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Australian Housing Market Overview: Trends and Opportunities

Explore the current state of the Australian housing market, including insights on new home building, renovations, rental market dynamics, and regional growth disparities. Discover key factors influencing housing affordability and investment prospects.

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Australian Housing Market Overview: Trends and Opportunities

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  1. Australian Housing and Renovation Markets Ben Phillips Assistant Director – Industry June 2008

  2. The World Economy and Us – where to? • The world economy is slowing and the prime culprit is the United States • Canada, Europe, the U.K., and Japan are slowing and ... • … interest rates are either falling or on hold in these economies. • East Asia (ex Japan) is holding up well. • “If we’re right on China then Australia is fine; if we’re wrong on China, Australia’s buggered.” • Australia’s biggest risk to growth lives right here at home

  3. The domestic interest rate outlook is still very uncertain • The risk of one more official rate rise to come. • Rates are still rising while the RBA sits on its hands. • Further rate rises will depend heavily on the June ¼ CPI figure (Mid July) and wages outcomes. • No fall in rates in 2008 • Interest rates are expected to start coming down in 2009/10.

  4. Consumer confidence is getting battered …

  5. … as is home buying confidence, but …

  6. … the labour market story is nothing short of exceptional

  7. Australia’s Economy is slowing

  8. State Economies still have widely differing growth rates

  9. The retail sector – slowing

  10. The business investment sector – strong

  11. The Housing Industry

  12. Sector 1: New home building

  13. Sector 1: New home building

  14. Sector 2: Renovations and Additions • Renovations, additions, and repairs have been the unsung hero for the housing sector

  15. Sector 2: Renovations and Additions • Total renovations spending grew last year while new home building was flat

  16. Sector 3: The Established Real Estate Market • Mature, trade up buyers/renovators are the king of the castle

  17. Sector 3: The Established Real Estate Market • We won’t see a repeat of the strong house price growth of 2007 but … • … talk of a house price crash is wide of the mark

  18. Sector 4: The Rental Market • The real casualty of the current housing squeeze • Public housing supply has all but disappeared • Vacancy rates are at crucially tight levels

  19. 4. The Rental Market • Yields remain low. • Perth, Melb and Syd offer the lowest yields • Perth had the strongest yield growth. • Rents growing strongly. • Highest rents in Darwin, Canberra, Syd. • Growing strongest in Melb, Perth.

  20. State by State

  21. New South Wales • Facing the toughest housing conditions in Australia thanks largely to Sydney • New housing is a disaster – fewer than 30,000 home starts, typical land price at over $250,000, total new house and land at $520,000. • Some regional areas are faring much better again • Economic growth in 2007/08 will be the fastest since 1999/00 • Victoria • The goldilocks state – not too hot and not too cold • Very strong employment growth and a robust economy • New housing has greater potential than NSW • Land is relatively affordable as are house and land packages • Housing Affordability is the best of the four largest states

  22. Queensland • The land of opportunity but it missed the bus in 2005, 2006 … • … but catching up now • A huge infrastructure spend will turn things around • Rapid escalation in land prices through chronic shortages – has stabilised recently at $165,000 • Very poor infrastructure and transport systems have affected the liveability of SEQ and could slow population growth … • … but Queensland still has one of the two strongest economies in Australia! • South Australia • The “10,000” state • Favourable affordability and a boost to population growth through migration • Land is readily available although it’s been rising in price - $130,000 • Wine and Mitsubishi have been a problem but the state has managed these problems reasonably well • The kick from resources will be very large

  23. Western Australia • Oh dear…! • With growth comes growing pains – no land, no labour, no housing • Inflation in the west is more than 1.5 times that of eastern states while it has the least affordable housing market • Land prices have escalated to as much as $276,000 per block • There is, however, a large amount of work in the pipeline and the aggregate economy is still booming

  24. Trades and Building

  25. Trade Prices and Availability • Trades are still in short supply and that means significant upward pressure on contractor rates.

  26. Trade Prices and Availability • Greatest shortage exists in Roofing, painting and plastering.

  27. The Built Form – House Size • For housing, affordability and energy concerns has seen house sizes ease of late

  28. The Future

  29. National Housing Policies The Supply side: the tight rental market • National Rental Affordability Scheme (NARS) • Initially involves an investment of $623m by the Government to private investors and is aimed at increasing the supply of residential dwellings for those on Commonwealth Rent Assistance • Expected to create 50,000 new affordable rental properties over the next 5 years throughout Australia by providing private investors with tax credits of $6,000 (+$2000 from the States) a year for 10 years for properties that are rented at 20 per cent below the prevailing market. • Possible extension to funding for a further 50,000 dwellings from 2011/12 depending on success of scheme.

  30. National Housing Policies The Supply side: Infrastructure provision • Investment in Residential Infrastructure (Housing Affordability Fund) • Close to HIA’s suggested Residential Infrastructure Fund • $500m competitive grant scheme to reduce state and local government infrastructure charges on new developments • Under the plan local governments will apply for funding via a competitive process for grants to cover part of the cost of infrastructure to support new residential development • Expected to reduce the price of serviceable land

  31. National Housing Policies The ‘Demand’ side: a savings vehicle • Home Super Saver Accounts • Based on HIA Home Super Saver Scheme • Announced by Federal Treasurer earlier this year • Savings of up to $5,000 per year will be eligible for a government contribution (minimum of 15%) paid directly into the Home Super Saver Account. • Account earnings taxed at statutory tax rate of 15%. • The minimum saving period is four years with individual contributions of at least $1,000 in each of the years.

  32. Housing Forecasts

  33. Renovation Forecasts

  34. Some points to take away • The world economy will slow but it won’t fall over. • Economic growth in Australia is likely to slow significantly in 2008/09. • The divide between the housing ‘haves’ and the housing ‘have nots’ will be with us for some time. • Housing starts will struggle to recover in 2008/09. • The renovations sector is looking a little healthier again. • There is no quick fix for tight rental markets and very low housing affordability, but there is a greater cause for optimism.

  35. Ben Phillips Assistant Director – Industry June 2008 http://economics.hia.asn.au

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