HIA – Page 7 – Digital Finance Analytics (DFA) Blog

Have We Passed Peak Build?

The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally-adjusted new home sales increased in September 2016, the second consecutive month of growth.

Within the month, growth was driven by detached house sales which rose by 3.8 per cent, while sales of units eased back by 0.8 per cent over the same period. However, Victoria was the only state to record an increase in new home sales over this period with 14.0 per cent growth in sales over the past year.

In fact, detached house sales fell in four out of the five states covered by the report, an exact reversal of the situation in August. During September 2016, the largest fall in sales was recorded in South Australia (-23.0 per cent), followed by Western Australia (-17.2 per cent), New South Wales (-12.9 per cent) and Queensland (-2.6 per cent).

“During September, HIA’s New Home Sales grew by 3.8 per cent, a further increase on the 2.9 per cent rate of growth over the previous month,” remarked HIA Senior Economist, Shane Garrett.

“However, the mix of available indictors suggests that new home building activity has now passed its peak and that the 2015/16 financial year will not be matched in terms new dwelling starts. This is particularly the case for multi-residential sales, which have eased by 6.2 per cent during the September 2016 quarter compared with the same period a year earlier”.

The HIA-CoreLogic Residential Land Report for the June 2016 quarter has just been published by the Housing Industry Association, and CoreLogic. The Residential Land Report offers a comprehensive review of quarterly sales activity and price trends in 41 regional and six capital city markets across Australia.

During the June 2016 quarter, land transactions experienced the largest increase in Hobart (+26.9 per cent) compared with the same period year earlier. Land turnover was unchanged in Adelaide (+0.2 per cent). Land sales saw the largest reduction in Sydney (-38.3 per cent), followed by Melbourne (-14.3 per cent) and Brisbane (-3.9 per cent). Perth also experienced a small decline in land market turnover (-3.5 per cent).

“Residential land prices in Australia climbed to yet another all-time high during the June 2016 quarter, on the back of strong demand and lower interest rates,” HIA Senior Economist, Shane Garrett commented.

According to the HIA-CoreLogic Residential Land Report, the median residential land price rose by 2.6 per cent during the June 2016 quarter, to a new all-time high of $237,535. A total of 18,395 residential lots are estimated to have been transacted during the quarter – down by some 9.3 per cent on a year ago.

According to CoreLogic research director Tim Lawless, the increase in land transactions nationally was accompanied by a surge in land sales located in Tasmania as well as in some regional markets. “Hobart saw land sales jump by almost 27 per cent over the first half of 2016 compared with the same period a year ago, while the largest cities, where affordability constraints are already the most visible, recorded a substantial reduction in land sales over the first six months of 2016.”

“The volume of land sales across Sydney was down sharply while land prices surged 14.1 per cent higher over the year. The opposing trends of transaction numbers and prices is a clear indication of demand outweighing supply which is creating significant price inflation across vacant land markets,” Mr Lawless added.

“While unit markets have seen approvals and construction activity reach spectacular highs, supply levels across the detached housing sector remains insufficient in many areas. The lack of available vacant land highlights that greenfield housing markets are likely to remain undersupplied which implies further upwards price pressures across the key vacant land markets where demand remains strong,” concluded Tim Lawless

“Housing affordability has deteriorated across several key markets, and the ongoing rise in land prices is proving very challenging,” Shane Garrett explained.

“With market supply having fallen further over the past year, policy makers need to look very carefully at ways of bringing about more sustainable outcomes in residential land supply. This will inevitably involve tackling issues around the pace of land release, the bottlenecks in the planning process and the excessive burden of taxation,” concluded Shane Garrett.

Housing Affordability Down In Melbourne and Canberra – HIA

The HIA has just released its Affordability Report for the September 2016 quarter which shows a small improvement in housing affordability, in some states, thanks to rate cuts but offset by rising prices. However, affordability fell in Melbourne and Canberra.

During the September 2016 quarter, housing affordability improved by 0.1 per cent compared with the previous quarter and affordability is now 2.5 per cent more favourable than it was a year earlier.

Affordability improved in six of the eight capital cities: Darwin (+7.8 per cent), Hobart (+7.6 per cent), Perth (+7.5 per cent), Brisbane (+2.7 per cent), Sydney (+1.5 per cent) and Adelaide (+1.1 per cent).

Affordability deteriorated in Melbourne (-2.6 per cent) and Canberra (-1.3 per cent) during the September 2016 quarter.

Comparatively, Sydney remains the capital city with the most challenging housing affordability conditions (affordability index score of 59.0), followed by Melbourne (70.9), Canberra (81.6) and Brisbane (87.9). Affordability is most favourable in Hobart (123.6) followed by Perth (98.0), Adelaide (93.7) and Darwin (86.8).

The HIA said “Over the past year, housing affordability has been helped by the two reductions in interest rates from the RBA. Despite not being fully passed on by lenders, these reductions have helped bring the mortgage repayment burden down a little. However, dwelling price growth remains strong in most capital cities and this has prevented affordability from improving more tangibly. Another challenge to housing affordability is presented by the fact that earnings growth in the economy is close to its weakest in two decades, making it more difficult to dilute the burden of mortgage repayments. With direct and indirect taxation accounting for over 40 per cent of the cost of a new house in some markets, the role of progressing tax reform in order to drive better affordability outcomes can no longer be ignored.”

New Home Sales mount a partial recovery in August – HIA

The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally-adjusted new home sales mounted a partial recovery in August 2016.

In the month of August 2016 detached house sales increased in four out of five mainland states, after falling everywhere in July and rising everywhere in June. In August 2016 sales increased by: 12.1 per cent in South Australia; 8.7 per cent in New South Wales; 7.8 per cent in Western Australia; and by 4.2 per cent in Queensland. Detached house sales fell by 5.0 per cent in Victoria during the month.

The number of seasonally-adjusted detached house sales increased by 2.9 per cent in August 2016, following a decline of 7.4 per cent in July. However, ‘multi-unit’ sales dropped by 17.3 per cent in July before recovering by 17.8 per cent in August.

“HIA New Homes Sales fell by a rather hefty 9.7 per cent in July 2016, but then increased by 6.1 per cent in August,” said HIA Chief Economist, Dr Harley Dale.

“Sales of new detached houses and ‘multi-units’ didn’t rebound sufficiently in August to offset the decline in July. These latest New Home Sales figures therefore don’t paint a stellar picture of an August recovery – following as they do a big drop in July, but unless you’re a pessimist looking for a large black hole then this latest update is a long way from a downbeat story.”

“Australia is in the midst of the longest and biggest new home building cycle in the nation’s history,” Harley Dale said. “Despite being at the mature stage of this cycle we still face a situation where key leading indicators such as HIA New Home Sales point to healthy levels of construction ahead, even if volumes will be down on the 2015/16 record high.”

“Total new home sales expanded by 1.5 per cent over the three months to July this year. That is a great result when the level of national new home building has already grown over four consecutive years,” concluded Harley Dale.

Will New Home Sales take a new year dip?

The Housing Industry Association (HIA) New Home Sales Report to July 2016, which is based on a survey of Australia’s largest volume builders, suggests new commencements in 2016/17 will slow significantly.

“The short term outlook for healthy levels of new home construction remains intact – calendar year 2016 will be a record year for new dwelling commencements, but the situation could look very different from next year,” commented HIA Chief Economist, Dr Harley Dale.

“The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally adjusted new home sales fell by 9.7 per cent in July 2016 following an increase of 8.2 per cent in June. The overall trend decline in new home sales is accelerating, signalling a relatively sharp drop (from a record high) in new dwelling commencements from 2017.”

“New home construction has been the kingmaker of the Australia economy, but the cycle has peaked,” noted Harley Dale.

“In all likelihood we will experience sharper falls in new home construction in both 2017 and 2018. The magnitude of decline in new home construction in coming years will of course be exaggerated by where we are coming from – record levels of medium/high density construction and historically healthy levels of detached/semi-detached dwelling construction.”

“There will no doubt be a tendency to sensationalise any negative results for new housing as the trajectory of the down cycle unfolds. We would do well to remember that this down cycle is following a record high that is some 24 per cent higher than the previous (1994) peak and that there is an unprecedented degree of uncertainty this time around as to how the next few years of new home building unfold,” concluded Harley Dale.

In the month of July 2016 detached house sales fell in all five mainland states, after rising everywhere in June. Sales dropped by 12.6 per cent in South Australia and were down by 8.7 per cent in Queensland, 8.2 per cent in Western Australia, 6.2 per cent in NSW, and 6.0 per cent in Victoria.

June Bounce for New Home Lending

Latest ABS figures on housing finance show that new home lending saw a healthy rise during June, said the Housing Industry Association, who suggests it is linked to the May interest rate cut.

During June 2016, the number of loans to owner occupiers for dwelling construction rose by 2.1 per cent in seasonally adjusted terms while loans for the purchase of new homes saw growth of 2.7 per cent. Overall, new home lending volumes increased by 2.3 per cent during the month and some 6.3 per cent higher than the same month last year.

“The RBA cut its interest rate at the beginning of May so June’s housing finance results are the first month’s data to fully capture the effect of cheaper mortgage costs,” explained HIA Senior Economist Shane Garrett. “Encouragingly, prospective homebuyers seem to have taken advantage of the lower interest rate environment as evidenced by today’s positive results for new home lending,” Shane Garrett pointed out.

“June was also dominated by the close federal election campaign which was the source of some uncertainty across the economy. Today’s data indicate that the benefits of lower interest rates trumped any reluctance by buyers to enter the market during the tight election race. It’s therefore likely that last week’s interest rate cut will help bolster activity on the new home building side,” concluded Shane Garrett.

Compared with a year earlier, the number of loans to owner occupiers constructing or purchasing new homes increased in a number of states over the year to June 2016. The strongest growth was in Victoria (+19.1 per cent), followed by New South Wales (+10.8 per cent). There was a more measured increase in Queensland (+4.3 per cent). . Over the same period, there were substantial reductions in Western Australian (-20.7 per cent), and the Northern Territory (-17.7 per cent) while Tasmania recorded a more modest fall(-3.5 per cent). New home lending to owner occupiers in South Australia and the ACT during June 2016 was comparable with the level a year ago.

New Home Sales bounce back in June – HIA

The HIA New Home Sales Report, a survey of Australia’s largest volume builders, shows that total new home sales ended 2015/16 on a higher note, said the Housing Industry Association.

“The overall trend is still one of modest decline for New Home Sales, but a bounce of 8.2 per cent in June 2016 highlights the resilience of the national new home building sector,” commented HIA Chief Economist, Dr Harley Dale.

“The overall profile of HIA New Home Sales is signalling an orderly correction to national new home construction in the short term, as are other leading housing indicators,” noted Harley Dale.

“Below the national surface, the large geographical divergences between state housing markets have been a prominent feature of the current cycle – that will continue. The New Home Sales series highlights this fact. Comparing the June quarter this year to the same period last year, detached house sales are down very sharply in South Australia (-21.4 per cent) and in Western Australia (-27.5 per cent), yet sales are up by 17.0 per cent in Victoria and by 7.1 per cent in Queensland. New South Wales rounds off the detached house coverage provided by the New Home Sales report and sales are down by 7.3 per cent on an annual basis.”

The sale of detached houses bounced back by 7.2 per cent in the month of June 2016. ‘Multi-unit’ sales continued their recent recovery, growing by 11.5 per cent after a lift of 4.9 per cent in May. In the month of June 2016 detached house sales increased in all five mainland states with the largest increases occurring in Queensland (+14.9 per cent) and WA (+9.1 per cent). Detached house sales increased by 7.5 per cent in NSW, 3.7 per cent in South Australia, and 2.2 per cent in Victoria.

Land Price Growth Moderates in early 2016

The March 2016 edition of the HIA-CoreLogic Residential Land Report has just been released by the Housing Industry Association, and CoreLogic. The report provides detailed results relating to prices and sales activity across Australia’s residential land markets.

During the March 2016 quarter, the pace of growth in national land prices slowed to 1.2 per cent, while turnover in the market fell by 1.3 per cent. The easing of price pressures was helped by a 3.4 per cent increase in land sales in capital city markets, although the number of transactions in regional Australia fell by some 8.1 per cent over the same period.

During the March 2016 quarter, vacant residential land sales increased most strongly in Perth (+22.3 per cent) followed by Melbourne (+5.2 per cent). However, land market turnover fell in Hobart (-28.4 per cent), Adelaide (-8.3 per cent), Sydney (-5.9 per cent) and Brisbane (-3.4 per cent) over the same period.

“The easing of price growth in the market for residential land is an encouraging sign, particularly given more favourable supply conditions in capital city markets,” HIA Senior Economist, Shane Garrett pointed out.

“However, the value of residential land remains at record highs. This is a key source of affordability difficulties confronted by the many Australian families wishing to purchase their first home,” Shane Garrett cautioned.

“Current arrangements around the funding and delivery of the infrastructure that services new housing are inadequate and preventing the release of more affordable residential land stocks.”.

“As well as hurting ordinary families, the absence of comprehensive reform is paring back Australia’s future growth prospects,” concluded Shane Garrett.

According to CoreLogic research director Tim Lawless, the moderation in the number of vacant land sales has been evident for some time. “National land sales peaked during the June quarter of 2014 and have been trending lower since this time. The quarterly number of vacant land sales hasn’t been this low since the third quarter of 2012,” said Mr Lawless.

“It’s encouraging to see capital city land sales bucking the national trend with an increase of 3.4 per cent over the March 2016 quarter. However, despite the quarterly rise in sales, the number of transactions was still 12.3 per cent lower than in the March quarter of 2015,” added Mr Lawless.

“The fact that vacant land prices are still broadly rising on both a median price and rate per square metre measure, albeit at a reduced pace, at a time when transactions numbers are consistently trending lower sends a clear signal that demand for well-located vacant land remains strong,” Mr Lawless noted.

Home price growth sees affordability ease in June 2016 quarter – HIA

The HIA Housing Affordability Index shows affordability for home buyers eased back in the June 2016 quarter, according to the latest Affordability Report from the Housing Industry Association.

According to the HIA, affordability fell by 3.7 per cent during the June 2016 quarter and was 2.1 per cent less favourable than the same period a year earlier. The capital city housing affordability index fell by 4.3 per cent during the quarter, while regional market index experienced a 1.9 per cent improvement.

During the June 2016 quarter, improvements in affordability were observed in three capital cities with the largest improvement in Perth (+3.2 per cent), Darwin (+2.9 per cent) and Hobart (+2.2 per cent). Affordability worsened in the remaining five capital cities during the March 2016 quarter with the largest decline recorded in Melbourne (-7.4 per cent), followed by Canberra (-5.7 per cent), Sydney (-1.6 per cent), Adelaide (-1.3 per cent), and Brisbane (-1.0 per cent).

“Home price growth moderated in the early part of the year and the HIA Housing Affordability Index showed an improvement in affordability during the March 2016 quarter. However, in the June quarter dwelling price growth returned and the index reverted to the level we saw at the end of 2015,” explained HIA Economist, Geordan Murray.

“While there was a decline in the headline index tracking the national picture, there was substantial variation around the country – with substantial differences between states, and also differences between capital city markets and regional markets.”

“The geographic variation in affordability is most evident in the comparison between Melbourne and Perth. Over the last year, the median dwelling price in Perth has fallen by 4.7 per cent while Melbourne’s has grown by 11.5 per cent. This has seen the affordability index for Perth increase by 6.2 per cent over the last year, while the index for Melbourne has fallen by 6.2 per cent.”

“These differences in affordability align with the relative economic performance of these two states. The Western Australian economy is navigating the tail end of the mining boom which has seen conditions in the local labour market deteriorate and consequently the rate of population growth has fallen quite sharply. In contrast, Victoria has experienced a healthy level of growth in the labour force and continues to record the strongest rate of population growth in the country.”

Housing portfolio must be in new Turnbull Ministry – HIA

Ensuring a strong national focus on housing is critical to retaining Australia’s AAA credit rating, says the Housing Industry Association (HIA).

“Residential building activity has been the engine room of the Australian economy for the past four years,” said HIA’s Chief Economist, Harley Dale. “It has filled the void left by a contracting mining sector, and has gained some ground on a decade of undersupply in new housing. But there’s much more that needs to be done if Australia is to defend its AAA credit rating.”

“The incoming Commonwealth Government needs to focus on building the new homes for our growing population, meeting the housing needs of our changing demographics, addressing the housing affordability challenges confronting younger generations, supporting the 321,595 businesses that operate across the residential building industry, and importantly, enabling the industry to grow and expand its contribution to the Australian economy.”

“The industry generates over $160 billion in national GDP each year, contributes $77 billion in taxes, provides jobs for over one million workers and touches the lives of every Australian every day.”

“Australia needs a Commonwealth Housing Minister – a senior Minister in cabinet to provide national leadership, to coordinate federal, state and local government housing programs, to guide important industry policy reform nationally, and ensure housing has a front seat in cabinet discussions around taxation reform, national budget repair, infrastructure and workforce development.”

“External rating agencies and organisations like the IMF are watching our economy closely, particularly housing, and are clearly looking for economic focus, leadership and policy reform. Reform is the key; while procrastination could well be the nation’s Achilles heel. A lack of federal focus on housing policy reform increases the chance of a ratings downgrade,” concluded Harley Dale.

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