New housing outlook bleak for 2012: HIA
There is likely to be little respite for residential builders in 2012, with the Housing Industry Association forecasting further declines in new housing starts – possibly to levels last seen in the wake of the GFC.
The bleak outlook comes despite a 6.8% increase in new home sales in November driven by interest rate cuts - and likely to offer only a short term respite.
In its January 2012 note on new housing conditions, the industry body expects housing starts to decline by 10.4% for the 2011-12 financial year (ending June 2012) to a level of 141,159, before recovering by 5.6% to a level of 149,007 in 2012-13.
Detached house starts are forecast to fall by 6.6% to 90,488 in 2011-12 before growing by 5.6% in 2012-13 to 95,535.
Starts for “other dwellings” are forecast to drop by 16.4% in 2011-12 to 50,671 before increasing by 5.5% to a level of 53,472 in 2012-13.
Source: HIA
These forecasts follow a September 2011 quarter where seasonally adjusted housing starts fell by 6.8% to 35,672, the lowest level in two years. On annualised basis, housing starts were running at an annualised level of just under 142,690 in September 2011, a level only 4,000 above the 138,690 dwelling starts recorded in 2009.
On the back of these forecasts and recent performance, the HIA paints a bleak picture and renews its call for the government to implement short-term stimulus measures.
“Since the release of the Spring edition of the HIA’s National Outlook at the end of September 2011 and the summer edition released on December 19 2011, residential land sales appeared to have bottomed at a woefully low level, as did new home sales volumes, while local government building approvals experienced accelerated weakness, which took them back toward GFC levels,” the HIA says.
“New housing finance had, encouragingly, tracked sideways for some months, but remained 2.5% down on the equivalent levels in 2010.”
“This is not an auspicious start for the new home building sector amidst the heightened weakness and uncertainty that the European debacle has assumed since mid-2011.”
According to the HIA, what is needed is “direct, short-term stimulus to new home building within an over-arching, renewed focus on structural reform to reduce the disproportionately high, inefficient and inequitable cost base of new homes throughout Australia”.
“Housing is shelter, it is a necessity of life. Australia doesn't provide enough of it, in an affordable fashion, for renters or owners.
“So, kill three birds with one stone. Stimulate the new home sector to ensure the short term provision of a larger amount of a necessity good. Create a positive multiplier impact to the wider domestic economy during a time of fragility and uncertainty. Engender a medium/long term level of new home building more commensurate with the requirements of Australia's population which will create efficiency gains and inter-generational equity improvements in the Australian economy. It seems so simple.
“Nothing is simple, of course, but neither should the housing policies Australia so desperately needs be as difficult to enact as recent inertia implies they are.”
According to the most recent ABS figures, building approvals slumped by 10.7% nationwide in October led by a 19.5% drop in building approvals in Queensland.
There were also big falls in approvals in Victoria (18%), Tasmania (12.9%) a modest decline in South Australia (3.3%) and flat growth NSW (0.4%) and the ACT (0%). The only state to register an increase was Western Australia, where approvals were up 2.1%.