HIA Industry Outlook Breakfast, Newcastle – May 2015

The Outlook for the Residential Construction
Industry – Hunter and the Central Coast
Dr Harley Dale
HIA Chief Economist
HIA Industry Outlook Breakfast, Newcastle, May 2015
The most comprehensive housing report
card produced in Australia
•
Autumn 2015 edition out May 18:-
•
The global economy has some risks and
China’s economy is slowing.
•
Economic growth in Australia is ‘weak’, but new
housing is holding us up.
•
The NSW economy is in a housing-led recovery
and is growing at its fastest pace in 15 years!
•
Renovations activity continues to struggle ...
For more information regarding HIA Economics,
please contact us at: (02) 6245 1393 or
[email protected]
The Economic Backdrop
The NSW Economy is on the up
Gross State Product - New South Wales
Source: ABS 5220.0; Access Economics
6.0
5.0
4.0
Long term average
Per cent
Forecast
3.0
2.0
1.0
Year ended June
• Growth of 2.8% in 2015/16 will be the fastest pace in 15 years!
2017/18
2016/17
2015/16
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
0.0
Interest rates are very supportive
Interest Rates, Australia
10.00
2.80
9.00
2.70
8.00
2.60
7.00
2.50
6.00
2.40
5.00
2.30
4.00
2.20
3.00
2.10
2.00
2.00
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
% Interest Rate
Source: HIA Economics, RBA
Mortgage Rate Margin to Cash Rate (RHS)
•
We got another cut yesterday …
•
Lock it in Eddie …
Discounted Variable Mortgage Rate
RBA Cash Rate
Small Business Variable Term Loan
Apr-15
Apr-14
Apr-13
Apr-12
Apr-11
Apr-10
Apr-09
Apr-08
Apr-07
Apr-06
Apr-05
Apr-04
Apr-03
Apr-02
Apr-01
Apr-00
Apr-99
Apr-98
Apr-97
Apr-96
Apr-95
Apr-94
Apr-93
Apr-92
Index
Consumer confidence remains weak
Consumer Confidence
Source: Westpac-Melbourne Institute
125
120
115
110
105
100
95
90
85
80
75
Unemployment is climbing higher
Unemployment Rate by State - March 2015
Source: ABS Labour Force
7.0
6.2
6.5
6.0
6.6
National Unemployment Rate
6.6
6.4
6.0
5.5
5.5
5.0
4.5
4.3
4.4
NT
ACT
4.0
3.5
3.0
NSW
VIC
QLD
SA
WA
TAS
The Hunter Economy
Economic and housing update: a mixed bag
HUNTER ECONOMY
INDICATOR
UPDATE
Interest rate settings
Very Favourable
Mining sector
Challenging
Unemployment rate
Mixed
Detached houses
Weakening
Mutli-units
Improved
Major alterations and additions
Improving
The unemployment profile needs to improve
Unemployment rate - Hunter region
Source" ABS Labour Force
14
12
8
6
4
2
Newcastle
Hunter Valley exc Newcastle
5 yr avge
20 yr avge
Mar-15
Sep-14
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
0
Mar-04
Per cent
10
There is some employment growth
Change in Newcastle employment levels - Feb 2015 vs Feb 2014
Source: ABS Labour Force
Administrative and Support Services
6.0
Electricity
3.3
Water and Waste Services
1.3
Wholesale Trade
1.3
Transport
1.1
Financial and Insurance Services
1.1
Hiring and Real Estate Services
0.6
Scientific and Technical Services
0.5
Forestry and Fishing
0.4
Professional
0.4
Information Media and Telecommunications
0.4
Agriculture
0.3
Manufacturing
0.2
Mining
-0.1
Gas
-0.4
Retail Trade
-0.4
Rental
-0.6
Construction
-0.8
Postal and Warehousing
Accommodation and Food Services
-1.1
-1.5
-2.0
-1.0
0.0
1.0
2.0
change in employed persons ('000)
3.0
4.0
5.0
6.0
7.0
There is some employment growth
Change in Hunter (exc Newcastle) employment levels - Feb 2015 vs Feb 2014
Source: ABS Labour Force
Gas
0.7
Construction
0.4
Retail Trade
0.3
Mining
0.1
Scientific and Technical Services
0.0
Forestry and Fishing
-0.1
Wholesale Trade
-0.1
Transport
-0.2
Accommodation and Food Services
-0.2
Professional
-0.5
Financial and Insurance Services
-0.6
Information Media and Telecommunications
-0.8
Water and Waste Services
-0.8
Hiring and Real Estate Services
-0.9
Postal and Warehousing
-1.1
Manufacturing
-1.3
Electricity
-1.4
Rental
-1.6
Agriculture
-1.7
Administrative and Support Services
-9.6
-12
-10
-8
-6
change in employed persons ('000)
-4
-2
0
2
Confidence seems to have bounced back
New Home Building in NSW and the
Hunter Region
The Short Term Future Looks Bright
Building Approvals - NSW
Source: ABS Building Approvals
7,000
6,000
4,000
3,000
2,000
Seasonally adjusted
Trend
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
Mar-00
Mar-99
Mar-98
Mar-97
Mar-96
Mar-95
Mar-94
1,000
Mar-93
Number
5,000
Hunter region land sales – heading south
South Eastern
11%
Murray
4%
Mid-North Coast
0%
North Western
-2%
Murrumbidgee
-6%
Richmond-Tweed
-6%
Central West
-6%
Hunter
-16%
Illawarra
Sydney
-22%
-26%
Northern -27%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Source: CoreLogic RP Data, HIA Economics
RESIDENTIAL LOT SALES - ANNUAL % CHANGE - 6 MTHS TO DEC 2014
‘Local’ Detached House Approvals
Single Detach House Approvals 12 months to Feb 2014 12 months to Feb 2015
Hunter Valley exc Newcastle
1,589
1,209
Lower Hunter
503
392
Maitland
628
534
Port Stephens
225
197
Upper Hunter
233
86
Newcastle and Lake Macquarie
1,279
1,115
Lake Macquarie - East
248
257
Lake Macquarie - West
446
516
Newcastle
585
342
Unit/Townhouse
12 months to Feb 2014 12 months to Feb 2015
Hunter Valley exc Newcastle
386
256
Lower Hunter
135
76
Maitland
167
164
Port Stephens
45
14
Upper Hunter
39
2
Newcastle and Lake Macquarie
522
734
Lake Macquarie - East
169
206
Lake Macquarie - West
60
198
Newcastle
293
330
Hunter Valley exc Newcastle Detached House
Approvals
Single Detached House Approvals - Hunter Valley exc Newcastle
Source: ABS Building Approvals
160
Annual change -24%
1,600
140
1,400
120
No. of approvals
1,800
1,200
100
1,000
80
800
60
600
40
400
20
200
0
0
Mar-14
Apr-14
May-14
Jun-14
Hunter Valley exc Newcastle
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Hunter Valley exc Newcastle ‘Multi-Unit’
Approvals
Unit Approvals - Hunter Valley exc Newcastle
Source: ABS Building Approvals
60
Annual change -34%
400
50
No. of approvals
450
350
40
300
250
30
200
20
150
100
10
50
0
0
Mar-14
Apr-14
May-14
Jun-14
Hunter Valley exc Newcastle
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Hunter Valley exc Newcastle Building Approvals
Total Dwelling Approvals - Hunter Valley exc Newcastle
Source: ABS Building Approvals
200
Annual change -26%
180
160
2,500
2,000
No. of approvals
140
120
1,500
100
80
1,000
60
40
500
20
0
0
Mar-14
Apr-14
May-14
Jun-14
Hunter Valley exc Newcastle
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Newcastle and Lake Macquarie Detached House
Approvals
Single Detached House Approvals - Newcastle and Lake Macquarie
Source: ABS Building Approvals
Annual change -13%
No. of approvals
140
1,400
120
1,200
100
1,000
80
800
60
600
40
400
20
200
0
0
Mar-14
Apr-14
May-14
Jun-14
Newcastle and Lake Macquarie
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Newcastle and Lake Macquarie ‘Multi-Unit’
Approvals
Unit Approvals - Newcastle and Lake Macquarie
Source: ABS Building Approvals
Annual change +41%
250
800
700
No. of approvals
200
600
500
150
400
100
300
200
50
100
0
0
Mar-14
Apr-14
May-14
Jun-14
Newcastle and Lake Macquarie
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Newcastle and Lake Macquarie Building
Approvals
Total Dwelling Approvals - Newcastle and Lake Macquarie
Source: ABS Building Approvals
350
Annual change +3%
1,800
300
1,600
250
No. of approvals
2,000
1,400
1,200
200
1,000
150
800
600
100
400
50
200
0
0
Mar-14
Apr-14
May-14
Jun-14
Newcastle and Lake Macquarie
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Renovations Activity in NSW and the
Hunter Region
Hunter Valley exc Newcastle Alterations and
Additions
Value Alterations and Additions - Hunter Valley exc Newcastle
Source: ABS Building Approvals
7,000
Annual change +15%
6,000
60,000
50,000
5,000
No. of approvals
40,000
4,000
30,000
3,000
20,000
2,000
10,000
1,000
0
0
Mar-14
Apr-14
May-14
Jun-14
Hunter Valley exc Newcastle
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Newcastle and Lake Macquarie Alterations and
Additions
Value Alterations and Additions - Newcastle and Lake Macquarie
Source: ABS Building Approvals
Annual change +2%
14,000
12,000
120,000
100,000
10,000
No. of approvals
80,000
8,000
60,000
6,000
40,000
4,000
20,000
2,000
0
0
Mar-14
Apr-14
May-14
Jun-14
Newcastle and Lake Macquarie
Jul-14
Aug-14
Sep-14
Oct-14
12 months to Feb 2014
Nov-14
Dec-14
Jan-15
Feb-15
12 months to Feb 2015
Some breadth to alts and adds activity
Value of Alterations and Additions 12 months to Feb 2014 12 months to Feb 2015
Hunter Valley exc Newcastle
42,561
49,017
Lower Hunter
13,994
18,524
Maitland
11,783
13,533
Port Stephens
12,473
12,440
Upper Hunter
4,312
4,525
Newcastle and Lake Macquarie
106,460
108,457
Lake Macquarie - East
27,757
29,402
Lake Macquarie - West
14,281
13,924
Newcastle
64,424
65,129
A glance at regional house prices
House Prices: 12 months to February 2015
Source: Australian Property Investor
$340,000
15.0
0.6
$330,000
3.1
10.0
$320,000
9.8
$310,000
6.6
$300,000
$290,000
$335,000
$332,000
$314,000
2.0
$280,000
$270,000
3.3
$250,000
-10.3
-13.0
Singleton
$300,000
0.0
3.9
-5.0
$285,000
$260,000
5.0
-10.0
-10.4
-15.0
Gosford
Median Price
Maitland
12 month Growth (%)
Muswellbrook
10 year Growth (%)
Cessnock
So what does the future hold?
A promising outlook?
Hunter Valley exc Newcastle Single Detached House Forecasts
Source: HIA Economics
2,100
40%
Forecast
1,900
1,837
1,712
Thousand dwellings commenced
1,700
1,500
1,396
1,420
1,312
1,287
1,300
1,100
1,093
30%
1,653
1,496
1,581
1,360
20%
10%
1,256
0%
1,046
986
-10%
900
-20%
700
500
-30%
2004 (a) 2005 (a) 2006 (a) 2007 (a) 2008 (a) 2009 (a) 2010 (a) 2011 (a) 2012 (a) 2013 (a)
Hunter Valley exc Newcastle
% growth
2014
2015
2016
2017
Steady ahead at higher levels?
Newcastle and Lake Macquarie Single Detached House Forecasts
Source: HIA Economics
1,300
1,186
1,200
1,108
Thousand dwellings commenced
1,171
1,155
20%
10%
1,000
800
1,167
1,078
1,100
900
30%
Forecast
959
928
892
870
820
0%
863
-10%
773
733
-20%
700
600
-30%
500
-40%
2004 (a) 2005 (a) 2006 (a) 2007 (a) 2008 (a) 2009 (a) 2010 (a) 2011 (a) 2012 (a) 2013 (a)
Newcastle and Lake Macquarie
% growth
2014
2015
2016
2017
THANK YOU FOR YOUR TIME THIS MORNING
Harley Dale
HIA Chief Economist
http://economics.hia.com.au