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Housing AustraliansThe Outlook for Australia’s Residential
Construction Industry
Graham WolfeHIA Chief Executive – Industry Policy & Media
20 September 2012
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Population Growth – Australia
Dec-
91
Dec-
92
Dec-
93
Dec-
94
Dec-
95
Dec-
96
Dec-
97
Dec-
98
Dec-
99
Dec-
00
Dec-
01
Dec-
02
Dec-
03
Dec-
04
Dec-
05
Dec-
06
Dec-
07
Dec-
08
Dec-
09
Dec-
10
Dec-
11
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Australia's Population Growth by ComponentSource: ABS 3101.0
Growth Natural increase Net overseas migration
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NET OVERSEAS MIGRATION - NSW
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New housing starts in New South Wales
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
Mar
-02
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Num
ber
Quarterly Dwelling Starts – New South WalesSource: HIA Economics, ABS 8750.0
Seasonally Adjusted Decade Trend
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NET INTERSTATE MIGRATION - NSW
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POPULATION GROWTH - NSW
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MOVING ANNUAL TOTAL - NSW
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NET OVERSEAS MIGRATION - VICTORIA
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POPULATION GROWTH - VICTORIA
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MOVING ANNUAL TOTAL - VICTORIA
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NET INTERSTATE MIGRATION - QUEENSLAND
Dec-
91
Dec-
92
Dec-
93
Dec-
94
Dec-
95
Dec-
96
Dec-
97
Dec-
98
Dec-
99
Dec-
00
Dec-
01
Dec-
02
Dec-
03
Dec-
04
Dec-
05
Dec-
06
Dec-
07
Dec-
08
Dec-
09
Dec-
10
Dec-
11
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Queensland's Net Interstate MigrationSource: ABS 3101.0
Net Interstate Migration
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MOVING ANNUAL TOTAL - QUEENSLAND
Dec-
91
Dec-
92
Dec-
93
Dec-
94
Dec-
95
Dec-
96
Dec-
97
Dec-
98
Dec-
99
Dec-
00
Dec-
01
Dec-
02
Dec-
03
Dec-
04
Dec-
05
Dec-
06
Dec-
07
Dec-
08
Dec-
09
Dec-
10
Dec-
11
0
20,000
40,000
60,000
80,000
100,000
120,000
Queensland's Population Growth by Component - Moving Annual TotalSource: ABS 3101.0
Total MAT Natural Increase MAT Net Overseas Migration MAT Net Interstate Migration
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POPULATION GROWTH - AUSTRALIA
Dec-
91
Dec-
92
Dec-
93
Dec-
94
Dec-
95
Dec-
96
Dec-
97
Dec-
98
Dec-
99
Dec-
00
Dec-
01
Dec-
02
Dec-
03
Dec-
04
Dec-
05
Dec-
06
Dec-
07
Dec-
08
Dec-
09
Dec-
10
Dec-
11
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Australia's Population Growth by Component - Moving Annual TotalSource: ABS 3101.0
Total MAT Natural Increase MAT Net Overseas Migration MAT
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Gap between population growth and new stock
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,00019
85
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
Population Growth & Completions - NSW, VIC, QLD, WA
Completions
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The world is a worryEurope is a basket case, but …• … it’s finding a way to muddle through.• Confidence, credit, and exposure for East Asia are the key linkages to
Australia.
Updates on the US economy are patchy• One recent, large, positive – the housing market seems to be
recovering
China holding up “okayish”?• China has slowed, and there are some concerns, but…• … these concerns still look over-played.• East Asia in general is slowing down and the focus is here to stay for a
while.
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The Australian Economy – how good are we?
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jun-
91
Jun-
92
Jun-
93
Jun-
94
Jun-
95
Jun-
96
Jun-
97
Jun-
98
Jun-
99
Jun-
00
Jun-
01
Jun-
02
Jun-
03
Jun-
04
Jun-
05
Jun-
06
Jun-
07
Jun-
08
Jun-
09
Jun-
10
Jun-
11
Jun-
12
% c
hang
e
Gross Domestic ProductSource: ABS 5206
Qtrly Annual
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The Australian Economy – how good are we?
4.8
5.65.9
5.7
3.9
6.8
4.2
3.6
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
NSW VIC QLD SA WA TAS NT ACT
Unemployment Rate by State - August 2012Source: ABS Labour Force
National Unemployment Rate
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The good, the bad, and the ugly
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Let’s get the ugly out of the way …
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The ugly: Housing starts are heading in the wrong direction, and ...
25,000
30,000
35,000
40,000
45,000
50,000
Jun-
92
Jun-
93
Jun-
94
Jun-
95
Jun-
96
Jun-
97
Jun-
98
Jun-
99
Jun-
00
Jun-
01
Jun-
02
Jun-
03
Jun-
04
Jun-
05
Jun-
06
Jun-
07
Jun-
08
Jun-
09
Jun-
10
Jun-
11
Jun-
12
Num
ber
Total Dwelling Starts – AustraliaSource: ABS 8750
Seasonally Adjusted Trend
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... it’s a synchronised downturn and …
-6%
-16%
-1%
-18%
-16%
-27%
-3%
-13%
-30%
-25%
-20%
-15%
-10%
-5%
0%
NSW VIC QLD SA WA TAS NT ACT
% C
hang
e
Change in the Number of Housing Starts, 12 months to June Qtr 2012Source: ABS 8750
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… renovations are also sliding
• Renovations investment has fallen over four consecutive quarters.
10,000
15,000
20,000
25,000
30,000
35,000Ju
n-19
89
Jun-
1990
Jun-
1991
Jun-
1992
Jun-
1993
Jun-
1994
Jun-
1995
Jun-
1996
Jun-
1997
Jun-
1998
Jun-
1999
Jun-
2000
Jun-
2001
Jun-
2002
Jun-
2003
Jun-
2004
Jun-
2005
Jun-
2006
Jun-
2007
Jun-
2008
Jun-
2009
Jun-
2010
Jun-
2011
Jun-
2012
$ m
illion
(mov
ing
annu
al to
tal)
Renovations Investment in Australia - Moving Annual TotalSource: ABS 5206
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The bad: consumers are unsure and nervous
75
80
85
90
95
100
105
110
115
120
125
Sep-94 Sep-96 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12
Inde
x
Consumer ConfidenceSource: Westpac-Melbourne Institute
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The good and bad: easing dwelling prices
• Do we really need to scare the living daylights out of people?
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Jul-9
1
Jul-9
2
Jul-9
3
Jul-9
4
Jul-9
5
Jul-9
6
Jul-9
7
Jul-9
8
Jul-9
9
Jul-0
0
Jul-0
1
Jul-0
2
Jul-0
3
Jul-0
4
Jul-0
5
Jul-0
6
Jul-0
7
Jul-0
8
Jul-0
9
Jul-1
0
Jul-1
1
Jul-1
2
Australia's Median Dwelling PriceSource: RP Data 3 month rolling median
Current price of just above $412,000 equivalent to September 2010
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Median Dwelling PriceJu
n-90
Jun-
91
Jun-
92
Jun-
93
Jun-
94
Jun-
95
Jun-
96
Jun-
97
Jun-
98
Jun-
99
Jun-
00
Jun-
01
Jun-
02
Jun-
03
Jun-
04
Jun-
05
Jun-
06
Jun-
07
Jun-
08
Jun-
09
Jun-
10
Jun-
11
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Median Dwelling PriceSource: RP Data/Rismark
17% Interest rate
6% Interest rate
Unemployment 8.5%
Sydney is FULL! and
GST commences
4.25% Interest rate6.9% unemployment
4% unemployment
Baby boomer FHB aged children
Baby boomer investors
GFC-induced stimulus
Infrastructure levies surge
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The good and bad: falling interest rates
• Are we at the end of the line?
2.00
2.10
2.20
2.30
2.40
2.50
2.60
2.70
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00Se
p-09
Oct
-09
Nov
-09
Dec
-09
Jan-
10Fe
b-10
Mar
-10
Apr-1
0M
ay-1
0Ju
n-10
Jul-1
0Au
g-10
Sep-
10O
ct-1
0N
ov-1
0D
ec-1
0Ja
n-11
Feb-
11M
ar-1
1Ap
r-11
May
-11
Jun-
11Ju
l-11
Aug-
11Se
p-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12Fe
b-12
Mar
-12
Apr-1
2M
ay-1
2Ju
n-12
Jul-1
2Au
g-12
Sep-
12
% In
tere
st R
ate
Interest Rates, Australia Source: HIA Economics, RBA
Mortgate Rate Margin to Cash Rate (RHS) Discounted Variable Mortgage Rate
RBA Cash Rate Small Business Variable Term Loan
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The good: housing affordability is improving
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Mar
-97
Mar
-98
Mar
-99
Mar
-00
Mar
-01
Mar
-02
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Housing Affordability in AustraliaSource: HIA-CBA Affordability Report
Australia Capital Cities Rest of State
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The good: some indicators are turning
6.8%5.0%
11.6%
1.4%
38.8%
1.7%4.6%
-2.6%
1.6%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Land sales Owner occupierlending - new
housing
Investor lending -new housing
Detachedapprovals
Other' approvals New home sales Starts Renovations Dwelling prices
Quar
terly
Cha
nge
Housing Indicators - Australia - Latest compared to three months agoSource: ABS, HIA Economics, RP Data
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The good: no shortage of potential
1 Canada Bay (A) - Concord Sydney 234,509 4.42 Blacktown (C) - North Sydney 236,633 3.03 Camden (A) Sydney 268,376 2.84 Auburn (C) Sydney 222,004 2.45 Sydney (C) - South Sydney 237,546 2.26 Parramatta (C) - North-East Sydney 162,949 2.27 Maitland (C) Hunter 149,701 2.18 Holroyd (C) Sydney 177,077 2.09 Liverpool (C) - West Sydney 110,705 1.9
10 Woollahra (A) Sydney 148,234 1.811 Pittwater (A) Sydney 150,776 1.612 Sydney (C) - West Sydney 365,935 1.513 Kogarah (C) Sydney 112,876 1.5
NSW Building and Population Hotspots****SLAs with in excess of $100 million in residential building work approved in 2010/11 and with an annual population growth rate in excess of the national rate
Statistical Local Area Statistical Divison Residential Building Approved, 2010/11, ($'000)Annual Population Growth Rate (%)
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The good: no shortage of potential
1 Whittlesea (C) - North Melbourne 717,249 17.42 Wyndham (C) - South Melbourne 441,308 14.03 Cardinia (S) - Pakenham Melbourne 333,853 9.84 Wyndham (C) - North Melbourne 470,051 6.65 Melton (S) - East Melbourne 183,490 5.96 Casey (C) - Cranbourne Melbourne 386,448 5.87 Wyndham (C) - West Melbourne 152,157 5.68 Melton (S) Bal Melbourne 257,921 5.39 Hume (C) - Craigieburn Melbourne 260,400 4.8
10 Surf Coast (S) - East Barwon 118,984 4.311 Mitchell (S) - South Goulburn 135,218 4.112 Melbourne (C) - S'bank-D'lands Melbourne 760,305 3.013 Frankston (C) - East Melbourne 179,243 2.914 Baw Baw (S) - Pt B West Gippsland 133,163 2.915 Ballarat (C) - Inner North Central Highlands 116,960 2.816 Melbourne (C) - Remainder Melbourne 444,376 2.517 Brimbank (C) - Sunshine Melbourne 162,510 2.518 Greater Geelong (C) - Pt B Barwon 151,080 2.319 Melbourne (C) - Inner Melbourne 479,580 2.120 Maribyrnong (C) Melbourne 165,214 1.721 Port Phillip (C) - West Melbourne 205,857 1.522 Moreland (C) - Brunswick Melbourne 123,422 1.523 Gr. Dandenong (C) - Dandenong Melbourne 104,857 1.5
Statistical Local Area Statistical Divison Residential Building Approved, 2010/11, ($'000)Annual Population Growth Rate (%)
VIC Building and Population Hotspots****SLA's with in excess of $100 million in residential building work approved in 2010/11 and with an annual population growth rate in excess of the national rate
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The good: no shortage of potential
1 Griffin-Mango Hill Brisbane 106,058 9.92 Condon-Rasmussen-Bohle Basin Northern 167,830 7.63 Kingsholme-Upper Coomera Gold Coast 105,964 5.54 Ipswich (C) - East Brisbane 256,551 4.35 Gladstone (R) - Gladstone Fitzroy 100,293 3.56 Mackay (R) - Mackay Pt A Mackay 179,517 2.17 Ipswich (C) - Central Brisbane 127,139 2.18 Jimboomba-Logan Village Brisbane 100,664 1.99 Buderim Sunshine Coast 103,739 1.7
Statistical Local Area Statistical Divison Residential Building Approved, 2010/11, ($'000)Annual Population Growth Rate (%)
QLD Building and Population Hotspots****SLAs with in excess of $100 million in residential building work approved in 2010/11 and with an annual population growth rate in excess of the national rate
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So what does the future hold?
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Short term housing starts outlook
Starts NSW VIC QLD SA WA TAS NT ACT Aust2003/04 (a) 45.67 45.42 44.21 10.44 22.56 2.85 1.04 2.90 175.082004/05 (a) 39.43 40.95 39.43 11.01 22.90 2.83 1.33 2.46 160.342005/06 (a) 33.01 39.27 37.74 10.64 25.91 2.56 1.35 1.87 152.352006/07 (a) 29.77 38.59 41.20 11.18 24.70 2.86 1.41 2.31 152.032007/08 (a) 31.56 41.74 44.81 11.88 22.44 2.89 1.05 2.24 158.622008/09 (a) 23.57 41.94 28.76 11.97 18.43 2.90 1.12 2.66 131.352009/10 (a) 32.07 54.77 34.31 11.97 25.10 3.13 1.25 4.41 167.002010/11 (a) 30.96 59.14 26.64 10.53 20.79 3.00 1.26 5.12 157.432011/12 28.52 47.69 25.37 8.85 17.51 2.26 1.10 3.98 135.282012/13 33.71 41.70 28.75 8.80 21.92 2.24 1.43 3.32 141.872013/14 35.50 40.24 33.29 9.09 23.02 2.32 1.38 3.23 148.06
% change:2004/05 (a) -13.6% -9.8% -10.8% 5.5% 1.5% -0.7% 28.3% -15.4% -8.4%2005/06 (a) -16.3% -4.1% -4.3% -3.4% 13.1% -9.4% 1.6% -24.0% -5.0%2006/07 (a) -9.8% -1.7% 9.2% 5.1% -4.7% 11.8% 4.7% 23.5% -0.2%2007/08 (a) 6.0% 8.2% 8.8% 6.2% -9.2% 1.1% -26.0% -2.7% 4.3%2008/09 (a) -25.3% 0.5% -35.8% 0.8% -17.9% 0.3% 7.4% 18.3% -17.2%2009/10 (a) 36.1% 30.6% 19.3% 0.0% 36.2% 7.7% 11.4% 65.9% 27.1%2010/11 (a) -3.5% 8.0% -22.4% -12.0% -17.2% -3.9% 0.6% 16.3% -5.7%2011/12 -7.9% -19.4% -4.8% -15.9% -15.8% -24.7% -12.7% -22.3% -14.1%2012/13 18.2% -12.6% 13.3% -0.5% 25.2% -1.0% 30.1% -16.7% 4.9%2013/14 5.3% -3.5% 15.8% 3.3% 5.0% 3.5% -3.7% -2.6% 4.4%
DWELLING STARTS: by state and territorythousand dwellings commenced
Source HIA Economics July 2012
Financial Year
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The short term outlook for renovations
NSW VIC QLD SA WA TAS NT ACT Aust2003/04 (a) 9,741 6,424 6,358 1,934 3,078 684 204 376 28,7992004/05 (a) 9,592 6,191 6,702 1,958 3,249 666 294 335 28,9872005/06 (a) 8,962 5,842 7,159 1,956 3,255 695 322 354 28,5452006/07 (a) 8,284 6,095 7,845 2,130 3,515 711 261 328 29,1692007/08 (a) 8,262 6,639 7,565 1,829 4,244 769 202 367 29,8772008/09 (a) 7,956 6,583 7,152 2,011 3,945 790 209 301 28,9472009/10 (a) 8,264 6,337 7,363 2,026 4,536 751 255 392 29,9242010/11 (a) 8,385 6,463 6,861 1,920 4,869 760 266 435 29,9592011/12 7,691 6,793 7,155 1,971 4,436 815 223 411 29,4952012/13 7,947 6,580 7,301 1,993 4,620 795 254 396 29,8872013/14 8,063 6,624 7,250 1,986 4,773 798 254 405 30,153
% change2004/05 -2% -4% 5% 1% 6% -3% 44% -11% 1%2005/06 -7% -6% 7% 0% 0% 4% 10% 6% -2%2006/07 -8% 4% 10% 9% 8% 2% -19% -7% 2%2007/08 0% 9% -4% -14% 21% 8% -23% 12% 2%2008/09 -4% -1% -5% 10% -7% 3% 3% -18% -3%2009/10 4% -4% 3% 1% 15% -5% 22% 30% 3%2010/11 1% 2% -7% -5% 7% 1% 4% 11% 0%2011/12 -8% 5% 4% 3% -9% 7% -16% -6% -2%2012/13 3% -3% 2% 1% 4% -2% 14% -4% 1%2013/14 1% 1% -1% 0% 3% 0% 0% 2% 1%(a) = actual
HOUSING RENOVATIONS FORECAST: by state and territoryValue of investment, $ million, Chain Volume Measure
Source HIA Economics July 2012
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So, what now?• There remain many short term challenges to residential construction, …
• … both new home building and renovations.
• The renovations model is changing and that brings opportunity.
• So too does state governments realising things have to change on the new home building front.
• People will adjust to the ‘new world’ for housing prices and with that will come opportunity as well.
• Australia’s housing backyard needs work and HIA will keep up the fight.
• The key challenge is uncertainty around when we will see ‘the turn’.
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THANK YOU FOR YOUR TIME
Graham WolfeHIA Chief Executive – Industry Policy & Media
September 2012