housing australians the outlook for australia’s residential construction industry

Housing AustraliansThe Outlook for Australia’s Residential

Construction Industry

Graham WolfeHIA Chief Executive – Industry Policy & Media

20 September 2012

Population Growth – Australia

Dec-

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Australia's Population Growth by ComponentSource: ABS 3101.0

Growth Natural increase Net overseas migration

NET OVERSEAS MIGRATION - NSW

New housing starts in New South Wales

4,000

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Quarterly Dwelling Starts – New South WalesSource: HIA Economics, ABS 8750.0

Seasonally Adjusted Decade Trend

NET INTERSTATE MIGRATION - NSW

POPULATION GROWTH - NSW

MOVING ANNUAL TOTAL - NSW

NET OVERSEAS MIGRATION - VICTORIA

POPULATION GROWTH - VICTORIA

MOVING ANNUAL TOTAL - VICTORIA

NET INTERSTATE MIGRATION - QUEENSLAND

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Queensland's Net Interstate MigrationSource: ABS 3101.0

Net Interstate Migration

MOVING ANNUAL TOTAL - QUEENSLAND

Dec-

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0

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Queensland's Population Growth by Component - Moving Annual TotalSource: ABS 3101.0

Total MAT Natural Increase MAT Net Overseas Migration MAT Net Interstate Migration

POPULATION GROWTH - AUSTRALIA

Dec-

91

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92

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93

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94

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0

50,000

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450,000

Australia's Population Growth by Component - Moving Annual TotalSource: ABS 3101.0

Total MAT Natural Increase MAT Net Overseas Migration MAT

Gap between population growth and new stock

0

50,000

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400,00019

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Population Growth & Completions - NSW, VIC, QLD, WA

Completions

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.

The Australian Economy – how good are we?

-2.0

-1.0

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Gross Domestic ProductSource: ABS 5206

Qtrly Annual

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

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7.0

NSW VIC QLD SA WA TAS NT ACT

Unemployment Rate by State - August 2012Source: ABS Labour Force

National Unemployment Rate

The good, the bad, and the ugly

Let’s get the ugly out of the way …

The ugly: Housing starts are heading in the wrong direction, and ...

25,000

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Total Dwelling Starts – AustraliaSource: ABS 8750

Seasonally Adjusted Trend

... it’s a synchronised downturn and …

-6%

-16%

-1%

-18%

-16%

-27%

-3%

-13%

-30%

-25%

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-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

… renovations are also sliding

• Renovations investment has fallen over four consecutive quarters.

10,000

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$ m

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Renovations Investment in Australia - Moving Annual TotalSource: ABS 5206

The bad: consumers are unsure and nervous

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Sep-94 Sep-96 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08 Sep-10 Sep-12

Inde

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Consumer ConfidenceSource: Westpac-Melbourne Institute

The good and bad: easing dwelling prices

• Do we really need to scare the living daylights out of people?

-

50,000

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Australia's Median Dwelling PriceSource: RP Data 3 month rolling median

Current price of just above $412,000 equivalent to September 2010

Median Dwelling PriceJu

n-90

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50,000

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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

The good and bad: falling interest rates

• Are we at the end of the line?

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% In

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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

The good: housing affordability is improving

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Housing Affordability in AustraliaSource: HIA-CBA Affordability Report

Australia Capital Cities Rest of State

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%

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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

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 (%)


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


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


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


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

So what does the future hold?

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

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

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’.

THANK YOU FOR YOUR TIME

Graham WolfeHIA Chief Executive – Industry Policy & Media

September 2012

housing australians the outlook for australia’s residential construction industry

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