The Outlook for the Residential Construction Industry Hunter and the Central Coast Graham Wolfe HIA Chief Executive Industry Policy and Media HIA Industry Outlook Breakfast Newcastle February 2013
Backdrop: Summary of the Global Economy?
The most comprehensive housing report card produced in Australia Summer 2012/13 edition:- Around the global economy there is cause for optimism, but the risks remain. Growth in more recent quarters has been slowing. The household sector remains cautious with debt reduction seemingly preferable to consuming. Nevertheless, it is encouraging to see attitudes towards housing have improved over recent months. For more information on the HIA Economics Group, please contact us at: (02) 6245 1393 or economics@hia.com.au
HIA NSW Outlook, Summer 2012/13 edition into early 2013 global economic circumstances remain tenuous... Consequently the Australian dollar is likely to remain high in the foreseeable future and this will continue to act as a break on a return to higher levels of growth in the Australian economy. The implications for interest rates:- We think that [further reductions] is a fair bet, but there is considerable uncertainty as to how much further interest rates will fall.
Overall expectations on a recovery in 2013
Economic backdrop across Australia
Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 % change The Australian Economy where are we heading? Gross Domestic Product Source: ABS 5206 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0 Qtrly Annual
Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 % Interest Rate Interest rates have eased since late 2011 Interest Rates, Australia Source: HIA Economics, RBA 11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.70 2.60 2.50 2.40 2.30 2.20 2.10 2.00 2.00 Mortgate Rate Margin to Cash Rate (RHS) Discounted Variable Mortgage Rate RBA Cash Rate Small Business Variable Term Loan Late 2011, the RBA started to cut rates there has been 175bps of cuts to the official cash rate in the current easing cycle. Businesses and households still face tight credit conditions
Index Consumer confidence is (finally) picking up Consumer Confidence Source: Westpac-Melbourne Institute 125 120 115 110 105 100 95 90 85 80 75 Feb-95 Feb-97 Feb-99 Feb-01 Feb-03 Feb-05 Feb-07 Feb-09 Feb-11 Feb-13
Unemployment is a big key to the outlook Unemployment Rate by State - January 2013 Source: ABS Labour Force 9.0 8.0 7.8 7.0 National Unemployment Rate 6.0 6.1 5.5 6.1 5.0 5.1 4.5 4.0 4.0 3.9 3.0 NSW VIC QLD SA WA TAS NT ACT
The Hunter Economy
Economic and housing update: a mixed bag HUNTER ECONOMY INDICATOR Interest rate settings Mining sector Unemployment rate Detached houses Mutli-units Major alterations and additions UPDATE Improved Mixed Improved Mixed Improved Mixed
Key to the Hunter s economic backdrop
But where are thermal coal prices heading?
Implications for the labour market Change in Hunter employment levels - Yr to Nov 2012 vs Yr to Nov 2011 Source: ABS Labour Force Health Care and Social Assistance 20.3 Agriculture, Forestry and Fishing Other Services Public Administration and Safety 11.8 11.4 14.5 Rental, Hiring and Real Estate Services 7.0 Electricity, Gas, Water and Waste Services Arts and Recreation Services Retail Trade Mining Wholesale Trade 3.9 2.9 1.8 1.3 0.8 Information Media and Telecommunications Education and Training Transport, Postal and Warehousing Construction Administrative and Support Services Financial and Insurance Services -0.3-0.6-1.7-2.9-5.0-6.0 Accommodation and Food Services -10.9 Manufacturing -27.7 Professional, Scientific and Technical Services -35.0-40.0-30.0-20.0-10.0 0.0 10.0 20.0 30.0 change in employed persons ('000) Though there are bigger employers than the local mining industry.
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Per cent Overall Hunter region unemployment Unemployment rate - Hunter region Source" ABS Labour Force 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Newcastle Hunter 5 yr avge 20 yr avge
Which is key to consumer confidence
Business sentiment in the Hunter
Residential construction in the Hunter
Good starting point: Hunter home buying sentiment has picked up Source: Hunter Valley Research Foundation
Sep-2004 Dec-2004 Mar-2005 Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 Jun-2011 Sep-2011 Dec-2011 Mar-2012 Jun-2012 Sep-2012 $ Source: rpdata.com, HIA Economics Hunter region land sales holding up decent levels RESIDENTIAL LAND SALES & MEDIAN LOT VALUE - HUNTER 210000 700 190000 170000 150000 130000 110000 90000 70000 600 500 400 300 200 100 50000 0 No. of sales Value (LHS) and are still outperforming other NSW regions
No. of approvals Hunter Detached House Approvals Detached House Approvals - Hunter Valley ex Newcastle Source: ABS Building Approvals 160 140 136 134 137 3 months to Dec 12 v 3 months to Dec11-6% change 149 140 120 120 109 109 120 107 112 110 100 87 93 87 80 60 40 20 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Hunter Multi-Unit Approvals Multi-Unit Approvals - Hunter Valley ex Newcastle Source: ABS Building Approvals 3 months to Dec 12 v 3 months to Dec 11 120 100 +155% change 106 80 60 40 20 0 55 47 46 38 31 20 22 17 30 29 28 7 11 2 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Newcastle Detached House Approvals Detached House Approvals - Newcastle and Lake Macquarie Source: ABS Building Approvals 3 months to Dec 12 v 3 months to Dec 11-10% change 100 90 80 70 60 50 69 91 69 71 48 52 74 61 59 76 84 82 75 48 40 30 29 20 10 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Newcastle Multi-Unit Approvals Multi-Unit Approvals - Newcastle and Lake Macquarie Source: ABS Building Approvals 3 months to Dec12 v 3 months to Dec 11 +15% change 70 60 64 62 62 50 47 40 41 32 30 20 14 18 18 10 5 8 6 6 7 10 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Detached House Approvals Central Coast Detached House Approvals - Central Coast Source: ABS Building Approvals 70 3 months to Dec 12 v 3 months to Dec 11 +7% change 60 60 50 51 51 40 30 32 41 37 37 36 36 28 43 42 38 31 36 20 10 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Central Coast Multi-Unit Approvals Multi-Unit Approvals - Central Coast Source: ABS Building Approvals 70 60 64 3 months to Dec 12 v 3 months to Dec 11 +283% change 50 50 40 30 20 10 0 26 21 17 14 9 9 10 7 8 5 4 0 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Total detached house approvals Detached House Approvals - Hunter Valley, Newcastle and Central Coast Source: ABS building approvals 300 250 200 237 266 193 186 216 193 173 237 210 256 3 months to Dec 2012 vs 3 months to Dec 2011-5.2% change 276 234 223 266 171 150 100 50 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Total multi-unit approvals Multi-unit Approvals - Hunter Valley, Newcastle and Central Coast Source: ABS building approvals 200 180 3 months to Dec 2012 vs 3 months to Dec 2011 91.9% change 185 160 140 128 134 120 100 107 91 97 96 80 60 40 57 25 41 32 36 26 66 20 12 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
No. of approvals Total Approvals Total Residential Building Approvals - Hunter Valley, Newcastle and Central Coast Source: ABS building approvals 3 months to Dec 2012 vs 3 months to Dec 2011 500 450 +16..2% change 451 400 394 371 367 350 300 250 200 249 250 211 323 234 205 246 282 300 320 267 150 100 50 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Number compared with NSW approvals Building Approvals - NSW Source: ABS Building Approvals 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Seasonally adjusted Trend
Hunter Alterations and Additions Value of Approved Major Alterations & Additions ($'000) - Hunter Valley ex Newcastle Source: ABS Building Approvals 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 3 months to Dec 12 v 3 months to Dec 11-3% change 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
Newcastle Alterations and Additions Value of Approved Major Alterations & Additions ($'000) - Newcastle and Lake Macquarie Source: ABS Building Approvals 12,000 3 months to Dec 12 v 3 months to Dec 11 +4% change 10,000 8,000 6,000 4,000 2,000 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
Central Coast Alterations and Additions Value of Approved Major Alterations & Additions ($'000) - Central Coast Source: ABS Building Approvals 8,000 3 months to Dec 12 v 3 months to Dec 11 +3% change 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 While NSW major alts and adds track sideways The NSW Renovations and Additions Market Monthly Lending and Monthly Council Approvals ($000) 250,000 200,000 150,000 100,000 50,000 0 Lending for Alts and Adds Value of Council Approved Alts and Adds
A glance at regional house prices: picking up House Prices: 12 months to November 2012 Median Price 12 month Growth (%) 10 year Growth (%) Cessnock $255,000 4.1 7.4 Gosford $263,000-4.2 0.4 Muswellbrook $313,000 6.0 10.3 Singleton $395,000 9.4 10.2 Source: Australian Property Investor
So what does the future hold?
Thousand dwellings commenced Short term starts outlook NSW Housing Starts Forecasts Source: HIA Economics Group 50.00 45.00 45.66 Forecast 40.00 35.00 30.00 39.43 33.00 29.76 31.55 31.99 30.96 29.09 33.71 35.50 25.00 23.56 20.00 15.00 10.00 5.00 0.00 2003/04 (a) 2004/05 (a) 2005/06 (a) 2006/07 (a) 2007/08 (a) 2008/09 (a) 2009/10 (a) 2010/11 (a) 2011/12 (a) 2012/13 2013/14
The outlook for renovations Financial Year DWELLING STARTS: by state and territory thousand dwellings commenced Starts NSW VIC QLD SA WA TAS NT ACT Aust 2003/04 (a) 45.663 45.417 44.212 10.442 22.554 2.845 1.037 2.902 175.072 2004/05 (a) 39.432 40.941 39.431 11.013 22.904 2.825 1.329 2.457 160.332 2005/06 (a) 33.004 39.271 37.732 10.640 25.912 2.562 1.350 1.867 152.338 2006/07 (a) 29.763 38.589 41.185 11.181 24.704 2.863 1.411 2.307 152.003 2007/08 (a) 31.550 41.718 44.794 11.876 22.440 2.898 1.045 2.246 158.567 2008/09 (a) 23.562 41.898 28.744 11.966 18.450 2.905 1.122 2.657 131.304 2009/10 (a) 31.994 54.700 34.407 11.991 25.087 3.121 1.243 4.405 166.948 2010/11 (a) 30.963 59.078 26.600 10.536 20.798 3.000 1.296 5.127 157.398 2011/12 (a) 29.085 49.704 26.502 8.690 17.592 2.225 1.261 4.465 139.524 2012/13 33.711 41.784 28.252 8.803 21.920 2.238 1.429 3.317 141.454 2013/14 35.503 40.336 32.183 9.090 23.024 2.316 1.376 3.232 147.060 Source HIA Economics % change: 2004/05 (a) -14% -10% -11% 5% 2% -1% 28% -15% -8% 2005/06 (a) -16% -4% -4% -3% 13% -9% 2% -24% -5% 2006/07 (a) -10% -2% 9% 5% -5% 12% 5% 24% 0% 2007/08 (a) 6% 8% 9% 6% -9% 1% -26% -3% 4% 2008/09 (a) -25% 0% -36% 1% -18% 0% 7% 18% -17% 2009/10 (a) 36% 31% 20% 0% 36% 7% 11% 66% 27% 2010/11 (a) -3% 8% -23% -12% -17% -4% 4% 16% -6% 2011/12 (a) -6% -16% 0% -18% -15% -26% -3% -13% -11% 2012/13 16% -16% 7% 1% 25% 1% 13% -26% 1% 2013/14 5% -3% 14% 3% 5% 3% -4% -3% 4% Updated December 2012
THANK YOU FOR YOUR TIME THIS MORNING Graham Wolfe HIA Chief Executive Industry Policy and Media February 2013 http://economics.hia.com.au