Contrary to popular opinion, the Australian housing industry is alive and doing sort of OK.
In fact in contrast to the blighted landscapes in the UK, New Zealand, Irish, UK, Spanish and Danish new home building sectors, ours is vibrant and booming. Of course it’s not: in our terms it’s sluggish and not running at capacity, which is just where the Reserve Bank wants it. But it is not tanking, as some commentators would have us believe from time to time.
Amid all the turmoil about the stability of financial groups, banks and the like, plus worries about the path of the economy, it’s another example of the resilience of an important part of the economy that is facing increasing competition from the resources industry. That’s not to say that new home building isn’t doing it tough, especially in NSW. But unlike the US where new home starts are 30% or so under what they were a year ago, our home building industry isn’t on its knees.
The Australian Bureau of Statistics said Monday that 38,348 homes were started in the three months to June, a seasonally-adjusted drop of 3.7% on the March quarter. “Bad news” went some of the commentary.
It was the lowest quarterly figure in a year, but given the sharp rise in the cost of money over that time and the drop in consumer confidence, it was an understandable outcome. It gives an annual rate of just over 153,000 new homes a year, 20,000 under what’s really needed. But new private home starts were up 4.1% quarter on quarter and other private new dwellings (home units etc) fell a very sharp 17% in the June quarter, compared to March.
And, compared to the June quarter of 2007, there was a 2.1% rise in total new dwelling starts and a 5.4% rise in new private home starts. Other new private dwellings were down 3.7% in the June quarter, compared with the June 2007 quarter.
New home building is actually solid, but the construction of home units, townhouses etc are down, more due to the higher cost of finance than anything else. So while activity has been quiet and well below the capacity of the industry (as the Housing industry Association has been pointing out), our industry isn’t down and out like the debt and loss-riddled US and UK sectors.
If anything, the downturn in commercial building finance has affected the overall sector more than the four interest rate rises from the RBA and the extra 0.55% from the credit crunch, not to mention the sharp rise in petrol prices and other costs earlier in the year.
Seasonally adjusted, the 17.1% fall in “new private sector other residential building” in the June quarter and followed a revised increase of 9.5% in the March quarter.
It was that fall which caused total starts to be down, but individuals have battled through the rate hikes, high petrol and falling consumer confidence in the June quarter to sign contracts for more houses in what was a very difficult three months.
Building approval figures since the end of June point to lower levels of activity, but again it’s not a wasteland like the US, New Zealand or the UK. But that’s not to say that it’s solid across the country.
The ABS figures reveal that NSW continues to be a basket case.
Despite being the biggest state, the biggest population and the largest home building sector, NSW is now behind Queensland, which is now the biggest home building state and Victoria which is a solid number 2.
According to the ABS figures around 6,990 houses were started in NSW in the June quarter, against 9,850 in Victoria and more than 10,700 in Queensland.
No wonder the recent national accounts showed NSW contracted in the June quarter: the housing performance played a big part in that grim news.