Data from the ABS today shows that the number of dwellings approved fell 0.8 per cent in October 2019, in trend terms, and has fallen for 23 months. Private dwellings excluding houses also fell, by 0.5 per cent.
The seasonally adjusted estimate for total dwellings approved fell 8.1 per cent in October, driven by a 11.3 per cent decrease in private dwellings excluding houses. Private sector houses fell 7.0 per cent.
The value of total building approved fell 0.7 per cent in October, in trend terms, and has fallen for two months. The value of residential building fell 1.2 per cent, while non-residential building fell 0.2 per cent.
Number of total dwelling units
The trend estimate for Australia fell 0.8% in October.
Number of private sector houses
The trend estimate for private sector houses approved fell 0.9% in October.
Number of private sector dwellings excluding houses
The trend estimate for private sector dwelling units excluding houses fell 0.5% in October.
Value of new residential building
The trend estimate for the value of new residential building approved fell 1.3% in October and has fallen for eight months.
Value of alterations and additions to residential building
The trend estimate for the value of alterations and additions to residential building fell 0.1% in October and has fallen for seven months.
Value of non-residential building
The trend estimate for the value of non-residential building approved fell 0.2% in October after rising for 14 months.
Across the states and territories, dwelling approvals fell in the Northern Territory (11.1 per cent), New South Wales (4.6 per cent), Queensland (1.4 per cent), and Western Australia (1.0 per cent). Tasmania (4.5 per cent), South Australia (3.1 per cent), Australian Capital Territory (3.1 per cent), and Victoria (1.3 per cent) recorded increases, in trend terms.
Approvals for private sector houses fell in New South Wales (2.3 per cent), Victoria (1.7 per cent), Western Australia (0.2 per cent), and Queensland (0.1 per cent). South Australia rose 2.0 per cent, in trend terms.
New South Wales
The trend estimate for total number of dwelling units approved in New South Wales fell 4.6% in October. The trend estimate for the number of private sector houses fell 2.3% in October.
Victoria
The trend estimate for total number of dwelling units approved in Victoria rose 1.3% in October. The trend estimate for the number of private sector houses fell 1.7% in October.
Queensland
The trend estimate for total number of dwelling units approved in Queensland fell 1.4% in October. The trend estimate for the number of private sector houses fell 0.1% in October.
South Australia
The trend estimate for total number of dwelling units approved in South Australia rose 3.1% in October. The trend estimate for the number of private sector houses rose 2.0% in October.
Western Australia
The trend estimate for total number of dwelling units approved in
Western Australia fell 1.0% in October. The trend estimate for the
number of private sector houses fell 0.2% in October.
The trend estimate for total dwellings approved fell 3.9% in August.
The seasonally adjusted estimate for total dwellings approved fell 1.1% in August.
The value of residential building fell 2.9% and has fallen for six months.
The trend estimate of the value of new residential building work done fell 2.5% in the June quarter. The value of work done on new houses fell 1.7%, while new other residential building fell 3.5%.
The seasonally adjusted estimate of the value of new residential building work done fell 4.7% to $16,097.2m. Work done on new houses fell 4.7% to $8,682.9m, while new other residential building fell 4.7% to $7,414.3m.
Despite a small improvement in new home starts in the June quarter, they remain 20 per cent lower than against the same period a year ago.
Annual housing starts during the 2018/19 financial year fell in all states and territories, with the exception of the Australian Capital Territory (+17.8 per cent) and Tasmania (+5.3 per cent).
The largest annual fall was recorded in the Northern Territory (-28.4 per cent), followed by South Australia (-22.6 per cent), Victoria (-17.8 per cent), Western Australia (-14.3 per cent), Queensland (-13.9 per cent), and New South Wales (-13.1 per cent).
“The number of new homes commencing construction in the June quarter
increased by 1.1 per cent, the first increase since December 2017,” said
Tim Reardon, HIA Chief Economist.
Commenting on the results, Tim Reardon, HIA Chief Economist said “The number of new homes commencing construction in the June quarter increased by 1.1 per cent, the first increase since December 2017.
“The increase in total starts was due to a 21 per cent lift in multi-unit starts, mainly in NSW and WA. Detached housing starts have slowed to their lowest level since December 2013.”
“More recent data informs us that the downturn in detached home starts has slowed. The impact of three cuts to interest rates and small fiscal stimulus has slowed the decline in work entering the pipeline.
“The slowdown in building activity over the past 18 months has adversely affected the national economy and has been one of the main drags on GDP growth.
“A return to normal lending conditions would provide a boost to home building and the wider economy.
“Indications are that the downturn in new projects entering the pipeline are starting to improve following cuts to interest rate but the market is not yet at the bottom of this cycle.
The ABS reported that the number of dwellings approved fell 3.9 per cent in August 2019, in trend terms, and has fallen for 21 months.
“The fall continues to be driven by private dwellings excluding houses, which decreased by 9.2 per cent in August,” said Daniel Rossi, Director of Construction Statistics at the ABS. “Private sector houses also fell, by 1.0 per cent.”
Across the states and territories, dwelling approvals decreased in August in the Australian Capital Territory (27.7 per cent), Northern Territory (8.7 per cent), New South Wales (5.4 per cent), Victoria (4.0 per cent), Queensland (2.3 per cent), South Australia (0.9 per cent), Tasmania (0.4 per cent) and Western Australia (0.2 per cent), in trend terms.
In trend terms, approvals for private sector houses fell in Western Australia (4.3 per cent), Queensland (1.7 per cent), South Australia (1.6 per cent) and Victoria (1.0 per cent), but rose in New South Wales (0.9 per cent).
The seasonally adjusted estimate for total dwellings approved fell 1.1 per cent in August, driven by a 2.4 per cent decrease in private houses. Private dwellings excluding houses rose 3.1 per cent in seasonally adjusted terms.
The value of total building approved rose 1.1 per cent in August, in trend terms, and has risen for eight months. The value of residential building fell 2.9 per cent, while non-residential building rose 5.7 per cent in trend terms.
“The value of non-residential building approved has risen for 12 months, to a record high of $4.8 billion. The rise in August was driven by approvals for health buildings in New South Wales,” said Mr Rossi.
Property expert Joe Wilkes and I discuss failed market intervention – and whether we should leave the market to be the market … rather than foist more debt on households.
The latest edition of our weekly finance and property news digest with a distinctively Australian flavour.
Contents:
1:11 – US Markets 4:25 – Bond Rates 5:29 – Q2 Earnings 6:40 – UK 7:51 – Europe 8:49 – Argentina
9:44 – Australian Section
10:00 – GDP Guidance
11:12 – Home Prices
16:56 – Auction Results
18:16 – Credit
19:52 – Construction
20:41 – Australian Markets
23:28 – Cash Ban
The ABS released their June 2019 “Construction Work Done, Australia, Preliminary” today. It paints a picture of slowing momentum once again. This will flow into a weaker GDP number ahead.
The trend estimate for total construction work done fell 2.7% in the June quarter 2019.
The seasonally adjusted estimate for total construction work done fell 3.8% to $48,778.0m in the June quarter.
The trend estimate for total building work done fell 2.2% in the June quarter 2019.
The trend estimate for non-residential building work done fell 0.8% and residential building work fell 3.0%.
The seasonally adjusted estimate of total building work done fell 5.7% to $28,506.2m in the June quarter.
The trend estimate for engineering work done fell 3.1% in the June quarter.
The seasonally adjusted estimate for engineering work done fell 1.1% to $20,271.8m in the June quarter.
The construction sector is in a downtrend, with activity having peaked in mid-2018. This reflects: (1) the turning down of the home building cycle; (2) a pull-back in public works; and (3) a further winding down of private infrastructure activity led by the mining sector (although this dynamic has largely run its course).
With the construction sector representing around 13% of the economy this result will dent Q2 GDP, potentially in the order of 0.4ppts – depending upon how these quarterly partials flow through to the national accounts estimates.
The housing downturn still has further to go and will weigh on conditions throughout 2019 and into 2020.
On public works, there is a sizeable work pipeline and governments are adding projects to the investment pipeline – suggesting that the segment will be more supportive of conditions over the forecast period. On private infrastructure, commencements have picked-up somewhat (eg some iron ore projects have proceeded in response to the recent elevated prices) and the work pipeline has increased – pointing to an emerging lift in activity during the year ahead.
“What we need to do is rebuild confidence in Australia’s building and construction sector,” said federal minister Karen Andrews after the July 2019 meeting of the Building Ministers’ Forum). Via The Conversation.
This has been a recurring theme since the federal, state and
territory ministers commissioned Peter Shergold and Bronwyn Weir in
mid-2017 to assess the effectiveness of building and construction
industry regulation across Australia. They presented their Building Confidence report to the ministers in February 2018.
In the 18 months since then, the combined might of nine governments
has made scant progress towards implementing the report’s 24 simple
recommendations. Confidence in building regulation and quality has
clearly continued to deteriorate among the public and construction
industry.
In last week’s Four Corners program, Cracking Up,
Weir was asked whether she would buy an apartment. She responded: “I
wouldn’t buy a newly built apartment, no […] I’d buy an older one.” She
went on to say:
We have hundreds of thousands of apartments that have been built
across the country over the last two, three decades. Probably the
prevalence of noncompliance has been particularly bad, I would say in
the last say 15 to 20 years […] And that means there’s a lot of existing
building stock that has defects in it […] There’ll be legacy issues for
some time and I suspect there’ll be legacy issues that we’re not even
fully aware of yet.
These comments may not have delighted those developers trying to sell
new apartments, or owners selling existing apartments, but they are
fair and correct. Confidence will not be restored until all the
governments act together to improve regulatory oversight and deal with
existing defective buildings.
Residents of the Lacrosse, Neo200, Opal and Mascot towers and other buildings with serious defects are already living with the impact of “legacy” problems. Over the weekend, another apartment building was evacuated
– this time in Mordialloc in southeast Melbourne. The building was
deemed unsafe because it was clad with combustible material and had
defects in its fire detection and warning system.
A costly but essential fix
Fixing such defects is a costly business. A Victorian Civil and Administrative Tribunal decision
established that replacing the combustible cladding on the Lacrosse
building in Melbourne would cost an average of A$36,000 per unit. At
Mascot Towers, consultant engineers estimated the cost of structural repairs at up to A$150,000 per unit on average.
According to UNSW and Deakin
research, between 70% and 97% of units in strata apartments have
significant defects. Let’s assume 85% have such defects and the average
cost of fixing these is only $25,000 per unit. That would mean total
repair costs for the 500,000 or so tall apartments (four-storey and
above) across Australia could exceed A$10 billion.
The Victorian government has taken the lead on combustible cladding, setting up and funding a A$600 million scheme
to replace it. It’s also replacing combustible cladding on low-rise
school buildings even though these may comply with the letter of the
National Construction Code.
No other state has yet followed this lead. This is concerning given the risk to life. No one viewing images of the Neo200 fire in the Melbourne CBD could doubt how dangerous combustible cladding can be.
The other states and territories should immediately copy the
Victorian scheme. While not perfect, and probably underfunded, it is a
positive step to improve public safety. The Andrews government should be
congratulated for doing something practical while its counterparts in
New South Wales and Queensland, which have many buildings with
combustible cladding, fiddle about.
All governments share responsibility
The federal government’s response has been inadequate. When asked
about contributing to the Victorian scheme, Karen Andrews said:
The Commonwealth is not an ATM for the states […] this problem is of
the states’ making and they need to step up and fix the problem and dig
into their own pockets.
This flies in the face of reality. All nine governments are responsible for building regulation and enforcement. All signed the intergovernmental agreement on building regulation.
The federal government, which chairs the Building Ministers’ Forum, leads building regulation in Australia. The Australian Building Codes Board, which produces the National Construction Code,
is effectively a federal government agency. The precursor to the
national code, the Building Code of Australia, was a federal initiative.
The crop of building defects we see today are a direct result of
negligent regulation by all nine governments over the past two decades.
Clearly, they all have a legal and moral duty to coordinate and
contribute to a program to manage the risks and economic damage this has
created.
The governments must stop playing a blame game. Effective programs
are urgently needed to fix defects, including combustible cladding,
incorrectly installed fire protection measures, structural
noncompliance, structural failure and leaks.
The Australian Building Codes Board, which is directly responsible
for the mess, should be reformed to ensure it becomes an effective
regulator. The National Construction Code should be changed to make consumer protection an objective in the delivery of housing for sale.
All parties involved will have to take some pain: regulators,
developers, builders, subcontractors, consultants, certifiers, insurers,
aluminium panel manufacturers, suppliers and owners. Only governments
can broker a solution as it will require legislation and an allocation
of responsibility for fault.
The alternative will probably be a huge number of individual legal cases and a rash of owner bankruptcies, which may well leave the guilty parties untouched.
Author: Geoff Hanmer, Adjunct Lecturer in Architecture, UNSW