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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

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

Harley Dale

HIA Chief Economist

Plumbing Supply Forum


May 2012

an economic health check australia
An Economic Health Check – Australia
  • The question is who is feeling the love?
the australian consumer
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?
the australian consumer6
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?
sector 1 new homes
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.
sector 1 new homes9
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.
sector 1 hia new home sales
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.
sector 1 new homes11
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.
sector 1 new homes and existing
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.
sector 2 renovations activity
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?
sector 2 renovations activity14
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.
sector 3 the established real estate market
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.
sector 4 the rental market
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.
sector 4 the rental market20
Sector 4: The Rental Market
  • Residential investment lending is historically low …
  • … but lending for investment in new stock is slowing climbing higher.
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.


  • 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.

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.
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.


  • 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.
thank you for your time this morning

Thank you for your time this morning

Harley Dale

HIA Chief Economist

May 2012