NIMBYism to impact on subdued two-speed recovery in new home building: ANZ
NIMBYism (not in my backyard) and "save our suburbs" campaigns by local residents and councils are one of a number of factors that will inhibit a strong residential building recovery despite rising pent-up demand for new housing, according to Paul Braddick, head of property research at ANZ.
In his latest update, Braddick lists the difficulty in obtaining dwelling construction approval due to both red and green tape (environmental concerns) as a key factor that will result in a subdued recovery, rather than a stronger one.
The other factors that will impinge on the recovery, he says, are soft house price expectations, rising building costs, a squeeze on developer profit margins, substantial infrastructure charges and developer contributions, problems with land availability, affordability and accessibility, insufficient infrastructure (especially transport) and tight credit conditions.
According to Braddick, there is strong pent-up demand for new housing with many conditions favouring a solid recovery including falling interest rates, improved market sentiment and house prices appearing to have bottomed out in most capital cities.
Braddick says total dwelling approvals have risen by almost 12% in trend terms since their low point in January this year, but says the upswing has been almost exclusively driven by a one-third jump in apartment approvals, while detached house approvals remain "near cyclical lows equal to the lows of the past 30 years, excluding the post-GST introduction".
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ANZ doubts the boom in apartment building’s share of new building activity (now above 40%) is sustainable given that detached housing makes up 75% of the existing housing stock
“While we continue to expect a affordability-driven structural shift away from traditional landed property towards higher-density living, we believe this will be a gradual, longer-term adjustment, rather than as dramatic as suggested in recent data," says Braddick.
ANZ forecasts real dwelling investment (seasonally adjusted) growth to have turned positive in the September quarter 2012 and for 138,000 and 146,000 dwellings to be completed in 2012-13 and 2013-14, respectively, compared with 142,000 in 2011-12.
However, the recovery will not be uniform with ANZ predicting “solid cyclical residential building recoveries for New South Wales, Queensland, Western Australia and the Northern Territory, but weak activity in Victoria, South Australia, Tasmania and the Australian Capital Territory in the near term.
This is due to a “marked de-synchronisation of home building cycles across the states” with Melbourne, Adelaide, Perth, Hobart and Canberra bucking the national trend in recent years and having “actually significantly out-performed relative to their long-run average home building activity levels”.
Overall though, Braddick warns that the recovery will “disappoint despite the urgent need for additional housing stock".
“The total decline in interest rates in the current cycle is small compared with earlier cyclical upturns.
“Moreover, economic uncertainty and heightened debt aversion mean the responsiveness of households and home buyers to lower interest rates is likely to be significantly lower in this cycle than before, though strong population growth means there is more pent-up demand.
“For all of the above-mentioned reasons, we suspect the current upswing in new dwelling approvals and building activity will disappoint relative to previous recoveries and existing market expectations.