Residential Construction

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<p>GUEST OBSERVER</p>
<p>Construction work done in the June quarter by 3.7 percent, to be down 10.6 per cent on a year ago.</p>
<p>Engineering work fell by 9 percent in the June quarter – biggest quarterly fall in 151⁄2 years. Engineering construction is down by 24.9 percent on a year ago – biggest annual fall on record. Residential work rose by 0.8 percent in the June quarter to record highs, while commercial building lifted by 2.1 percent.</p>
<p>Building inflation: Building inflation rose by 0.6 percent in the June quarter. The annual rate of construction inflation rose from 2.1 percent to 2.7 percent – marking the fastest annual growth rate in 71⁄2- years.</p>
<p><a href="/images/2016/08/24/Screen%20Shot%202016-08-24%20at%201.49.52%20PM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/24/Screen%20Shot%202016-08-24%20at%201.49.52%20PM.png" alt=""></p>
<p>Construction work fell in four of the states and territories in the June quarter. Leading the falls was Western Australia (down 19 percent), followed by Northern Territory (down 3.2 percent), NSW (down 1.3 percent) and Tasmania (down 0.4 percent). Construction rose in Victoria (up 5.2 percent), Queensland (up 2.7 percent), the ACT (up 0.5 percent) and South Australia (up 0.1 percent).  The data on construction work is important for builders, building material companies and developers.  </p>
<p>What does it all mean?</p>
<p>Inflation in the building sector is lifting. Not only is the annual rate of construction inflation the fastest in over seven years. But inflation in three out of the past four quarters is amongst the strongest results recorded in the past four years. In addition recent construction industry reports forecast a further rise in hourly rates over the medium term at unionised building sites due to new enterprise bargaining agreements and labour shortages. Overall the lift in inflation in the building sector would not concern the Reserve Bank at present given the lack of inflation across the rest of the economy.</p>
<p>The ‘baton pass’ from engineering to residential building is clear for all to see. Engineering work continues to recede while home building has hit new highs. In fact engineering work record the sharpest quarterly decline in almost 16 years. Interestingly the gap between building (residential and commercial) and engineering in terms of total work is the largest in almost 10 years. The results are even more staggering when you consider that just over two years ago engineering work surpassed total building by more than $8 billion. The speed of the turnaround has shown up in the patchiness across the national economy and in effect highlights the difficulties faced by policymakers in trying to shore up growth</p>
<p>Today’s data is unlikely to alter the Reserve Banks thinking when it comes to rates. Focus now turns to the June quarter business investment data released on September 1. And while the Reserve Bank will be particularly interested in estimates of completed non-mining investment, there will be a much greater focus on future spending plans - especially in light of the fact that private sector construction activity continues to disappoint. </p>
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<p>What do the figures show?</p>
<p>Construction Work</p>
<p>Construction work done fell by 3.7 per cent in real (inflation-adjusted) terms in the June quarter after sliding by 0.3 per cent in the March quarter. Work done is down by 10.6 per cent on a year ago. Public sector construction work rose by 5.3 per cent in the quarter while private sector activity fell by 5.7 per cent.</p>
<p>Construction work fell in four of the states and territories in the June quarter. Leading the falls was Western Australia (down 19 per cent), followed by Northern Territory (down 3.2 per cent), NSW (down 1.3 per cent) and Tasmania (down 0.4 per cent). Construction rose in Victoria (up 5.2 per cent), Queensland (up 2.7 per cent), the ACT (up 0.5 per cent) and South Australia (up 0.1 per cent).</p>
<p>Engineering work fell by 9 percent in the June quarter – biggest quarterly fall in 15 1⁄2 years. Engineering construction is down by 24.9 percent on a year ago – biggest annual fall on record.</p>
<p>Commercial (non-residential) building rose by 2.1 percent in the June quarter to be up 0.4 percent over the year.</p>
<p>Residential building rose by 0.8 percent in the June quarter and was up by 9.4 percent over the year. Alterations &amp; additions rose by 5.4 percent in the quarter while new residential work rose by 0.1 percent.</p>
<p>The measure of inflation in the construction sector (deflator) rose by 0.6 per cent in the June quarter. The annual rate of construction inflation rose from 2.1 per cent to 2.7 percent – matching the fastest annual growth rate in almost 71⁄2 years. Engineering prices rose by 0.6 percent in the quarter (up 2.6 percent over the year) while building prices rose by 0.4 percent in the quarter (2 per cent over the year).</p>
<p>What is the importance of the economic data?</p>
<p>The Bureau of Statistics releases quarterly estimates of Construction work done. The estimates are based on a survey and cover around 85 per cent of the construction work done in the period. Revised estimates will be released in coming months. The data is useful largely for historical purposes but the work yet to be done estimates provide an early warning signal of future activity. The residential work figures give a good early guide to the strength of residential investment in the national accounts.</p>
<p>What are the implications for interest rates and investors?</p>
<p>There is plenty of work in the construction sector. But there are winners and losers across states and industry sectors. The Reserve Bank will not be overly concerned with the current trends in construction. Overall activity is correcting as expected and adjusting to the new realities.</p>
<p>While policymakers will continue to discuss the merits of another rate cut, it really comes down to the inflation outlook. CommSec expects a low inflation result over the September quarter should result in the central bank cutting the cash rate once again in November. </p>
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<div class="column"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></div>
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Building costs rise at the fastest pace in 7.5 years: CommSec's Savanth Sebastian

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<p>GUEST OBSERVER</p>
<p>A weaker set of economic results. A modest slide in the number of dwelling approvals, and a substantial rise in the trade deficit. The only positives to be taken out of the data related to the rise in the value of building approvals. Overall there is nothing in the data to stop the Reserve Bank from cutting interest rates if they deem it necessary.  </p>
<p>The housing sector continues to bubble along at a healthy pace. Home prices remain resilient despite changes in regulation and tighter lending standards that have been adopted by the banking sector. Importantly the pipeline of new building will continue to support broader-based economic growth over the coming 12-18 months.  </p>
<p>Over the past year 233,246 new homes were approved, easing further from the record high 240,842 in the year to October 2015. The anticipated lift in housing supply should ensure a more balanced environment – in essence house price growth is likely to be more contained over the medium term.  </p>
<p><a href="/images/2016/08/02/Screen%20Shot%202016-08-02%20at%201.59.09%20PM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/02/Screen%20Shot%202016-08-02%20at%201.59.09%20PM.png" alt=""></p>
<p>The housing sector isn’t the hotly contested issue it was a year ago, but still the Reserve Bank will keep a close eye on the sector, particularly in Sydney and Melbourne.</p>
<p>The trade accounts remain firmly in the red. Not only have the trade accounts been in deficit for over two consecutive years, but the 12-month rolling annual deficit came in at a sizeable $35.7 billion. However the trade data doesn’t have the impact on the currency that it once did.</p>
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<p><img src="/images/2016/08/02/Screen%20Shot%202016-08-02%20at%202.00.10%20PM.png" alt=""></p>
<p>What do the figures show?</p>
<p><br>Building Approvals:</p>
<p>Dwelling approvals fell by 2.9 per cent in June after falling by 5.4 per cent in May. In trend terms, approvals fell by 0.9 per cent in June.  <br>Over the past year 233,246 new homes were approved, easing further from the record high 240,842 in the year to October 2015.  <br>House approvals fell by 2.4 per cent in June after a 0.5 per cent rise in May (private sector fell by 2.3 per cent). Meanwhile ‘lumpy’ apartment approvals fell by 3.4 per cent in June after falling by 10.7 per cent in May. Private sector apartment approvals fell by 2.4 per cent in June.<br>Dwelling approvals in June were down 5.9 per cent on a year ago with house approvals down 5.5 per cent while apartments are down by 6.3 per cent.  </p>
<p>Across states and territories in June: NSW (-4 per cent); Victoria (+4.1 per cent); Queensland (-2.1 per cent); South Australia (-12.3 per cent); Western Australia (+2.4 per cent); Tasmania (-23.6 per cent). In trend terms, approvals rose by 3.6 per cent in the Northern Territory and by 2.8 per cent in the ACT.  </p>
<p>The value of all commercial and residential building approvals rose by 5.3 per cent in June after falling by 10.7 per cent in May. Residential approvals fell by 1.5 per cent with new building down by 1.2 per cent while alterations &amp; additions fell by 3.8 per cent. Commercial building rose by 20.8 per cent in June to be up 18.8 per cent on a year ago.  </p>
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<p><img src="/images/2016/08/02/Screen%20Shot%202016-08-02%20at%202.01.10%20PM.png" alt=""></p>
<p>International trade:</p>
<p>Australia’s trade deficit widened from $2.42 billion in May to $3.2 billion in June. It was the 27th consecutive  monthly deficit. The rolling 12-month deficit eased from $36.2 billion to a 7-month low of $35.7 billion.</p>
<p>In June, exports of goods and services fell by 0.8 per cent (goods down 1.1 per cent) while imports of goods and services rose by 2 per cent (goods up 2.6 per cent). Exports are down 0.9 per cent on a year ago, while imports are down by 2.3 per cent.  </p>
<p>Within imports, consumer imports rose by 7.4 per cent with capital goods imports up by 2.9 per cent while intermediate goods imports fell by 1.1 per cent.</p>
<p>Consumption goods imports are up 8.9 per cent on a year ago while capital goods imports are up 8.6 per cent and intermediate goods imports are down by 18 per cent. </p>
<p>Australia's annual exports to China stood at $80.1 billion in the year to June. Annual exports were down 1 per cent on a year ago. Exports to China accounted for 32.9 per cent of Australia's total exports.  </p>
<p>Australia's annual imports from China eased from $61.4 billion to $61.3 billion in the year to June, up 7.6 per cent on a year ago. Imports from China accounted for 23.3 per cent of Australia's total imports.  </p>
<p>Australia's rolling annual trade surplus with China held near recent 5-year lows. The annual trade surplus was $18.7 billion in June – but well down from the record high of $51.2 billion set in April 2014.  </p>
<p>Australia annual exports to the US eased from $13.3 billion to $13.2 billion in the year to June and down from a record high of $13.69 billion in the year to October 2015. The share of annual exports going to the US eased from a 7-year high of 5.5 per cent to 5.4 per cent.  </p>
<p>Australia’s annual exports to India eased further from the two-year high of $10.34 billion set in the year to December 2015 to $9.52 billion in the year to June.  </p>
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<p><img src="/images/2016/08/02/Screen%20Shot%202016-08-02%20at%202.02.15%20PM.png" alt=""></p>
<p>What is the importance of the economic data? </p>
<p>The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.  </p>
<p>The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.  </p>
<p>What are the implications for interest rates and investors?  </p>
<p>While new council approvals to build new homes appear to have peaked, activity levels are still healthy. But now investors and builders need to do more research to ensure that the projects they are interested in remain viable with competing projects. There is certainly potential for indigestion in certain towns and regions as new projects are completed and the stock is absorbed.</p>
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<p><img src="/images/2016/08/02/Screen%20Shot%202016-08-02%20at%202.03.22%20PM.png" alt=""></p>
<p>The Reserve Bank will closely monitor developments in China and financial markets more generally. Encouragingly the Reserve Bank has plenty of firepower to provide stimulus to the economy, especially given the low inflation environment.  </p>
<p><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></p>
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Weaker housing approvals, trade deficit blowout: CommSec's Savanth Sebastian

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<p><span>GUEST OBSERVER</span></p>
<p><span>The fall in the volume of construction work done over QIII was larger than market consensus which was for a fall of 2.0% {CBA in line with consensus}.  However, the larger than expected fall follows an upwardly revised 2.1% increase in QII (previously reported as +1.6%)</span></p>
<p><span>There were plenty of familiar themes in today’s result – falling engineering construction was partially offset by a pickup in residential construction.  And non‑residential construction remains weak.  This has been the general pattern in the data for the past two years.  The chart opposite depicts these trends.</span></p>
<p><span>Engineering construction continues to fall as we work our way through the massive downturn in mining investment.  The drag on growth from falling mining investment will continue through 2015/16 and isn’t expected to lessen until 2016/17.  It’s the hangover from a once in a century mining boom.</span></p>
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<p><span>Residential construction is powering along and is providing a partial offset to declining engineering construction.  We have a big lift in apartment construction underway across Australia.  And the forward looking indicators, namely the building approvals, suggest that this will continue deep into 2016.  Today’s figures show that the volume of dwelling construction is up 12.4% through the year.  The resultant increase in the housing stock from a big lift in residential construction will put some downward pressure on rent and dwelling price inflation over the next year.</span></p>
<p><span>The breakdown by public and private sectors construction shows that it’s important to look at the reality rather than necessarily believe the rhetoric.  Despite there being plenty of talk around big investment in public infrastructure the data shows that it simply isn’t the case; at least at the national level.  Public construction work done is down 9.8% through the year and has been a drag on GDP growth since 2010.   </span></p>
<p><span>The construction deflators show that inflation in the residential construction sector has picked up a little while it is negative in the engineering space.  It’s unsurprising really given residential construction has picked up sharply while engineering construction is in decline. </span></p>
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<p><img src="/images/2015/11/25/Screen%20Shot%202015-11-25%20at%203.10.08%20PM.png" alt=""></p>
<p><em><span>Gareth Aird is e</span><span>conomist at Commonwealth Bank and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905" target="_blank">here</a>.</span></em></p>
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Fall in the volume of construction work done over Q3: Gareth Aird

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<br>The ‘baton pass’ from engineering to residential building is clear for all to see.</div>
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<div class="column">Engineering work continues to recede while home building has hit new highs. Interestingly the gap between building (residential and commercial) and engineering in terms of total work is the largest in almost for six years. The results are even more staggering when you consider that just over two years ago engineering work surpassed total building by more than $11 billion. The speed of the turnaround has shown up in the patchiness across the national economy and in effect highlights the difficulties faced by policymakers in trying to shore up growth.</div>
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<div class="column">Interestingly inflation in the building sector seems to be more subdued than in the past year. Granted the annual rate of construction inflation is the fastest in almost five years. But it is largely due to a couple of outsized inflation in the September and December quarters last year. In fact the more sedate 0.5 per cent March quarter inflation reading resonates with the modest consolidation taking place in the housing sector and adds to the lack of inflation across the broader economy. The lack of inflation in the rest of the economy is likely to keep the Reserve Bank focussed on supporting price growth. </div>
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<p>The data is unlikely to alter the Reserve Banks thinking when it comes to rates.</p>
<p>The focus now turns to the March quarter business investment data released tomorrow. And while the Reserve Bank will be particularly interested in estimates of completed non-mining investment, there will be a much greater focus on future spending plans. In the March quarter the first estimate of investment in 2016/17 was just $82.57 billion (weakest result since 2007/08), and 19.5 per cent lower than the first estimate for 2015/16 – marking the largest fall for a first estimate reading in records going back 25 years.</p>
<p>While policymakers will continue to discuss the merits of another rate cut, it really comes down to the inflation outlook. CommSec expects a low inflation result over the June quarter should result in the central bank cutting the cash rate in August.</p>
<p>What do the figures show?</p>
<p>Construction Work</p>
<p>Construction work done fell by 2.6 percent in real (inflation-adjusted) terms in the March quarter after sliding by 2.9 percent in the December quarter. </p>
<p>Work done is down by 6.7 percent on a year ago. Public sector construction work rose by 2.5 percent in the quarter while private sector activity fell by 3.7 percent. </p>
<p>Construction work fell in five of the states and territories in the March quarter. Leading the falls was Northern Territory (down 10.2 percent), followed by Western Australia (down 9.3 percent), South Australia (down 3.2 percent), Queensland (down 2.9 percent) and Victoria (down 1 percent). Construction rose in NSW (up 2.6 percent), the ACT (up 2.3 percent) and Tasmania (up 1.9 percent).</p>
<p>Engineering work fell by 4.2 percent in the March quarter. Engineering construction is down by 13.7 percent on a year ago.</p>
<p>Commercial (non-residential) building fell by 5.5 percent in the March quarter to be down 7.2 percent over the year. </p>
<p>Residential building rose by 1.5 percent in the March quarter and was up by 5.7 percent over the year. Alterations &amp; additions rose by 1.1 percent in the quarter while new residential work rose by 1.5 percent.</p>
<p>The measure of inflation in the construction sector (deflator) rose by 0.5 percent in the March quarter. The annual rate of construction inflation rose from 1.9 percent to 2.3 percent – matching the fastest annual growth rate in almost five years.</p>
<p>Engineering prices rose by 0.6 percent in the quarter (up 1.9 percent over the year) while building prices rose by 0.4 percent in the quarter (2.3 percent over the year).</p>
<p>What is the importance of the economic data?</p>
<p>The Bureau of Statistics releases quarterly estimates of Construction work done. The estimates are based on a survey and cover around 85 per cent of the construction work done in the period. Revised estimates will be released in coming months. The data is useful largely for historical purposes but the work yet to be done estimates provide an early warning signal of future activity. The residential work figures give a good early guide to the strength of residential investment in the national accounts. </p>
<p>What are the implications for interest rates and investors?</p>
<p>There is plenty of work in the construction sector. But there are winners and losers across states and industry sectors. The Reserve Bank will not be overly concerned with the current trends in construction. Overall activity is correcting as expected and adjusting to the new realities. We expect the Reserve Bank to cut rates once again in August.</p>
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<div class="column"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></div>
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Construction eases, home building at record highs: CommSec's Savanth Sebastian

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<br>The latest construction data was certainly disappointing. Not only is construction work down over 11 percent on a year ago, but the falls were across an array of sectors.</div>
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<div class="column">Engineering and commercials continued to record the brunt of the weakness, while residential construction also fell from record highs. In addition the major states all recorded a fall in construction activity, with gains only in ACT, Tasmania and the Northern Territory.</div>
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<p>The ‘baton pass’ from engineering to residential building was clearly the driver of activity over the last couple of years. In fact engineering work is down by 23.2 percent on a year ago – just shy of the biggest annual fall on record, as opposed to residential construction, which eased from record highs. The results are even more staggering when you consider that just over two years ago engineering work surpassed total building (residential and commercial) by more than $9 billion.</p>
<p>And while policymakers would not be overly concerned at present, a substantial pullback in residential activity would create a void that could cause concern. Essentially the hope would be that commercial and non-mining related business investment will lift over the coming year and provide the economy with a lift in momentum.</p>
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<div class="column">Inflation in the building sector is healthy without being excessive. Not only was inflation flat in the September quarter but the annual rate of construction inflation eased back to 2 per cent. Interestingly recent construction industry reports forecast a rise in hourly rates over the medium term at unionised building sites due to new enterprise bargaining agreements and labour shortages.</div>
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<div class="column">In addition recently signed agreements suggest a 20 percent lift in wages over the next 4 years on some sites. Overall a lift in inflation in the building sector would not concern the Reserve Bank at present given the lack of inflation across the rest of the economy.  </div>
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<div class="column">Today’s data is unlikely to alter the Reserve Banks thinking when it comes to rates. Focus now turns to the June quarter business investment data released on December 1. And while the Reserve Bank will be particularly interested in estimates of completed non-mining investment, there will be a much greater focus on future spending plans - especially in light of the fact that private sector construction activity continues to disappoint.</div>
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<div class="column">What do the figures show?</div>
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<div class="column">Construction Work</div>
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<br>Construction work done fell by 4.9 percent in real (inflation-adjusted) terms in the September quarter after sliding by 3.1 percent in the June quarter. Work done is down by 11.1 percent on a year ago. Public sector construction work fell by 0.2 percent in the quarter while private sector activity fell by 6.0 percent.</div>
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<br>Construction work fell in five of the states and territories in the September quarter. Leading the falls was Western Australia (down 13.6 percent), followed by Victoria (down 6.9 percent), South Australia (down 1.3 percent), NSW (down 2.1 percent) and Queensland (down 0.2 percent). Construction rose in the ACT (up 7.1 percent), Tasmania (up 4.7 percent), and the Northern Territory (up 0.6 percent).</div>
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<br>Engineering work fell by 3.8 percent in the September quarter. Engineering construction is down by 23.2 percent on a year ago – just shy of the biggest annual fall on record.</div>
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<br>Commercial (non-residential) building fell by 10.9 per cent in the September quarter to be down 7.6 percent over the year. </div>
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<div class="column">Residential building fell by 3.1 per cent in the September quarter and was up by 6.3 percent over the year. Alterations &amp; additions fell by 0.6 percent in the quarter while new residential work fell by 3.4 percent.<br><p>The measure of inflation in the construction sector (deflator) was flat in the September quarter. The annual rate of construction inflation fell from 2.6 percent to 2.0 percent. Engineering prices fell by 0.7 percent in the quarter (up 1.7 percent over the year) while building prices rose by 0.6 percent in the quarter (1.9 percent over the year).</p>
<p><a href="/images/2016/11/24/Screen%20Shot%202016-11-24%20at%208.52.56%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/11/24/Screen%20Shot%202016-11-24%20at%208.52.56%20AM.png" alt=""></p>
<p>What is the importance of the economic data?</p>
<p> The Bureau of Statistics releases quarterly estimates of Construction work done. The estimates are based on a survey and cover around 85 per cent of the construction work done in the period. Revised estimates will be released in coming months. The data is useful largely for historical purposes but the work yet to be done estimates provide an early warning signal of future activity. The residential work figures give a good early guide to the strength of residential investment in the national accounts.</p>
<p>What are the implications for interest rates and investors?</p>
There is still plenty of work in the construction sector. But there are winners and losers across states and industry sectors. The Reserve Bank will not be overly concerned with the current trends in construction. Overall activity is correcting as expected and adjusting to the new realities.</div>
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<br>CommSec expects the cash rate to remain on hold over the foreseeable future. </div>
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<div class="column"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></div>
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Construction activity falls, tame building costs: Savanth Sebastian

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<p>Construction costs in Australia put it the 14th most expensive out of 38 countries surveyed for the latest International Construction Market Survey from Turner &amp; Townsend, with national construction costs expected to rise 2.5 percent on average in 2016 compared to 2.9 percent globally.</p>
<p>Zurich took out first spot with Perth at 18, Melbourne at 20 and Brisbane at 22nd.</p>
<p>Gary Emmett, senior economist for Turner &amp; Townsend comments said since last year’s survey, Australia’s construction costs have only increased a few percent in contrast to other countries where markets are overheated. </p>
<p>He said to ensure Australian prices stay at reasonable levels, the construction industry must think differently and look for cost savings within the supply chain where the biggest savings and innovation can be found including manufacturing production, design and logistics.</p>
<p>“The industry needs to collaborate with suppliers to look for savings as opposed to traditional adversarial relationships. The use of building information modelling (BIM) will help the industry collaborate to gather data and share plans throughout the lifecycle of an asset to find greater cost saving efficiencies,” he said.</p>
<p>"The costs across Australia’s four major markets show Brisbane increased by 4 per cent in the past 12 months, Sydney hit 3.5 per cent while Perth and Melbourne recorded cost increases of 1 per cent respectively.</p>
<p>“For example, Brisbane and Sydney’s apartment booms have led to the increase in costs in these states. Perth has remained relatively steady due to the mining boom finishing and Melbourne is now experiencing a flat period following a busy apartment boom.</p>
<p>“We are also witnessing increased tender competition which is driving down profit margins.  There is an opportunity now for the industry to look at different delivery and commercial models to improve productivity and margin on projects."</p>
<p>The International Construction Market Survey 2016 analyses input costs uch as labour and materials and charts the average construction cost per sq m for both commercial and residential projects. It can be found <a href="https://turnerandtownsend.cld.bz/icms-16" target="_blank">here</a>.</p>
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Australia's construction costs remain stable

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<p><img src="https://counter.theconversation.edu.au/content/63264/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Breeze blocks are having a moment in the sun. Having been painfully hip in the architecture of the 1950s and 60s, they were used so extensively, in both houses and commercial buildings, that they became ubiquitous anywhere in the world where it was hot – including throughout Australia.</p>
<p>While particularly associated with a beachy, holiday feeling – Gold Coast motels, houses in Palm Springs – they were really so widely-used that they can still be found pretty much everywhere. But after that postwar high point, they fell drastically out of favour, and languished for the next fifty years, built into the walls and gardens of our youths, widely loathed and reviled for being ugly and out of date.</p>
<p>Now their fortunes have turned again and architects, for the moment at least, can’t get enough of them: at the 2016 Houses Awards, announced two weeks ago, the “Best house under 200 metres squared” went to the Naranga Avenue House, by James Russell Architect – a lovely minimal house with a tight, rigorous plan, which undoubtedly won the award because of its “skin of delicate breezeblocks,” described by the awards jury as having “a sublime, ephemeral quality.”</p>
<p>Likewise, one of last year’s most published dwellings was Architect Prineas’ Breeze Block House, which transformed a 1950s bungalow through the use of a crisp, white-painted breezeblock screen wall. Dividing and defining two indoor/outdoor courtyard spaces, this wall also gives the house a distinct character.</p>
<p>You only need to dip into the Instagram feed of Sydney architect Sam Marshall, aka @breezeblockhead, to see the architectural community (including me, I’ll admit) collectively drooling over the multifarious screens, walls, fences, stairwells, undercrofts, carports, and garden rooms that this versatile material lends itself to. Marshall has been collecting images of breezeblocks for sixteen years, and has more than nine thousand followers.</p>
<p>Meanwhile on Pinterest it’s fascinating to see patterns and shapes from other countries – some highly inventive and very beautiful, a long way from the one or two rather stolid designs that were standard in the Adelaide suburbs of my childhood.</p>
<p>Patterned concrete blocks have a long (and sometimes celebrated) lineage. Some people credit Frank Lloyd Wright with inventing them, and indeed he did invent a precast concrete “textile block” system, which he used on several houses in Los Angeles including the Millard and Ennis Houses.</p>
<p>Inspired by the ornamentation on Mayan temples, the relief patterns on Lloyd Wright’s blocks are only slightly reminiscent of what we in Australia would call a breeze block (or screen block, or pattern block, or cinder block) because they are much less permeable – really his is a wall system, rather than a screen one.</p>
<p>The breeze block can also be linked more broadly to the tradition of the <em>brise soleil</em>, which refers to any kind of sun baffle installed outside the skin of a building (which is where the sun screens should be! Stop the heat before it enters your building envelope!). Breeze blocks are not (usually) structural, hence they were often used where a garden meets a house – patio screens or carports or garden walls. In commercial buildings, they were often used for stairwells, balcony screening, and curtain wall sun-shading to large windows.</p>
<p>Right now we are in the midst of a resurgence of interest in postwar design: the wild popularity of all things <a href="https://en.wikipedia.org/wiki/Mid-century_modern">mid-century modern</a> (or mid-mod, or MCM) has spread beyond furniture and houses to materials, and the breeze block has been carried along on that tide.</p>
<p>It is of course a well-known strategy to take the most passe thing you can find and re-appropriate it, for shock value, and to jolt everyone into seeing it anew. But in the case of the breeze block it seems to me more than that – because these “concrete masonary units” (as they’re technically called) actually have qualities that don’t exist in other materials.</p>
<p>You can make permeable walls out of timber or sheet materials or even bricks, but you won’t get quite the same effect as breeze blocks provide: a durable screen which is private and secure, offers sun shading and weather protection <em>and</em> ventilation, and has the added bonus of being highly patterned with geometric ornament. Breeze blocks expand the architect’s repertoire and ability to manipulate the wall with different degrees of solidity and permeability, openness and enclosure. </p>
<p>Plus, they’re pleasing to the eye. A breeze block screen wall can be a beautiful thing – the pattern of each individual block adding to a greater whole, and a larger pattern, when they’re used en masse.</p>
<p>Of course, I didn’t always see the beauty in a breeze block. In fact, I thought they were hideous; an irredeemably ugly vestige of another time, banal and styleless, they reminded me of everything I hated about suburbia. Partly it was their materiality – concrete blockwork can be hard to love, especially in its untreated forms, and breezeblocks are made of a particularly scratchy and drab variety. It’s no coincidence that many of the contemporary architects are choosing to paint theirs.</p>
<p>So what can we make of this resurgence, other than yet another spin on the wheel of architectural fashion? Building materials come and go; my childhood home in the late 1970s had faux venetian glass in the windows and timber shakes on the roof – the very height of style at the time. Likewise, at the moment there is a rash of rusted corten steel, and an eruption of laser-cut perforated metal screens, creeping over the buildings of our cities – these are very modish right now, but in a few years they will be testaments to the (past) time of their design and construction, as all buildings and materials inevitably are.</p>
<p> </p>
<p>Because, in fact, architectural fashions are far more than just frivolous or superficial fancies, they can tell us a lot about the values and concerns of a building’s culture, in a particular location, at a particular time. This is why architectural historians are so interested in past “fashions” (we might also link them to movements, or schools, or ideologies) – because they can be highly revealing. Thus the more interesting story here is not so much fashion, but <em>temporality</em> – how a thing, or material, or building, reveals its being of its time.</p>
<p>This also leads to a danger, for so-called “middle aged” buildings: it’s a truism of the heritage professions that when a building is old enough to seem unstylish and dated, but not yet old enough to be valued as legitimately historical and worth preserving, then it is highly vulnerable to being demolished, or equally of being renovated to death. Young buildings are valued, and very old ones are too, but middle-aged buildings are exposed, and many good ones don’t make it.</p>
<p>Finally, though, in the return of the breeze block is a story about ornament. Many contemporary architects are exploring new modes of surface and material ornament, and it’s easy to see the return of the breeze block as part of this movement. The exploration, and valuation, of pattern, geometry, adornment and richness in the surface of buildings is very much A Good Thing. And so, all hail the breeze block: a material redeemed.</p>
<p><em><span class="fn author-name">Naomi Stead is a</span>ssociate professor, The University of Queensland and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/naomi-stead-108029" target="_blank">here.</a></em></p>
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The return of the breeze block

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<p><img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>Most of our hidden housemates are harmless. But when it comes to termites, some can literally eat us out of house and home.</p>
<p>While termites' ability to damage our homes by eating wooden foundations is legendary, most species do not cause problems. Usually they are rarely seen, hidden away inside wood, underground or in their nests.</p>
<h2>The importance of termites</h2>
<p>Termites eat cellulose – the complex sugars that plants use to build leaves, stems and trunks. Cellulose is the most abundant organic compound on earth. To find wood and other cellulose sources, termites often construct miniature, private highways under the soil that can radiate more than 50 m from their nests.</p>
<p>Perhaps the most famous termite nests are those made by the magnetic termite, <em>Amitermes meridionalis</em>, in northern Australia. These nests are oriented in a north-south direction. Many other species build mounds of different shapes and sizes, while others nest in wood, underground in the soil, or in trees.<span style="line-height: 1.3em;"> </span></p>
<p>The combined mass of termites on earth is estimated at 445 million tonnes, putting them in the top ten alongside cattle, krill, ants and humans.</p>
<p>Outside our homes, termites play a critical role as carbon recyclers and are considered keystone species in many tropical ecosystems, such as savannah habitats like those of northern Australia, Africa and South America. They use nutrient-rich saliva and gut excretions to build tunnels, which improves the quality of the soil. Alongside ants, there is evidence that termites increase crop yields.</p>
<p>When winged adult termites emerge from the nest they become a feast for many animals across the tropics.</p>
<h2>Cockroach relatives</h2>
<p>Termites evolved more than 140 million years ago from social cockroaches that burrowed deep into rotting wood. The closest living relatives of termites are cockroaches from the genus <em>Cryptocercus</em>, found only in isolated mountainous areas of China, Korea and North America.</p>
<p>Mum and dad <em>Cryptocercus</em> pair up and burrow into a large log that will be their home (and source of food) for life. Soon after meeting, the female lays a single clutch of 10 or so offspring, which they both feed and look after for around three years – about half the life of a typical <em>Cryptocercus</em>.</p>
<p>As termites evolved, their firstborn offspring began to look after the next clutch of siblings, freeing mum and dad to produce more sons and daughters. The older siblings stayed to build and defend the colony, and feed and look after the young.</p>
<p>The population of a termite colony these days can number in the millions. All the offspring derive from of a single reproductive pair (the queen and king).</p>
<p>Some species have evolved alternative systems. Colonies of the Australian termite <em>Nasutitermes exitiosus</em> often contain up to four unrelated pairs living together with their countless offspring in apparent harmony – a bit like a 1960s hippie commune.</p>
<p>In the Japanese termite <em>Reticulitermes speratus</em>, the king tends to outlive the queen. But the queen produces many half-clones of herself without any genetic input from the king (a form of virgin birth). These clones replace their dead mother, and all mate with the remaining king. In one colony, over 600 of these queen-clones have been found, making it the largest harem known in the animal kingdom.</p>
<h2>One giant organism</h2>
<p>The vast majority of termite offspring within a colony will never reproduce. Instead, these worker and soldier termites remain in a state of suspended development, never becoming adults. Soldier termites attack predators to ensure the survival of the colony and have evolved impressive jaws or snouts that spray toxic chemicals.</p>
<p>In some species like <em>Neocapritermes taracua</em> from South America, workers sacrifice themselves through the use of an “explosive backpack”. They do this by rupturing their skin, which allows normally harmless chemicals to mix and produced modified chemicals that are dangerous to any nearby predators.</p>
<p>All the efforts of the workers and soldiers go towards raising a small proportion of their brothers and sisters to adulthood, usually once a year. This select few will grow wings (all four of which are almost identical, hence the scientific name Isoptera meaning “equal wings”), pair up and promulgate the genes they share with their siblings back home.</p>
<h2>Living with us</h2>
<p>The dark, humid areas under the floor of many Australian houses provide the ideal environment for termites to emerge from the soil and create their covered highways up foundations to a mother lode of wooden frames.</p>
<p>In Australia, about a billion dollars is spent each year on termite control. House-eating termites are most common in the tropical north, although they are found throughout the continent. While there are more than 300 species of termite, only a handful are considered pests.</p>
<p>Most termites are deterred with chemicals and by replacing damaged wood with treated timber.</p>
<p>Their sophisticated social system is also their Achilles heel. Termite baits contain slow-acting chemicals that prevent termites from moulting or disrupt their nervous systems. Workers voraciously feed on the bait and take it back to the colony, where the poison is spread to the queen, king and their new offspring.</p>
<p>But as one colony is killed, another is often ready to take over. Termites have been around a long time and they are not likely to go away any time soon.</p>
<p><span class="fn author-name">Nathan Lo is a</span><span style="line-height: 1.3em;">ssociate professor, School of Biological Sciences, University of Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/nathan-lo-248026" target="_blank">here</a>.</span></p>
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Hidden housemates: the termites that eat our homes

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<p>GUEST OBSERVER</p>
<p>Private building activity is set to soften in 2016 after strengthening in four of the past five years.</p>
<p>Approvals have long since declined, led lower by the office market, with recent activity levels sustained by reducing the work pipeline. We anticipate only a relatively modest moderation in private activity.</p>
<p>By contrast, public works - accounting for 20 percent of total activity - is beginning to recover, after the downturn of recent times. This will provide only a partial offset to weaker private sector activity.</p>
<p>Click to enlarge</p>
<p><img src="/images/2016/07/22/Screen%20Shot%202016-07-25%20at%208.14.53%20AM.png" alt=""></p>
<p>Activity: Real private building activity turned down in the March quarter, contracting by 6.7 percent to be 4.4 percent lower than a year ago. That follows a 31% expansion in the five years to December 2015, including a 7.8 percent increase in 2015.</p>
<p>Public works began to turn higher in the March quarter, advancing by 2.7 percent, to still be 11.7 percent lower than a year ago.</p>
<p><a href="/images/2016/07/25/Screen%20Shot%202016-07-25%20at%208.19.49%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/07/25/Screen%20Shot%202016-07-25%20at%208.19.49%20AM.png" alt=""></p>
<p>Total real building work contracted by almost 5% in the March quarter, to be almost 6% lower than a year, having been broadly flat in both 2014 and 2015.</p>
<p>Total commencements lifted to be above par in the March quarter, valued at $8.9bn, up from a 2015 average of $7.5bn and averages for the previous five calendar years ranging between $8.2bn and $8.4bn. That said, the March result is insufficient to prevent a near-term moderation in activity.</p>
<p>Private commencements moved broadly sideways in Q1, at $6.2bn, relative to $5.9bn on average for 2015, which is down from the three previous calendar years, ranging between $6.3bn and $6.9bn. Public commencements lifted in Q1 to $2.7bn, the strongest quarterly result in four years, and up from a 2015 average of $1.5bn. The result was boosted by health projects proceeding across Tasmania, NSW, South Australia and the ACT.</p>
<p>The pipeline of work outstanding has been significantly reduced since mid-2014, to be at $20bn, down from a peak of $27bn, as work progresses on major health projects and office buildings across the states. For private projects, the work pipeline at $13.9bn currently, down from $20.7bn, is approaching the lows of 2009 to 2011. For public projects, the pipeline has lifted to a still low $6.2bn, up from $4.7bn in mid-2015.</p>
<p>•As to the prospects for a near-term moderation in building activity, it is notable that private commencements are running 13% below the current level of work done, while for the sector as a whole, the figure is about 7 percent below.</p>
<p><a href="/images/2016/07/25/Screen%20Shot%202016-07-25%20at%208.25.44%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/07/25/Screen%20Shot%202016-07-25%20at%208.25.44%20AM.png" alt=""></p>
<p>Commencements and approvals</p>
<p>Commencements were above par in the opening quarter of 2016, coming in at $8.9bn, up from the 2015 average of $7.5bn. Strength was evident in public projects, at $2.7bn, up from a 2015 average of $1.5bn. Notably, a number of health projects commenced in the quarter, across Tasmania, South Australia, the ACT and NSW. Private commencements tracked broadly sideways in March 2016, at $6.2bn relative to a 2015 quarterly average of $5.69bn.</p>
<p>Notwithstanding the positive start to 2016, the broader trend remains that commencements and approvals have taken a step lower since the first half of 2014 - albeit a relatively modest one by historical standards.</p>
<p>As to the more timely building approvals, these have been broadly steady of late, but are down from earlier highs - see charts opposite. In the year to May 2016, total approvals increased by 2% relative to the year prior, leaving them 14 percent below the peak in the year to February 2014. For private sector projects, approvals are 15% below the peak of early 2014, including a 5 percent decline over the past year.</p>
<p>The office market is a key driver - but certainly not the only driver - of building approvals and building activity. Office approvals are characterised by large swings reflecting the long lead times for often large projects. Over the past decade, office approvals have moved through two cycles, with a pre-GFC peak in 2008 of $9bn and a post-GFC peak of almost $8bn in 2013, see chart opposite. Currently, office approvals are at cyclical lows, at $3.7bn, some $4bn, 50 percent, below earlier highs.</p>
<p>Total building approvals are only modestly below the highs of early 2014, in contrast to the sharp retreat in the office market. This divergence reflects a number of key trends, notably: strength and the growing importance of social building projects (which includes health, education, aged cared, accommodation and entertainment); the resilience of the retail sector, as competition for the consumer dollar intensifies; and a lift in public approvals during the past year, albeit from relatively low levels.</p>
<p><strong>State-by-state </strong></p>
<p>Conditions and the outlook are quite varied across the states. As at the national level, the importance of social building projects, a lift in public investment, and resilience in the retail sector together add nuances to the state-by-state picture not apparent from differences in office markets across the capital cities.</p>
<p>Real building work nationally declined by 6% over the past year, down $0.5bn, centred on a softening of activity in: Victoria (from a high base); South Australia; and WA - which more than offset a lift in Qld and Tasmania, while the cycle was cresting in NSW.</p>
<p>In the mining state of WA, building activity in 2016 has further downside, notwithstanding firmer approvals over the past couple of months. By contrast, conditions in Qld are likely to be reasonably resilient with retail and social approvals strengthening of late. In Victoria, where the work pipeline is now relatively low, much of the pull-back in activity has occurred. In NSW, a sizeable work pipeline will support activity near-term, ahead of a likely moderation - one that may be relatively mild if a round of new projects receive the go ahead. In South Australia and Tasmania, a lift in public investment will support activity going forward, particularly in Tasmania. </p>
<p> </p>
<p><span>Andrew Hanlan is senior economist for Westpac and can be contacted </span><a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/andrew-hanlan/3/222/430" target="_blank">here</a><span>. </span></p>
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Modest downturn in non-residential building sector:  Andrew Hanlan

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<h4> </h4>
<p><span>GUEST OBSERVER</span></p>
<p>Prime Minister Malcolm Turnbull’s recent warnings that house prices would fall steeply under a Labor government confirm the underlying politics of housing policy in Australia. The default position for politicians is to sound concerned about housing affordability, but do nothing.</p>
<p>In a recent paper, we draw on the notion of “policy capture” to understand why politicians and governments appear determined to avoid seemingly obvious solutions to housing problems.</p>
<p>Policy capture theories explain how special interests can have a disproportionate influence on public policy. Their techniques include the construction and provision of information (or “evidence”), problem forming and framing, lobbying, financial donations and direct political action. The vectors of influence include think-tanks, professional lobbyists, “spin doctors” and peak interest groups.</p>
<p>Our analysis applies the lens of policy capture to understand the sorry history of Australian housing policy over the past two decades.</p>
<h2>All talk, little action</h2>
<p>Numerous national and state policy processes have pointed out the need for more affordable housing in Australia since the Productivity Commission reported on home ownership costs in 2003-04.</p>
<p>The National Housing Supply Council (axed in 2013) estimated that Australia needed around 500,000 more affordable homes. But very few government initiatives have directly supported affordable housing supply.</p>
<p>Rather, the response has been to hold inquiries, form taskforces and blame another level of government. State and local planning systems take most of the flak. The withdrawal of Commonwealth funding for social housing – accounting for around 12 percent of new dwellings in the mid-1980s but only around 2 percent today – hardly rates a mention.</p>
<h2>A narrative of ‘artificial barriers’ and planning constraint</h2>
<p>Conservative think-tanks have played a key role in framing a policy narrative that presents planning system barriers as the housing problem. And regulatory reform is presented as the solution.</p>
<p>The Institute of Public Affairs' (IPA) long-running Great Australian Dream Project was launched under the leadership of Bob Day, former head of the Housing Industry Australia and now Family First senator. The IPA campaign focuses squarely on the impact of “regulatory policy” and “artificial” land-supply constraints.</p>
<p>For “evidence”, the IPA cites the work of private consultancy firm Demographia. Its annual housing affordability surveys purport to prove links between planning and high house prices, despite being widely debunked.</p>
<p>Writing the foreword to Demographia’s latest report, Day argues that barriers to home ownership are “the product of restrictions imposed through planning regulation and zoning”. Planning rules have also dragged young women out of the home, he laments" "<span style="line-height: 1.3em;">We cannot deny the rising generation a home of their own merely to satisfy the ideological fantasies of urban planners … We cannot deny ourselves the joys of grandchildren because young women have to work to pay mortgages instead of raising a family."</span></p>
<p>Providing adequate and well-located land is an important measure of planning systems. Barriers to diverse or affordable housing development must also be dismantled where these are shown to exist.</p>
<p>But the politics of property and planning seems perversely to encourage speculative land development (buying rural, industrial or low-density residential land and agitating for a valuable rezoning), while enabling nervous residents to block proposals for affordable and social housing development.</p>
<p>The Property Council of Australia, along with other development industry “peak groups”, has been vocal in blaming the planning system for affordability pressures. It has staunchly opposed the inclusionary housing measures that predominate in the global cities of the US and Europe but remain nascent in Australia.</p>
<p>Inclusionary planning approaches preserve affordable housing opportunities when land is rezoned or following major public infrastructure investment. These approaches do have many limitations and usually depend on other sources of finance to deliver homes for very low-income groups.</p>
<p>But their strength lies in ensuring that the benefits of public infrastructure investment and urban development are not solely capitalised in house and land values. These gains benefit existing owners at the expense of those trying to find a decent place to live.</p>
<p>In another example of the “revolving doors” phenomenon whereby politicians and senior bureaucrats slide between industry, advocacy and officialdom, Treasurer Scott Morrison’s CV includes six years as the Property Council’s national manager, policy and research. The Property Council is leading the charge against “seismic” changes to negative gearing.</p>
<h2>More houses, but young people still can’t buy a home</h2>
<p>The housing supply crisis, which has been debated for much of the past ten years, appears to have temporarily resolved. New housing starts are at their highest in a decade. But despite the narrative of housing shortage as the reason for high prices, new supply hasn’t made houses more affordable for aspiring first home buyers.</p>
<p>That’s because we’re trapped in a housing system that seems dependent on rising prices (driven by market demand) to stimulate increased supply. It’s a catch 22. When house prices slow, so does housing construction, anticipating a drop-off in demand.</p>
<p>That’s why the scare campaign about negative gearing is so effective. That most economists think Labor’s proposed changes would be benign has been lost in the emotions and fear surrounding this debate.</p>
<p>According to the Property Council, the nation’s economy and our own personal wealth is a fragile “house of cards”, vulnerable to collapse with any shift in the status quo.</p>
<h2>Can we create affordable supply without reducing prices?</h2>
<p>The debates do reflect two enduring policy problems:</p>
<ul>
<li>
<p>how to keep housing construction running when price growth slows or reverses; and</p>
</li>
<li>
<p>how to create affordable housing without lowering prices across the market.</p>
</li>
</ul>
<p>Luckily, there’s a proven way for governments to stabilise housing production, despite market fluctuations and without bringing down existing home prices. That’s to expand, radically, the size of the non-profit/affordable housing sector.</p>
<p>Governments can do so by driving investment towards affordable rental housing and by enabling new housing products. These range from low-cost home ownership schemes to community land trusts and shared equity programs.</p>
<p>These models are well established overseas. Numerous studies have demonstrated their potential significance and viability for Australia. Even the Property Council supports incentives for affordable housing development.</p>
<p>As yet another working party considers the problem of affordable housing, let’s hope its members are listening to the wide range of voices who have long called for real “financing and structural reform”.</p>
<p>Low-income tenants and aspiring homeowners haven’t had much traction in this arena. They have been locked out by the latent political power of the property-owning electorate and the pervasive campaigns run by the development industry.</p>
<p>Despite the tenor of the current debate, real change is on the table. The question is whether those who are the main beneficiaries will continue to enable the charade or whether the politics of housing policy can finally turn.</p>
<p><em><span class="fn author-name" style="line-height: 1.3em;">Nicole Gurran is p</span><span style="line-height: 1.3em;">rofessor - Urban and Regional Planning , University of Sydney and can be contacted <a href="https://theconversation.com/profiles/nicole-gurran-759" target="_blank">here</a>.</span></em></p>
<p><em><span class="fn author-name" style="line-height: 1.3em;"><span style="line-height: 1.3em;">Peter Phibbs</span> is c</span><span style="line-height: 1.3em;">hair of Urban Planning and Policy, University of Sydney and can be contacted <a href="https://theconversation.com/profiles/peter-phibbs-27130" target="_blank">here</a>. </span></em></p>
<p><em><span style="line-height: 1.3em;">Both are authors for The Conversation.</span></em></p>
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