How Australia’s apartment frenzy echoes the 1870s cattle boom

From The Conversation.

Imagine in the years ahead that you were to come across a photograph of the Melbourne streetscape from 2017. Two things would immediately signify it as being from today – the number of cranes across the skyline and at street level, the construction hoardings glistening with glamourous promise.

Melbourne is now experiencing the most dramatic real estate boom in living history – this feverish development has seen 13,000 new apartments constructed each year for the past two years with plans for another 22,000 over the next few years.

And like that photograph of the 2017 streetscape, one can also take another kind of record, a typographic snapshot. Fonts can tell us something about a time and a place. Within the real estate industry, this is centred around branding – and more specifically those ubiquitous logos weaved throughout our urban landscape.

In an age when each individual building demands a logo as much as an address, and often these congeal (8 Breese, 85 Spring Street) or fill us with an aspiration to be somewhere else (West Village, Haus), the end result is a seemingly never-ending array of marks all jostling to dazzle us with their glamour and aspiration. But is this massive explosion of logos a new thing?

The clearest way to see any of these connections is to look across other periods of economic boom. The oversupply of livestock in the 1870s is one such time. During this period the plentiful supply of cattle necessitated that the ownership of herds be strongly signified and differentiated in the marketplace. At that time the most effective way to do this was through branding – quite literally, a hot iron branded seared into the rumps of the livestock.



Cattle branding, 1864. S. T. G./State Library of Victoria

By the latter half of the 19th century the simpler alphabetical brands had all been used up so the designs became increasingly complex and idiosyncratic. These plentiful livestock brands began to do odd things – letters would be turned upside down or flipped, there would be strange little icons of hats, anchors, fish, shields, glasses and other even more abstract shapes.

When placed alongside the embellished brands extolling the contemporary real estate boom, some strong design similarities become clear. It seems that the imperative to produce a distinct identity seems to bridge 140 years with ease. These design similarities hint at the underlying economic cycle, boom followed by bust.

 

The top line are real estate brands from 2016 whilst the bottom line are cattle brands from 1870. Apartment brands from left to right: Nest at the Hill (Doncaster); Queens Place (CBD); Reflections (North Melbourne); Capital Grand (South Yarra) Author provided

Who we are and want we want

The logos that festoon the hoardings across our streets tell us a great deal about who we are, and more specifically, what we want. Script typefaces (those based on handwriting) tell us that we are in an age where people yearn for the authentic, the handmade, a personal connection. The use of fonts, patterns and symbols as well as specific colours may offer us an insight into what cultural shorthand is being used to speak to many prospective buyers.

It is that supreme marker of modernity – sans serif fonts – that above all others expresses our shared contemporary notions of style and urbane aspiration. These fonts, such as “helvetica”, do not use the ornamental ends of letters that serif fonts, like the one you are reading on, include. We take in and process all of these factors in the split second that we consume a logo.

Logos, and the typefaces from which they are composed, have always spoken of the times we live in – including the reflection of economic and social patterns. The mechanised efficiencies of the early 20th century were met by a geometric simplicity in letterforms, whilst the 1970s sexual revolution coincidentally saw spacing between letterforms become very intimate, coupled as it was with the advent of phototypesetting, a process soon superseded by computers.

Booms have a habit of producing an oversupply. And this oversupply calls for some kind of unique differentiation. Differentiation calls for creativity. This is where branding comes in. Trying to tell a herd of cows apart in the 1870s is perhaps no easier than trying to differentiate the often generic architectural forms of apartment developments built today.


Brands of the cattle boom (black) contrasted with contemporary real estate (white)

The old marketing adage “the more generic the product, the more you differentiate by brand” certainly appears to be at work here. This is but one comparison across two localised economic booms but the same pattern could be expected to appear whenever there is an “over stimulation” in a highly crowded marketplace.

What this frenzy of logos does show us is that despite the world of brands being fixated on the “now” it too has a “then” – one that I am sure we will see again some time soon.

Author: Stephen Banham, Lecturer in Typography, RMIT University

The hollow promise of construction-led jobs and growth

From The Conversation.

Any downturn in the construction industry could trigger job losses to a range of sectors that support the building industry, such as planning, project management, real estate and property services. This threat reveals the risk of relying on building and construction to sustain the economy.

Since before the global financial crisis, urban economies across the world have relied increasingly on the construction of housing, especially high rise urban apartments, to maintain economic activity.

Construction has boomed in Australia, especially in Melbourne and Sydney. Migration from overseas and interstate, as well as international student numbers, have so far maintained sufficient demand for city apartments and suburban houses to keep the building boom going.

Nationally the number of jobs in construction has increased from 927,000 in May 2007 to 1,110,400 in May 2017, an increase of 183,400 jobs. Even now, the federal government expects that construction employment will increase by 10.9% in the five years to 2022.

But this view is at odds with new data. A recent report by advisory firm BIS Oxford predicts that new dwellings construction will fall by 31%, from 230,000 to 160,000 dwellings in Australia, in the next three years. This prediction foreshadows a dramatic decline in construction employment.

The other jobs construction creates

Construction activity creates employment across the economy. There are jobs in industries that provide input building materials – such as local quarries and forests, sawmills, concrete products manufacturers, steel makers and glass, plastic and metal products manufacturers. There are also jobs created for people working in import firms bringing in materials that might not be made locally, as well as for people who work to store materials and transport them from ports and factories to building sites. Construction generates jobs for people involved in the design and planning of buildings, also those involved in the financing and contracting of construction projects.

Once the buildings exist, construction creates more jobs in marketing the properties, building inspections, buyers agents, mortgage brokers, real estate agents and the like. After the sale, more jobs are sustained in interior designer, selling furnishings and fittings and appliances, and providing internet connections and utilities.

The wages earned and taxes paid by these workers then create jobs in other services industries. This includes everything from dentists and personal trainers to bank tellers and public servants. New populations create new demand for supermarkets and schools and hospitals that employ more people.

The secondary circuit of capital

Following the ideas of French urban theorist Henri Lefebvre, geographer David Harvey famously explained a process called the “second circuit of capital” where building replaces manufacturing as the driver of growth. This secondary circuit soaks up the excess capital sloshing around the world that can’t be invested profitably in the primary circuit of (manufacturing) production. Buildings are built for the purpose of generating profits for developers and investors.

In places like Melbourne, the secondary circuit has created so many jobs in construction and related industries, that these have become the key drivers of growth. All these jobs are at risk when construction activity stalls.

David Harvey’s crucial insight was that once economies rely on construction to drive employment, then the entire economy becomes like a giant Ponzi scheme. The only way that employment in a host city can be maintained is to keep building more buildings.

Harvey argues the principle purpose of building is to generate profit, which means that the building will stop if there are insufficient numbers of buyers, or insufficient buyers willing to pay a price that will generate profit.

If the developers can elect to build elsewhere, in places where returns are higher, the local construction-led system can collapse like a house of cards. The resulting crisis would not be confined to the construction sector but would resonate through all the activities contributing to building or benefiting from the taxes and charges generated by building.

That pretty much means everybody. Once the cards fall over, not only do employment opportunities decline, but so do property values, as prices adjust to the new reality.

Some economists recommend creating new infrastructure projects to provide work, to keep the construction sector and material suppliers in business. But they rarely consider the second order effects as the downturn in construction filters through the economy. Most economists would argue that dealing with these secondary effects is best left to market forces.

This means that as the downturn filters through the economy, jobs will be lost quietly across a range of sectors. The sectors most obviously vulnerable in the event of a downturn in residential building activity will be those that rely on discretionary building-related spending – such as furniture and effects retailing, wholesaling and manufacturing. The impacts on affected households will be no less devastating than for direct building jobs.

Author: Sally Weller, Visiting Fellow, Australian Catholic University

Building Approvals Just A Little Stronger

The number of dwellings approved rose 0.1 per cent in June 2017, in trend terms, after falling for three months, according to data released by the Australian Bureau of Statistics (ABS) today.

Dwelling approvals increased in June in the Australian Capital Territory (5.9 per cent), South Australia (3.2 per cent), Western Australia (1.7 per cent), Queensland (1.1 per cent) and Tasmania (0.7 per cent), but decreased in the Northern Territory (2.7 per cent) and Victoria (1.9 per cent) in trend terms. Dwelling approvals were flat in New South Wales.

In trend terms, approvals for private sector houses rose 0.8 per cent in June. Private sector house approvals rose in Queensland (1.8 per cent), New South Wales (1.1 per cent) and Victoria (0.5 per cent), but fell in Western Australia (0.6 per cent) and South Australia (0.1 per cent).

In seasonally adjusted terms, dwelling approvals increased by 10.9 per cent in June, driven by a rise in total dwellings excluding houses (20.1 per cent), while total house approvals rose 4.0 per cent.

The value of total building approved rose 1.3 per cent in June, in trend terms, and has risen for five months. The value of non-residential building rose 3.4 per cent while residential building fell 0.1 per cent.

“Dwelling approvals have been relatively stable in trend terms over the first six months of the year, after falling from record highs in mid-2016,” said Daniel Rossi, Director of Construction Statistics at the ABS. “The June 2017 data showed that the number of dwellings approved is now 15 per cent below the peak in May 2016”.

New Home Sales Crash

New home sales in Australia’s largest states hit their lowest level since October 2013 with sales sliding in both the detached house and multi-unit sides of the market according to the latest HIA New Home Sales Report.

HIA says during June, new home sales declined by 6.9 per cent compared with the previous month and were 11.9 per cent lower than the same period last year.

The reduction in new home sales during June 2017 was comprised of a 5.8 per cent reduction in new detached house sales and a 10.7 per cent fall in new multi-unit sales.

There were considerable differences in sales in June around the states with new detached house sales rising both in Victoria (+4.1 per cent) and Western Australia (+21.1 per cent). However, sales fell in New South Wales (-9.7 per cent), Queensland (-29.3 per cent) and South Australia (-23.7 per cent) during the month.

“These results support HIA’s latest set of forecasts that new dwelling commencements are set to continue easing until late 2018″. explained HIA Senior Economist Shane Garrett.

“The reduction in sales of both detached houses and multi-units during the month of June continues the trend underway since sales peaked in early 2015.

“The fall in sales needs to be considered against the backdrop of residential building coming off a record peak of activity in 2016. We project that residential building will still be operating at a historically high level,” concluded Shane Garrett.

 

 

Trend dwelling approvals fall 1.9 per cent in May

The number of dwellings approved fell 1.9 per cent in May 2017, in trend terms, and has fallen for three months, according to data released by the Australian Bureau of Statistics (ABS) today.

The peak in multi-unit construction is well and duly done, down 27% on a year ago. We are looking at approvals, and of course there is significant building underway at the moment, but this may ease later.

“Dwelling approvals continue to weaken in trend terms, falling by around 700 dwellings over the past three months,” said Daniel Rossi, Director of Construction Statistics at the ABS. “The May 2017 data showed that the number of dwellings approved is now 18 per cent below the peak in May 2016”.

Dwelling approvals decreased in May in the Australian Capital Territory (8.2 per cent), Victoria (3.9 per cent), Western Australia (3.7 per cent) and New South Wales (2.6 per cent), but increased in Queensland (2.2 per cent), Northern Territory (2.1 per cent), South Australia (1.6 per cent) and Tasmania (1.5 per cent) in trend terms.

In trend terms, approvals for private sector houses were flat in May. Private sector house approvals rose in South Australia (1.0 per cent), New South Wales (0.4 per cent) and Victoria (0.2 per cent), but fell in Queensland (0.9 per cent) and Western Australia (0.6 per cent).

In seasonally adjusted terms, dwelling approvals decreased by 5.6 per cent in May, driven by a fall in total dwellings excluding houses (12.6 per cent), while total house approvals rose 0.4 per cent.

The value of total building approved rose 0.8 per cent in May, in trend terms, and has risen for five months. The value of non-residential building rose 4.6 per cent while residential building fell 1.5 per cent.

Housing Starts Set To Fall – HIA

Today’s Autumn 2017 edition of the HIA’s National Outlook Report discusses how the number of new dwelling commencements nationally is likely to continue to decline – last year’s record levels of activity are unlikely to be seen again until well into the 2020s.

HIA expects that 221,500 new dwellings will have been started in 2016/17, a decline of 4.5 per cent compared with the previous year. A further reduction of 10.7 per cent is forecast for 2017/18 before new home starts bottom out at 176,670 during 2018/19.

“Having touched record levels during 2016, the latest edition of the Housing Industry Association’s flagship forecasting report predicts that new home building starts are set to move lower over the remainder of 2017,” explained HIA Senior Economist, Shane Garrett.

“The housing boom was not consistent across Australia and now with NSW and Victoria cooling, all indicators are that the market is well past its 2016 peak when over 231,000 new homes were commenced.

“Solid population growth, very low interest rates and consistent gains in employment do mask some concerning trends with respect to under-employment and decelerating GDP growth. Combined with another layer of obstacles to foreign investor participation in the housing market, new home building volumes are set to move downwards over the next couple of years.

“Even though new dwelling starts will decline over the next couple of years, the annual volume of new home starts is not likely to fall below 170,000 at any stage. By any standard, this is still a very robust level of activity.

“The investor side of the market has also been hit by tighter lending finance due to APRA’s recent restrictions on interest-only mortgages.

“The multi-unit side of the market is expected to drive the downturn in residential building, with commencements on this side of the market projected to fall by 41 per cent from peak to trough,” stated Mr Garrett concluded.

According to today’s HIA National Outlook Report, the volume of renovations work is anticipated to grow by 2.0 per cent during both 2017/18 and 2018/19. The pace of growth is expected to pick up the following year (+2.7 per cent) bringing the value of the Australian renovations market to $34.31 billion during the 2019/20 year.

NSW Government Reveals Housing Affordability Plan

So NSW has perpetuated the “quick fix” approach to housing affordability, alongside taxing foreign investors harder and changes to planning. The removal of stamp duty concessions to property investors may slow that sector, but the fundamental issue is that supply is not the problem many claim it to be.

Lets see if first time buyer property values rise by the amount of the increased incentives, as has happened elsewhere.

Premier Gladys Berejiklian, Treasurer Dominic Perrottet and Minister for Planning and Housing Anthony Roberts announced the far reaching changes on which could save first homebuyers up to $34,360. The package includes:

  • Abolishing all stamp duty for first homebuyers on existing and new homes up to $650,000 and stamp duty discounts up to $800,000. These changes, to be introduced on 1 July 2017, will provide savings of up to $24,740 for first homebuyers
  • Abolishing the stamp duty charged on lenders’ mortgage insurance, which is often required by banks to lend to first homebuyers with limited deposits, providing a saving of around $2,900 on an $800,000 property
  • Doubling the foreign investor surcharge from 4% to 8% on stamp duty and 0.75% to 2% on land tax
  • Removing stamp duty concessions for investors purchasing off the plan
  • Committing $3bn in infrastructure funding from Government, councils and developers to accelerate the delivery of new housing
  • Fast-track approvals for well-designed terraces, townhouses, manor homes and dual occupancy by expanding complying development to include these dwelling types
  • Greater use of independent panels for Councils in Sydney and in some regional areas to ensure development applications are done efficiently and to ensure the integrity of the planning process
  • Measures to maintain the local character of communities

“I want to ensure that owning a home is not out of reach for people in NSW,” Berejiklian said.

“These measures focus on supporting first homebuyers with new and better targeted grants and concessions, turbocharging housing supply to put downward pressure on prices and delivering more infrastructure to support the faster construction of new homes.

“This is a complex challenge and there is no single or overnight solution. I am confident these measures will make a difference and allow us to meet the housing challenge for our growing State.”

Former Reserve Bank of Australia Governor Glenn Stevens advised the NSW Government in developing its housing affordability package. His report to Government was also released on Thursday.

“I would like to thank Mr Stevens for his valuable advice and insights during the development of this package,” Berejiklian said. “In particular, his advice about avoiding any unintended consequences on the market was greatly appreciated.”

Perrottet said the Government would take advantage of its strong Budget position to give a leg up to prospective first homebuyers while also investing more into targeted infrastructure to support housing growth throughout Sydney and parts of regional NSW.

“As a Government, we have always focused on supporting first homebuyers and this package takes it to the next level,” Perrottet said.

“We know how challenging it can be to enter the property market and are pleased to be providing even more financial support for people wanting to make their first purchase.”

Roberts said the package included measures to speed up planning processes to ensure developments get off the ground as quickly as possible.

“While we have done well to release an unprecedented amount of land over the last six years, we need to do better with our development application process to ensure we are keeping up with demand,” Roberts said.

“That is why we are simplifying complying development rules for greenfield areas and establishing specialist teams to help speed up the rezoning process for residential development, while maintaining the local character of communities.”

As reported in Australian Broker.

The housing market is swinging to over-supply

From The NewDaily.

First time home-buyers may have been relieved on Wednesday to see home prices falling by an average 1 per cent across the nation, according to the latest data from CoreLogic.

‘May’ is the operative word. In a nation full of property experts, even relatively inexperienced house hunters know that figure could bounce back next month.

The figures for bubble-cities Sydney and Melbourne were heartening for non-home-owners, falling 1.3 and 1.7 per cent respectively – the biggest monthly slide since November 2015.

What makes these figure different to the falls seen 18 months ago, however, is the context in which they are happening.

In its simplest form, the market is swinging towards over-supply in a very short space of time – something that will surprise buyers who’ve been told for years that the problem was ‘under-supply’ .

The ‘over-demand’ problem

The government, and every real estate agent or property spruiker worth their salt, has been using the myth of ‘under-supply’ to explain the sky-high prices that are locking a generation buyers out of the market.

High profile real estate agent John McGrath wrote on Tuesday in the Switzer Daily investment newsletter that: “We have too much population growth fuelling demand and too much of an undersupply to experience a crash.”

Well it’s not quite that simple. As covered earlier this week, the immigration intake is going to become a hot-potato at the next election, so may not be as reliable a back-stop as in recent years.

And the ‘under-supply’ problem is mostly a myth anyway.

As University of Sydney town planning academics Peter Phibbs and Nicole Gurran explained recently, ‘under-supply’ is the government’s way of explaining rock-bottom housing affordability, without having to do much about it.

A far more accurate term to use is ‘over-demand’, which is created by the large tax refunds the government has been handing back to property investors since changes to capital gains tax laws in 1999.

The much under-reported figure that proves that point is the number of Australian residents per dwelling, measured by the Bureau of Statistics, which has remained virtually unchanged right through the housing boom years.

There is no great mis-match between the number of dwellings available to be lived in, and the number of people wishing to rent or buy them.

The ‘under-supply’ simply reflects too few dwellings on the market to cater for investors who wish to enjoy large tax refunds through negative gearing, as well as the apparently fool-proof capital gains that benefit from the 50 per cent capital gains tax discount.

When these dynamics are understood, falling house prices in the bubble cities have to be the result of one of two things: investors deserting the market, or a larger volume of properties coming onto the market.

Well investors are still not deserting the market according to the Reserve Bank’s latest credit data. It shows the value of investor loans growing by 7.3 per cent year-on-year, which is still higher than the growth in owner-occupier loans, at 6.1 per cent.

So if investor demand for credit is continuing apace, and if the usual numbers of young first-home-buyers are out looking for a home, how can prices be falling?

The answer is on the supply side. The much discussed ‘apartment glut’ is beginning to work through the system, with knock-on effects in the detached housing market.

As Mr McGrath himself notes: “CoreLogic figures tell us that the supply of established housing stock available for sale in Sydney and Melbourne is at its highest level for this time of year since 2012.”

Meanwhile, foreign buyers – mostly from China – many of whom are not captured by the RBA credit data, are pulling out of the market. That leaves even greater supply for local investors to pick over.

In those circumstances, prices can fall despite ‘strong investor demand’.

What we are seeing is not a shift from a large under-supply back to more normal levels of supply, but a shift from normal-ish levels of supply to over-supply – with slightly lower levels of investor demand due to the China exodus.

That will leave Treasurer Scott Morrison with some explaining to do at the next election, when he will presumably continue to promise to ‘unlock supply’ and solve the affordability problem.

In fact, it’s looking pretty unlocked already.

Dwelling Approvals Rose A Little In April

The number of dwellings approved rose 0.1 per cent in April 2017, in trend terms, and has risen for three months, according to data released by the Australian Bureau of Statistics (ABS) today.

Dwelling approvals increased in April in the Australian Capital Territory (3.6 per cent), Queensland (3.4 per cent), New South Wales (1.7 per cent), South Australia (1.6 per cent) and Tasmania (0.3 per cent), but decreased in Victoria (3.2 per cent), Western Australia (2.3 per cent) and the Northern Territory (2.2 per cent) in trend terms.

In trend terms, approvals for private sector houses fell 0.2 per cent in April. Private sector house approvals rose in South Australia (2.0 per cent), Victoria (0.3 per cent) and New South Wales (0.2 per cent), but fell in Queensland (2.0 per cent). Private house approvals were flat in Western Australia.

The movements across states show an upswing in SA, slight rises in VIC, NSW and WA, and a sharp fall in QLD.

In seasonally adjusted terms, dwelling approvals increased by 4.4 per cent in April, driven by a rise in total dwellings excluding houses (8.9 per cent) and total house approvals (0.8 per cent).

The value of total building approved rose 2.5 per cent in April, in trend terms, and has risen for three months. The value of residential building rose 0.2 per cent while non-residential building rose 6.9 per cent.

“Dwelling approvals have been relatively stable in trend terms over the past three months, after falling from record highs in mid-2016,” said Daniel Rossi, Assistant Director of Construction Statistics at the ABS. “The April 2017 data showed that the number of dwellings approved is now 14 per cent below the peak in May 2016”.

Here’s where housing construction is booming in Australia

From Business Insider and HIA.

Australia has been on an epic residential building boom in recent years, constructing more homes than ever before in the 2015/16 financial year.

And nowhere has this been more evident than in the locations listed below.

Courtesy of Australia’s Housing Industry Association (HIA), it shows Australia’s top 20 residential building “hotspots” for the 2015/16 financial year.

Here’s the list released in a report from the group over the weekend.

Source: HIA

The HIA deems a “hotspot” to be a region where population grew above the 1.4% national average and where at least $150 million worth of residential building was approved during the year.

Perhaps unsurprisingly, the group found that nine of the top 20 Hotspots were in New South Wales, with a further four and three located in Victoria and Queensland resectively.

And many of those were in inner-city regions, courtesy of an unprecedented level of apartment construction in these locations.

Pimpama, sandwiched between the Gold Coast and Brisbane in Southeast Queensland, was deemed to be the hottest of the hotspots in the 2015/16 financial year, logging population growth of 35.1% with $340.2 million worth of dwellings approved.

Cobitty-Leppington in Sydney’s Southwestern fringe, along with Palmerston in Darwin, took out second and third spots respectively.

Inner-city locations such as Docklands and Southbank in Melbourne, and Waterloo-Beaconsfield in Sydney, also made the top ten list.

While residential building activity across the broader Australian economy looks set to slow in the years ahead — building approvals have been trending lower, particularly for apartments, while the value of residential construction work done in the March quarter of this year fell — the HIA is forecasting that the decline will be modest, leaving total residential construction at elevated levels.

“Even though new dwelling starts will decline over the next couple of years, the annual volume of new home starts is not likely to fall below 173,000 at any stage,” the group said in early March this year.

“By any standard, this is still a very robust level of activity.”

Source: HIA