New Home Starts continue to Ease from Peak

ABS data on building activity indicate that new dwelling starts have passed their record peak, said the Housing Industry Association (HIA).

During the September 2016 quarter, only New South Wales (+5.4 per cent) and Queensland (+6.3 per cent) saw increases in new dwelling commencements. The largest decline was in the ACT (-39.6 per cent) followed by South Australia (-20.0 per cent). There were also large reductions in Western Australia (-13.6 per cent) and Victoria (-9.6 per cent). Falls in new dwelling starts also occurred in the Northern Territory (-7.6 per cent) and Tasmania (-0.6 per cent) during the September 2016 quarter.

“New dwelling starts hit all-time record levels during 2016, but today’s data provides further evidence that we’ve left the peak behind,” commented HIA Senior Economist, Shane Garrett.

During the September 2016 quarter, new dwelling commencements fell by 2.8 per cent in seasonally-adjusted terms to 55,070. Detached house starts were down by 1.8 per cent compared with the previous quarter, while multi-unit commencements dipped by 3.9 per cent. Over the year to September 2016, new dwelling commencements totalled some 229,336.

“The result for the September 2016 quarter represents the second consecutively quarterly decline in new dwelling starts, with a substantial portion of the reduction happening on the multi-unit side,” explained Shane Garrett.

“In contrast, detached house starts have been holding up quite well. The upturn in new home building between 2012 and 2016 was heavily influenced by increased apartment building with output more than doubling,” Shane Garrett pointed out.

“With new home building set to move lower over the next few years, we expect that the higher density market will have to absorb the bulk of the reduction. From a peak of over 230,000 starts during 2015/16, we anticipate that new home starts will continue to ease over the next couple of years and bottom out at around 172,000 during the 2018/19 financial year,” Shane Garrett concluded.

NSW Tops latest HIA Housing Scorecard

New South Wales has widened its lead over Victoria in the latest HIA Housing Scorecard report released today. The HIA Housing Scorecard ranks each of the eight states and territories based on the performance of their housing markets.

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“The large states dominate the top rankings in the latest HIA Housing Scorecard, with NSW extending its lead in first place thanks to a remarkable performance on the detached house side,” explained HIA Senior Economist, Shane Garrett.

“In second place on the HIA Housing Scorecard, Victoria was particularly strong for home renovations activity but also did well on the detached housing side,” continued Shane Garrett.

“In this edition of the HIA Housing Scorecard, Queensland grabbed the bronze medal with a solid showing on the multi-unit side,” Shane Garrett remarked.

“Outside of the Top Three, South Australia and the ACT occupied the mid-table positions. Western Australia, the Northern Territory and Tasmania are all neck-and-neck with declining market momentum on the HIA Housing Scorecard,” added Shane Garrett.

“Probably the starkest result from today’s HIA Housing Scorecard concerns the volume of First Home Buyer loans, which have fallen well below their long-term average in each state and territory. The obstacles to housing affordability for first home buyers merit a national-led response,” concluded Shane Garrett.

New Home Sales Fall to Two-Year Low

The Housing Industry Association’s monthly survey of Australia’s largest home builders indicates that new home sales dropped to a two-year low during the month of October.

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“HIA New Home Sales fell by some 8.5 per cent during October 2016, the lowest volume of sales since July 2014,” remarked HIA Senior Economist, Shane Garrett.

“Sales on both sides of the market saw sizeable reductions during October,” explained Shane Garrett. “Detached house sales were down by 8.2 per cent during the month, while multi-unit sales fell by 9.2 per cent.”

“The reduction in the volume of new home sales is not unexpected, given that Australia is coming to the end of its longest and strongest new home building upturn,” Shane Garrett pointed out.

“October’s new home sales results are consistent with HIA’s latest forecasts for new home building starts which foresee a reasonably marked reduction in activity over the next couple of years. Even so, activity is projected to fall to a low point of around 172,000 new dwellings starts during 2018/19, about the same as the average of the past decade,” concluded Shane Garrett.

During October 2016, detached house sales fell in three of the five mainland states covered by the report. The largest reduction in sales volumes during the month was in Victoria (-20.4 per cent), with new detached house sales also falling in Western Australia (-5.6 per cent) and New South Wales (-2.8 per cent). New detached house sales rose by 4.5 per cent in Queensland during October, with a slight increase of 0.8 per cent in South Australia.

HIA Says Unit Construction Will Slow

HIA says from their peak of 117,000 in this calendar year multi-unit commencements are expected to fall by over 40 per cent by 2018/19.

“New residential building will slow for the next two years to bottom out at what will still be a historically healthy level of activity” said the Housing Industry Association.

The latest ”HIA National Outlook” released today takes a comprehensive look at conditions in the residential building and renovation markets around the country.

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HIA Acting Chief Economist Warwick Temby said “notwithstanding the current uncertainties around the broader economic outlook, especially with the future US policy settings up in the air, HIA is forecasting a measured return to more normal levels of home building activity over the next couple of years.

“The recent peak in new home building was unprecedented: an all-time record 229,823 new residential dwellings started building in 2015/16. This record level of building has made a major contribution to Australia’s economic growth over the last few years and eased the under-supply of housing for both owner occupiers and renters that had built up over the previous ten years.

“Multi-unit building, especially apartments in the Eastern States, has driven much of the growth in this cycle and is also forecast to lead the slowdown in new activity over the next couple of years. From their peak of 117,000 in this calendar year multi-unit commencements are expected to fall by over 40 per cent by 2018/19.

“A softer landing is forecast for detached homes with 103,000 starts predicted for 2018/19, down 9 per cent on the peak this year.
“The forecast falls in new activity will not be uniform across the country; Western Australia and South Australia started their down-cycle well in advance of other states.

“Total new commencements are forecast to decline 3.1 per cent, 18.5 per cent and 5.1 per cent over the period 2016/17 – 2018/19, which would take commencements to a trough of 172,242, which is the average for the last ten years.

“Actual building activity on the ground will not decline in the same way as new starts due to the substantial volume of work under construction that will not be completed until 2018 and into 2019.

“Dwelling renovations are forecast to grow over the forecast period counteracting some of the decline in the new home building activity. By 2018/19 renovations are forecasts to have grown by 6.5 per cent to be worth $32.96 billion in that year” Mr Temby concluded.

Have We Passed Peak Build?

The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally-adjusted new home sales increased in September 2016, the second consecutive month of growth.

hia-sept-2016Within the month, growth was driven by detached house sales which rose by 3.8 per cent, while sales of units eased back by 0.8 per cent over the same period. However, Victoria was the only state to record an increase in new home sales over this period with 14.0 per cent growth in sales over the past year.

In fact, detached house sales fell in four out of the five states covered by the report, an exact reversal of the situation in August. During September 2016, the largest fall in sales was recorded in South Australia (-23.0 per cent), followed by Western Australia (-17.2 per cent), New South Wales (-12.9 per cent) and Queensland (-2.6 per cent).

“During September, HIA’s New Home Sales grew by 3.8 per cent, a further increase on the 2.9 per cent rate of growth over the previous month,” remarked HIA Senior Economist, Shane Garrett.

“However, the mix of available indictors suggests that new home building activity has now passed its peak and that the 2015/16 financial year will not be matched in terms new dwelling starts. This is particularly the case for multi-residential sales, which have eased by 6.2 per cent during the September 2016 quarter compared with the same period a year earlier”.

 

Land Prices Push Higher

The HIA-CoreLogic Residential Land Report for the June 2016 quarter has just been published by the Housing Industry Association, and CoreLogic. The Residential Land Report offers a comprehensive review of quarterly sales activity and price trends in 41 regional and six capital city markets across Australia.

During the June 2016 quarter, land transactions experienced the largest increase in Hobart (+26.9 per cent) compared with the same period year earlier. Land turnover was unchanged in Adelaide (+0.2 per cent). Land sales saw the largest reduction in Sydney (-38.3 per cent), followed by Melbourne (-14.3 per cent) and Brisbane (-3.9 per cent). Perth also experienced a small decline in land market turnover (-3.5 per cent).

“Residential land prices in Australia climbed to yet another all-time high during the June 2016 quarter, on the back of strong demand and lower interest rates,” HIA Senior Economist, Shane Garrett commented.

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According to the HIA-CoreLogic Residential Land Report, the median residential land price rose by 2.6 per cent during the June 2016 quarter, to a new all-time high of $237,535. A total of 18,395 residential lots are estimated to have been transacted during the quarter – down by some 9.3 per cent on a year ago.

According to CoreLogic research director Tim Lawless, the increase in land transactions nationally was accompanied by a surge in land sales located in Tasmania as well as in some regional markets. “Hobart saw land sales jump by almost 27 per cent over the first half of 2016 compared with the same period a year ago, while the largest cities, where affordability constraints are already the most visible, recorded a substantial reduction in land sales over the first six months of 2016.”

“The volume of land sales across Sydney was down sharply while land prices surged 14.1 per cent higher over the year. The opposing trends of transaction numbers and prices is a clear indication of demand outweighing supply which is creating significant price inflation across vacant land markets,” Mr Lawless added.

“While unit markets have seen approvals and construction activity reach spectacular highs, supply levels across the detached housing sector remains insufficient in many areas. The lack of available vacant land highlights that greenfield housing markets are likely to remain undersupplied which implies further upwards price pressures across the key vacant land markets where demand remains strong,” concluded Tim Lawless

“Housing affordability has deteriorated across several key markets, and the ongoing rise in land prices is proving very challenging,” Shane Garrett explained.

“With market supply having fallen further over the past year, policy makers need to look very carefully at ways of bringing about more sustainable outcomes in residential land supply. This will inevitably involve tackling issues around the pace of land release, the bottlenecks in the planning process and the excessive burden of taxation,” concluded Shane Garrett.

 

Housing Affordability Down In Melbourne and Canberra – HIA

The HIA has just released its Affordability Report for the September 2016 quarter which shows a small improvement in housing affordability, in some states, thanks to rate cuts but offset by rising prices. However, affordability fell in Melbourne and Canberra.

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During the September 2016 quarter, housing affordability improved by 0.1 per cent compared with the previous quarter and affordability is now 2.5 per cent more favourable than it was a year earlier.

Affordability improved in six of the eight capital cities: Darwin (+7.8 per cent), Hobart (+7.6 per cent), Perth (+7.5 per cent), Brisbane (+2.7 per cent), Sydney (+1.5 per cent) and Adelaide (+1.1 per cent).

Affordability deteriorated in Melbourne (-2.6 per cent) and Canberra (-1.3 per cent) during the September 2016 quarter.

Comparatively, Sydney remains the capital city with the most challenging housing affordability conditions (affordability index score of 59.0), followed by Melbourne (70.9), Canberra (81.6) and Brisbane (87.9). Affordability is most favourable in Hobart (123.6) followed by Perth (98.0), Adelaide (93.7) and Darwin (86.8).

The HIA said “Over the past year, housing affordability has been helped by the two reductions in interest rates from the RBA. Despite not being fully passed on by lenders, these reductions have helped bring the mortgage repayment burden down a little. However, dwelling price growth remains strong in most capital cities and this has prevented affordability from improving more tangibly. Another challenge to housing affordability is presented by the fact that earnings growth in the economy is close to its weakest in two decades, making it more difficult to dilute the burden of mortgage repayments. With direct and indirect taxation accounting for over 40 per cent of the cost of a new house in some markets, the role of progressing tax reform in order to drive better affordability outcomes can no longer be ignored.”

 

New Home Sales mount a partial recovery in August – HIA

The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally-adjusted new home sales mounted a partial recovery in August 2016.

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In the month of August 2016 detached house sales increased in four out of five mainland states, after falling everywhere in July and rising everywhere in June. In August 2016 sales increased by: 12.1 per cent in South Australia; 8.7 per cent in New South Wales; 7.8 per cent in Western Australia; and by 4.2 per cent in Queensland. Detached house sales fell by 5.0 per cent in Victoria during the month.

The number of seasonally-adjusted detached house sales increased by 2.9 per cent in August 2016, following a decline of 7.4 per cent in July. However, ‘multi-unit’ sales dropped by 17.3 per cent in July before recovering by 17.8 per cent in August.

“HIA New Homes Sales fell by a rather hefty 9.7 per cent in July 2016, but then increased by 6.1 per cent in August,” said HIA Chief Economist, Dr Harley Dale.

“Sales of new detached houses and ‘multi-units’ didn’t rebound sufficiently in August to offset the decline in July. These latest New Home Sales figures therefore don’t paint a stellar picture of an August recovery – following as they do a big drop in July, but unless you’re a pessimist looking for a large black hole then this latest update is a long way from a downbeat story.”

“Australia is in the midst of the longest and biggest new home building cycle in the nation’s history,” Harley Dale said. “Despite being at the mature stage of this cycle we still face a situation where key leading indicators such as HIA New Home Sales point to healthy levels of construction ahead, even if volumes will be down on the 2015/16 record high.”

“Total new home sales expanded by 1.5 per cent over the three months to July this year. That is a great result when the level of national new home building has already grown over four consecutive years,” concluded Harley Dale.

 

Will New Home Sales take a new year dip?

The Housing Industry Association (HIA) New Home Sales Report to July 2016, which is based on a survey of Australia’s largest volume builders, suggests new commencements in 2016/17 will slow significantly.

HIA-New-Home-July-2016“The short term outlook for healthy levels of new home construction remains intact – calendar year 2016 will be a record year for new dwelling commencements, but the situation could look very different from next year,” commented HIA Chief Economist, Dr Harley Dale.

“The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally adjusted new home sales fell by 9.7 per cent in July 2016 following an increase of 8.2 per cent in June. The overall trend decline in new home sales is accelerating, signalling a relatively sharp drop (from a record high) in new dwelling commencements from 2017.”

“New home construction has been the kingmaker of the Australia economy, but the cycle has peaked,” noted Harley Dale.

“In all likelihood we will experience sharper falls in new home construction in both 2017 and 2018. The magnitude of decline in new home construction in coming years will of course be exaggerated by where we are coming from – record levels of medium/high density construction and historically healthy levels of detached/semi-detached dwelling construction.”

“There will no doubt be a tendency to sensationalise any negative results for new housing as the trajectory of the down cycle unfolds. We would do well to remember that this down cycle is following a record high that is some 24 per cent higher than the previous (1994) peak and that there is an unprecedented degree of uncertainty this time around as to how the next few years of new home building unfold,” concluded Harley Dale.

In the month of July 2016 detached house sales fell in all five mainland states, after rising everywhere in June. Sales dropped by 12.6 per cent in South Australia and were down by 8.7 per cent in Queensland, 8.2 per cent in Western Australia, 6.2 per cent in NSW, and 6.0 per cent in Victoria.

 

June Bounce for New Home Lending

Latest ABS figures on housing finance show that new home lending saw a healthy rise during June, said the Housing Industry Association, who suggests it is linked to the May interest rate cut.

During June 2016, the number of loans to owner occupiers for dwelling construction rose by 2.1 per cent in seasonally adjusted terms while loans for the purchase of new homes saw growth of 2.7 per cent. Overall, new home lending volumes increased by 2.3 per cent during the month and some 6.3 per cent higher than the same month last year.

“The RBA cut its interest rate at the beginning of May so June’s housing finance results are the first month’s data to fully capture the effect of cheaper mortgage costs,” explained HIA Senior Economist Shane Garrett. “Encouragingly, prospective homebuyers seem to have taken advantage of the lower interest rate environment as evidenced by today’s positive results for new home lending,” Shane Garrett pointed out.

“June was also dominated by the close federal election campaign which was the source of some uncertainty across the economy. Today’s data indicate that the benefits of lower interest rates trumped any reluctance by buyers to enter the market during the tight election race. It’s therefore likely that last week’s interest rate cut will help bolster activity on the new home building side,” concluded Shane Garrett.

Compared with a year earlier, the number of loans to owner occupiers constructing or purchasing new homes increased in a number of states over the year to June 2016. The strongest growth was in Victoria (+19.1 per cent), followed by New South Wales (+10.8 per cent). There was a more measured increase in Queensland (+4.3 per cent). . Over the same period, there were substantial reductions in Western Australian (-20.7 per cent), and the Northern Territory (-17.7 per cent) while Tasmania recorded a more modest fall(-3.5 per cent). New home lending to owner occupiers in South Australia and the ACT during June 2016 was comparable with the level a year ago.

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