the outlook for residential construction in the south west dr. harley dale hia chief economist hia...
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![Page 1: The Outlook for Residential Construction in the South West Dr. Harley Dale HIA Chief Economist HIA South West Industry Update Bunbury December 2012](https://reader036.vdocuments.net/reader036/viewer/2022062312/551bcc70550346c3588b51c1/html5/thumbnails/1.jpg)
The Outlook for Residential Construction in the
South West
Dr. Harley Dale
HIA Chief Economist
HIA South West Industry Update
Bunbury
December 2012
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The most comprehensive housing report card produced in Australia
Spring 2012 edition:-
• The global outlook could be worse, but it’s not that good.
• Australia is in sound economic shape, but the devil is in the detail.
• The outlook for WA is indeed impressive, relative to other states (rivalled only by Queensland), though the state has had better.
• Residential construction is showing promise.
For more information on the HIA Economics Group, please contact us at:
(02) 6245 1393 or [email protected]
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HIA WA Outlook, Spring 2012 edition
• “Sentiment towards the global economy has soured … and so the perception is that global economic prospects have weakened.”
• The implications for interest rates:-• “Against this backdrop, the Reserve Bank of Australia (RBA) cut interest rates by a
further 25bps on October 2, taking the Official Cash Rate (OCR) to 3.25 per cent.”
• “We’re maintaining our view that 2012/13 will see a decent rebound of 25.1 per cent, followed by a year of consolidation in 2013/14 wherein starts are forecast to grow by a modest 5.0 per cent. This would leave the level of starts in WA at 23,024…”
• “… activity in the coming months will be crucial to this view materialising.”
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‘We’ll all muddle through’ seems to be the view
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WA Economy – looking better than mid year
INDICATOR UPDATE
Gross State Product Improved
Interest rate outlook Improved
Household consumption Mixed
Unemployment Improved/mixed
Detached houses Improved
Multi-units Improved
Renovations Improved
WA ECONOMY
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Economic growth is strong in WA, but…
-5.7%
1.6% 1.8% 2.7% 2.9%
5.6%
9.6%
28.7%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
TAS VIC SA QLD NSW ACT WA NT
Annual growth in State Final Demand (% change to September 2012 quarter)Source: HIA Economics Group
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… not everywhere
5.9% 1.4%
-10.9%
8.9%
18.3%
7.2%
-31.5%
-22.2%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Private businessinvestment
Household consumption New home investment Renovations investment
WA's state final demand - key components September quarter, 2012 Source: ABS National Accounts
Qtrly change Annual change
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Interest rates back near historic lows
• 2012 has seen a total of 125bps of cuts to the official cash rate.
• However, households and businesses have not received all these cuts – there should still be more yet to come…
2.00
2.10
2.20
2.30
2.40
2.50
2.60
2.70
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00De
c-09
Jan-
10Fe
b-10
Mar
-10
Apr-1
0M
ay-1
0Ju
n-10
Jul-1
0Au
g-10
Sep-
10O
ct-1
0No
v-10
Dec-
10Ja
n-11
Feb-
11M
ar-1
1Ap
r-11
May
-11
Jun-
11Ju
l-11
Aug-
11Se
p-11
Oct
-11
Nov-
11De
c-11
Jan-
12Fe
b-12
Mar
-12
Apr-1
2M
ay-1
2Ju
n-12
Jul-1
2Au
g-12
Sep-
12O
ct-1
2No
v-12
Dec-
12
% In
tere
st R
ate
Interest Rates, Australia Source: HIA Economics, RBA
Mortgate Rate Margin to Cash Rate (RHS) Discounted Variable Mortgage Rate RBA Cash Rate Small Business Variable Term Loan
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Hopefully to keep confidence more buoyant
75
80
85
90
95
100
105
110
115
120
125
Nov-94 Nov-96 Nov-98 Nov-00 Nov-02 Nov-04 Nov-06 Nov-08 Nov-10 Nov-12
Inde
x
Consumer ConfidenceSource: Westpac-Melbourne Institute
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The Western Australian Economy
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Gross state product: not amazing, but still decent…
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
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
Jun.
2016
Year ended June
Gross State Product - Western AustraliaSource: ABS 5220.0; Access Economics
Long term average
Forecast
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WA’s labour market
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
Nov-
92
Nov-
93
Nov-
94
Nov-
95
Nov-
96
Nov-
97
Nov-
98
Nov-
99
Nov-
00
Nov-
01
Nov-
02
Nov-
03
Nov-
04
Nov-
05
Nov-
06
Nov-
07
Nov-
08
Nov-
09
Nov-
10
Nov-
11
Nov-
12
Per c
ent
Per c
ent
Western Australia's Labour MarketSource: ABS Labour Force
U/e rate (LHS) Annual Employment Growth Rate (RHS)
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Residential construction in WA
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Where we’ve come: WA’s housing starts
22.56 22.91
25.9124.70
22.44
18.45
25.09
20.80
17.52
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2003/04 (a) 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a)
Thou
sand
dwe
llings
com
men
ced
WA Housing Starts Source: HIA Economics Group
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WA’s alterations and additions
3,0783,249 3,255
3,515
4,244 3,945
4,5364,869
4,322
0
1,000
2,000
3,000
4,000
5,000
6,000
2003/04 (a) 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a)
Valu
e of
Inve
stm
ent
WA Renovations ForecastsSource: HIA Economics Group
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South West home to Hotspots in 2010/11
1 Serpentine-Jarrahdale (S) Perth 108,861 6.92 Armadale (C) Perth 206,900 5.43 Wanneroo (C) - North-East Perth 140,809 5.44 Mandurah (C) South West 213,614 5.35 Wanneroo (C) - North-West Perth 235,109 4.76 Rockingham (C) Perth 277,445 3.77 Roebourne (S) Pilbara 186,240 3.38 Cockburn (C) Perth 280,512 2.99 Port Hedland (T) Pilbara 149,502 2.9
10 Swan (C) Perth 282,568 2.811 Busselton (S) South West 146,801 2.812 Gosnells (C) Perth 146,107 2.213 Stirling (C) - Central Perth 258,632 2.114 South Perth (C) Perth 128,190 1.915 Stirling (C) - Coastal Perth 271,663 1.816 Canning (C) Perth 128,542 1.6
Statistical Local Area Statistical Divison Residential Building Approved, 2010/11, ($'000)Annual Population Growth Rate (%)
WA Building and Population Hotspots****SLAs with in excess of $100 million in residential building work approved in 2010/11 and with an annual population growth rate in excess of the national average
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Land sales and prices in the South West
• Land sales increased by 10% in the June 2012 qtr; by 17% in 2012H1.
0
200
400
600
800
1,000
1,200
1,400
1,600
0
50,000
100,000
150,000
200,000
250,000
Jun-
2004
Sep-
2004
Dec-
2004
Mar
-200
5
Jun-
2005
Sep-
2005
Dec-
2005
Mar
-200
6
Jun-
2006
Sep-
2006
Dec-
2006
Mar
-200
7
Jun-
2007
Sep-
2007
Dec-
2007
Mar
-200
8
Jun-
2008
Sep-
2008
Dec-
2008
Mar
-200
9
Jun-
2009
Sep-
2009
Dec-
2009
Mar
-201
0
Jun-
2010
Sep-
2010
Dec-
2010
Mar
-201
1
Jun-
2011
Sep-
2011
Dec-
2011
Mar
-201
2
Jun-
2012
$
No. of sales Value
RESIDENTIAL LAND SALES & MEDIAN LOT VALUE - SOUTH WEST
Sour
ce: r
pdat
a.co
m, H
IA E
cono
mics
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WA approvals heading in the right direction…
500
1,000
1,500
2,000
2,500
3,000
Oct
-90
Oct
-92
Oct
-94
Oct
-96
Oct
-98
Oct
-00
Oct
-02
Oct
-04
Oct
-06
Oct
-08
Oct
-10
Oct
-12
Num
ber
Building Approvals - WASource: ABS Building Approvals
Seasonally adjusted Trend
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…and across the Bunbury region
0
20
40
60
80
100
120
140
160
180
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov-
11
Dec-
11
Jan-
12
Feb-
12
Mar
-12
Apr-1
2
May
-12
Jun-
12
Jul-1
2
Aug-
12
Sep-
12
Oct
-12
num
ber o
f app
rova
ls
Total dwelling approvals , Bunbury region Source: ABS Building Approvals
3 months to Oct 12 v Oct 11, +3% change
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Selected South West areas
219
145
214
39
333
159
208
43
0
50
100
150
200
250
300
350
Mandurah Augusta - Margaret River -Busselton
Bunbury Manjimup
Total dwelling approvals, selected South West areas - Oct 'qtr' 2012 vs Oct 'qtr 2011 Source: ABS, HIA economics
3 mnths to Oct 11 3 mnths to Oct 12
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House and unit values – tracking sideways?
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Nov-
02
Nov-
03
Nov-
04
Nov-
05
Nov-
06
Nov-
07
Nov-
08
Nov-
09
Nov-
10
Nov-
11
Nov-
12
House and unit prices - Regional WA, November 2012 Source: RP Data and Rismark 3 month rolling simple median
Regional WA Houses Regional WA Units
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Mixed performance of prices in the South West
Median priceQuarterly growth
(%)12 month growth
(%)10 year growth (% per annum)
Mandurah 363,000$ 5.1 2.8 10.8Augusta 470,000$ 0 2.2 8.0Bussleton 415,000$ -1.2 -6.7 9.8Bunbury 480,000$ 0 1.1 8.6Manjimup 230,000$ -9.8 9.8 11.1Margaret River 425,000$ -1.2 -2.7 6.9Source Australian Property Monitors
House Prices: 12 Months to September 2012
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Improvements in WA’s affordability
30.0
40.0
50.0
60.0
70.0
80.0
90.0
S07 D07 M08 J08 S08 D08 M09 J09 S09 D09 M10 J10 S10 D10 M11 J11 S11 D11 M12 J12 S12
HOUSING AFFORDABILITY INDEX, WA
PERTH REST OF WA
Sour
ce: H
IA-C
omm
onwe
alth
Bank
Affo
rdab
ility R
epor
t
HOUSING AFFORDABILITY INDEX, WA
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Total renovations investment: sliding in WA…
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500Se
p-19
90
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
Sep.
2012
$ m
illion
(Mov
ing
Annu
al T
otal
)
Renovations Investment in Western Australia - Moving annual totalSource: ABS State Final Demand
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… as in the Bunbury region
-
1,000
2,000
3,000
4,000
5,000
6,000
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov-
11
Dec-
11
Jan-
12
Feb-
12
Mar
-12
Apr-1
2
May
-12
Jun-
12
Jul-1
2
Aug-
12
Sep-
12
Oct
-12
$'00
0
Value of major renovations approvals , Bunbury region Source: ABS Building Approvals
3 months to Oct 12 v Oct 11, -8.9% change
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Alts and adds in selected South West areas
2,972
3,552
4,559
2,099
2,790
3,484
4,569
1,251
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Mandurah Augusta - Margaret River -Busselton
Bunbury Manjimup
$'00
0
Value of major alts and adds approvals ($'000) - Selected South West areas, Oct 'qtr' 2012 vs Oct 'qtr 2011 Source: ABS, HIA economics
3 mnths to Oct 11 3 mnths to Oct 12
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So what does the future hold?
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Short term starts outlook
22.56 22.91
25.9124.70
22.44
18.45
25.09
20.80
17.52
21.9223.02
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2003/04 (a) 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a) 2012/13 2013/14
Thou
sand
dwe
llings
com
men
ced
WA Housing Starts ForecastsSource: HIA Economics Group
Forecast
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The outlook for renovations
3,0783,249 3,255
3,515
4,244 3,945
4,5364,869
4,3224,620 4,773
0
1,000
2,000
3,000
4,000
5,000
6,000
2003/04 (a) 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a) 2012/13 2013/14
Valu
e of
Inve
stm
ent
WA Renovations ForecastsSource: HIA Economics Group Forecast
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Economic reform is the key
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THANK YOU FOR YOUR TIME THIS MORNING
Harley DaleHIA Chief Economist
December 2012http://economics.hia.com.au