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Sydney Construction Boom Nearly Here; Construction growth of 15% is forecast in NSW over next two years
Topic Started: 8 Aug 2011, 12:56 PM (51,149 Views)
Shadow
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Evil Mouzealot Specufestor

Here comes the Sydney construction boom I've been talking about for the past few years...

http://www.propertyobserver.com.au/residential/nsw-heads-to-recovery-but-others-catch-the-construction-blues-bis-shrapnel/2011080751062

Quote:
 
NSW heads to recovery but others catch the construction blues: BIS Shrapnel

By Larry Schlesinger

Monday, 08 August 2011

Building construction activity is expected to pick up strongly in NSW over the next two years, according to forecasts by BIS Shrapnel.

Growth of 15% and 14% is forecast in NSW over the next two years to 2013, compared with national growth of 8% and 1%.

“Very strong growth” in residential construction and a strengthening of non-residential activity – both coming off a very low base – will drive the recovery in NSW, BIS Shrapnel estimates.

In contrast, construction activity in Queensland will stagnate over 2011-12, growing by just 1% over the period, but will pick up over 2012-13, accelerating by 16%, according to the forecast.

A drop in residential activity in Queensland 2011-12 will be followed by a “sharp rise in residential construction in 2012-13, with both detached house and higher density projects contributing” the research group has forecast.

Alterations and additions will also support building in Queensland in 2011-12 as housing is refurbished after being damaged by floods and cyclones across the state in early 2011, the company says.

Non-residential commencements in Queensland are anticipated to weaken in 2011-12 as spending on education and health projects winds back to more historically normal levels, before showing a small rise in 2012-13 as commercial and industrial building improves.

BIS Shrapnel forecasts the value of new residential building commencements to rise by 10% over 2012-13 on the back of an accelerating economy.

The research group attributes the 12% national decline in building activity over 2010-11 to the winding down of construction related to the “Building Education Revolution” program.

This fall-off more than offset the emerging recovery in commercial and industrial building, which is forecast to continue to underpin overall growth in 2011-12.

“The continuing recovery in commercial and industrial building – up 21% – will be a key driver of the improvement in building commencements in 2011-12, while increased construction in the health sector – up 73% – will also play a part,” says BIS Shrapnel managing director Robert Mellor.

“With the Australian economy largely recovering since the GFC, the environment has become more conducive for commercial and industrial development. There is also $7 billion in new hospitals and other health care facilities due to commence in 2011-12, particularly in Victoria, Queensland, South Australia and Western Australia.”

According to Mellor, the contribution from residential building is forecast to be minimal in 2011-12 after being negative in 2010-11 due to the decline in activity after the expiry of the first-home owner’s grant boost scheme, as well as the winding down of the federal government public housing stimulus.

The decline is expected to more than offset an otherwise healthy rise in multi-unit residential starts. That rise is largely due to the improved financial environment that allows developers to be increasingly able to fund apartment projects.

Despite a weakening in net overseas migration inflows, which have fallen from a record 300,000 people in 2008-09 to an estimated 165,000 in 2010-11, Mellor says “construction nationally still remains below the level of underlying demand, although in some states the market is closer to balance”.

Gains are expected to be roughly felt equally across new houses and multi-unit dwellings, with the upturn concentrated in Queensland, Western Australia and New South Wales.

However, the residential building upturn is expected to be short-lived, with BIS Shrapnel forecasting the value of residential building starts to decline by 15% during 2013-14 and 2014-15.
Edited by Shadow, 8 Aug 2011, 12:57 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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raveswei
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Shadow
8 Aug 2011, 12:56 PM
Oh yeah, boom is just to begin

we will start building hundreds of thousands of new homes a year and their price will double every five years until the end of the time …

BIS Shrapnel said so it must be true
Edited by raveswei, 8 Aug 2011, 01:13 PM.
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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Shadow
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Evil Mouzealot Specufestor

raveswei
8 Aug 2011, 01:12 PM
Oh yeah, boom is just to begin

we will start building hundreds of thousands of new homes a year and their price will double every five years until the end of the time …

BIS Shrapnel said so it must be true
BIS Shrapnel didn't say that. You made it up.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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davel
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Shadow, I've noticed that BIS Shrapnel don't have the best of reputations when it comes to forecasting.

What is your take on their justification for these predictions? All I can find in the article is this:

"BIS Shrapnel forecasts the value of new residential building commencements to rise by 10% over 2012-13 on the back of an accelerating economy.

The research group attributes the 12% national decline in building activity over 2010-11 to the winding down of construction related to the “Building Education Revolution” program."


Which doesn't seem very convicing argument to me, and assumes "an accelerating economy" in NSW (presumably) that many commentators seem to believe is the opposite to whats taking place.
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Catweasel
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Catweasel say imagine if it could invent the newspaper like a iPad that only tell the story that tickle a emotion trigger. Fortune teller, media, and a zealot would be a eternally happy. It remind a Catweasel of a Minority Report.
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Catweasel
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Whims a shadow zealot get a happy about a construction boom boom prophecy, some a construction company face the tough one. It a wonder how mouse can keep a finance together when a business fail.

Over the past fortnight, Safi Brothers Constructions, Port Melbourne Building Supplies, Coastline Bricklaying and Blue Hills Bricklaying have entered administration. Others to have collapsed of late include plumbers, plasterers and landscape gardeners.

Registered company liquidator, Cliff Sanderson of Dissolve Pty Ltd, says while the building sector always features pretty heavily in the collapse lists, the numbers have increased over the past three to five months.

The reasons, according to Sanderson, are the relatively recent downturn and increased aggression from the Australian Taxation Office.

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jrsnr
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Shadow
8 Aug 2011, 12:56 PM
FYI HIA Economics Group - Economic and Housing Snapshot report (PDF format). Following image (p. 21) is HIA's forward looking projections for dwelling starts (by number and per cent. change). Note that HIA title their projections as "Weak short term outlook for new home building..."

Posted Image

Let's compare the HIA and BIS estimates/forecasts. Taking BIS Shrapnel's estimate (10/11) and forecasts (11/12 and 12/13) based on 9/10 actuals (for NSW);

09/10; 31,870 (actual)
10/11; 27,090 (-15% estimate)
11/12; 31,153 (+15% forecast)
12/13; 35,514 (+14% forecast)

It would seem that BIS's forecast is not as optimistic as HIA's. Even still, both are less starts than occurred in 03/04 (45,710) and 04/05 (39,400), and considering that Sydney values (based on RP Data Hedonic Value Index) were essentially flat between Dec-03 and Dec-08 this may not bode well for Sydney values if there is any correlation between number of starts and housing values, i.e. more starts depresses values.

Posted Image
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Shadow
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jrsnr
8 Aug 2011, 04:02 PM
Sydney values (based on RP Data Hedonic Value Index) were essentially flat between Dec-03 and Dec-08 this may not bode well for Sydney values if there is any correlation between number of starts and housing values, i.e. more starts depresses values.
More starts will eventually depress values once the construction boom gets going and sufficient new starts are completed, flowing through to create supply / dwellings for sale.

Generally what happens is at the start of the construction boom house prices start rising strongly because of all the extra construction income flowing into the economy. And the fact that prices are rising encourages more developers to construct, creating a positive feedback loop.

After a while (several years) what can happen is prices rise too far, but the momentum of the construction boom keeps it running for longer than necessary, leading to oversupply. That's when prices start to fall, and that's basically what happened in Sydney post 2003 (or Melbourne today).
Edited by Shadow, 8 Aug 2011, 04:24 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Catweasel
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Shadow
8 Aug 2011, 04:22 PM
More starts will eventually depress values once the construction boom gets going and sufficient new starts are completed, flowing through to create supply / dwellings for sale.

Generally what happens is at the start of the construction boom house prices start rising strongly because of all the extra construction income flowing into the economy. And the fact that prices are rising encourages more developers to construct, creating a positive feedback loop.

After a while (several years) what can happen is prices rise too far, but the momentum of the construction boom keeps it running for longer than necessary, leading to oversupply. That's when prices start to fall, and that's basically what happened in Sydney post 2003 (or Melbourne today).
The Shadow say a house price go the up because a construction income flow into economy. Is it some a natural order because macro the environment not a very sexy if it open a blind for a few minutes in a day. Lesson 1 for the zealot: It can make a story base on a history but foolish to say a future base on that story, especially if promote by data company.
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Shadow
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Evil Mouzealot Specufestor

Catweasel
8 Aug 2011, 04:29 PM
some a natural order because macro the environment not a very sexy if it open a blind for a few minutes in a day
I'm sorry, but I don't understand what you're saying.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
Profile "REPLY WITH QUOTE" Go to top
 
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