It amazes me, in these "the facts are" arguments, positing a "deficit" in new house construction, that so little attention is paid to how the classic economic demand curve works:
If the price for some key "newbuild" resource rises, then potential consumers will make do with less of it. They will be especially free to do so if there is a large--nay, huge--stock of already-built resource which can be, temporarily or permanently, used more intensively than it was before.
An important observation.
I cant make sense of B_B's logic on this one either.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
The Housing Industry Association, the voice of Australia’s residential building industry, today released the Autumn 2013 edition of its National Outlook, Australia’s most comprehensive housing report card.
HIA’s latest National Outlook highlights a challenging environment for businesses operating in both sectors of the residential construction industry.
“Cautious household attitudes continue to restrain expenditure on residential construction, although many prospective buyers are being impeded by tight credit conditions. This impediment is preventing some new home building and larger renovation jobs from proceeding,” said HIA Chief Economist, Dr Harley Dale.
“The dominant constraints to a sustained recovery in residential construction continue to be found on the supply side. A further tightening of credit conditions for residential development, together with disproportionately high and inefficient taxation as well as excessive regulation of new housing stifle the potential of an inherently efficient component of the Australian economy,” said Harley Dale.
“Lower interest rates are playing a role in creating a more favourable environment for residential construction activity, but Federal government action holds the key to a sustainable recovery,” commented Harley Dale.
“If the residential construction industry is to play its required role in rebalancing Australia’s economic growth then Federal leadership is imperative in a range of areas including a reduction in taxation and regulatory costs, increased banking competition, and greater workplace flexibility,” said Harley Dale.
“In terms of the short term outlook for residential construction it is encouraging to see a new home building recovery underway in New South Wales and Western Australia. However, it appears unlikely that there will be any growth in national housing starts in 2013.”
HIA is forecasting a flat year for housing starts in Australia in 2013, although NSW starts are forecast to increase by 14 per cent and WA starts by 17 per cent. Growth of 2.5 per cent and 2.8 per cent is forecast for national housing starts in 2014 and 2015, respectively, which would take starts to a level of 155,336.
“Renovations activity endured a disappointing year in 2012, falling to its lowest level since 2002, with weaker levels of home equity restricting finance for renovation jobs.” HIA is forecasting modest growth of 1.9 per cent in 2013 and 2.3 per cent in 2014 which would take the value of total renovations investment to $29.7 billion, around $1.4 billion short of the 2011 peak.
An upturn in the building of new houses and apartments is now “well entrenched” in NSW and WA, says Westpac senior economist Matthew Hassan.
There is a more gradual upturn in Queensland, but approvals are still trending down in Victoria, he says.
Hassan's comments follow yesterday’s ABS dwelling approvals data, which showed a greater than expected 9.1% bounce in approvals in April following a 5.5% fall in March.
Hassan points out that total building approvals in NSW rose 33% led by a 57% jump in unit approvals but with a strong 6.6% rise for private sector house approvals as well.
“Victoria also posted a strong 9.3% gain with a more evenly balanced mix (private sector house approvals up 8.2%).
“Queensland approvals fell overall but led by units with private sector house approvals up 8.8%.
“Approvals rose 4.3% in WA although private sector house approvals were down 10%,” he says.
“Stepping back from the monthly volatility, the upturn is well entrenched in WA and NSW but coming through more gradually in Queensland with trend approvals still falling 1% per month in Victoria,” he says.
Renovation activity is also improving with the value of renovation approvals rising 1.5% in April "continuing its improvement from a soft run earlier in the year".
Overall, Hassan says the housing construction recovery, “which began early last year but seemed to lose its way in late 2012 and early 2013 is showing signs of regaining momentum”.
“After trending lower through the first three months of the year, dwelling approvals rose 9.1% in April, well above market expectations of a 4% rise,” he says.
Hassan adds that the strong 18% rise in private sector units in April – a traditionally less reliable number often skewed by the launch of new high rise and medium density projects – “showed fairly broad gains”.
“Both 'high rise' and 'low to mid-rise' sub-categories drove the rise. The more granular geographic detail also shows a broad gain rather than one driven by individual projects,” he says.
The chief executives of Australia’s struggling building products manufacturers have warned the hoped-for recovery in housing construction is proving patchy and they are weighed down by high costs and an outdated industrial relations system.
Boral, Fletcher Building, CSR and Adelaide Brighton have been forced to cut thousands of jobs, close plants, write down equipment and lower production in response to a construction industry in the doldrums despite record low interest rates, a rising population and state government incentives.
Boral chief executive Mike Kane said earnings from its construction materials division were being underpinned by resources-related work in Queensland and Western Australia. But the stagnant housing market had hurt sales of bricks, window and timber products.
He forecast “some strength” in NSW and West Australian housing construction and said Victorian and Queensland housing activity was “still not moving in the right direction”.
The warnings are likely to worry the Reserve Bank of Australia, which is counting on an uptick in housing construction to drive growth as the resources investment boom peters out.
So far, the Reserve Bank’s low- interest rate strategy has been driving up prices of established houses and apartments.
Even though the number of new home loans in the three months ended June 30 was the highest in three years, the Reserve Bank board noted at its meeting two weeks ago that the housing recovery was “muted” compared to previous economic upswings.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index has been in contraction for 38 consecutive months.
Our homebuilder in WA has had record sales for most of the last 6 months. It takes some time before this results in jobs. Our project took almost 6 months to start. Next year should see a big tick up in Perth residential construction as the work is already on the books.
There are also a few residential towers being planned for Perth.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
This is stifling construction activity as landowners ration supply by parking their fat bums on develop-able parcels in the hope of a repeat of recent rises.
Rather than being a residual value, land is the core cost.
A market reset (soon, soon) will crush land values.
Combine this with steady structure depreciation during the retreat and the outlook for residential is bleak.
This is stifling construction activity as landowners ration supply by parking their fat bums on develop-able parcels in the hope of a repeat of recent rises.
Rather than being a residual value, land is the core cost.
A market reset (soon, soon) will crush land values.
Combine this with steady structure depreciation during the retreat and the outlook for residential is bleak.
Don’t Buy Now!
Don't procrastinate too long, you don't want to be the last bear standing. There is nothing more comical than a dated doom and gloomer watching his rent rise , while their peers share stories of lively property price growth and dropping mortgage costs relative to income.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
In most of Australia, rental vacancy rates are stable and houses for sale are at reasonable levels. So despite immigration being very high there isn't really a sign of a housing shortage (Sydney possibly excluded). Therefore you would have to conclude that enough houses are being built at the moment. So unless you want to turn up immigration even higher, housing construction is about as good as it's going to get. There does seem to be a shift towards apartments being built over detached which is expected given the lack of space available in our cities. It may also be the case that more migrants have a preference for apartment living.
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