem.


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Sector 4: The Rental Market

  • Residential investment lending is historically low …

  • … but lending for investment in new stock is slowing climbing higher.


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State by State


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New South Wales

Was the goldilocks state for many years – not too hot and not too cold.

Is coming off a massive building boom.

There is potentially a lot of downside to housing in Victoria, and…

… the risks are mounting.

Victoria is a lesson in relative new home affordability.

Victoria

  • Housing in NSW has under-performed for close to a decade now.

  • There have been numerous policy failures.

  • There is hope the current government can turn the ship.

  • The clock is ticking for a sustainable turnaround to take effect.

  • NSW is Australia’s largest state but only built the third highest number of new homes for five consecutive years.


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NSW New Building Approvals


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Victoria New Building Approvals


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NSW Major Alterations and Additions


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Victoria Major Alterations and Additions


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Queensland

The “10,000” state became the “12,000” state.

SA was known as a relatively stable market for a long time.

Now it is the “<10,000” state.

The kick from resources will be large but …

… there needs to be action now on housing and …

… there are some positive indications.

South Australia

  • Queensland has become the weakest housing market in Australia.

  • New home building costs became too high as QLD looked to copy the worst performer, NSW and ....

  • … the credit crunch hit QLD harder because of a larger reliance on regional ‘banks’.

  • The medium term prospects are good but..

  • …conditions are still very tough.


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QLD New Building Approvals


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QLD Alterations and Additions


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SA New Building Approvals


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SA Alterations and Additions


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Western Australia

Along with SA, Tasmania was the over-achieving state last decade.

A relatively affordable housing market together with a ‘late to the party pass’ means Tassie largely skipped the ‘recession’ and …

… was for a long time a consistent and relatively strong economy.

That is no more and we need to prepare for lower average levels of activity which in 2012 is occurring rapidly.

Tasmania

  • With growth again come the same old challenges.

  • The WA economy is back on fire, but ...

  • … housing has again been left behind.

  • There has been some improvement in sentiment again since late 2011, but with that comes ...

  • … concern about residential land availability and skilled labour availability.


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WA New Building Approvals


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Tasmania New Building Approvals


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WA Alterations and Additions


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Tasmania Alterations and Additions


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The Short Term Future


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Housing Starts Outlook


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Renovation Forecasts


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The Built Form – Types of Dwellings


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Why can we be positive about the future?


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The potential is enormous …


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… and huge opportunities exist


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Thank you for your time this morning

Harley Dale

HIA Chief Economist

May 2012

http://economics.hia.com.au


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