Prospects for Residential Building in Southwest WA?

Transcription

1 Prospects for Residential Building in Southwest WA? Shane Garrett, HIA Senior Economist HIA Industry Outlook Breakfast Bunbury, November 2015

2 We have just passed an all time high WA Detached House Building Highs and Lows, 1989 to ,000 32,198 30,000 25,000 27,011 25,618 23,000 26,529 20,000 18,566 15,000 13,513 14,442 13,861 10,000 5,000 Jun 1989 (High) Jun 1991 Source: ABS (Lowest) Sep 1994 (High) Dec 1996 (Low) Jun 2000 (High) Jun 2001 (Low) Dec 2006 (High) Jun 2009 (Low) Mar 2015 (Highest)

3 Detached Houses have led the charge Total Approvals (year to Sept 2015) Detached House Share (%) Augusta - Margaret River - Busselton % Augusta % Busselton % Busselton Region % Margaret River % Bunbury % Australind - Leschenault % Bunbury % Capel % College Grove - Carey Park % Collie % Dardanup % Eaton - Pelican Point % Gelorup - Dalyellup - Stratham % Harvey % Koombana % Waroona % Manjimup % Bridgetown - Boyup Brook % Donnybrook - Balingup % Manjimup % Pemberton %

4 but have started to ease back Total New Dwelling Approvals - Bunbury Region Year to Sept 2014 Year to Sept 2015 Change Detached Houses 1,966 1, % Multi-Units % Total Dwellings 2,053 1, %

5 Activity is very high by any standard Key Activity Levels in WA New Home Building Activity 35,000 31,124 30,000 25,000 23,634 21,154 20,000 18,566 15,000 13,513 14,442 13,861 10,000 5,000 June 2015 Jun 1991 (Lowest) Dec 1996 (Low) Jun 2001 (Low) Jun 2009 (Low) Decade Average 20 Year Average Source: ABS

6 What makes the WA Market Tick? Confidence Population Interest Rates Economic Conditions Home Prices Rental Market

7 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Population Growth has Slowed Considerably Western Australia's Population Growth by Component - Moving Annual Total Source: ABS ,000 80,000 60,000 40,000 20, ,000 Total MAT Natural Increase MAT Net Overseas Migration MAT Net Interstate Migration MAT

8 What makes the WA Market Tick? Confidence Population Interest Rates Economic Conditions Home Prices Rental Market

9 Economic Backdrop Advanced economies like the US and the UK are performing well and interest rates may soon be increased As the world s biggest importer of metals, China s recent difficulties are not good new for the WA economy Australia s economic growth rate is below par but unemployment looks to have peaked nationally The debate around repairing the federal government s budgetary hole will continue and it looks certain that GST will increase at some stage WA s economy is being hammered by the near collapse in mining project work but the weak dollar and low interest rates are better news Unemployment has grown from 4.1 per cent to 6.1 per cent over the past three years employment growth is weak

10 What makes the WA Market Tick? Confidence Population Interest Rates Economic Conditions Home Prices Rental Market

11 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 % change in index Perth s Rental Market is Slack CPI Rental Growth Perth Source: ABS Qtrly (LHS) Annual (RHS) Rental vacancy rate in Perth at 3.7 per cent during September Rental yields at 4.0 per cent (houses) and 4.4 per cent (units) in October

12 What makes the WA Market Tick? Confidence Population Interest Rates Economic Conditions Home Prices Rental Market

13 Perth Dwelling Prices are falling Change in home values to October 2015 Source: CoreLogic RP Data 20% 15% 15.6% 12.8% 10% 5% 0% -5% 4.5% 3.8% 3.8% 3.1% 2.3% 1.5% 1.2% 1.0% 0.8% -0.1% -1.7% -3.6% -3.5% -3.7% Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra Year-on-Year Quarter-on-Quarter

14 but is it not just catching up? Dwelling Price Growth Cycles in Australia's Capital Cities 180% 160% 140% 146.7% 136.8% 152.6% 120% 100% 80% 84.9% 109.1% 111.4% 99.1% 73.0% 60% 43.1% 36.9% 40% 25.9% 26.8% 20% 12.4% 12.8% 6.5% 4.2% 8.1% 8.8% 0% SYD MEL BRI ADL PRT HOB DRW CNB 8-CAPS Source: CoreLogic RP Data May 2002 to May 2012 May 2012 to June 2015

15 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 Jun-2011 Sep-2011 Dec-2011 Mar-2012 Jun-2012 Sep-2012 Dec-2012 Mar-2013 Jun-2013 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 $ Source: CoreLogic RP Data, HIA Economics Land Supply Bottlenecks are adding to Pressures 250,000 RESIDENTIAL LAND SALES & MEDIAN LOT VALUE - SOUTH WEST , , , , No. of sales Value (LHS)

16 Rental Yields indicate that the market is sound Rental Yields and Investor Mortgage Rate by Capital City, October % 5.5% 5.5% 5.3% 5.7% 5.7% 5.0% 4.5% 4.0% 3.5% 4.0% 3.6% 3.8% 3.5% 4.9% 4.8% 4.5% 4.4% 4.4% 4.2% 4.6% 4.6% 4.1% 3.8% 3.0% 2.5% 2.0% Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra Capital Cities Rental Yield (May '15) Rental Yield (Oct '15) Effective Net Borrowing Rate for Investors Source: CoreLogic RP Data; RBA

17 What makes the WA Market Tick? Confidence Population Interest Rates Economic Conditions Home Prices Rental Market

18 Interest rates are exceptionally low Previous RBA Official Cash Rate Troughs 5% 4.75% 4.75% 5% 4.25% 4% 4% 3% 3.00% 3% 2% 2% 1% 1% 2.00% 1.75% 0% Source: RBA Jul '93 to Jul '94 Dec '98 to Oct '99 Dec '01 to Apr '02 Apr '09 to Sep ' 09 May '15 to? Late 2015?

19 What about when rates start rising? Magnitude of Previous RBA Official Cash Rate Increases (Basis Point Change) Aug '94 to Dec ' Nov '99 to Aug ' May '02 to Mar ' Oct '09 to Nov ' Source: RBA

20 What makes the WA Market Tick? Confidence Population Interest Rates Economic Conditions Home Prices Rental Market

21 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Index Confidence is stuck below the waterline Consumer Confidence Source: Westpac-Melbourne Institute

22 Stamp Duty Bill in $ Thousands Median Dwelling Price ($ Thousands) Source: CoreLogic RP Data, HIA Stamp Duty Watch Stamp Duty is also quite a Deterrent Stamp Duty Bill and Median Prices for Non-FHB Owner Occupier, June NSW (2) VIC (3) QLD (8) SA (6) WA (4) TAS (7) NT (1) ACT (5) Stamp Duty Bill (LHS) Median Dwelling Price (RHS) 0

23 The Outlook for 2015/16

24 Thousand dwellings commenced We are in the early stage of a big downturn WA Housing Starts Forecasts Source: HIA Economics Forecast /08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a) 2012/13 (a) 2013/14 (a) 2014/15 (a) 2015/ / /18 Detached Multi

25 What keeps the Renovations World Turning? Confidence New Building Patterns Housing Stock Age Dwelling Price Growth

26 Value of Investment (millions) Renovations are also set to see some weakness WA Renovations Forecasts Source: HIA Economics 6,000 Forecast 5,000 4,000 3,775 4,556 4,234 4,771 5,140 4,725 4,208 3,886 3,635 3,679 3,517 3,466 3,000 2,000 1, /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/ / /18

27 THANK YOU FOR YOUR TIME Shane Garrett, HIA Senior Economist economics.hia.com.au