Housing completions hit decade low

By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released building activity data for the March quarter, the highlight of which is the sharp contraction in dwelling completions. According to the ABS, there were only 32,557 (seasonally-adjusted) dwellings completed in the March quarter, which is a decade low (see below chart).

The trend in dwelling completions is down across the mainland, with the exception of Victoria. Housing construction in Queensland and New South Wales, in particular, is in a funk (see below chart).

The only bright spot for the building construction industry is that dwelling approvals picked-up in May – signalling a lift in future activity – although the trend in approvals is down too (see below chart).

Where are those school halls when we need them?

Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.

Comments

  1. Amazing that it’s Victorian construction that’s keep the national figures from plunging further. In the face of an apparent slump in demand from property in that state, (as mentioned already on Macrobusiness) it’ll be interesting to see how long this can persist. Surely it’s not just O/S investors soaking up this construction binge, or just another Miami-esque surge in supply lag after a short term demand bubble?

    • I presume it’d be a lag given it’s completions, not starts. Given the recent removal of first home builders grants, i’d expect another spike in 12 months time before a massive drop.

  2. The Patrician

    That Qld completions trajectory to March is frightening…and that was with a healthy building grant.

    There must be some fully loaded Hiluxs heading north for the coal/gas fields

    I suspect we may see a kick up in the Qld June quarter unit completions as HRH’s stuff is finished.

    re “The Milton” update : After an early April build start estimate there is still no activity on the site. I’d bet there are more large builds in a similar situation.

    • MsSolarFelineAU

      “I suspect we may see a kick up in the Qld June quarter unit completions as HRH’s stuff is finished.”
      Buuut, are they going to be occupied though? What’s the build quality like? What will the vacency rate be for each building??

      Took the old duck to dinner @ Portside last week, and there are lots of empty holes in the ground, and empty shops at the bottom of the apartment buildings…hmmmmm

    • The Patrician

      I wouldn’t mind seeing the Qld approvals v completions for the last 12 months. I get the feeling approvals may still be up but completions (particularly for units)are falling sharply due to finance blockages/slow presales

      • I don’t know a single builder with work past July (Qld) It is all quite desperate. There is just a big nothing!
        Note I am not in favour of trying to restore the unsustainable previous status quo. Nor do I have a short term answer to the problem.

    • Patrician – if they don’t get 80% presales at least they won’t have finance. No finance no build.

    • HRH is now on twitter – @Harry_Triguboff.

      After Business Hysteria’s Gotti sold him out and went to Murdoch, HRH probably felt the need to blow his own trumpet.. Poor billionaire.

  3. “According to the ABS, there were only 32,557 (seasonally-adjusted) dwellings completed in the March quarter”

    So enough completions to house

    32,557 x 4 x 2.5 = 325,570 people if this trend continues.

    I don’t think I’d be grabbing that rope attached to the under supply bell just yet. Looks ok to me. Unless you’re Bob the Builder of course.

    • 24% as lone occupants so I think the real number is more like 3.5 per house. 10% of homes have 5 or more people.

    • Except 32,557 is a gross completions number.

      The net number is obviously lower given:
      – Knock down rebuild activity (rife in older suburbs;
      – Infill higher density development (for every couple apartments built a house is knocked down);
      – Attrition (houses burning down etc).

      • Good point OC. Houses are consumer durables just like cars etc, they just happen to last quite a lot longer, so that churn is less obvious.

        Also, as has been mention here & elswhere, those numbers are not evenly spread, with only Vic having a decent supply response. The NSW numbers by comparison, have been very low for about 7 years now. The only positive you could take from that, is there is potential for a construction boom in NSW, which could create a lot of good jobs, and the added supply would help lower prices and rents.

  4. builders will start building agian soon enough. at the moment they are all too scared as they know the cost of land and cost to build is more than what they can sell the finished product for. like many speculators they are waitng for the market to improve but are slowly going broke in the meantime. they will soon relaise that the property market isnt improving and instead of worrying about profits they will be worrying about cash flow and will start building at a loss just to keep the doors open. all those that think house prices cant fall below the cost of production are about to learn a lesson deflationary economics

    • Exactly….!

      The cost of land is the main problem here, it is higher than normal markets expect to pay for the land plus house. And this is because of the Baptists and Bootleggers racket in urban land, with the Enviro Taleban as the Baptists.

      • these guys are so predcitable. from the HIA today:

        “The industry is anxiously awaiting the cumulative effect of four
        Reserve Bank rate cuts totalling 1.25 per cent over recent months
        to kick in.

        “The March ABS figures indicate the rate cuts from November and
        December 2011 haven’t had the effect they typically would have. The
        industry is relying on the effect from last year’s cuts, and the
        rate cuts in May and June this year begin to take hold.

        waiting for goddot….

    • Give us your view on FKP GB. What’s your recommendation, Buy, Hold or Sell? It looks to be close to all time lows. Not that I’m interested, it looks more like a canary to me.

      • Rumplestatskin

        Why the interest in FKP?

        I worked in the residential development team at FKP back in 2004. And I’ll be honest, even in those boom conditions they had a hard time making money. Overpaying for sites because they just had too much money available; poor designs that left them stuck with unsellable apartments for years; in an industry where managers had incentives to conceal the true figures on their projects to advance their own careers.

        If you can’t tell, it was a serious learning experience for me about property development.

        I haven’t followed FKP at all since then, but the one good thing they had going was retirement villages – but I suspect that lucrative business model will come under threat soon enough.

        As far as Milton railway station goes, this project didn’t stack up in 2004, and I doubt it stacks up now. I just watched a news clip and it seems that the $8million upgrade to the station was negotiated down to $6million, and the height is now 30 storeys, which was what we were bargaining for 8 years ago. They have $210million worth of sales to make on the project, and it took three years to get to $74mill (as of Jan 2012).

        Of course, best to blame government approvals
        for any delays.

        I have no idea what quantity of presales required are for this project to start construction, or how long it will take to get enough sales to recoup construction costs.

  5. The Patrician

    If I’m not mistaken that looks like the lowest Qld completion rate for at least 24 years.

  6. innocent bystanderMEMBER

    WA flatlining but I would not be surprised by an uptick later… don’t know the fine detail/timing/impact but WA stat govt changed the application process around May. Supposed to have streamlined it by using “certified” planners on the application so councils could rubber stamp. big c*ck up apparently and virtually nothing got thru. big stink on talk-back about it.

    I wouldn’t mind a bit of that restructuring … I can’t get a tradie for love of money.