Tag: HIA

Overseas Migration Down by 9 Per Cent

The ABS data on migration shows a 9% fall since visa changes made in April 2017. No surprise then the HIA bemoans the fall, pointing to slowing demand for new property.

Of course this is another reason why home prices are likely to go lower.

ABS data released today shows that Australia’s annualised population growth rate slowed for the fourth consecutive quarter.

Over the year to March 2018, Victoria saw the strongest growth in population (+2.2 per cent), followed by the ACT (+2.1 per cent) and Queensland (+1.7 per cent). New South Wales was fourth fastest (+1.6 per cent) with Tasmania fifth (+1.0 per cent), Western Australia sixth (+0.8 per cent) and South Australia seventh (+0.7 per cent). The population of the Northern Territory has actually declined over the last two quarters and the annual rate of growth has slowed to 0.1 per cent.

“Australia’s overseas migration fell by 9 per cent since changes to visa requirements came into force in April 2017, slowing the population growth rate to 1.6 per cent,” Mr Murray added.

“In April 2017, Australia introduced a range of visa changes which have been successful in reducing the number of skilled migrants arriving in Australia.

“The current phase of Australia’s 28 years of continuous economic growth is built upon the arrival of skilled migrants. Skilled migration is necessary to offset the impact of our aging population.

“Looking domestically, states such as New South Wales and Victoria that have benefitted the most from overseas migration over recent years are now seeing population growth rates slowing.

“The slowing rate of population growth, while it remains high for a developed economy, will contribute to slower growth of household consumption.

“This means slower growth in sectors such as retail and residential building. Given that these two sectors are amongst the nation’s largest employers the risks presented a decline in population growth should not be underestimated,” concluded Mr Murray.

HIA Calls For Easing Lending Practices

In their latest release, HIA is essentially calling for an easing of lending practices, suggesting that investors need encouragement to come back into the market.

“A growing list of disincentives are deterring investors from Australia’s housing market,” stated HIA economist, Diwa Hopkins.

Today the ABS released data on housing finance for the month of July 2018. These figures show the value of lending to investors declined by a further 1.3 per cent in the month. The value of lending in July 2018 is now 15.7 per cent lower than in July 2017.

“Investors played a significant role in the record levels of new home building that occurred in recent years. By the same token their retreat from the market will weigh on activity over the near to medium term,” said Ms Hopkins.

“The exiting of investors from the housing market can be traced back to well-documented APRA interventions at the end of 2014 and then again in early 2017.

“In addition, state and federal governments have acted to deter foreign investors by levying additional taxes and charges on their investments in the domestic market.

“More recently the Banking Royal Commission has seen lenders further tighten their practices beyond APRA’s initial requirements and yesterday two of the other major banks joined Westpac in raising their variable mortgage rates.

“Add to this, a situation of falling dwelling prices in the key Sydney and Melbourne markets as well as the prospect of increased taxes on investment housing through negative gearing restrictions and increased capital gains tax, and the list of deterrents to investors in the housing market is comprehensive.

“Overall, most of these factors are having the effect of limiting credit availability.

“The concern now is APRA’s interventions appear to have run beyond their usefulness,” said Ms. Hopkins.

Record Supply of Homes Eases Affordability – HIA

The Housing Industry Association continues to discuss a simply demand supply equation for  property prices, when in fact our analysis suggests it is credit supply which is the real lever of price growth. As credit is tightening, and supply of property is booming, which ever lever you look at, it suggests prices will continue to fall, and further than many are predicting….

Here is the HIA release:

“Housing affordability is about ‘supply and demand’ and for most of this century there have been constraints on new home building that have limited supply and forced up prices.

“Since 2014, Australia has built an unprecedented volume of new homes and we are starting to see affordability indicators improve,” stated HIA’s Principal Economist, Tim Reardon.

Mr Reardon was speaking at HIA’s Industry Outlook event in Canberra today marking the release of HIA’s latest forecasts for residential building activity in the State and National Outlook reports. The reports include updated forecasts for new home building and renovations activity for each of the eight states and territories.

“The fall in house prices in Sydney and Melbourne is one indicator that affordability is improving, but the stalling of rental price inflation in the June quarter this year is the most important indicator as it tells us that the pent-up demand for new housing in Sydney and Melbourne is beginning to be met with a record volume of new housing,” added Mr Reardon.

“The fall in house prices will dampen demand for new housing over the next 12 months. Add to this, the proliferation of punitive taxes on investors in the housing market, disincentives to overseas buyers and tighter oversight of mortgage lending for home purchases and the environment for residential building is facing significant challenges.

“For these reasons we expect that the housing market will cool over the next couple of years, but the down-cycle that has emerged, in certain segments of the market and locations, will be moderate.

“Detached house starts in March 2018 were the strongest quarterly result in 18 years. Leading indicators suggest that we should expect another strong result for the June 2018 quarter. On this basis, it now looks like we will round out the 2017/18 year with over 120,000 detached house starts. This would be the strongest four quarter performance for the sector since the mid-1990s.

“The market for apartments in metropolitan areas will be the most significantly affected by the improvement in affordability and by the regulatory imposts.

“In the March 2018 quarter Victoria posted a record high of 12,000 multi-unit starts, which accounted for nearly half of the 26,300 units that were commenced across the entire country. The slowdown in apartments is also likely to be focused on metropolitan Melbourne and Sydney.

“The slowdown in Sydney and Melbourne is not consistent across the rest of their respective states. Strong activity in major regional centres has offset some of the decline in metropolitan areas. Queensland, Tasmania and South Australia are also on different trajectories and Western Australia is no longer in decline,” concluded Mr Reardon.

Tighter Credit Cramping New Home Sales – HIA

The HIA says their New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – provides an early indication of trends in the residential building industry. The May edition is out, and as expected, tighter credit means fewer sales.  The largest reduction in house sales occurred in New South Wales.

New house sales declined by 4.4 per cent in May and are now 12.8 per cent lower than the most recent cyclical high that occurred in December last year.

“The first half of 2018 has seen a renewed downward trend in new house sales,” said Tim Reardon, HIA’s Principal Economist.

“Access to finance has become the barrier to ongoing growth in home sales.

“The availability of credit has tightened over the past 12 months with banks responding to the decline in house prices and the Banking Royal Commission by limiting lending to new home buyers.

“Australia’s population growth has slowed over the past three quarters in response to tighter visa requirements that have constrained inward migration.

“And for the first time in this cycle we are seeing sales declining in Melbourne.

“The new home market in Melbourne has been exceptionally strong over a number of years and we are now seeing a very modest slow-down in activity.

“While market conditions are slowing in Melbourne, building activity will continue to be solid given the very large volume of work still in the pipeline.

“The impact of the tighter constraints on finance will ease over the year.

“In fact we are expecting detached house starts to rise slightly in 2018 following the 2.8 per cent decline that occurred in 2017.

“Beyond that temporary lift, we expect the downturn in detached house building to properly take root in 2019 – and house sales appear to be providing a very early indication of this occurring,” concluded Mr Reardon.

During May 2018, new house sales declined in all five markets covered by the HIA New Home Sales Report. The largest reduction in house sales occurred in New South Wales (-6.8 per cent) followed by Queensland (-5.0 per cent), Victoria (-4.6 per cent), Western Australia (-2.4 per cent) and South Australia (-0.2 per cent).

Australian Homebuyers Paid Out Over $21 billion In Stamp Duty Last Year

HIA’s Stamp Duty Watch report, released today, reviews the latest developments around stamp duty across Australia’s eight states and territories.

“Australian homebuyers paid out over $21 billion in stamp duty to state governments during the 2017/18 financial year – and the total cost of the tax is expected to get even bigger over the next few years,” explained HIA Senior Economist, Shane Garrett.

“The Report shows that revenue from stamp duty across the states and territories has doubled over the past 8 years. This has added considerably to the cost of buying a home and represents a real setback for affordability.

“The recent set of state Budgets envisage stamp duty revenues increasing by another 11 per cent over the next four years.

“This will involve homebuyers’ having their pockets drained to the tune of $23.1 billion annually by 2021/22 through stamp duty.

“State governments are more dependent on stamp duty than at any time in the last decade. Stamp duty is notoriously unstable and Australia’s largest states are heavily exposed to any downturn in duty receipts should economic conditions change.

“Housing affordability and the sustainability of government finances would both be winners if stamp duty was replaced by better revenue-raising designs. Australian governments really need to tackle this issue once and for all,” concluded Shane Garrett.

New Homes Sales Down In Largest States – HIA

The HIA says new house sales fell in each of Australia’s five largest states during April. Nationally, sales have fallen each month of this year and in April they fell a further 4.2 per cent. New house sales for the year to date are now 3.1 per cent lower, than they were in the same period in 2017.

During April 2018, new house sales declined in all five markets covered by the HIA New Home Sales Report. The largest reduction in house sales occurred in Western Australia (-11.6 per cent) followed by New South Wales (-8.2 per cent), Queensland (-2.9 per cent), South Australia (-1.7 per cent) and Victoria (-0.1 per cent).

New house sales are a leading indicator of new dwelling approvals – and ultimately activity on the ground. New home sales were strong through most of 2017 and the fall back in sales reflects a modest slowdown in demand from both owner occupiers and investors.

There are a number of factors influencing this result. The most recent concern is that access to finance has been constrained as banks exhibit greater caution as house prices fall in key markets. Banks responding to falling house prices by increasing their requirements for collateral is an obvious reaction to the change in house price conditions.

The decline in house prices in Sydney and Melbourne also impacts on the market as more new home purchases are delayed and alternative investments become increasingly attractive.

The second concern is that the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry may lead the banks to be increasingly cautious in lending for residential homes.

Australian banks have significant exposure through loans for the purchase of residential homes and the Royal Commission has highlighted concerns in other aspects of the banking industry. Lending for the purchase of home-ownership is an aspect of the banking industry that is closely monitored by a number of government agencies including the RBA, APRA and departments of treasury. This can be demonstrated through the number of interventions in the residential lending market in recent years.

Indications are that the growth in FHB participation has slowed after strong growth since July 2017. The re-emergence of FHBs is due to enhanced state government supports, the deceleration of dwelling price growth in key markets like Sydney and Melbourne working to make the home purchase more accessible to FHBs. Since January’s 2018 the FHB share has retreated marginally to 17.4 per cent in March. Even so, the number of FHB loans totalled 26,460 during the first three months of 2018, an increase of 28.0 per cent on the same time last year.

This upturn in first home buyer participation has been more than offset by a fall in the value of investor lending. The value of housing loans to investors peaked in August 2017 at $152.7 billion in the preceding 12 months. Since then investor loans have been falling quite steadily to $144.2 billion over the year to March 2018. This represents a reduction of 5.6 per cent on last August’s peak.

These risks need to be balanced against the strong population growth rate, solid employment growth and improving economic activity which is maintaining demand for new homes at elevated levels.

 

New House Sales Fall for Third Consecutive Month

The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – provides an early indication of trends in the residential building industry.

During March 2018, new house sales declined in three of the five markets covered by the report. The largest reduction in house sales occurred in South Australia (-11.4 per cent), followed by NSW (-10.2 per cent) and Victoria (-7.2 per cent). Two states bucked the overall trend, with the largest increase in new house sales in Western Australia (+26.2 per cent) and more measured growth occurring in Queensland (+2.7 per cent).

“Detached house sales fell again in March – meaning that declines have occurred in each of the first three months of 2018,” commented HIA Senior Economist Shane Garrett.

“New detached house sales were down by 2.0 per cent during March following a 0.7 per cent fall in February,” added Mr Garrett.

“The reduction in new house sales in Sydney and Melbourne is likely to be the result of tighter lending policies for investors being imposed by APRA.
“There has been a welcome increase in first home buyers participation which has partially offset the fall in investor involvement in the market.

“Economic recovery is underway in Queensland and WA – and these two states were the only ones to see new house sales rise during March. Detached house building has always been of considerable importance in these two markets.

“HIA’s new house sales index is a leading indicator of activity on the ground. Based on today’s results, new house building activity is likely to move lower on a national basis over the next few months,” concluded Shane Garrett.

 

HIA Says Affordability Improving in Most Capital Cities (Thanks To Price Falls)

“Affordability improved in most of Australia’s capital cities during the first three months of 2018 as house price pressures eased,” commented Shane Garrett, HIA Senior Economist.

This does not necessarily take account of the now tighter, and becoming even tighter lending standards now in play.  In any case, in most centres, affordability is still well below the long term averages.

HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and takes into account latest dwelling prices, mortgage interest rates and wage developments. The results are published and analysed in the HIA Affordability Report.

“Affordability in Sydney improved by 1.9 per cent as a result of the reduction in dwelling prices over the past six months, while in Melbourne the outcome was largely unchanged as price growth remains solid.

“Across the eight capital cities overall, affordability improved slightly (+0.2 per cent) during the March 2018 quarter. The improvement was held back by strong home price growth in a limited number of markets including Melbourne and Hobart.”

“Current interest rate settings continue to benefit affordability. The RBA’s official cash rate is at a record low and hasn’t been moved in over 20 months – an unprecedented period of stability.

“Even though we have started to move in the right direction, housing affordability remains very challenging in the larger capital cities. The root cause of the problem is that the cost of producing new houses and apartments is still too high.

“Governments need to focus on solutions involving lower land costs, a more nimble planning system and a lighter taxation burden on new home building,” concluded Mr Garrett.

Investor retreat is behind apartment downturn – HIA

More data showing the impact of the fleeing of property investors on the property market.  We suspect the decline will continue as credit rules are tightened.

The HIA begs for no further constraints on this sector of the market, but with one third of loans for investment purposes, it is still too high. Remember the Bank of England got twitchy at 16%.

“Investors have been the target of a number of regulatory interventions and we are now seeing this impact on residential building activity,” said HIA Senior Economist, Geordan Murray.

The ABS today released building activity data for the final quarter of 2017. Detached house commencements increased by 0.7 per cent over the December 2017 quarter, while starts for other dwelling types (predominantly apartments) declined by 11.2 per cent.

“The decline in multi-unit dwelling starts has dragged down the total number of new home starts during the final quarter of 2017. The total number of dwellings starts fell by 5.0 per cent in the December 2017 quarter and was down by 8.3 per cent on the level recorded a year earlier,” added Mr Murray.

“In contrast to the decline in multi-unit starts, the resilience of the detached house market continued to shine through. The number of detached house starts during the December quarter of 2017 increased by 0.7 per cent over the quarter and was up by a similar amount compared with the level of a year ago.

“Despite the soft starts result in the quarter, the pipeline of multi-unit activity remains quite large. There were still over 150,000 multi-unit dwellings under construction at the end of the 2017, which is only slightly below the 155,000 level at the peak of the cycle. There are a further 33,800 dwellings in projects that have been approved and are yet to start work, this is a record high.

“The combination of falling commencements and the build-up of dwellings in projects awaiting commencement is somewhat concerning. It is likely to indicate a slowdown in pre-sales activity. New projects will not commence construction until they achieve a satisfactory level of pre-sales.

“Pre-sales to investors, both domestic and from overseas, have been important for many multi-unit developments. With additional taxes on foreign investors and regulators clamping down on investor lending, investors have retreated from the market.

“If we see investors return to the market and the approved projects continue to progress through to work on the ground then residential building work could potentially make a stronger contribution to economic growth this year than we are expecting.

“Now is not the time to impose additional taxes or constraints on investors,” concluded Geordan Murray.

HIA Says Just Build More … And More..

The HIA has released a new report peddling the same old message. Just build more.  This despite the fact that vacancy rates are rising, we have 150,000 new units coming on stream in the next year or so, and the root cause of the affordability problem is NOT population growth, but poor credit policy.  You can read more about the truth about housing affordability here.

“Australia needs to build in more than 230,000 homes every year if we are to address our current housing affordability challenge,” stated Tim Reardon, HIA’s Principal Economist.

HIA has released a Report, “Housing Australia’s Future”, which presents a number of scenarios based on future population growth and wages growth to estimate the number of new homes required avoid exacerbating the housing affordability challenge.

“Over the past 15 years Australia’s housing market has been dominated by a persistent undersupply of housing – the underlying cause of the rapid acceleration in prices and ultimately Australia’s housingaffordability crisis.

“The excessive cost of supplying new housing lies at the core of the affordability challenge. This has been recognised by a number of key organisations including the RBA and the Productivity Commission; and federal and state Treasury’s have identified the supply of housing as the key problem.

“In 2016 Australia built a record number of 230,000 new homes and we will need to maintain this rate of annual supply for the next thirty years, if we are to meet future housing needs.

“The enormous pent up demand for housing in metropolitan areas is now being met and for the first time in 15 years the supply of new housing is in balance with the demand for new housing.

“Housing affordability will not be solved by amending negative gearing, capital gains tax or imposing punitive charges on foreign investors.

“Such measures increase taxation on housing and further raise the cost of new supply, which is already excessive and inefficient.

“Meaningful action needs to include all three tiers of government, working with industry, to ensure the delivery of affordable residential housing,” concluded Mr Reardon.