Housing Construction

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<p><span>New apartment sales dropped 15.1 per cent nationallyï¿½in November 2015, according to theï¿½Housing Industry Associationï¿½sï¿½new home sales report,ï¿½released on Thursday.</span></p>
<p><span>HIA chief economist Harley Dale said it was a ï¿½confluence of factorsï¿½ that droveï¿½the home construction decline, with aï¿½</span><span>steeperï¿½descent apparent for the ï¿½multi-unitï¿½ market compared to detached houses.</span></p>
<p><span>The HIA New Home Sales Report, a survey of Australiaï¿½s largest volume builders, showed a third consecutive decline in November 2015.</span></p>
<p><span>ï¿½A confluence of factors is driving a decline in leading indicators of new home construction.</span></p>
<p><span>"The lagged effect of slowing population growth, an up-tick in variable mortgage costs, over-reach on the part of APRAï¿½s credit controls, and an easing in property price growth in Sydney and Melbourne are all in play,ï¿½ said Dr Harley Dale.</span></p>
<p><span>"In a welcome sign for the short term residential outlook, leading indicators such as HIAï¿½s new home sales didnï¿½t fall sharply in the second half of 2015."</span></p>
<p><span>HIA new homes sales fell by 2.7 per cent in November 2015, a result driven by a 15.1 per cent drop in ï¿½multi-unitï¿½ sales.</span></p>
<p><span>Detached house sales increased by 1.1 per cent due to a stronger November across the eastern seaboard.</span></p>
<p><span>Over the three months to November last year detached house sales fell by 4.1 per cent while the sale of multi-units dropped by 11.8 per cent.</span></p>
<p><span>In the month of November 2015 detached house sales increased in three out of the five mainland states.</span></p>
<p><span>Detached house sales increased by 8.0 per cent in Queensland, 3.3 per cent in Victoria, and 0.7 per cent in New South Wales. Detached house sales fell by 1.0 per cent in South Australia and by 9.0 per cent in Western Australia.</span></p>
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HIA's Harley Dale blames APRA credit over-reach for housing construction decline

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<p>GUEST OBSERVER</p>
<p>Consumer confidence: The Westpac/Melbourne Institute survey of consumer sentiment rose by 0.1 percent in January to 97.4. The confidence index is up 0.1 percent on a year ago.</p>
<p>Dwelling starts: Starts fell by 2.8 percent in the September quarter after falling by 7.2 percent in the June quarter. Building work done fell by 5.5 percent in the quarter to be up 1.4 percent on the year.</p>
<p>As at the September quarter, a record 218,297 homes were being built, up 12.1 per cent on a year ago.</p>
<p>In the year to September, dwelling starts were at record highs in NSW (70,326) and 79 percent above the decade average. In Queensland starts were at 21-year highs (49,939) and 36 percent above decade averages.</p>
<p>The consumer confidence figures have implications for finance providers, retailers, and companies dependent on consumer and business spending. Building &amp; building material companies are affected by dwelling starts including Boral, James Hardie, Adelaide Brighton, Brickworks, AV Jennings Limited, Devine Limited and Beacon Lighting.</p>
<p>What does it all mean?</p>
<p>The latest monthly reading on consumer sentiment suggests consumers are non-plussed about life. But the more timely Roy Morgan weekly survey suggest consumers are super chipper about the current environment. In addition the monthly consumer sentiment reading suggests that sentiment lifted by between 1.9 percent and 7.4 percent across the major capital cities, yet the overall reading only lifted by a sedate 0.1 percent. </p>
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<p>So just how are consumers faring? The outcome is likely to be somewhere in the middle. Consumers are modestly upbeat and more importantly household finances remain in good shape. Interestingly the weekly and monthly consumer sentiment readings seem to agree on one key point - the measure on whether it is a good time to purchase a major household item? Well, it seems there is no time like the present, with both readings recording a four or five-month high.</p>
<p>Looking forward, a potential dampener to sentiment is likely to be the lift in petrol prices. However the stronger Australian dollar should help to offset that in coming weeks. The ongoing strength in sharemarkets should provide a degree of support to household confidence. Interestingly the measure of whether it was a good time to buy a major household item remains upbeat despite the latest fall.</p>
<p>What do the figures show?</p>
<p>Consumer confidence</p>
<p>The Westpac/Melbourne Institute index of consumer confidence rose by 0.1 percent in January to 97.4. The confidence index is up 0.1 percent on a year ago.</p>
<p>The current conditions index fell by 0.5 percent while the expectations index rose by 0.5 percent.</p>
<p>Three of the five components of the index rose in January:</p>
<ul>
<li>The estimate of family finances compared with a year ago was down by 7.6 percent; </li>
<li>The estimate of family finances over the next year was up by 0.3 percent;</li>
<li>Economic conditions over the next 12 months was up by 2.5 percent;</li>
<li>Economic conditions over the next 5 years was down by 1.4 percent;</li>
<li>The measure on whether it was a good time to buy a major household item was up by 4.9 percent.</li>
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<p>Gender &amp; demographics: Men (index reading of 102.9, up 5.2 percent) were still more optimistic than Women (99.6, up 2.8 percent). The sentiment index for young people fell by 0.6 percent to 119.3 in January. Across the other demographics: 25-44 years (index 99.3, down by 1.3 percent); 45 years plus (index 98.3, up by 9.5 percent). </p>
<p>Housing outlook: A good time to buy a dwelling? The index was down 2 percent in the month to 100.9 and was down by 10.7 percent over the year.</p>
<p>States: NSW (103.8, up by 2.7 percent); Victoria (index 103.7, up 5.7 percent); Queensland (99.6, up 3.2 percent); Western Australia (95.2, up 7.4 per cent); South Australia (92.8, up 1.9 percent).</p>
<p>Dwelling starts</p>
<p>Dwelling starts (commencements) fell by 2.8 percent in the September quarter after falling by 7.2 percent in the June quarter. House approvals fell by 1.8 per cent and apartments fell by 0.7 percent. Work started on 229,295 new dwellings over the year to September, easing further from the record high of 232,018 dwellings in the year to March.</p>
<p> </p>
<p>Across Australia, starts in the September quarter fell in six states/territories: NSW (up by 5.8 percent); Victoria (down by 9.6 percent); Queensland (up by 6.3 percent); South Australia (down by 20 percent); Western Australia (down by 13.6 percent); Tasmania (down by 0.6 percent); Northern Territory (down by 7.6 percent); and the ACT (down 39.6 percent).</p>
<p>In the year to September, dwelling starts were higher than the decade average in all the states &amp; territories except for South Australia (down 1 percent), Western Australia (down 3.5 percent), Tasmania (down 15 percent) and Northern Territory (down 12.6 percent). Starts were at record highs in NSW (70,326) and 79 percent above the decade average. In Queensland starts were at 21 year highs (49,939) and 36 percent above decade averages.</p>
<p>What is the importance of the economic data?</p>
<p>Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.” Confident consumers may be more inclined to spend, especially on major items.</p>
<p>The Australian Bureau of Statistics releases data on dwelling commencements (starts) each quarter. The figures provide guidance on future construction activity. If construction begins on new houses or apartments, it signifies work for building trades.</p>
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<p>What are the implications for interest rates and investors?</p>
<p><span> </span><span>There are a few headwinds for consumer confidence. No doubt the lift in oil prices and the resulting lift in petrol prices does have a direct impact on household budgets. In addition, the ongoing rebalancing of the Australian economy away from mining to housing and uncertainty about future housing supply in Sydney, Melbourne and Brisbane will occupy policymaker discussions in coming months. Overall the Reserve Bank is comfortably on the sidelines looking to see how the economy evolves over the early part of 2017. </span></p>
<p><span><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>.</em></span></p>
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NSW leads national building boom: CommSec's Savanth Sebastian

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<p>GUEST OBSERVER</p>
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<p><span>The value of new residential construction work completed fell nationally by 3% in seasonal terms for the June 2015 quarter according to the latest ABS Construction Work Done release. </span></p>
<p><span>For the 12 months to June 30 however, the value of new residential construction work done had improved by 10.6% across the country largely due to more significant annual improvements in the value of residential work completed in New South Wales, Queensland, South Australia and Tasmania. </span></p>
<p><span>The figures underscore the important role residential construction work is playing right now in supporting the broader Australian economy.</span></p>
<p><span>The activity underway is still very strong, however the drop over the quarter posted by most states could be signs of a slowing in commencements. </span></p>
<p><span>This is something to watch as we can’t afford to see new construction levels weaken. </span><span>Maintaining high activity is crucial to keep pace with housing demand, population growth and job creation. </span></p>
<p><span>States such as Queensland and South Australia </span><span>posted declines in the value of work done in the June quarter of 10.2% and 16.2% respectively which needs to be monitored over the forward updates. </span></p>
<p><span>The value of residential construction work done in Queensland is the best it</span><span>’</span><span>s been since 2010, however the 2015 result still sits below the ten year annual average. </span></p>
<p><span>The ABS data shows good annualised levels of activity is flowing through the residential industry and the industry is in the midst of a strong patch but supply side efficiencies will be needed to support this activity long term. </span></p>
<p><span>Governments need to focus on supply side efficiencies in land release, improvements to development assessment and reform of inefficient taxes such as stamp duty to create </span><span>prosperity, jobs and strong communities.</span></p>
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<p><em>Nick Proud is residential executive director, Property Council of Australia and can be contacted<a href="https://www.propertyoz.com.au" target="_blank"> here</a>.</em></p>
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Mid-year drop in residential construction value

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<p class="x_MsoListParagraph"><span>GUEST OBSERVER</span></p>
<p class="x_MsoListParagraph"><span>The March quarter 2016 <span id="0.30423283972777426" class="highlight">ANZ-Property</span> <span id="0.9538933432195336" class="highlight">Council</span> <span id="0.6875761854462326" class="highlight">Survey</span> shows that<strong> </strong>the property sector is expecting much slower growth in housing construction and house prices across most markets in the coming year. </span></p>
<p class="x_MsoListParagraph"><span>This highlights the challenge that weaker growth from the housing market will present for the Australian economy in 2016.</span></p>
<p class="x_MsoListParagraph"><span>However, the <span id="0.28816580562852323" class="highlight">survey</span> also revealed a slight increase in property sector confidence, with the sharp decline in housing market confidence being offset by both a solid pipeline of planned work for property businesses in 2016 and an optimistic outlook for commercial property.</span></p>
<p class="x_MsoListParagraph"><span>Despite weaker housing sales activity in recent months and a sharp decline in house price growth expectations, the <span id="0.06578527600504458" class="highlight">ANZ-Property</span> <span id="0.9831584345083684" class="highlight">Council</span> <span id="0.8176737835165113" class="highlight">Survey</span> showed<strong> </strong>continued strong demand for Australian housing from foreign investors. In future, this measure may be impacted by tighter foreign investor policy enforcement by the Australian government (effective from 1 December 2015) and the recent volatility in China’s financial markets.</span></p>
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<p class="x_MsoNormal"><span>The housing sector, which plays an important role in shaping the Australian economic cycle, will likely be less stimulatory for growth in 2016 than in 2015. The <span id="0.23203078075312078" class="highlight">ANZ-Property</span><span id="0.8833400206640363" class="highlight">Council</span> <span id="0.4701945139095187" class="highlight">Survey</span> shows that in the largest, and until recently strongest, state housing market of New South Wales, there has been a tempering of confidence and indications of the forward work schedule have also become more muted. </span></p>
<p class="x_MsoNormal"><span>Most other states and territories are steadier though, with evidence of a continued improvement in confidence in Victoria and Queensland. This is consistent with our view that there will not be a significant downturn, but a more muted profile for housing construction and prices this year. The exceptions are Western Australia, where planned business activity and confidence continue to deteriorate, and Tasmania, which has shown a significant pick-up from a low base in recent quarters.</span></p>
<p class="x_MsoNormal"><span>Overall, the housing sector’s contribution to growth will ease through softer construction activity and a reduced ‘wealth effect’ on Australian households from weaker price growth. The recent <span id="0.5294632681179792" class="highlight">ANZ-Property</span> <span id="0.06710881600156426" class="highlight">Council</span> <span id="0.538970761699602" class="highlight">Survey</span> results show that tighter regulation of investor mortgage lending and higher mortgage lending rates have weighed on housing market sentiment. </span></p>
<p class="x_MsoNormal"><span>This has also become evident in weaker mortgage lending data through the second half of 2015. Today’s <span id="0.39811774366535246" class="highlight">survey</span> data suggests that the property industry is bracing for higher interest rates and more prudent credit distribution by lenders. We expect, however, that the Reserve Bank may provide some relief for the economy this year, through interest rate cuts, if other sectors do not pick up to compensate for the slower path of housing.</span></p>
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<p><span><em><span>Cherelle Murphy is</span><span> co-head of Australian Economics, ANZ. David Cannington is senior economist. They can be contacted <a href="https://bluenotes.anz.com/authors/our-economists/" target="_blank">here</a>.</span></em> </span></p>
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Housing may be the little engine that can't any longer: ANZ Research

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<p>GUEST OBSERVER</p>
<p>The September 2016 building approvals date, released earlier today by the ABS, shows some of the growing fears around the excess heat in the market for new apartments may be premature.</p>
<p>The data shows a massive turnaround in apartment approvals, from the strong growth recorded in the August data of 26.3 percent (year-on-year), to a reversal in the September data, to record a fall over 9.9 percent measured year-on-year.</p>
<p>Building approvals data has a tendency to be quite volatile when comparing results month by month, but this latest result is an example of how quickly the housing market can respond when market conditions change.</p>
<p>Talk of an emerging oversupply in inner-city apartments markets in Sydney, Melbourne and some parts of Brisbane has no doubt made developers and builders in these markets more cautious.</p>
<p>However, Master Builders would caution against being overly bearish on the prospects of inner-city apartment markets while auction clearance rates remain high, rents are growing and house prices continue to march forward.</p>
<p>On the government’s own estimates Sydney is projected to have a population of 6.4 million by 2036. On average, that would add 210,000 people to Sydney’s population each year, or pretty much the equivalent of the entire population of Hobart each and every year for the next twenty years.</p>
<p>Elsewhere, the RBA’s decision this week to keep interest rates on hold came with more jawboning of risks for the housing sector. While the rhetoric was more positive overall, particularly on the global economic outlook, there is a heightened level of concern around the impact a further reduction may have on house prices.</p>
<p>Master Builders agrees with the RBA’s sentiments.  While acknowledging the role interest rates have played in supporting a much needed boom in housing construction over the past couple of years, Master Builder would caution the Bank to carefully consider the impact that further reductions may have on some of Australia’s hotter housing markets in Sydney and Melbourne.</p>
<p><em>Matthew Pollock is national manager, housing, Master Builders Australia and can be contacted <a href="https://www.masterbuilders.com.au" target="_blank">here</a>.</em></p>
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Fall in approvals points to peak in housing construction cycle

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<p>GUEST OBSERVER</p>
<p>ABS figures show that new home building approvals faltered during the first month of 2016.</p>
<p><span style="line-height: 1.3em;">January 2016 was a rather weak month for new home building approvals, with both detached house approvals and those for multi-units falling back compared with December. </span></p>
<p>During January 2016, new home building approvals declined by 7.5 percent. This comprised a 6.1 percent drop in detached house approvals and a reduction of some 9.1 percent in multi-unit approvals. Over the past year, approvals totalled some 231,752 which is 10.6 percent higher than the previous 12 month period and still very strong by historical standards. </p>
<p>Towards the end of 2015, the residential building industry was hit by a number of unfavourable developments. The major banks increased their mortgage interest rates, credit conditions were tightened for domestic investors and the $5,000 foreign investor fee came into force. This has made it more difficult to deliver new housing supply and today’s figures seem to bear this out.</p>
<p>The HIA’s <em>Housing Australia’s Future </em>report warned last week of the major challenges in meeting Australia’s housing needs over the coming decades. It is therefore vital that policy settings and credit conditions become more focused on the consistent delivery of the required volume of new housing supply over the long term. We’re just not seeing this at the moment. </p>
<p>During January 2016, total seasonally adjusted new home building approvals saw the largest increase in South Australia (+14.2 percent), followed by Western Australia (+7.2 percent) and Victoria (+2.9 percent). The volume of approvals fell in New South Wales (-22.9 percent), Queensland (-13.4 percent) and Tasmania (-11.1 percent). In trend terms, approvals saw a 9.4 percent decline in the Northern Territory and contracted by 11.4 percent in the Australian Capital Territory.</p>
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<p><em>Shane Garrett is senior economist for HIA and can be contacted <a href="https://hia.com.au/en/BusinessInfo/economicInfo/EcoGroup.aspx" target="_blank">here</a>.</em></p>
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Building approvals stumble into 2016: HIA's Shane Garrett

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<p>GUEST OBSERVER</p>
<p>How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.</p>
<p>Just as the Reserve Bank uses long-term averages to determine the level of ‘normal’ interest rates; we have done the same with key economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the ‘normal’ performance.</p>
<p>NSW has retained top spot as the best performing economy, edging a little further ahead of Victoria. Both states are maintaining a healthy lead over the other states and territories.</p>
<p>The big change over the past quarter has been the lift of the ACT economy to equal third position alongside the Northern Territory. Western Australia has dropped from fourth to fifth. But there is little to separate the ACT and the Northern Territory in the second grouping of economies. In the third grouping of state and territory economies, Queensland is sixth ranked, ahead of the South Australia (seventh) and Tasmania (eighth).</p>
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<p>NSW has retained its top rankings on population growth, retail trade, dwelling starts and housing finance but now adds unemployment and equipment investment to the list. NSW is still fourth-ranked on construction work done and fifth ranked on economic growth.</p>
<p>Victoria has lost a little ground on NSW but is solidly in second spot on the economic performance rankings. Victoria’s main strengths are population growth and housing finance (second ranked) and dwelling starts and retail trade (third ranked on each indicator).</p>
<p>The Northern Territory remains the third ranked economy, but now shares that position with the other territory – the Australian Capital Territory.</p>
<p>Northern Territory is top ranked on construction work done and is second ranked on economic growth, business investment and unemployment. But the ‘top end’ economy is last ranked on population growth and housing finance.</p>
<p>The ACT economy lifted to equal third courtesy of improved rankings on equipment investment and dwelling starts. The ACT is also third ranked on economic growth, population growth and housing finance. Western Australia is in fifth spot on the economic performance rankings. <span style="line-height: 1.3em;">While top ranked on economic growth, it is bottom ranked on equipment investment and unemployment.</span></p>
<p>Queensland is now in sixth position on the economic performance table. Best rankings are retail trade and dwelling starts (fourth ranked on each indicator). South Australia remains in seventh spot on the economic performance rankings.</p>
<p>South Australia does best on population growth and housing finance (both fourth ranked) but is seventh or eighth on three indicators. Tasmania remains at the bottom of the Australian economic performance table. Tasmania is third ranked on unemployment (previously first) and weakened from third to sixth on housing finance.</p>
<p><a href="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.42.20%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.42.20%20AM.png" alt=""></p>
<p>Ideally gross state product (GSP) would be used to assess broad economic growth. But the data isn’t available quarterly. Rather, state final demand (household and business spending) is added to exports less imports to act as a proxy for GSP.</p>
<p>Exclusion of the trade sector would provide an incorrect assessment of growth for economies such as Western Australia and Queensland. The only major change in the rankings since the last quarter has been at the top of the leader-board with Western Australia now on top from Northern Territory.</p>
<p>Now while economic growth has slowed in both economies over the past year, the current level of economic activity is still higher than the ‘normal’ or decade-average level of output in percentage terms than the comparison for other economies.</p>
<p>Western Australian output is just under 19 per cent higher than the decade average level of output, from Northern Territory (18.1 per cent), ACT (up 11.6 per cent), Victoria (up 10.8 per cent) and NSW (up 10.1 per cent).</p>
<p>At the other end of the scale, economic activity in Tasmania in the September quarter was just 1.6 per cent above its decade average, while South Australian activity was higher by 8 per cent and Queensland economic activity up by 9.2 per cent.</p>
<p>Victoria now has the fastest annual economic growth rate in the nation, up by 3.4 per cent on a year ago, ahead of ACT with 2.6 per cent and Tasmania (2.3 per cent). By contrast, the Northern Territory economy is down 13.9 per cent on a year ago, while Western Australian economic activity is down 1.6 per cent on a year ago with the Queensland economy down 0.2 per cent on a year ago.</p>
<p><a href="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.44.56%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.44.56%20AM.png" alt="" width="807" height="337"></p>
<p>The measure used was real (inflation-adjusted) retail trade in trend terms with September quarter data the latest available. NSW has held on to the top spot on the retail rankings from Western Australia and Victoria with spending in the September quarter 17.0 per cent above decade-average levels. Solid activity in the housing sector, lower unemployment and higher home prices are supporting spending.</p>
<p>Spending in Western Australia was 14.3 per cent above decade-average levels with a legacy of the mining boom – higher income levels – supporting spending. Spending in Victoria was up 13.8 per cent on the decade average followed by Queensland (up 11.5 per cent).</p>
<p>In fifth spot was the Northern Territory with spending 10.5 per cent above decade averages. Tasmania continues to record the weakest result on retail spending, up 6.8 per cent on the decade average, just below South Australia with 6.9 per cent growth and the ACT with 8.3 per cent growth.</p>
<p>If monthly retail trade was assessed instead to calculate the rankings (November data available), the rankings would be slightly different with Victoria in second spot and South Australia in eighth position. In terms of annual growth of real retail trade, Victoria is strongest, up 4.0 per cent, from NSW, up 3.7 per cent, and South Australia, up 3.6 per cent.</p>
<p>And looking at monthly retail trade, the strongest annual growth is again in Victoria (up 5.8 per cent) from Tasmania (up 4.8 per cent) and NSW (up 4.7 per cent).</p>
<p>NSW is now on top on equipment investment from the Northern Territory, further highlighting the transition in the economy after the resources boom. Equipment spending in the September quarter was just under 5 per cent above ‘normal’ – or decade-average levels.</p>
<p>In the June quarter Northern Territory equipment spending was 20.2 per cent above decade-averages. Now spending is up by just 1.5 per cent. South Australia has held onto third spot, up 1.2 per cent above decade-average levels, followed by ACT (up 0.2 per cent). By contrast, other states and territories had equipment spending below decade averages in the September quarter.</p>
<p>Weakest was Western Australia (down 30.5 per cent) followed by Tasmania (down 17.0 per cent) and Queensland (down 10.1 per cent). Equipment spending in Victoria was down on decade average levels, but just by 1.5 per cent. On a shorter-run analysis, equipment investment in the September quarter was higher than a year ago in only three of the state and territory economies (last quarter, five states and territories had equipment spending up on a year ago).</p>
<p>Equipment investment is up the most on a year ago in the ACT (up 12.6 per cent), followed by Tasmania (up 7.8 per cent) and Victoria (up 2.7 per cent). By contrast new equipment investment in the Northern Territory was down 30.6 per cent on a year ago while spending in Western Australia was down 30.1 per cent with Queensland down 10.3 per cent.<br><br></p>
<p><a href="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.47.32%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.47.32%20AM.png" alt="" width="757" height="302"></p>
<p>Which state or territory has the strongest job market in the nation? It is not an easy question to answer. The lowest trend unemployment rate in Australia can be found in the Northern Territory at 4.1 per cent from NSW and the ACT at 5.2 per cent. But the ACT jobless rate is over 44 per cent above its decade average. And Northern Territory’s jobless rate is 0.7 per cent above its decade average (“normal”) jobless rate.</p>
<p>However the NSW jobless rate is actually 2.4 per cent lower than the decade average. In further comparing current jobless rates in each state and territory with their respective decade averages, Tasmania follows NSW and Northern Territory, its 6.6 per cent jobless rate is 8.7 per cent above the decade average.</p>
<p>In Victoria, unemployment stands at 5.9 per cent, up 9.0 per cent on its decade average of 5.4 per cent. At the other end of the scale is Western Australia. Trend unemployment stands at 6.4 per cent, 47.8 per cent higher than the 4.3 per cent ‘normal’ or decade-average. Next weakest is the ACT – as noted above the trend unemployment rate is 44.4 per cent above the decade average.</p>
<p>South Australia’s jobless rate is 28 per cent above the decade average, while Queensland is mid pack – its 5.9 per cent jobless rate is up 12.5 per cent on the ‘normal’ level. Unemployment rates in NSW, Victoria, Queensland, South Australia and Northern Territory have all eased in trend terms in the past three months.</p>
<p>The measure used for analysis was the total real value of residential, commercial and engineering work actually completed in trend terms in the September quarter. In five of the states and territories, construction work was higher than decade averages.</p>
<p>Leading the way was the Northern Territory with construction work done almost 117 per cent above its decade average with activity associated with the gas projects providing solid support. Next strongest was Western Australia (up 35.1 per cent) while construction work done in Victoria was up by 17.2 per cent on ‘normal’ levels in trend terms. Construction work done in both economies was well up on a year ago in the September quarter.</p>
<p>NSW is fourth ranked with construction work 7.2 per cent above decade averages. Tasmania is fifth ranked with construction work 0.7 per cent above ‘normal’ levels. In Queensland, overall new construction work completed in the September quarter was almost 19 per cent below the decade average, weaker than the 11 per cent decline recorded in the June quarter.</p>
<p>Next weakest to Queensland was the ACT where construction work was 12.1 per cent below decade averages, followed by South Australia (down 1.6 per cent). In terms of annual growth rates, Western Australian construction work done in the September quarter was up 13.3 per cent on a year ago, followed by Victoria, up 11.5 per cent. Other economies had construction work lower than a year ago, led by Queensland, down by 30.5 per cent – the biggest annual decline in records going back over 26 years.</p>
<p><a href="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.49.58%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.49.58%20AM.png" alt="" width="698" height="299"></p>
<p>The measure used was the trend number of dwelling commencements (starts) with the comparison made to the decade-average level of starts. Starts are driven in part by population growth and housing finance and can affect retail trade, unemployment and overall economic growth. However any over-building or under-building in previous years can affect the current level of starts.</p>
<p>The outlook for home building remains strong over the next year but a slowdown can be expected later in 2016 as the surge in the supply of new homes meets pent-up demand. The slowdown in population growth will also restrain future home building. NSW retains the mantle of the strongest in the nation for new home construction, with starts almost 72 per cent above decade averages.</p>
<p>In addition, in the September quarter the number of dwellings started was 24.6 per cent higher than a year earlier. The ACT has replaced Victoria in second spot, with starts 48.2 per cent above decade averages. Victorian starts are 38.3 per cent above decade averages and Queensland starts are up 26.7 per cent. At the other end of the scale, South Australian dwelling starts were 3.0 per cent below decade averages.</p>
<p>And in the September quarter starts were down 2.6 per cent on a year earlier. Next weakest was Northern Territory (down 2.8 per cent from decade highs) from Tasmania (up 12.6 per cent on the decade average) and Western Australia (up 16.1 per cent on the decade average). In terms of annual growth, the ACT is strongest with dwelling starts at record highs in trend terms in the September quarter, up 44.3 per cent on a year ago.</p>
<p>In the June quarter, NSW was alone in recording a fall in real wages. However in the September quarter, wage growth in all states and territories was above that of consumer prices.</p>
<p>Strongest real wage growth was again recorded in the Northern Territory with wages 2.0 percentage points (pp) higher than consumer prices. Wage growth was second highest in the nation while inflation was the lowest. Real wage growth was next highest in three economies – Victoria, South Australia and Tasmania – with wages 1.2pp above consumer prices (inflation).</p>
<p>At the other end of the scale, NSW wage growth of 2.2 per cent was just above the 1.9 per cent annual growth of prices. Despite that, retail spending still remains firm in NSW. Real wages remains only modestly positive in Queensland (+0.5pp) and Western Australia (+0.9pp).</p>
<p>Turning to home prices, in December four of the capital cities had positive annual growth of home prices. Back in June, similarly four of Australia’s capital cities had home prices higher than a year earlier. Strongest growth in home prices was in Sydney (up 11.5 per cent) followed by Melbourne (up 11.2 per cent) and then there was a fair gap to the other capital cities. Next strongest were Brisbane and Canberra with prices in both cities up 4.1 per cent on a year ago. Home prices were lower than a year ago in Perth (down 3.7 per cent), Darwin (down 3.6 per cent), Hobart (down 0.7 per cent), and Adelaide (down 0.1 per cent).</p>
<p><a href="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.53.11%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/01/27/Screen%20Shot%202016-01-27%20at%209.53.11%20AM.png" alt=""></p>
<p>Currently we look at eight indicators to get the broadest assessment of economic performance. If we added new motor vehicle registrations to the list the only change in the overall economic rankings would be the ACT taking third position on its own.</p>
<p>NSW has a solid grip on the top ranking of economic performance. Unemployment has improved while population growth is above long-term averages, thus providing solid momentum to the economy.</p>
<p>Victoria also still has a strong grip on the second ranking but hasn’t been able to narrow the gap with NSW. Victoria still has the strongest population growth in the nation, underpinning retail and housing activity.</p>
<p>The ACT has been the big improver in the rankings and a sharp lift in dwelling starts is a clear reason for the improvement. Stronger housing activity will support the job market and retail spending over 2016.</p>
<p>The Northern Territory will face challenges in the next few years as key resource projects are either completed or near completion. Slow population growth, weak demand for housing loans and a sharp fall in dwelling starts will constrain economic momentum. Western Australia continues to slip in the performance rankings, having relinquished top spot in October 2014.</p>
<p>Slower population growth and higher unemployment will constrain activity in the housing market. Queensland remains in the third tier of economies alongside South Australia and Tasmania. Encouragingly, however, unemployment has fallen to two-year lows in trend terms.</p>
<p>And dwelling starts have lifted to 7½ year highs. The South Australian job market has improved in the past eight months. If the positive trend continues, then there is scope for an improvement in retail spending. The Tasmanian economy continues to struggle for momentum. In October, trend unemployment had fallen to near 4-year lows. While unemployment has lifted in the past two months, real wage growth remains healthy.</p>
<p><em>Craig James is chief economist, CommSec and Savanth Sebastian is economist, CommSec. Both can be contacted <a href="https://www.commsec.com.au/" target="_blank">here</a>.</em></p>
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CommSec's State of the States shows NSW as best performing economy: Craig James

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<p><span>The Australian Bureau of Statistics (ABS) published building approvals data for August 2015 earlier this week.  The data showed a month-on-month fall in approvals driven by a sharp drop in the number of unit approvals.  Keep in mind that unit approvals tend to be much more volatile than house approvals on a monthly basis.</span></p>
<p><a href="/images/2015/10/06/Chart-1.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/06/Chart-1.jpg" alt=""></span></p>
<p><span>Over the month there were 18,071 dwelling approvals which was a decline of -6.9% over the month.  Dwelling approvals hit a record high of 20,215 approvals in March 2015 and they are now -7.5% lower.  It does appear that approvals have peaked notwithstanding the fact that they remain at historically high levels.</span></p>
<p><a href="/images/2015/10/06/Chart-2.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/06/Chart-2.jpg" alt=""></span></p>
<p>There were 9,882 houses and 8,819 units approved for construction in August 2015.  House approvals actually increased by 4.4% over the month while unit approvals fell by -16.9%.  Year-on-year house approvals have increased by 2.2% compared to an 8.4% lift in unit approvals.  To further highlight the volatility of unit approvals the 8.4% year-on-year increase in August is well down on the 44.2% year-on-year rise in July.  Although it looks as if approvals have peaked it would not surprise to see a sharp rebound in unit approvals next month.</p>
<p>Across the country there was a record high 226,415 dwellings approved for construction over the 12 months to August 2015.  To put the magnitude of approvals in perspective, two years ago over the year to August 2013 there had been 166,658 dwelling approvals nationally.  There has also been a surge in unit approvals over recent years with a record high 48.8% of all dwelling approvals nationally being for units over the past year.  Again, 2 years ago units accounted for 42.5% of all approvals over the year.</p>
<p><a href="/images/2015/10/06/Chart-3.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2015/10/06/Chart-3.jpg" alt=""></p>
<p>It isn’t just the fact that more units are being built, the type of units being constructed is changing dramatically.  Over the 12 months to August 2015, 25.7% of all unit approvals were for townhouses, 10.1% were low rise (less than 4 storeys) and 64.3% were high-rise (4 storeys or more).  The above chart shows that historically townhouses have received the highest proportion of approvals.  Trends have changed quite swiftly, 2 years ago just 49.2% of all unit approvals were high-rise.  The rise in high-rise approvals is reflective of higher densities within our inner city markets.  High rise unit projects also take longer to build than a house or townhouse and as a result the economic benefit is stretched over a longer period.  Of course the fact that we are approving high-rise units at an unprecedented pace also creates some challenges.  Most notably who are buying these properties and over the longer term who is going to live in these units.</p>
<p>The data indicates that dwelling approvals have probably peaked for the current phase however, the number of approvals remains elevated.  This has created a significant pipeline of new construction much of which is high-rise and will take some time to complete.  Because unit development is so dependent upon presales it will be interesting to see just how many of these units are ultimately built.</p>
<p><em>Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/author/cameron-kusher/" target="_blank">here</a>.</em></p>
<p><span> </span></p>
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ckusher-ujnxiKuFQs

Dwelling approvals remain elevated but fall in August: Cameron Kusher 

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<div>
<span style="line-height: 1.3em;">In the past week the ABS released its </span><span style="line-height: 1.3em;">Construction Activity</span><span style="line-height: 1.3em;"> figures for the June 2015 quarter, which pull together data on building and engineering construction.</span>
</div>
<div> </div>
<div>As you can see below total construction surprised in jumping back up by a seasonally adjusted +1.8% in Q2 to sit above $50 billion in chain volume measures terms.</div>
<div> </div>
<div>The rebound was driven by a surge in engineering construction (see the blue shaded area in the graphic below), which rose by +5.7% in the quarter, although with fewer large projects in the pipeline this sector will soon enough resume its inevitable decline over the next couple of years. </div>
<div> </div>
<div>Given the sheer size of the engineering construction sector at $26.7 billion of work done in the June quarter, the downturn is will continue to act as a material drag on economic growth for quite some time.</div>
<div> </div>
<div>The red shaded area below shows that residential building work declined in the June quarter by -2.9% to $14.7 billion, despite still being up by +7.6% over the year. </div>
<div> </div>
<div>Non-residential building, denoted by the yellow shaded area below, has not really contributed a great deal to growth, having actually declined by -1.2% over the past year. </div>
<div> </div>
<div><a href="/images/2015/10/19/CONS1.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2015/10/19/CONS1.jpg" alt=""></div>
<div> </div>
<div>
<div><strong><span style="text-decoration: underline;">Apartment approvals to decline</span></strong></div>
<div> </div>
<div>While there is still a high volume of residential building approvals in the pipeline - which is expected to see housing starts remain strong across the next financial year - it appears that the peak in construction activity may be in for the cycle.</div>
<div> </div>
<div>Although defaults relating to apartment pre-sales have been low to date and indicators of household financial stress benign, developers will be increasingly reticent to lend against high density projects in certain inner city areas, particularly in Melbourne and Brisbane.</div>
<div> </div>
<div>If you take a walk around Fortitude Valley/Newstead (see my photos <a href="https://petewargent.blogspot.co.uk/2015/08/cranewatch-newstead" target="_blank">here</a> for an idea of what I'm referring to), or West End/South Brisbane (see my photos <a href="https://petewargent.blogspot.co.uk/2015/02/brisbane-apartments-part-deux" target="_blank">here</a> for more of the same) it is not hard to see why, with building approvals as a percentage of existing dwelling stock already tracking at an elevated level.<br><br>Brisbane CBD faces similar challenges as I looked at with some photos <a href="https://petewargent.blogspot.com.au/2015/01/brisbane-apartments" target="_blank">here</a>, as does Melbourne in certain inner city locations.</div>
<div> </div>
<div>The is a glut of apartment building coming online in these areas which will see vacancy rates rise and rents fall, and it follows there is no requirement for further apartment approvals.</div>
<div> </div>
<div>Indeed, we already know that DA lodgements in Brisbane began to fall quite sharply earlier in the year. </div>
<div> </div>
<div>This is one of the risks identified by the <a href="https://www.rba.gov.au/publications/fsr/2015/oct/html/contents" target="_blank">Reserve Bank</a> of a property cycle which is driven largely by investors - speculative demand can lead to a sharp supply response. </div>
<div> </div>
<div>In this case it comes in the guise of rapid increase in construction activity in the apartment sector, and in turn a future supply overhang.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Implications</span></strong></div>
<div> </div>
<div>While work in the pipeline should keep residential building activity humming along at a historically high level - and a boom in major renovations work could even see total residential activity rise a little from here - there appears to be little hope that the sector can contribute a great deal more to economic growth than it already has.</div>
<div> </div>
<div>Since engineering construction is also set to decline over the next couple of years, it is perhaps little wonder that future markets are beginning to look for further interest rate cuts (plural) towards a cash rate of just 1.50%. </div>
<div> </div>
<div>While forecasters are expecting the economy to grow at a moderate pace in Q3, on the evidence of the above numbers there could potentially be some downside risk, particularly if resources construction resumes its contraction. </div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
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pwargent-M4siyDbqQY

Residential construction peak: Pete Wargent

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<p>As Property Bloom nears it's one hundredth development project, it occurred to me that we, as project managers and our clients as investors/developers, have been contributing to the diversity of main stream housing supply.</p>
<p>What I mean by this is that we build small dwellings - two or three bedroom villas that once subdivided end up on small, manageable lots. The majority of new housing stock is still four or five bedroom family homes.  </p>
<p>I read a document released by the NSW Government Planning and Environment  department about the importance of housing diversity. It mentions the changes occurring in the housing market which are driven by demographics, affordability and lifestyle trends. </p>
<p>Families are having less children and some choosing not to have any at all, couples are working longer hours leaving less time for property and yard maintenance, there are more single person households than ever before,  first home buyers are looking for more affordable homes and we are living independently  longer and so older people are looking for low maintenance properties.  </p>
<p>Whilst the mainstream consumer is still after the large four to five bedroom homes, there is a definite need for smaller dwellings. In one of the locations we are developing in, there is strong demand by older buyers who want to down size but live close to their kids who have built their four bedroom dream home in this premium estate. There are so few smaller dwelling available that when one does become available there are several buyers vying for it.</p>
<p>So this is what we do, find these areas and meet the demand. There is a need to diversify the types of housing available in new release areas to ensure housing is affordable and meets the needs of all community members.</p>
<p><em>Jo Chivers is chief executive officer of property development project managers <a href="https://www.propertybloom.com.au/about" target="_blank">Property Bloom</a>.</em></p>
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