Warrnambool Housing Data - HIA

Source: HIA Economics, RBA. Mortgage Rate Margin to OCR (RHS). Discounted Variable Mortgage Rate. RBA Cash Rate. Small Business Variable Term Loan ...
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RESIDENTIAL CONSTRUCTION - WHAT’S THE STORY FOR SOUTH AUSTRALIA IN 2015/16? Dr Harley Dale, HIA Chief Economist HIA Industry Outlook Breakfast Adelaide, April 2016

The most comprehensive housing report card produced in Australia Summer 2016 edition:• The global economy – oh dear, what can the matter be?!

• The SA economy has hit the void; • New housing starts set to fall further; • Renovations activity in SA appears to be treading water For more information regarding HIA Economics, please contact us at: (02) 6245 1393 or [email protected]

Setting the Scene for South Australia

What does the global economy mean for us?

• The US economy is recovering and interest rates will rise further ... • Nearly everywhere else is apparently terrible …. Eurozone, Latin America, China … • …world growth forecasts have been lowered. • Plus, it’s Brexit time! • Oil prices are a net plus. • What does all this mean for SA?

The SA economy needs policy action • The economy is in a void and … • … we need a vision and strategy for the future which … • … includes action now. • Housing is integral to this view, but can’t be the leader. • Renovations is a good example of how SA’s housing industry is always an important part of the mix – I’ll come back to that.

Population growth is our challenge South Australia's Population Growth by Component - Moving Annual Total Source: ABS 3101.0

25,000 20,000 15,000 10,000 5,000 0

Total MAT

Natural Increase MAT

Net Overseas Migration MAT

Net Interstate Migration MAT

• Population growth is (at 0.7%) growing at it slowest pace in ten years.

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

-10,000

Sep-95

-5,000

The Unemployment Rate needs to fall back below the black South Australia's Unemployment Rate Source: ABS Labour Force

11.0

10.0

8.0

20 Year Average Unemployment Rate

7.0 6.0

5 Year Average Unemployment Rate

5.0

Feb-16

Feb-15

Feb-14

Feb-13

Feb-12

Feb-11

Feb-10

Feb-09

Feb-08

Feb-07

Feb-06

Feb-05

Feb-04

Feb-03

Feb-02

Feb-01

Feb-00

Feb-99

Feb-98

Feb-97

4.0

Feb-96

Per cent

9.0

The SA Economy is growing below par Gross State Product - South Australia Source: ABS 5220.0; Access Economics 6.0

5.0 Long term average

Per cent

4.0

Forecast

3.0

2.0

1.0

Year ended June

• Growth of 2.0% in 2014/15 is thanks to us; 2015/16 and 2016/17 is weaker – again thanks (not only) to us.

2017/18

2016/17

2015/16

2014/15

2013/14

2012/13

2011/12

2010/11

2009/10

2008/09

2007/08

2006/07

2005/06

2004/05

2003/04

2002/03

2001/02

2000/01

1999/00

1998/99

1997/98

1996/97

1995/96

1994/95

0.0

What does this mean?

We’re the follower, not the leader, but … South Australia

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

1,698,594

1,698,594

1,698,594

Population in 2050

2,403,461

2,197,574

2,063,783

Implied annual population growth rate

1.0%

0.7%

0.6%

Additional dwellings required per annum

7,777

5,505

4,029

9,202

6,931

5,454

Medium real income growth

10,628

8,356

6,880

High real income growth

12,053

9,781

8,305

Required annual build rate Low real income growth

Source: HIA Economics

• Remember that population is growing at 0.7 per cent per annum.

… we want to build more? New Home Building in SA: past, present, future... 14,000 12,000

12,000 10,000

10,873 9,943

11,041 9,800

9,595

8,000 6,000 4,000 2,000 0 LT Average Source: HIA Economics, ABS

20 yr average

10 yr average

Current

Future requirement 1 Future requirement 2

Construction Conditions in South Australia

Interest rates are supporting housing activity Interest Rates, Australia Source: HIA Economics, RBA

9.00

2.90

8.00

2.80 2.70 2.60

6.00

2.50

5.00

2.40

4.00

2.30

3.00

2.20

Mortgage Rate Margin to OCR (RHS)

Discounted Variable Mortgage Rate

RBA Cash Rate

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

Sep-14

Aug-14

Jul-14

2.00 Jun-14

1.00 May-14

2.10

Apr-14

2.00

Mar-14

% Interest Rate

7.00

Small Business Variable Term Loan

Housing Starts are on wane Total Dwelling Starts – South Australia Source: ABS 8752 4,000 3,500

Number

3,000 2,500

2,000 1,500

Seasonally Adjusted

• •

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

1,000

Trend

In 2013/14 total starts increased by 21%, compared to HIA’s forecast for +17%. In 2014/15 total starts fell by 2.9%, compared to HIA’s forecast (August) for -1.4%.

Housing Starts – is the ‘devil’ in the detail? South Australia Dwelling Commencements by Dwelling Type - Year to June 2015 Source: HIA Economics, ABS

8,000

7,532

7,000 6,000 5,000 4,000 3,000

2,000 732

1,000

743

240

833 110

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 SA

Building approvals have bottomed out Building Approvals - SA

Source: ABS Building Approvals, HIA Economics

1,700 1,500 1,300

900 700 500

Seasonally adjusted

Trend

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

300

Jan-06

Number

1,100

Land sales are as you’d expect Adelaide

47%

Outer Adelaide

31%

Yorke and Lower North

8%

Murray Lands

-4%

South East

-10%

Eyre

Northern -40%

Source: CoreLogic RP Data, HIA Economics

RESIDENTIAL LOT SALES - ANNUAL % CHANGE - 6 MTHS TO SEP 2015

-13%

-30% -30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

House Prices growth is slow Change in house values to February 2016 Source: CoreLogic RP Data

25%

22.8%

20% 15% 11.8%

10%

9.7% 8.1% 6.1%

5.4%

5%

3.0% 1.3%

3.0%

0.9%

5.0%

1.9%

0.9%

0% -3.2%

-5% Sydney

Melbourne

Brisbane

Year-on-Year

Adelaide

-2.3%

Perth

-2.6%

Hobart

Year-to-Date

Darwin

Canberra

Dec-2015

Dec-2014

Dec-2013

Dec-2012

Dec-2011

Dec-2010

Dec.2009

Dec-2008

Dec-2007

Dec-2006

Dec-2005

Dec-2004

Dec-2003

Dec-2002

Dec-2001

Dec-2000

Dec-1999

Dec-1998

Dec-1997

Dec-1996

Dec-1995

Dec-1994

$ million (moving annual total)

Renovations activity is holding up Renovations Investment in South Australia - Moving Annual Total

Source: ABS State Final Demand 5206.0 2,400

2,200

2,000

1,800

1,600

1,400

1,200

1,000

Harley’s Policy Rant

We need a VAWS • Vision & Action with Strategy. • Housing is an important contributor to this. • Renovations incentives, for example. • Residential consolidation incentives, for example. • Major reform – that’s harder.

• Then there’s negative gearing …

The Residential Outlook

Where to for housing starts? SA Housing Starts Forecasts Source: HIA Economics 13.00

11.91

12.00 11.00

11.22

12.13

12.34 Forecast

10.95

10.70

10.70

10.39

10.14

Thousand dwellings commenced

10.00 9.13 9.00

9.96 9.32

8.83

8.00 7.00 6.00 5.00 4.00

• •

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)

Approvals currently imply more starts. No VAWS, no 2017/18 bounce?

2015/16

2016/17

2017/18

Renovations activity should hold up? SA Renovations Forecasts Source: HIA Economics 2,500

Forecast

2,193

Value of Investment (millions)

2,000

2,087 1,883

2,098

2,034

2,039 1,934

1,963

1,858

1,859

1,878

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

1,775

1,941

1,500

1,000

500

2018/19

What does the global economy mean for us?

• The short term challenges for our industry are considerable. • It could be worse.

• In SA it’s not about our industry, it’s about our economy and future economic prosperity, … • … which feeds back into our industry.

Further information … •

HIA Economics is always at hand to assist with any queries you have.



Contact me: [email protected] or [email protected]



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THANK YOU FOR YOUR TIME Harley Dale, HIA Chief Economist economics.hia.com.au