It is widely reported that Australia needs a protracted housing construction cycle to help offset the mining capex slowdown.
And we are having a longer than usual new dwelling construction upturn.
Dwelling approvals are presently at an all-time high.
It is also understood that this upturn is somewhat widely spread – unlike, say, dwelling price escalation, which is largely limited to Sydney, Melbourne & to some degree, now, SEQ.
Finally, again, it has been widely reported that there are now nearly as many new apartments (well, technically attached dwellings) being built across Australia as new detached homes.
But what isn’t understood is exactly where new dwelling starts actually take place within our major urban areas.
Many would think it is all downtown.
They are wrong.
Some observations (well, quite a few!)
- Just under a quarter of our new housing starts – see our table above – are currently taking place across the inner city suburbs within our five major cities. A third take place in the middle ring suburbs (usually 5km to 20km from the GPO) and just over two-thirds (44%) still are built some distance from the CBD.
- Five years ago, our research showed that 18% of housing starts that year (fiscal 2011) took place in the inner city; 27% across the middle-ring & 55% in the outer burbs.
- Detached housing holds a 55% market share of new dwelling starts across Australia. It was 80% thirty years ago, and has been steadily falling – with one distinct exception during the mid-2000s – since then. And the proportion of attached new dwelling starts now exceeds (just) new detached homes in our capital cities.
- Dwelling approvals over the past decade have averaged about 14,500 new starts each month. At present, our monthly residential build rate is closer to 19,000. This is at a record high.
- About 200,000 new dwellings (actually 198,000) were approved across Australia during fiscal 2014. A similar volume (193,000) is projected for this financial year. During 2012/13, about 170,000 new dwellings were approved & next fiscal year (2015/16) about 180,000 new dwelling starts are expected.
- Of the 193,000 new house starts expected this year – 110,000 are likely to be detached houses & 83,000 attached dwellings. This new dwelling construction has an estimated end value of $51 billion.
- In addition, the alterations & additions business (as measured by the ABS) is worth another $31 billion. This market is growing too, up by 3% during 2014 and is predicted to rise by 7% this year.
- This is a lot of cabbage. To help put this in some perspective, let’s imagine that a single $A1 equals one second in time. A million bucks is the equivalent of 11 and a half days. Now, a billion dollars – it rolls off our tongues so easily, but we often forgot how big a number a billion is – times out at just under 32 years. But enough of the side bar…
- This current housing construction upturn has already lasted about 12 quarters (36 months) from its trough. It is expected to last another six months until it starts to slowdown. It may last longer, depending on interest rate movements; the impact/actual policing of APRA’s macro-prudential controls around investment lending & of course the recent FIRB changes & new charges.
- The last three housing upturns – starting in March 1996; September 2000 & March 2009 respectively – on average lasted nine quarters (27 months) before entering their downturns.
- Almost all states or territories have shared in this current lift in new housing construction – with New South Wales (Sydney) being the clear winner. But SEQ, Perth and Melbourne have also enjoyed strong lifts in new home building.
- Over the next 12 months 54,000 new homes are expected to be built in in both NSW & Victoria; 35,000 across Qld; 11,000 in SA; 30,000 in WA and about 9,000 across Tas, NT & ACT combined.
We will continue to pump-prime new housing construction
There appears little else we can do when it comes to employment or economic growth.
Some of our new dwellings – but nowhere near as much as many think – are currently being constructed across our inner city suburbs and mostly in high-rise apartment towers.
We are already – or are very close to it – overbuilding.
Most are sold to investors, many from overseas.
This high density housing form is increasingly out of reach of average Australians – they are too expensive & often way too small.
The loss of private space isn’t being compensated enough in terms of convenience, local amenity or cheaper living costs.
We are still not building enough medium density housing in our middle-ring suburbs.
Affordable solutions are needed here.
Most Australians live in a suburban setting. A lot of Aussies – close to 62% – live in the outer suburbs.
Still, around half of our new housing construction takes place 20km or beyond our central business districts.
The outer suburbs are being ignored by policy makers. They don’t seem to have a voice.
If they do, it doesn’t get much airplay.
It is time to take stock & start delivering a fairer share of our already limited infrastructure spend to our middle & outer suburbs.
Surprisingly few Australians want a downtown, crowded lifestyle, or the price tag that goes with it.
FROM MICHAEL MATUSIK –
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