“There is a lot of pain to come for Victoria, and there is a danger of the state going into a longer downward cycle.”
New South Wales Queensland Victoria South Australia Western Australia Property News Residential House & Land New Developments Hotspots Trends Economy Demographics Industry news
WA and Queensland housing markets to get demographic boost, but four years of cloudy skies for Victoria: BIS Shrapnel
Immigration trends, vacancy rates, housing undersupply and employment prospects all favour Queensland and Western Australia to lead the next phase of housing market growth over the next two to three years, according to BIS Shrapnel.
But the stars are not lining up in Victoria, with BIS Shrapnel’s team of forecasters and economists tipping up to four years of pain and downturn for its economy and housing markets.
“There is a lot of pain to come for Victoria, and there is a danger of the state going into a longer downward cycle,” warns BIS Shrapnel managing director Robert Mellor.
The pessimistic outlook for Victoria was repeated by BIS Shrapnel chief economist Frank Gelber, who apologised for such a dark outlook for the state given his comments were made in Melbourne in front of Victorian building industry participants.
“The weakness we have seen in Melbourne so far is only just the beginning,” he says.
Gelber is also critical of the Victorian state government for pulling back on infrastructure investment and stimulus measures, including ending the $13,000 first-home bonus at the end of June.
The Queensland state government is also reining in spending and culling its civil service, but the state has the benefit of the mining boom and is also supporting new housing construction through the just-introduced $15,000 first-home owner construction grant.
Taking a look a recent immigration data, Angie Zigomanis, senior manager at BIS Shrapnel, says there is already evidence of a pick-up in overseas migration – not to the 2009-10 high of nearly 300,000, but expected to reach around 250,000 people by 2013-14. A drop in overseas student numbers due to the high Australian dollar will prevent migration reaching previous highs, he says.
“Of this increase, WA and Queensland are expected to see the biggest improvement as their economies post some of the strongest growth and also attract strong numbers of interstate migration,” says Zigomanis.
WA in particular is picking up a great share of new overseas arrivals – 20% currently, compared with a long-run historical average of 13%, according to ABS figures.
The rise in immigration will cause population growth to pick up from around 1.34% in 2010-11 to reach 1.73% in 2013-14, with proportionally greater shares of growth in WA and Queensland, says BIS Shrapnel.
Both these states, along with NSW, also have significant dwelling stock deficiencies, while Victoria has been building too many new apartments and houses.
Source BIS Shrapnel andABS
BIS Shrapnel forecasts a 15,000 dwelling unit oversupply in Melbourne by the 2014 financial year, but in contrast a 52,800-dwelling undersupply in NSW, an undersupplyof 45,400 in Queensland and an undersupply of 46,000 in WA.
Also in WA and Queenslands' favour are relatively more affordable capital city housing markets and tightening rental markets. In Melbourne vacancies are rising, while median house and unit prices remain elevated.
"In a suburb like Morley, about nine kilometres north of Perth, the vacancy rate is 0.48%. People have to camp outside a property overnight with the hope of a getting a foot in the door,” says Zigomanis.
Also in Queensland and WA’s favour are strong jobs markets supported by the mining boom and businesses that service this sector – while Victoria has relatively little exposure to the resources boom.
The bottom line is that NSW and the mining states are at different stages of the property cycle than Victoria.
“Victoria and some of the smaller states and territories have supported residential building activity in recent years,” says BIS Shrapnel in its September 2012 residential property report.
“We are now starting to see the situation reversed as their economies slow and recent high levels of construction have created emerging oversupplies in those markets.
“On the other hand NSW and the mining states are coming off relatively low levels of residential building and their economies are set to show strong growth over [the next two-year] forecast period.
“With the demographic need for dwellings expected to pick up in line with stronger population growth in these states, significant stock deficiencies are beginning to emerge, particularly in Sydney.
“This will help drive an upturn in residential building in these states over the forecast period, which will outweigh the falls experienced in the other states and territories.”