The Outlook for the Housing Industry in Western Australia

Transcription

1 The Outlook for the Housing Industry in Western Australia Dr Harley Dale HIA Chief Economist HIA Industry Outlook Breakfast Perth March 2012

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3 Europe muddles while China rebalances China is looking to rebalance its economic growth such that this growth is increasingly driven by domestic consumption, rather than investments and exports. China also has a view that their growth needs to increasingly come from the production of services, and the production of elaborately transformed manufactures. There is much talk (which is indeed informed and credible talk) therefore, of reduced demand over time for imports of resources.

4 Is this bad news for WA? On (our famous) one hand indeed, if we do see a rebalancing away from investment and export driven growth, then a reduced demand for Australian commodities, namely iron ore should follow. WA will indeed feel the effects. However, on (our infamous) other hand economic advancement is typically accompanied by increased energy consumption, plus China has a very long way to go. So as China continues its trajectory toward becoming an advanced economy, we should also see its appetite for energy grow. WA is very well placed to capitalise (to export energy such as LNG) on this outcome of a rebalanced China.

5 Some final points on China and East Asia This rebalancing of China s economy will be a broad process of structural change, not some surprise shift that will happen overnight. Iron ore exports are set to see very big increases over the next five to seven years. The financial crises of the 2000s how global have they been? The fallout appears most concentrated in the North Atlantic. Australia has trading partners other than China emerging and rapidly growing economies in Southeast Asia, with whom WA in particular, is well placed to engage.

6 There is enormous potential in WA, despite recent (accurate) reporting of the best of times having passed, but

7 the fact remains, housing is still being left behind, so

8 Jun.1994 Jun.1995 Jun.1996 Jun.1997 Jun.1998 Jun.1999 Jun.2000 Jun.2001 Jun.2002 Jun.2003 Jun.2004 Jun.2005 Jun.2006 Jun.2007 Jun.2008 Jun.2009 Jun.2010 Jun.2011 Jun.2012 Jun.2013 Jun.2014 Jun.2015 Annualised Growth (%) New Housing and Renovations Outlook The potential economic growth is the healthiest in Australia Western Australia Gross State Product and National Gross Domestic Product Source: ABS and ; Access Economics Forecast WA GSP GDP WA Long Term Average GSP Growth

9 The potential the WA labour market is strong Unemployment Rate by State - February 2012 Source: ABS Labour Force National Unemployment Rate NSW VIC QLD SA WA TAS NT ACT

10 The potential fastest growing employment market Change in Employment - Feb 2011 to Feb 2012 Source: ABS, HIA WA Qld SA NT (trend) ACT(trend) Tas NSW Vic Change in the Number of Employed Persons ('000)

11 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 The potential - fastest growing population Western Australia's Population Growth by Component - Moving Annual Total Source: ABS ,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,000 Total MAT Natural Increase MAT Net Interstate Migration Net Overseas Migration MAT

12 Source: HIA-Commonwealth Bank Affordability Report The potential improving housing affordability HOUSING AFFORDABILITY INDEX, WA HOUSING AFFORDABILITY INDEX, WA D06 M07 J07 S07 D07 M08 J08 S08 D08 M09 J09 S09 D09 M10 J10 S10 D10 M11 J11 S11 D11 PERTH REST OF WA

13 The potential no shortage of housing demand Western Australia's Projected Housing Shortage Source: HIA 8,000 80,000 7,000 70,000 6,000 60,000 5,000 50,000 4,000 40,000 3,000 30,000 2,000 20,000 1,000 10,000 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Perth Rest of WA Cumulative Shortage (RHS) 0

14 The potential highlighting the challenge ahead Western Australia's Housing in 2011 Ranking State National Local Government Area Shortage 1 3 Joondalup (C) 3, Stirling (C) 3, Melville (C) 2, Canning (C) 1, Mandurah (C) 1, Bayswater (C) 1, South Perth (C) 1, Bunbury (C) 1, Mundaring (S) 1, Kalgoorlie/Boulder (C) 968 WA is home to three regions out of the nation s top ten which have the most critical shortages

15 The challenge interest rates are a big negative for us

16 % Interest Rate Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 The challenge interest rates are too high Interest Rates, Australia Source: RBA Discounted Variable Mortgage Rate RBA Cash Rate Small Business Variable Term Loan Don t rule out further official interest rate cuts, but right now it doesn t look good.

17 Index New Housing and Renovations Outlook The challenge - consumers should be happier Consumer Confidence Source: Westpac-Melbourne Institute Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Feb-12

18 Sep-2002 Jan-2003 May-2003 Sep-2003 Jan-2004 May-2004 Sep-2004 Jan-2005 May-2005 Sep-2005 Jan-2006 May-2006 Sep-2006 Jan-2007 May-2007 Sep-2007 Jan-2008 May-2008 Sep-2008 Jan-2009 May-2009 Sep-2009 Jan-2010 May-2010 Sep-2010 Jan-2011 May-2011 Sep-2011 The challenge housing should be out-performing Trends in housing starts - Western Australia and National Source: ABS , , , , , , Australia, trend (LHS) WA, trend (RHS)

19 How do we look post turkey and ham? WA ECONOMY INDICATOR Gross State Product Interest rate outlook Household consumption Unemployment Detached houses Multi-units Renovations UPDATE Mixed Steady/deteriorated Deteriorated Steady Improved Deteriorated Improved

20 New Housing Activity

21 Residential lot sales are still declining and... Residential Lot Sales - Annual % change - 6 mths to Sept 2011 Source: RP Data, HIA Economics Group South Eastern -13% Perth -24% South West -30% -35% -30% -25% -20% -15% -10% -5% 0% Annual % change

22 ... new dwelling approvals are just bottoming out WA Monthly Dwelling Approvals Source: ABS Building Approvals Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Total Detached Houses Multi-Units New residential approvals fell by nearly 12% over the three months to January 2012.

23 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 New home lending is also bottoming out WA New Home Lending - Number of Loans, Original Source: ABS Housing Finance 2,250 2,000 1,750 1,500 1,250 1, Total New Loans Construction of dwellings Purchase of new dwellings

24 Number of loans Housing finance is growing First Home Buyer versus Non-First Home Buyer Loans - WA Source: ABS Housing Finance 18,000 16,000 14,000 13,908 % change: +12% 15,518 12,000 10,000 8,000 6,000 4,000 2,000 0 % change: +18% 3,758 3,186 FHB Non-FHB 3mths to Dec 10 3mths to Dec 11

25 Thousand dwellings commenced Housing Starts set to grow in 2012/13 and... WA Housing Starts Forecasts Source: HIA Economics Group Forecast /04 (a) 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/ /13

26 ... so they should Financial Year DWELLING STARTS: by state and territory thousand dwellings commenced Starts NSW Vic Qld SA WA Tas NT ACT Aust 2003/04 (a) /05 (a) /06 (a) /07 (a) /08 (a) /09 (a) /10 (a) / / / % change: 2004/05 (a) -14% -10% -11% 5% 2% -1% 28% -15% -9% 2005/06 (a) -17% -4% -4% -3% 13% -9% 2% -24% -5% 2006/07 (a) -10% -2% 9% 5% -5% 12% 5% 24% 0% 2007/08 (a) 6% 8% 9% 6% -9% 1% -26% -3% 4% 2008/09 (a) -25% 0% -36% 1% -18% 0% 6% 18% -17% 2009/10 (a) 35% 31% 15% 0% 36% 8% 12% 66% 26% 2010/11-3% 8% -19% -12% -17% -4% 3% 16% -5% 2011/12-4% -20% 4% -9% -6% -25% -18% -23% -10% 2012/13 15% -3% 7% 12% 9% 6% 35% -16% 6% Source HIA Economics December 2011

27 Housing Prices and Renovations Activity

28 The home price environment appears weaker, and... Change in home values - year on year, December 2011 Source: RP Data, Rismark International 2.0% 0.0% 0.9% -2.0% -4.0% -0.9% -3.6% -1.1% -4.3% -4.2% -2.2% -2.6% -2.5% -1.4% -1.5% -4.3% -6.0% -5.3% -8.0% -6.5% -6.8% -6.8% -10.0% Sydney Melbourne Brisbane Adelaide Perth Darwin Canberra Australian Capitals Houses Units

29 % change... not only in Perth WA Dwelling Prices - December 2011 vs December 2010 Source: RP Data-Rismark 0.0% 0.0% -1.0% -2.0% -1.3% -3.0% -4.0% -3.1% -5.0% -6.0% -5.1% Regional WA Perth Houses Units

30 $ million (Moving Annual Total) Sep-1989 Sep-1990 Sep-1991 Sep-1992 Sep-1993 Sep-1994 Sep-1995 Sep-1996 Sep-1997 Sep-1998 Sep-1999 Sep-2000 Sep-2001 Sep-2002 Sep-2003 Sep-2004 Sep-2005 Sep-2006 Sep-2007 Sep-2008 Sep-2009 Sep-2010 Sep.2011 Total renovations activity continues to power along Renovations Investment in Western Australia - Moving annual total Source: ABS State Final Demand 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Renovations activity in WA is at nearly $5bn and growing faster than anywhere else in Australia.

31 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Major renovations activity is holding up The WA Renovations and Additions Market Monthly Lending and Monthly Council Approvals 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Lending for Alts and Adds Value of Council Approved Alts and Adds

32 Renovations activity Reasonable growth in both 2011/12 and 2012/13 is likely. Further research is being conducted into renovations activity in 2012 and longer term forecasts are also on their way.

33 Are people waking up to the housing challenge? Maybe, at least on days when you re in an upbeat mood! The policy space is very crowded, but the housing industry has a case. What is that case and what are we doing? It s all up to state action in the first instance, but... a federal appetite is vital and (currently) missing.

34 THANK YOU FOR YOUR TIME THIS MORNING Harley Dale HIA Chief Economist March