Australian construction outlook December 2011 Residential building ...

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2 Australian construction outlook December 2011 Residential building TABLE OF CONTENTS Australia Overview... 1 Summary... 3 Outlook for states and territories... Error! Bookmark not defined. Value of residential building... Error! Bookmark not defined. 1. Underlying Demand Summary of Underlying Demand Summary of Underlying Demand Calculation Overseas Migration State shares of overseas migration Age profile of Migration Interstate Migration Population Projections Number of Households Number of Households by Dwelling Type Demolitions and Unoccupied Dwellings Unoccupied dwellings Demolitions Total Underlying Demand Australia and States Underlying Demand for Houses & Other Dwellings New South Wales Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values Victoria Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values Queensland Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values

3 Contents TABLE OF CONTENTS (CONTINUED) 5. South Australia Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values Western Australia Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values Tasmania Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values Northern Territory Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values Australian Capital Territory Market Indicators Outlook for Residential Building Numbers Outlook for Residential Building Values

4 Australian construction outlook December 2011 Residential building LIST OF TABLES Australia Overview 1. Dwellings Commenced, Underlying Demand and Stock Balance 4 2. Number of New Dwellings Commenced Australia 7 3. Estimated Dwelling Commencements Commonwealth Social Housing Initiative 8 4. Number of Total Dwellings Commenced Number of Houses Commenced Number of Other Dwellings Commenced (including conversions) Residential Construction Value of Work Commenced Australia Residential Construction Value of Work Done Australia Residential Construction Value of Work Done Australia and States Residential Construction Value of Work Done Houses Residential Construction Value of Work Done Other Dwellings Residential Construction Value of Work Done Alterations & Additions to Dwellings Residential Construction Value of Commencements Australia and States Residential Construction Value of Commencements Houses Residential Construction Value of Commencements Other Dwellings 37 Underlying Demand 16. Average Annual Underlying Demand for Dwellings Overseas Migration Net Interstate Migration Total Residential Population Proportion of Each Age Group by Household Member Type Total Australia - Based on 2006 Census Calculation of Estimated Number of Households Total Australia Proportion of Each Age Group by Household Member Type Total Australia 1996 and Estimated Number of Households Estimated Proportion of Households Residing in Detached Houses Estimated Number of Households By Type of Dwelling Unoccupied Dwellings Census Data Annual Additions to Underlying Demand Average Annual Underlying Demand for Dwellings Australia and States Average Annual Underlying Demand for Dwellings Australia and States 73 New South Wales 30. Number of New Dwellings Commenced NSW Residential Construction Value of Work Commenced NSW Residential Construction Value of Work Done NSW 95

5 Contents LIST OF TABLES (CONTINUED) Victoria 33. Number of New Dwellings Commenced Victoria Residential Construction Value of Work Commenced Victoria Residential Construction Value of Work Done Victoria 115 Queensland 36. Number of New Dwellings Commenced Queensland Residential Construction Value of Work Commenced Queensland Residential Construction Value of Work Done Queensland 136 South Australia 39. Number of New Dwellings Commenced South Australia Residential Construction Value of Work Commenced South Australia Residential Construction Value of Work Done South Australia 154 Western Australia 42. Number of New Dwellings Commenced Western Australia Residential Construction Value of Work Commenced Western Australia Residential Construction Value of Work Done Western Australia 174 Tasmania 45. Number of New Dwellings Commenced Tasmania Residential Construction Value of Work Commenced Tasmania Residential Construction Value of Work Done Tasmania 190 Northern Territory 48. Number of New Dwellings Commenced Northern Territory Residential Construction Value of Work Commenced Northern Territory Residential Construction Value of Work Done Northern Territory 206 Australian Capital Territory 51. Number of New Dwellings Commenced ACT Proportion of Households Living in Other Dwellings - ACT Residential Construction Value of Work Commenced ACT Residential Construction Value of Work Done ACT 224

6 Australian construction outlook December 2011 Residential building LIST OF CHARTS Australia Overview 1. Housing Affordability Australia 3 2. Number of All Dwellings Australia 5 3. First Home Owner Grants and New Loans Australia 6 4. Estimated Composition of Dwellings Commenced Australia 9 5. Number of Dwellings Commenced Australia Interest Rates Proportion of Age Group Living at Home with Parents Dwelling Demand Indicators Australia Number of Houses Australia Number of Other Dwellings Australia Stock Balance and 2009/10 Construction Gap All Dwellings Total Number of Dwellings Commenced Number of Houses Commenced Number of Other Dwellings Commenced Residential Construction Work Done Australia Residential Construction Work Done Houses 28 Underlying Demand 17. Permanent Migration Intake Long Term Visitors Net Overseas Migration Shares of Net Overseas Migration Major States Age Structure of Migration Australia Net Interstate Migration Dwelling Demand Indicators Australia Dwelling Demand Indicators New South Wales Dwelling Demand Indicators Victoria Dwelling Demand Indicators Queensland Dwelling Demand Indicators South Australia Dwelling Demand Indicators Western Australia Dwelling Demand Indicators Tasmania Dwelling Demand Indicators Northern Territory Dwelling Demand Indicators Australian Capital Territory Underlying Demand Australia 72 New South Wales 33. House Price Indicators Sydney Housing Affordability Sydney Rents Sydney, Rent to Interest Ratio Sydney First Home Owner Grants and New Loans NSW Finance Commitments (New Loans) Owner Occupiers NSW Estimated Composition of Dwellings Commenced NSW Number of All Dwellings NSW Number of Dwellings Commenced NSW 89

7 Contents LIST OF CHARTS (CONTINUED) New South Wales (continued) 41. Number of Houses NSW Number of Other Dwellings NSW Residential Construction Work Done - NSW 93 Victoria 44. House Price Indicators Melbourne Housing Affordability Melbourne Rents Melbourne, Rent to Interest Ratio Melbourne First Home Owner Grants and New Loans Victoria Finance Commitments (New Loans) Owner Occupiers Victoria Estimated Composition of Dwellings Commenced Victoria Number of All Dwellings Victoria Number of Dwellings Commenced Victoria Number of Houses Victoria Number of Other Dwellings Victoria Residential Construction Work Done Victoria 114 Queensland 55. House Price Indicators Brisbane Housing Affordability Brisbane Rents Brisbane, Rent to Interest Ratio Brisbane First Home Owner Grants and New Loans Queensland Finance Commitments (New Loans) Owner Occupiers Queensland Estimated Composition of Dwellings Commenced Queensland Number of All Dwellings Queensland Number of Dwellings Commenced Queensland Number of Houses Queensland Number of Other Dwellings Queensland Residential Construction Work Done - Queensland 134 South Australia 66. House Price Indicators Adelaide Housing Affordability Adelaide Rents Adelaide, Rent to Interest Ratio Adelaide First Home Owner Grants and New Loans South Australia Finance Commitments (New Loans) Owner Occupiers South Australia Number of Dwellings Commenced South Australia Number of All Dwellings South Australia Number of Houses South Australia Number of Other Dwellings South Australia Residential Construction Work Done - South Australia 152

8 Australian construction outlook December 2011 Residential building LIST OF CHARTS (CONTINUED) Western Australia 76. House Price Indicators Perth Housing Affordability Perth Cost of House Building Capital Cities Rents Perth, Rent to Interest Ratio Perth First Home Owner Grants and New Loans Western Australia Finance Commitments (New Loans) Owner Occupiers Western Australia Estimated Composition of Dwellings Commenced Western Australia Number of Dwellings Commenced Western Australia Number of All Dwellings Western Australia Number of Houses Western Australia Number of Other Dwellings Western Australia Residential Construction Work Done - Western Australia 172 Tasmania 88. House Price Indicators Hobart Housing Affordability Hobart Rents Hobart, Rent to Interest Ratio Hobart Number of All Dwellings Tasmania Number of Dwellings Commenced Tasmania Number of Houses Tasmania Number of Other Dwellings Tasmania Residential Construction Work Done - Tasmania 188 Northern Territory 96. House Price Indicators Darwin Housing Affordability Darwin Rents Darwin, Rent to Interest Ratio Darwin Number of All Dwellings Northern Territory Number of Dwellings Commenced Northern Territory Number of Houses Northern Territory Number of Other Dwellings Northern Territory Residential Construction Work Done - Northern Territory 204

9 Contents LIST OF CHARTS (CONTINUED) Australian Capital Territory 104. House Price Indicators Canberra Housing Affordability Canberra Rents Canberra, Rent to Interest Ratio Canberra Number of All Dwellings Australian Capital Territory First Home Owner Grants and New Loans Australian Capital Territory Finance Commitments (New Loans) Owner Occupiers - ACT Number of Dwellings Commenced Australian Capital Territory Number of Houses Australian Capital Territory Number of Other Dwellings Australian Capital Territory Residential Construction Work Done - Australian Capital Territory 222

10 Table 20 Proportion of Each Age Group by Household Member Type Total Australia - Based on 2006 Census Age in years Couple family with children Husband, Wife or Partner Child Other related individual Couple family with no children Husband, Wife or Partner Other related individual Lone parent One parent family Child Other related individual 0-4 0% 85% 0% 0% 0% 0% 15% 0% 0% 0% 0% 0% 0% 100% % 78% 0% 0% 0% 0% 21% 0% 0% 0% 0% 0% 0% 100% % 50% 1% 8% 1% 2% 15% 1% 3% 3% 8% 4% 3% 100% % 9% 0% 24% 0% 6% 3% 0% 2% 2% 7% 9% 1% 100% % 2% 0% 11% 0% 9% 2% 0% 1% 1% 2% 9% 1% 100% % 1% 0% 21% 0% 9% 2% 0% 1% 1% 2% 11% 1% 100% % 0% 1% 50% 0% 4% 1% 0% 1% 0% 2% 15% 1% 100% % 0% 1% 58% 0% 4% 0% 1% 1% 0% 2% 21% 2% 100% 75 and over 4% 0% 2% 38% 1% 5% 0% 1% 1% 0% 1% 33% 13% 100% Total 25% 25% 0% 21% 0% 5% 7% 0% 1% 1% 3% 10% 2% 100% Source: ABS and Macromonitor Other family Unrelated individual living in family household Group household member Lone person Usual residents of nonprivate dwellings Total Australian construction outlook December 2011 Residential building 53

11 Australian construction outlook December 2011 Residential building NUMBER OF HOUSEHOLDS BY DWELLING TYPE In our analysis of the number of households required each year, we have examined the extent to which the population dwelling needs are satisfied by detached houses as opposed to other dwelling types. Table 24 below provides some estimates (based on Census data) of the proportion of households of different types residing in detached housing. Using these proportions, and projections of these proportions, we have estimated the number of required households by dwelling type, historically and into the future. These data are subject to inaccuracy as a result of some problems in the data (for example, large numbers of dwellings in the census being categorised as dwelling type not stated ) and also due to changes in preferences and behaviour which are difficult to predict. This analysis provides a guide to understanding the likely proportions of the projected total household increases normally satisfied by detached houses and the proportion normally satisfied by other dwelling types. Table 25 on the following page outlines our findings of the split in total households between houses and other dwellings, by state, based on the usual preferences in Table 24. Table 25 also shows the historical and projected rate of increase in the number of households calculated. This increase is the largest component of underlying demand for dwellings. This analysis lays the groundwork for us to make some approximate splits of total underlying demand into the two categories of dwellings. Table 24 Estimated Proportion of Households Residing in Detached Houses Couple family with children Couple family with no children One parent family Other family (related individuals, no parents) Lone Person Households Goup Households Total Households NSW VIC QLD SA WA TAS NT ACT AUST % 94% 96% 94% 96% 98% 91% 94% 93% % 94% 96% 95% 96% 98% 91% 94% 93% % 94% 95% 95% 95% 98% 91% 93% 91% % 85% 87% 85% 85% 92% 69% 81% 83% % 83% 86% 86% 85% 93% 69% 81% 82% % 83% 84% 86% 85% 92% 70% 78% 81% % 82% 82% 76% 81% 89% 76% 79% 79% % 82% 82% 78% 84% 91% 76% 80% 80% % 82% 83% 82% 86% 90% 77% 81% 80% % 68% 75% 70% 72% 82% 68% 67% 68% % 66% 73% 72% 73% 83% 68% 70% 67% % 65% 72% 73% 75% 82% 71% 67% 66% % 60% 63% 55% 55% 69% 37% 53% 57% % 60% 61% 58% 58% 71% 37% 54% 57% % 60% 61% 61% 61% 72% 40% 54% 58% % 58% 64% 65% 66% 72% 50% 61% 58% % 56% 62% 67% 68% 76% 50% 60% 56% % 56% 62% 65% 68% 76% 52% 55% 55% % 81% 83% 78% 80% 87% 71% 78% 79% % 80% 82% 79% 81% 88% 70% 78% 78% % 79% 80% 80% 82% 87% 70% 76% 77% Source: ABS, Macromonitor

12 Australian construction outlook December 2011 Residential building 69 Chart 30 Dwelling Demand Indicators - NT Annual Increase in Total Population Log Scale 7,500 5,000 Yearly Underlying Demand 4,000 3,000 2,000 Average Annual Underlying Demand 1,000 Annual Increase in Households Year Ended June Source: ABS & Macromonitor Chart 31 Dwelling Demand Indicators - ACT Log Scale 10,000 Annual Increase in Total Population Average Annual Underlying Demand 5,000 4,000 3,000 2,000 Yearly Underlying Demand Annual Increase in Households 1, Year Ended June Source: ABS & Macromonitor

13 Australian construction outlook December 2011 Residential building Victoria 3.1 MARKET INDICATORS Residential property prices in Melbourne have fallen over the past 12 months, after a surge during 2009/10. House prices increased by 30% between March 2009 and June 2010; by far the strongest growth of any capital city during this period. Index Chart 44 House Price Indicators - Melbourne $' By the end of the long boom run, in mid-2008, housing affordability (see Chart 45 following) had reached its lowest point, worse than during the extremely high interest rate period at the end of the 1980s. The end of the strong price growth came during 2008/09, triggered firstly by rising interest rates and then by the onset of the GFC. Another price surge during 2009/10 led to poor affordability once again and the current weakness in property values. We are only seeing marginal improvement in affordability at present, from very poor levels in an historical context Median House Price -ABS (right axis) Housing Affordability - Melbourne House Price Index -ABS (left axis) June Source: ABS & Macromonitor The implication of these indicators for residential building is that, even with the two most recent interest rate cuts, affordability remains very poor. In fact it is the worst of any capital city Ratio 6.0 Average household incomes over average mortgage repayments

14 106 Queensland 4.2 OUTLOOK FOR RESIDENTIAL BUILDING NUMBERS The past two years have been strongly influenced by first home owner demand and by the Commonwealth Government s Social Housing Initiative. Chart 58 below illustrates movements in first home owner grants and new finance commitments for first home owners. The effects of these temporary stimulus policies (first positive then negative) have now largely worked their way through the market. The outlook from this point on will be driven by affordability and demand, with an additional factor being rebuilding work associated with the floods of January Chart 58 First Home Owner Grants and New Loans - Queensland Moving quarterly totals 12,000 Recipients of First Home Owners Grants 9,000 6,000 Finance Commitments for First Home Buyers Recipients of FHOG Boost Scheme Finance Commitments for First Home Buyers Estimated New Dwellings Component (i.e. excluding established dwelling) Recipients of $14,000 FHOG Boost (new dwelling) 3,000 0 Quarter Ended Source: ABS & Macromonitor There were around 50,000 recipients of the first home owner boost payment in Queensland. The effects of this injection of demand were felt on dwelling commencements primarily in 2009/10, with a large negative impact appearing in 2010/11. First home owner demand has now started to rise again and should be solidly positive in 2011/12.

15 150 Tasmania Chart 91 Number of All Dwellings - Tasmania Estimated Annual Underlying Demand 4,500 3,500 Estimated Underlying Demand 2,500 1,500 Number of Dwellings Completed Number of Dwellings Commenced ,000 4,000 Stock Balance 2,000 Positive number represents a stock surplus Negative number represents a stock deficiency -2, June Source: ABS & Macromonitor 0

16 176 Australian Capital Territory Table 51 Number of New Dwellings Commenced - ACT Year Ended June Number Houses Other Dwellings Total Ann. %Ch Number Ann. %Ch Number Ann. %Ch , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Average Annual Growth Rates Source: ABS & Macromonitor

17 178 Australian Capital Territory Chart 111 Number of Houses - ACT Estimated Underlying Demand Number of Houses Commenced 3,000 2,500 2,000 1,500 Number of Houses Completed Estimated Annual Underlying Demand 1, Positive number represents a stock surplus Negative number represents a stock deficiency 500 3,000 2,000 1,000 Stock Balance 0-1,000-2, June Source: ABS & Macromonitor

18 Australian construction outlook December 2011 Residential building 179 Chart 112 Number of Other Dwellings - ACT Number of Other Dwellings Completed 3,500 3,000 2,500 Number of Other Dwellings Commenced 2,000 1,500 1,000 Estimated Annual Underlying Demand Estimated Underlying Demand ,000 Positive number represents a stock surplus 6,000 Negative number represents a stock deficiency 5,000-3, June Stock Balance 500 4,000 3,000 2,000 1, ,000-2,000 Source: ABS & Macromonitor

19 Australian construction outlook December 2011 Residential building 181 Table 53 Residential Construction - Value of Work Commenced - ACT Chain Volume Measures /09 Prices Year Ended June $M Houses Ann. %Ch Other Dwellings $M Ann. %Ch Total New Dwellings $M Ann. %Ch Average Annual Growth Rates Source: ABS & Macromonitor

20 182 Australian Capital Territory Table 54 Residential Construction - Value of Work Done - ACT Chain Volume Measures /09 Prices Year Ended June $M Houses Ann. %Ch Other Dwellings $M Ann. %Ch Alterations & Additions $M Ann. %Ch $M Total Ann. %Ch Average Annual Growth Rates Source: ABS & Macromonitor