Queensland’s new home sales rose by 1% in February.
New home sales fell by 5% in February with apartment sales down 11% & detached house sales down by 4%. Detached house sales fell by 14% in Victoria, 3% in New South Wales & 7% in South Australia but rose in Western Australia (+2%) & Queensland (+1%).
Several commentators remarked that the drop in new home sales was not a worry, well “at least for the moment” to quote the Commbank. Home sales are still about 10% higher than the lows set five months ago but for mine, given low interest rates, new sales (and hence new housing construction) should be much higher & they should be improving on a monthly basis.
Despite lifts in new housing starts in recent months, there will most likely be about 146,000 new housing starts across Australia this financial year. This will be just 3% more than the year before.
New housing construction fell by 10% during 2011/12 & also dropped by 6% during the preceding financial year.
In fact, new housing starts across Australia have fallen five out of the last ten years; showed no real change for another two years since the early 2000s; & have risen during three years only since 2002/03.
And next year – financial 2013/14 – if the growth over the past three months can be sustained, then up to 160,000 new housing starts are possible. But the HIA are forecasting a more subdued fiscal 2014 with just 146,000 starts (a repeat of 2012/13), despite interest rates being at record lows & a significant rise in population growth in recent years.
Even if the 160,000 starts happen, Australia’s new housing market needs a serious overhaul. It is just spluttering along.
Below are some housing start statistics.
Distribution of starts. According to the HIA, 40,000 new starts are expected to take place in Victoria next year – this equates to a 28% share of the Australian market. New South Wales is to get 36,000 starts (25% share); Queensland 31,000 new dwellings (21%) followed by Western Australia with 24,000 commencements or a 16% market share.
The other four states/territories combined hold just 10% of the overall Australian market.
Movements in new construction. Despite getting top billing next year, new starts are expected to fall by 13% across Victoria next year, when compared to the 2012/13 financial year. In contrast, new starts are expected to rise by 13% in both Queensland & South Australia. A half decent lift (of 11%) is expected in the Northern Territory. New starts are expected to remain steady in New South Wales, and fall 5% in the ACT.
New product mix. Three out of five (62%) of the new dwellings built across Australia next year will be detached houses. Obviously, 38% will be attached product – most of which will be apartments or townhouses.
Almost half of the new product built in New South Wales, the Northern Territory & the ACT will be attached. Two out of five new dwellings in Victoria these days are also attached; followed by Queensland with 37%; Tasmania and South Australia each with 25% & Western Australia with 19%.
Changes to product mix. Ten years ago, close to one in seven (68%) of new dwellings built across Australia were detached. Today it has dropped to 62%.
The biggest mover by state towards ‘alternate’ new housing forms over the past decade has been Victoria, with a 24% attached market share in 2004 to 41% next year. Next is Tasmania, from 12% to 25%, followed by Queensland from 33% ten years ago to 37% now. The other states/territories have seen little change in their new broad dwelling mix over the last ten years.
All three states essentially are playing catch-up. Stigma (both from the development community & the public), plus archaic planning, has kept new attached development subdued in Victoria; Tasmania & Queensland.
The Newman government’s new state assessment & referral agency (SARA) is a step in the right direction.
In summary, unless we see serious government action (like SARA) to assist new housing get off the ground, new starts will continue to be artificially curtailed. This limitation on new housing construction will see Australia enter another period of serious undersupply – it has already started; which it turn should drive prices north & will create – in about three, maybe four years’ time – another price-driven bust.
Ironically, higher levels of residential construction will be an important economic growth driver once mining investment begins to wind down.
If new housing starts continue to rise in line with the trend over recent months – i.e. head towards 160,000 during financial 2013/14 – then the cash rate is likely to remain at 3.00% throughout calendar 2013.
But if the HIA’s outlook becomes reality (146,000 starts or thereabouts next financial year) – and keep in mind that building approval figures tend to be volatile – then the cash rate will need to fall further.
Enjoy the ride!
Originally article published by matusikmissive.com.au on 16/4/2013