Via the excellent George Tharenou at UBS:
Dwelling starts forecast cut again to <100k near-term, lowest since the 1960s
Dwelling commencements in Q4-19 bounced by 1.2% q/q (UBS: -1.0%) to 166k annualised, albeit still down 15.2% y/y, and near the lowest level since 2013. Meanwhile, renovations (i.e. alterations & additions) commencements volumes also retraced (-4.0% q/q, -0.4% y/y). Looking ahead, we are materially revising down our forecasts (again). It is increasingly likely that mobility restrictions (specifically on housing) will remain in place over coming months; as well as a potentially even longer and more impactful drop in migration (with potentially effectively closed borders for many months, or even until next year). This is coupled with a severe recession lifting unemployment, and poor sentiment amid expectations of price falls. So far, there has also not been material enough policy support directly aimed at housing to offset these growing negatives. Hence, we now expect dwelling commencements to collapse from 174k in 2019, to around 120k in CY-2020 (was 140k), including a dip below 100k in coming quarters, which would be the lowest level since at least 1960. We then assume some easing of mobility restrictions to allow a rebound to 170k in 2021 (unrevised). Given the focus of the prior boom in demand from foreigners was buying high-rises, we expect much of this looming correction to be multis, rather than free-standing houses. Meanwhile, we also expect house prices to decline at least 10% in the coming year, in line with our ‘full pandemic scenario’. Indeed, without an easing of mobility restrictions, and/or more direct policy support, the price falls will likely be larger.Q4 non-residential construction commencements already -18% q/q & -17% y/y
Elsewhere, Q4 total non-residential construction commencements volumes (ahead of COVID-19) already slumped by 18% q/q and 17% y/y, to the lowest level since Q1-17.
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