Warrnambool Housing Data - HIA

NSW is benefitting from the rebound in services exports, like tourism, education and ... Sydney. Melbourne. Brisbane. Adelaide. Perth. Hobart. Darwin. Canberra.
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Will the NSW Upturn Continue in 2016? Shane Garrett, HIA Senior Economist HIA Industry Outlook Breakfast Sydney, March 2016

Starts have soared to record highs Total Dwelling Starts – New South Wales

Seasonally Adjusted

Trend

Sep-15

Sep-14

Sep-13

Sep-12

Sep-11

Sep-10

Sep-09

Sep-08

Sep-07

Sep-06

Sep-05

Sep-04

Sep-03

Sep-02

Sep-01

Sep-00

Sep-99

Sep-98

Sep-97

Sep-96

Sep-95

Number

Source: ABS 8752 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000

Houses and High Rise have dominated… New South Wales Dwelling Commencements by Dwelling Type - Year to June 2015 Source: HIA Economics, ABS

7,000

6,380

6,000

5,328

5,000 4,000 3,000 2,000

1,000

539

923 210

122

0 Houses

One Storey

Two or more storeys In a one or two storey In a three storey block In a four or more storey block block

Semi-detached, row or terrace houses, townhouses

Flats units or apartments

…and there remains a large Pipeline of High Density Snapshot of the Building Activity Pipeline - Flats, units and apartments Source: HIA Economics, ABS 8752.0, ABS 8731.0

12,000

45,000 40,000

10,000

35,000

8,000

30,000 25,000

6,000

20,000

4,000

15,000 10,000

2,000

5,000

Commenced

Dec-15

Dec-14

Not yet commenced

Dec-13

Dec-12

Dec-11

Approved (1 month lag)

Dec-10

Dec-09

Under construction (RHS)

Dec-08

Dec-07

Dec-06

Dec-05

-

Completed

What makes the NSW Market Tick? Confidence

Population

Economic Conditions

Interest Rates

Home Prices

Rental Market

NSW Population Growth is Solid New South Wales Population Growth by Component - Moving Annual Total Source: ABS 3101.0

140,000 120,000 100,000 80,000 60,000 40,000

20,000 0 -20,000

Total MAT

Natural Increase MAT

Net Overseas Migration MAT

Net Interstate Migration MAT

Jun-15

Jun-14

Jun-13

Jun-12

Jun-11

Jun-10

Jun-09

Jun-08

Jun-07

Jun-06

Jun-05

Jun-04

Jun-03

Jun-02

Jun-01

Jun-00

Jun-99

Jun-98

Jun-97

Jun-96

-60,000

Jun-95

-40,000

Population will see Strong Growth Long Term

Population Growth Scenario Series A Series B Series C Population in 2015

7,618,241

7,618,241

7,618,241

Population in 2050

11,359,104

10,665,010

10,268,959

1.1%

1.0%

0.9%

41,274

33,616

29,246

Low real income growth

46,824

39,166

34,796

Medium real income growth

52,373

44,715

40,346

High real income growth

57,923

50,265

45,895

Implied annual population growth rate Additional dwellings required per annum

Required annual build rate

Source: HIA Economics

What makes the NSW Market Tick? Confidence

Population

Economic Conditions

Interest Rates

Home Prices

Rental Market

Risks Continue to Haunt World Economy • World economic recovery has stumbled a bit – particularly emerging markets • The collapse in oil prices has hurt some – but benefitted most • US interest rates increased late last year • China risks still weigh most heavily on Australia • Several geopolitical risks – ‘Brexit’ vote in June – President Trump?

• The shadow of debt still looms large globally

NSW Economy doing Quite Nicely • GDP grew surprisingly quickly during the final quarter of 2015 – well done, consumers! • Inflationary pressures are very muted, partly thanks to oil prices • The weakness of the Australian dollar is making the economy’s traded sectors more competitive • NSW is benefitting from the rebound in services exports, like tourism, education and high skill services • NSW labour market has reaped the rewards and is performing strongly • Residential building is propping growth up… • …but non-residential construction is really struggling

What makes the NSW Market Tick? Confidence

Population

Economic Conditions

Interest Rates

Home Prices

Rental Market

Rental Price Growth has Slowed… CPI Rental Growth – Sydney Source: ABS 6401 3.0

9.0 8.0

2.5

% change in index

7.0

2.0

6.0 5.0

1.5 4.0

1.0

3.0 2.0

0.5 1.0

0.0

Qtrly (LHS)

• •

Annual (RHS)

Rental vacancy rate in Sydney at 2.1 per cent during December 2015 quarter Rental yields at 3.3 per cent (houses) and 4.3 per cent (units) in February 2016

Dec-15

Dec-14

Dec-13

Dec-12

Dec-11

Dec-10

Dec-09

Dec-08

Dec-07

Dec-06

Dec-05

Dec-04

Dec-03

Dec-02

Dec-01

Dec-00

Dec-99

Dec-98

Dec-97

Dec-96

Dec-95

0.0

…but the Sydney market is still tight Rental Market Indicators by Capital City, December 2015 quarter Source: ABS; SQM Research 5.0% 3.9%

4.0% 3.0% 2.0%

2.7%

2.5%

2.3% 1.8%

2.2%

2.0%

1.7% 1.0%

1.0%

3.8%

1.2%

1.0%

1.0%

0.0% -1.0% -1.5%

-2.0% -3.0%

-2.7%

-2.9%

-4.0% Sydney

Melbourne

Brisbane

Adelaide Rental Growth

• •

Perth

Hobart

Darwin

Canberra

Vacancy Rate

Rental vacancy rate in Sydney at 1.8 per cent during December Rental yields at 3.2 per cent (houses) and 4.2 per cent (units) in June

Real Rental Price Growth Annual Net Overseas Migration

Jun-15

Feb-15

Oct-14

Jun-14

Feb-14

Oct-13

Jun-13

Feb-13

Oct-12

Jun-12

Feb-12

Oct-11

Jun-11

Feb-11

Oct-10

Jun-10

Feb-10

Oct-09

Jun-09

Feb-09

Oct-08

Jun-08

Feb-08

Oct-07

Jun-07

Feb-07

Oct-06

Jun-06

Feb-06

Oct-05

Jun-05

Annual Change (%) 7%

6%

4%

3%

200

2% 150

1% 100

0%

-1% 50

-2% 0

Thousands

Overseas Migration is Key Real Rental Price Growth and Net Overseas Migration, 2005 to 2015

Source: ABS

350

300

5%

250

What makes the NSW Market Tick? Confidence

Population

Economic Conditions

Interest Rates

Home Prices

Rental Market

Sydney Prices have cooled a little… Change in home values to February 2016 Source: CoreLogic RP Data

12% 10%

11.1% 9.5% 8.5%

8% 6.2%

5.5%

6%

4.5%

3.8%

4%

2.0%

2%

2.8% 1.5% 0.3%

0.3%

0.2%

0% -0.2%

-2% -3.1%

-4% Sydney

Melbourne

Brisbane

Year-on-Year

Adelaide

Perth

-2.9%

Hobart

Quarter

Darwin

Canberra

…but Prices remain high relative to earnings Median Dwelling Price to Average Earnings, 2001 and 2016 9.02 8.00

8.02

6.83

7.02 6.02

5.94

5.02

6.17

5.88

5.55

5.91

5.32

4.63 4.01

4.02

3.55

3.27

3.68

3.46

3.02

2.61

2.02 1.02 0.02 Sydney Source: CoreLogic RP Data; RBA

Melbourne

Brisbane

Adelaide February 2001

Perth

Hobart February 2016

Darwin

Canberra

Affordability could be worse… Ratio of Mortgage Repayments to Average Earnings, 1994 to 2015 - Sydney Source: CoreLogic RP Data; ABS 6302.0; RBA

60% 55% 50% 45% 40% 35%

Nov-15

Nov-14

Nov-13

Nov-12

Nov-11

Nov-10

Nov-09

Nov-08

Nov-07

Nov-06

Nov-05

Nov-04

Nov-03

Nov-02

Nov-01

Nov-00

Nov-99

Nov-98

Nov-97

Nov-96

Nov-95

30%

No. of sales Value (LHS)

Sep-2015

Jun-2015

Mar-2015

Dec-2014

Sep-2014

Jun-2014

Mar-2014

Dec-2013

Sep-2013

Jun-2013

Mar-2013

Dec-2012

Sep-2012

Jun-2012

Mar-2012

Dec-2011

Sep-2011

Jun-2011

Mar-2011

Dec-2010

Sep-2010

Jun-2010

Mar-2010

Dec-2009

Sep-2009

Jun-2009

Mar-2009

Dec-2008

Sep-2008

Jun-2008

Mar-2008

Dec-2007

Sep-2007

450,000 3,500

400,000 3,000

350,000

2,500

2,000

300,000 1,500

250,000

1,000

200,000

500

150,000 0

Source: CoreLogic RP Data, HIA Economics

$

Shortages of Land seem to be intensifying RESIDENTIAL LAND SALES & MEDIAN LOT VALUE - SYDNEY

What makes the NSW Market Tick? Confidence

Population

Economic Conditions

Interest Rates

Home Prices

Rental Market

Interest rates could go lower… Previous RBA Official Cash Rate Troughs 5.0%

4.75%

4.75%

4.5%

4.25%

4.0% 3.5% 3.00%

3.0% 2.5%

2.00%

2.0%

1.75%

1.5%

1.50%

1.0% 0.5% 0.0% Jul '93 to Jul '94 Source: RBA

Dec '98 to Oct '99

Dec '01 to Apr '02

Apr '09 to Sep ' 09

May '15 to date

How about this?

Or even this?

…but will have to rise eventually Magnitude of Previous RBA Official Cash Rate Increases (Basis Point Change) 275

Aug '94 to Dec '94

150

Nov '99 to Aug '00

300

May '02 to Mar '08

175

Oct '09 to Nov '10

0 Source: RBA

50

100

150

200

250

300

350

What makes the NSW Market Tick? Confidence

Population

Economic Conditions

Interest Rates

Home Prices

Rental Market

Confidence hasn’t had a good run Consumer Confidence Source: Westpac-Melbourne Institute 125 120 115 110

100 95 90

85 80

Feb-16

Feb-15

Feb-14

Feb-13

Feb-12

Feb-11

Feb-10

75

Feb-09

Index

105

Additional Mortgage Repayments Resulting from Stamp Duty, November 2015 50

45

43.3

46.9

45.3

Thousands of Dollars

40

33.7

35 28.3

30

30.0

25 20

17.1

15

11.6

10 5 0

NSW (3)

VIC (2)

QLD (8)

SA (6)

WA (5)

TAS (7)

NT (1)

ACT (4)

Source: RBA; CoreLogic RP Data, HIA Stamp Duty Watch

Stamp Duty is also quite a Deterrent

What’s coming down the tracks?

NSW market will ease back in 2016/17 NSW Housing Starts Forecasts Source: HIA Economics 70.00

Forecast 59.59

60.00

55.43 51.30

Thousand dwellings commenced

50.00

45.97 41.13

40.00 32.98 30.00

30.25

34.48

31.91

32.40

40.36

30.70

24.06

20.00 10.00 0.00 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a) 2012/13 (a) 2013/14 (a) 2014/15 (a) 2015/16

2016/17

2017/18

Renovations will see modest recovery Australia Renovations Forecasts Source: HIA Economics 35,000 33,980

34,000 33,000

Forecast 33,346

33,128

32,328

32,274

32,362

Value of Investment (millions)

32,000

31,486 30,878

31,000 30,000

30,353 29,117

29,292

29,541

29,000 28,000 27,000 26,000 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a) 2012/13 (a) 2013/14 (a) 2014/15 (a)

2015/16

2016/17

2017/18

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THANK YOU FOR YOUR TIME Shane Garrett, HIA Senior Economist economics.hia.com.au