Housing Industry Association Quarterly Outlook

Here is a summary of the HIA quarterly outlook.

The global economy is now very much a two-tier story. The strong side is led by the United States.

The official cash rate in Australia has remained at an all-time low of 2 per cent since May 2015. Borrowing costs are still very low, but lenders are raising variable mortgage rates and APRA’s credit rationing is unhelpful at this point in the new home construction cycle.

                                                  

The research article in this outlook considers Australia’s residential property markets, with a focus on capital city dwelling prices.

Australia’s economic growth rate disappointed in mid-2015 (2.0 per cent yoy), but the weakness was probably overstated. What we need is evidence that momentum in the economy is building, so we have a chance of nearing the upper threshold of the RBA’s 2016/17 forecast range (3.5 per cent).

The rebalancing of economic growth across states and territories is well into its stride. The HIA Housing Scorecard, the ACI Construction Monitor, and the CommSec State of the States Report all convey favourable outcomes for New South Wales and Victoria.

The overall update for housing finance shows the strong pace of growth of previous quarters has pulled back, against the backdrop of steadily tightening credit conditions.

The analysis of building approvals in this outlook includes an extended update on the distinct dwelling types – semidetached dwellings are one component displaying upward momentum.

The latest dwelling commencements figures confirmed that Australia started a record 212,000 dwellings in 2014/15.

The HIA Housing Indicator Profile is consistent with a strong 2015/16 for new housing, but there are more variables losing momentum than at any time in the last three years.

Nationally, it remains our expectation that we are currently seeing the peak level of activity in the home building cycle, and the strong pipeline of approved activity will sustain a historically high level of activity throughout 2015/16 (200,300 commencements).

Having increased by 16.6 per cent during 2014/15, NSW new dwelling commencements are projected to further increase by 7.1 per cent in 2015/16 before declining by 15.3 per cent in 2016/17 and 9.4 per cent in 2017/18. That would result in activity declining to 44,070 in 2017/18.

Multi-units’ rather than detached housing is where the downside resides.

All policy makers should be cognisant that the timing and magnitude of the next new housing downturn is less certain than any other of the post war era. We’re confident that the RBA grasps that …

There is likely to be considerable variation in the pattern of renovations activity from state to state over the coming years due to the diverging fates of respective economies.

NSW renovations activity increased by 6.8 per cent in 2014/15 and activity is forecast to increase by 7.8 per cent in 2015/16 and by 0.6 per cent in 2016/17.