The Reserve Bank of Australia’s decision to keep the official cash rate on hold at 2.75% reduces the potential for residential building activity to support the national economy, it is claimed.
According to the Housing Industry Association, the voice of Australia’s residential building industry, the RBA had the option to reduce rates and deliver badly needed support to businesses and households but by failing to move, the weaknesses in the residential construction industry will merely be prolonged.
‘Outside of the mining sector, growth in other sectors of the economy is quite weak. This includes residential construction where activity is at its lowest in almost a decade. Lower interest rates are badly needed to help place the industry on a sustainable growth path and to give businesses a bit of breathing space in terms of interest costs,’ said Shane Garrett, HIA’s senior Economist.
‘Our economy needs a strong residential building sector to substitute for declining construction activity in the mining sector. The scope for further reduction in the cash rate exists, despite the RBA’s concerns about inflation. It must be remembered that the inflationary impacts of the recent dollar decline will be limited by the considerable slack that exists across sections of the economy as well as the use of fixed price contracts with suppliers,’ he explained.
‘Accordingly, the RBA should not allow worries about inflation to hold it back from providing necessary stimulus to the economy. Since November 2011, the banks have withheld up to 35 basis points of rate reductions from small business and mortgage borrowers. The RBA’s failure to move means that the banks now have the opportunity to seize the initiative. A unilateral rate cut from them over the next couple of days would add to the prospects for a decent and a sustainable residential construction recovery, which would directly or indirectly benefit tens of thousands of business, including the banks themselves,’ he added.
Meanwhile, the HIA has expressed little surprise at the news that a survey of community service providers lists housing availability and affordability as the biggest problem facing the sector and the greatest drain on resources.
The survey by ACOSS of 500 service providers states that a lack of affordable housing is having a ‘devastating impact’ and that nearly 70% of housing and homeless service providers report that they struggle to meet demand.
‘There has been a failure by successive governments at a state and federal level to address the fundamental constraints to housing delivery,’ said HIA chief executive for industry policy Graham Wolfe.
‘Residential construction is currently experiencing its longest trend decline in post war history, which is being driven in part by the excessive and inefficient taxation on housing, a tight credit supply and state planning systems that constrain the timely and cost effective delivery of housing,’ he pointed out.
‘When there is shortage of homes being built, this impacts on the rental market at all levels. Families that would have otherwise been owner occupiers instead now compete for rental properties. This places cost pressures on those already in the rental market. Families that can now no longer afford the rental accommodation they need due to more competition, move to a lower price point and so on it goes,’ he explained.
‘At the end of this cascading effect is the people who are the most vulnerable, but they have nowhere else to go and this has a social and economic cost to the entire community,’ he added.
The latest HIA-RP Data residential land report is signalling only modest improvements in new home building activity.
“From a very low base in 2011, residential land sales have displayed only modest upward momentum, a trend reinforced by the 4.3% increase observable for the March 2013 quarter,” says HIA chief economist, Harley Dale.
“The March quarter update signals we are moving in the right direction, but, as a key leading indicator, land sales suggest the magnitude of a first stage new home building recovery will fall short of what the economy requires.
“Any clear improving trends are limited to NSW and Western Australia.”
“WA is the only state to have achieved clear and consistent improvements in residental land sales over the past 18 months.
Despite only a modest pick-up in sales, Dale says land prices continue to find record highs.
"Sydney and Perth are the country’s two most expensive land markets - and by quite a margin.”
"It’s no coincidence that they are the two most highly taxed residential new home building markets in the country, due in large part to excessive taxes and charges related to land."
Dale says these costs aren’t exclusive to Sydney and Perth. He says other capital cities are seeing upwards price pressures on serviceable residential land.
The latest HIA-rpdata Residential Land Report provided by the Housing Industry Association, the voice of Australia’s residential building industry and RP Data, Australia’s leading property information analytics provider, is signalling only modest improvements in new home building activity in 2013.
“From a very low base in 2011, residential land sales have displayed only modest upward momentum, a trend reinforced by the 4.3 per cent increase observable for the March 2013 quarter,” said HIA Chief Economist, Harley Dale. “The March quarter update signals we are moving in the right direction, but as a key leading indicator land sales suggest the magnitude of a first stage new home building recovery will fall short of what the economy requires.”
“At this juncture, any clear improving trends are limited to New South Wales and Western Australia,” said Harley Dale. “WA is the only state to have achieved clear and consistent improvements in residential land sales over the past 18 months.”
“Land prices, however, continue to find record highs. Sydney and Perth are the country’s two most expensive land markets and by quite a margin,” said Harley Dale. “’It’s no coincidence that they are the two most highly taxed residential new home building markets in the country, due in large part to excessive taxes and charges related to land.” “These costs aren’t exclusive to Sydney and Perth – other capital cities are also witnessing upwards price pressures on serviceable residential land. Ensuring readily available and affordable land forms a crucial part of the wider policy challenge of addressing the excessive and inefficient tax and regulatory environment faced by the new home sector,” Harley Dale added.
According to RP Data’s research director Tim Lawless, land sales are broadly starting to head in the right direction however, affordability constraints, particularly in capital city markets may limit the extent of the recovery. “The consecutive quarterly increases in land sales are certainly encouraging, albeit the rate of growth has slowed from 11.9 per cent in the December 2012 quarter to 4.3 per cent in the March 2013 quarter. With the increase in sales, there has also been a lift in land values, ongoing increases in the value of land may restrict the extent of the recovery given the already restrictive land prices in certain regions, in particular capital city markets.”
“The increase in land sales is in line with the improving trend in sales across the detached house and unit markets throughout the second half of 2012 and early 2013. Lower interest rates are clearly encouraging broadly improving housing market conditions and hopefully this recent momentum can continue, especially with first home buyer incentives now being directed specifically at new construction across a number of states.”
In the March 2013 quarter the weighted median residential land value in Australia increased by 2.5 per cent to $198,152. This value was 2.4 per cent higher when compared to the same period in 2012. The median value for capital cities increased by 3.2 per cent in the March 2013 quarter to $225,781, 2.9 per cent higher than in the March 2012 quarter. The median value for Regional Australia was $155,807 in the March 2013 quarter. This represents a quarterly increase of 0.7 per cent and a 1.3 per cent increase compared with the same period in 2012.
New home sales lifted for the fourth consecutive month in June, but the outlook for the property sector remains far from certain, according to a private survey.
The Housing Industry of Australia new home sales report showed that total seasonally adjusted new home sales increased by 3.4 per cent in June.
In the same period detached house sales increased by 7.3 per cent, but multi-unit sales dropped by 17.5 per cent.
HIA chief economist Harley Dale said the report reiterated the changing composition of new home building in 2013.
"Last financial year was a tale of two halves for new home sales," Dr Dale said.
"The first stanza was dominated by weakening detached house sales up against stronger multi-unit sales, the latter marked by an improving detached house segment occurring as the multi-unit market lost momentum.
"The overall result was that new home sales fell by 4.3 per cent in 2012/13 when compared to the 2011/12 financial year."
Dr Dale said detached housing has gained momentum as non-detached housing, primarily mid/high density product, lost momentum in the year to date.
"The leading home building indicators of both new home sales and building approvals are highlighting this trend."
New home sales continue to indicate the changing composition of new home building in 2013, said the Housing Industry Association, the voice of Australia’s residential building industry.
“Detached housing has gained momentum as non-detached housing, primarily mid/high density product, has lost momentum over 2013 to date,” said HIA Chief Economist, Dr Harley Dale. “The leading home building indicators of both new home sales and building approvals are highlighting this trend.” The HIA New Home Sales report, a survey of Australia's largest volume builders, showed that total seasonally adjusted new home sales increased by 3.4 per cent in June 2013, representing a fourth consecutive rise. Detached house sales increased by 7.3 per cent at the end of last financial year, but multi-unit sales dropped by 17.5 per cent.
“Last financial year was a tale of two halves for new home sales. The first stanza was dominated by weakening detached house sales up against stronger multi-unit sales, the latter marked by an improving detached house segment occurring as the multi-unit market lost momentum,” said Harley Dale. “The overall result was that new home sales fell by 4.3 per cent in 2012/13 when compared to the 2011/12 financial year.”
“Given it was a weaker year overall for new home sales it has been very encouraging to observe upward momentum build as we moved through 2012/13,” noted Harley Dale. “There is still a long way to go. New home sales volumes are 27 per cent down on their long term average. A range of leading indicators beyond just new home sales are yet to provide evidence of Australia approaching the healthy and geographically broad-based new home building levels required by our growing population and transitioning economy.”
In the month of June 2013 detached house sales increased by 19.7 per cent in Victoria, 7.1 per cent in Western Australia, 3.9 per cent in New South Wales, and 0.5 per cent in South Australia. Detached house sales fell by 11.0 per cent in Queensland.
New home sales figures illustrate the changing composition of new home building this year, according to the Housing Industry Association (HIA).
“Detached housing has gained momentum as non-detached housing - primarily mid/high density product - has lost momentum to date,” chief economist Harley Dale says.
“The leading home building indicators of both new home sales and building approvals are highlighting this trend.”
The HIA New Home Sales report, which surveyed Australia's largest volume builders, shows that total seasonally adjusted new home sales rose by 3.4% in June - the fourth consecutive rise.
Detached house sales rose by 7.3% in the last month of the 2013 financial year, but multi-unit sales dropped by 17.5%.
“Last financial year was a tale of two halves for new home sales,’’ Dale says.
‘’The first stanza was dominated by weakening detached house sales up against stronger multi-unit sales; the latter marked by an improving detached house segment occurring as the multi-unit market lost momentum.”
Dale says the overall result is that new home sales fell by 4.3% in 2012/13 when compared to the 2011/12 financial year.
“Given it was a weaker year overall for new home sales it has been very encouraging to observe upward momentum build as we moved through 2012/13,” Dale says.
“There is still a long way to go. New home sales volumes are 27% down on their long-term average. A range of leading indicators beyond just new home sales are yet to provide evidence of Australia approaching the healthy and geographically broad-based new home building levels required by our growing population and transitioning economy.”
In June detached house sales rose by 19.7% in Victoria, 7.1% in Western Australia, 3.9% in New South Wales, and 0.5% in South Australia. Detached house sales fell by 11.0% in Queensland.
New home sales fell for the first time in five months in July 2013, said the Housing Industry Association.
"There has been strong upward momentum to new home sales since the record lows plumbed in 2012. One monthly fall, while disappointing, does not really change the story," said HIA chief economist, Dr Harley Dale.
The HIA new home sales report, a survey of Australia's largest volume builders, showed that total seasonally adjusted new home sales fell by 4.7% in July, the first decline in total sales since a drop of 5.3% in February.
Detached house sales fell by 6.4% cent in July, which was also the first decline since February.
But sales of multi-units posted a monthly rise of 7.2% following a 17.5% in June.
"What we need to observe over the remainder of this year is strong growth in new home sales volumes," commented Harley Dale.
"To date, what we have seen is a recovery from a very low base which takes sales volumes back to levels that are reasonable, but still well short of healthy.
"It remains the case that detached house sales are running well below long term average levels in four out of five mainland states.
"The aggregate multi-unit sales measure is in a similar position of under-performance," added Harley Dale.
In the month of July 2013 detached house sales fell by 4.2 per cent in New South Wales, 10.5 per cent in Victoria, 9.6 per cent in South Australia, and 10.8 per cent in Western Australia. Detached house sales increased by 12.6 per cent in Queensland in July following three consecutive months of decline.
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