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<em>CoreLogic-RP Data</em> already appears set to report further dwelling price growth in October for Sydney, with prices once again up at a sprightly pace and moving another +$5,300 higher. </div>
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<div>There has been plenty of spirited debate in the media about what comes next for house prices in Australia.</div>
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<div>Macquarie has suggested that a housing market correction of -7.5 per cent could take place - beginning some time in 2016 before ending in 2017 - while Stockland's Mark Steinert disagrees and sees prices continuing to rise by +3% to +5% through next year.</div>
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<div>This pretty much tells you everything you need to know about short term property market predictions: one analyst thinks prices will rise, another thinks they'll fall!<br><br><strong><span style="text-decoration: underline;">Central Bank</span></strong><br><br>What about the role of the Reserve Bank and monetary policy settings?<br><br>Here's what central bank expert Sophia Rodrigues thinks:</div>
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<strong><span style="text-decoration: underline;">Long term focus</span></strong><br><br>Property owners would do well to retain a long term outlook rather than waste too much energy on short term dwelling price predictions, which are invariably a hit and miss affair at the best of times.</div>
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<div>As for the bubble/crash/correction calls which have continued over the past 15 years or so, Sydney median house prices now need to suffer an enormous correction - a gargantuan fall of $300,000 - even just to get back to where they were a couple of years ago in June 2013, let alone to actually correct from there. </div>
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<strong><span style="text-decoration: underline;">Market variances</span></strong><br><br>One thing that can be said with some certainty is that there will be significant variances across the Sydney property market.</div>
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<div>Outer suburban auction markets in Sydney have already turned in favour of buyers with clearance rates tanking fast in the west, south west, and north west sub-regions.<br><br>More stringent deposit requirements appear to be biting hard in the outer.<br><br>On the other hand clearance rates have remained relatively elevated for now in the eastern suburbs, the inner west, lower north shore, northern beaches, and the city &amp; inner south.<br><br>
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<div>Higher density markets will also almost certainly fare less happily than the metropolitan averages due to a looming stock overhang.</div>
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<span>In terms of other market drivers, Sydney presently has a vacancy rate of around 1.7% but with plenty of supply now in the pipeline, while the unemployment rate for Greater Sydney is only 5.1%.</span><br><br><span>Implied yields on cash rate futures contracts are pricing a 100% chance of an interest rate cut to just 1.75% by April 2016.</span><br><br><span>This morning's Building Activity data release will shed more light on dwelling commencements and completions around the states.</span><br><br><span>Expect to see both commencements and completions respectively at close to their highest ever levels.</span>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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October housing prices: Pete Wargent

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<p>EXPERT OBSERVER</p>
<p>Fewer homes will be built over the coming year, and that is to be expected following the frenetic pace of building over 2014-2018.</p>
<p>But there will be no shortage of work for the broader building and construction sectors.</p>
<p>Over $140 billion of work is yet to be done.</p>
<p>Commercial building work to be completed is at record highs with engineering work near 4-year highs. And that doesn’t include the raft of new infrastructure planned by state and territory governments.</p>
<p>Rebuilding after the horrific bushfires will add to the work total as well in coming years.</p>
<p>While off the absolute peak levels in 2012 – a total driven by mining activity – work yet to be done on building and construction projects is up almost 4 per cent over the year and near the highest levels in 4½ years.</p>
<p>There is a perception that the economy is listing. But building and construction remains a bevy of activity and there is plenty of work to support building material providers, builders, tradespeople and professional services like architects. Outside the resources sector, a record amount of engineering work remains to be done.</p>
<p><strong>What do the figures show?</strong></p>
<p>The number of dwelling starts fell by 11.7 per cent in the September quarter after rising 1.5 per cent in the June quarter.</p>
<p>House starts fell by 4.8 per cent in the September quarter after a 9.4 per cent fall in the June quarter. Apartment starts fell by 21.9 per cent in the September quarter after a 20.3 per cent increase in the June quarter.</p>
<p>Work started on 180,972 new dwellings over the 12 months to September, down by 21.5 per cent on the year. Starts fell from the record high of 234,186 dwellings in the year to December 2016.</p>
<p>Across Australia, starts in the September quarter fell in six states/territories: NSW (down by 19.5 per cent); Victoria (down by 9.7 per cent); Queensland (up by 3.0 per cent); South Australia (up by 1.9 per cent); Western Australia (down by 14.8 per cent); Tasmania (down by 4.6 per cent); Northern Territory (down by 18.5 per cent); and the ACT (down by 3.1 per cent).</p>
<p>In the year to September, dwelling starts were higher than the decade average in only two of the states and territories: NSW (up 7.6 per cent) and Tasmania (up 17.0 per cent). Starts were below the decade average in: Victoria (down 0.2 per cent); Queensland (down 13.6 per cent); South Australia (down by 9.1 per cent); Western Australia (down by 35.4 per cent); Northern Territory (down 60.9 per cent); the ACT (down 7.6 per cent); and total Australia (down 5.9 per cent).</p>
<p>In the September quarter residential and commercial building work done fell by 0.5 per cent. New residential work fell 3.4 per cent with alterations &amp; additions down 0.3 per cent but commercial building rose by 3.8 per cent and engineering work rose by 0.5 per cent.</p>
<p>The value of residential and commercial building work in the pipeline stood at $89.6 billion at the end of September, down by 7.1 per cent on a year ago and below the record-high of $99.2 billion at the end of June 2018.</p>
<p>Across Australia, 201,317 homes are currently being built, down from a record 231,416 homes in March 2018.</p>
<p>In the September quarter residential and commercial building work yet to be done (completed), stood at $69.8 billion, down 7.9 per cent on a year ago. Engineering work to be done stood at $74.1 billion, up 18.1 per cent on a year ago. Total building and construction work to be done stood at $144 billion at the end of September, just off 4½-year highs but up 3.9 per cent on the year.</p>
<p><strong>What are the implications for interest rates and investors?</strong></p>
<p>Building and construction sectors face mixed prospects. Work to be done on commercial projects stands at record highs. Engineering work is near 5-year highs but dwelling construction is easing from unsustainable highs.</p>
<p>When the word ‘decline’ or ‘fall’ is used, the perception is negative. But always the base needs to be considered as well as history. While some construction work levels have eased, in many sectors the decline is from super-normal or unsustainable levels. In NSW at the peak more than 70,000 apartments were being built. Prior to the last five years, a number of 25,000 apartments being built was considered a high level of building.</p>
<p>The healthy levels of construction work to be done provides further complications for the Reserve Bank in its thinking about rates at the February 2020 Board meeting. The next two key events are the December job figures on January 23 and the Consumer Price Index (inflation) on January 29.</p>
<p><strong>CRAIG JAMES </strong><em>is the Chief Economist at CommSec</em></p>
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Record commercial building work to be done: CommSec's Craig James

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<p>EXPERT OBSERVATION</p>
<p>Dwelling approvals fell 15.5% in February, unwinding a 19.1% jump in February that reflected a big spike in high rise approvals. That was in line with Westpac's forecast but a touch weaker than the consensus view of a 12.5% decline.</p>
<p>Headline moves over the last two months have been driven by 'high rise' units with approvals in the segment more than doubling between January and February and nearly halving again between February and March. Approvals in this segment are still well above Jan's extreme low and about 10% above the average level over the three months to January.</p>
<p>Outside of the high rise segment, the underlying trend looks to be weak. Total approvals ex high rise (covering both detached houses and mid-low rise) looks to be down a further 2% in the month following a 4% fall in February and down around 19% year. Private detached house approvals declined 3.2% month, to be down 18.3% year. Mid-low rise unit approvals look to have risen slightly by around 1% in the March month but are still down by around 20% year.</p>
<p>The state detail also points to a soft underlying tone. The unwinding high rise spike was concentrated in NSW (–27% month, –23% year) and Vic (–27% month, –36% year). Excluding high rise, NSW posted a 10% month gain in the month but was coming off a much weaker January with approvals still down 7.7% on their Dec level. Vic approvals ex high rise declined 1.9% month but is down a milder 3.5% compared to Dec. Approvals declined the other major eastern states, the slide over the last year now looking brutal in Qld (–2.4% month, –35.9% year); much milder in SA (–2% month, –11.5% year). WA bucked the wider trend this month, posting a surprisingly strong 4.8% month gain to be up 20.7% year, very much against the odds.</p>
<p>The total value of renovation approvals fell 8.7% month to be up 3.6% on a rolling three month average basis, a reasonable uptrend still in place. The state detail continues to point to gains coming through more strongly in Qld and WA.</p>
<p>The total value of non res building approvals rose 2.1% month but is still down 0.5% year on a rolling three month basis. Conditions remain mixed across both segments but the state split points to slowing in NSW and Vic partially offset by gains in Qld and WA.</p>
<p>Overall the March dwelling approvals update again points to weakening underlying momentum, highlighting downside risks to the near term outlook for new dwelling construction. So far the weakness mostly just cancels out the lift from the February high rise spike. However clearly there are downside risks to the outlook if the weak momentum continues in coming months, particularly if we also start to see approved high rise projects get put on hold.</p>
<p><em><strong>MATTHEW HASSAN</strong> is a Senior Economist for Westpac.</em></p>
<p><em>Download the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/May/er20190503BullDwellApprovMar.pdf" target="_blank">Australian dwelling approvals March' (PDF 327kb)</a>.</em></p>
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Dwelling construction forecast is weak: Westpac's Matthew Hassan 

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<p>EXPERT OBSERVER </p>
<p>The number of dwelling starts (commencements) fell by 16.3 per cent in the December quarter to 46,706 dwellings after falling by 3.8 per cent in the September quarter. </p>
<p>House starts fell by 7.6 per cent in the December quarter and apartment starts fell by 26.8 per cent. </p>
<p>Work started on 221,606 new dwellings over the 12 months to December, up 2.4 per cent on the year, but fell from the record high of 234,179 dwellings in the year to December 2016. </p>
<p><img src="https://www.urban.com.au/images/2019/4/11/CMSC%201.JPG" alt=""></p>
<p>Across Australia, starts in the December quarter fell in seven states/territories: NSW (down by 15.6 per cent); Victoria (down by 10.5 per cent); Queensland (down by 29.7 per cent); South Australia (down by 4.5 per cent); Western Australia (up by 14.9 per cent); Tasmania (up by 3.9 per cent); Northern Territory (down by 24.6 per cent); and the ACT (down by 53.1 per cent).</p>
<p>In the year to December, dwelling starts were higher than the decade average in all of the states &amp; territories except for the Northern Territory (down 53.9 per cent), and Western Australia (down 30.8 per cent). Starts in NSW were 43.2 per cent above the decade average. Next highest was the ACT where starts were up by 42.7 above the decade average with Victoria up 22.5 per cent; Queensland up 12.4 per cent; Tasmania up 12.0 per cent; and South Australia up 8.5 per cent. \</p>
<p>In the December quarter $72.9 billion of residential and commercial building work was yet to be done (completed), up 5.6 per cent on a year ago. </p>
<p>The value of residential and commercial building work in the pipeline stood at $94.9 billion at the end of December, down by 0.7 per cent on a year ago but down from a record $99 billion at the end of June.</p>
<p>Across Australia, 216,948 homes are being built, down from a record 230,573 homes in March.</p>
<p><img src="https://www.urban.com.au/images/2019/4/11/CMSC%203.JPG" alt=""></p>
<p><strong>Consumer confidence</strong> </p>
<p>The Westpac/Melbourne Institute survey of consumer sentiment index rose by 1.9 per cent to 100.7 in April. But the sentiment index is below its long-term average of 101.3 and down 1.7 per cent over the year to April. A reading above 100 denotes optimism. The survey of 1,200 people was conducted from April 1-5. </p>
<p>The current conditions index fell by 3.2 per cent, but the expectations index rose by 5.4 per cent. </p>
<p>Three of the five components of the index rose in April: </p>
<p>The estimate of family finances compared with a year ago fell by 5.0 per cent to 80.2;</p>
<p>The estimate of family finances over the next year rose by 4.1 per cent to 105.6;</p>
<p>Economic conditions over the next 12 months rose by 6.2 per cent to 101.8; </p>
<p>Economic conditions over the next 5 years rose by 5.9 per cent to 100.2;</p>
<p>The measure on whether it was a good time to buy a major household item fell by 2.0 per cent to 115.5. </p>
<p><img src="https://www.urban.com.au/images/2019/4/11/CMSC%202.JPG" alt=""></p>
<p>Housing outlook: A good time to buy a dwelling? The index rose by 2.4 per cent to 119.4, and was up 14.9 per cent on the year. House price expectations rose by 11.9 per cent to 95.6, but were down by 26.5 per cent on a year ago. </p>
<p>Unemployment expectations: Unemployment expectations fell by 2.5 per cent to 127.4 in April to be up by just 1.4 per cent over the year.</p>
<p><strong>What are the implications for interest rates and investors?</strong> </p>
<p>Council approvals to build new homes may have eased from record levels, but there is still plenty of work to be done over the next year. Dwelling starts in ‘boom’ state of Tasmania are particularly strong. At the other end of the spectrum, building in the ‘Top End’ is at record lows due to weak population growth. </p>
<p>And it’s not all ‘doom and gloom’ for building materials’ companies. In fact, the growing pipeline of public transport-related infrastructure projects could ‘fill the gap’ for residential builders, while boosting demand for building products. If re-elected, the Federal government has committed to $100 billion worth of rail, roads and other transport projects over a 10-year period. </p>
<p>Consumer spending and the jobs market are both key to the interest rate outlook. Spending at supermarkets and on food have both been solid. As the Easter holidays approach, retailers will be hoping that Aussies feel chipper about their tax cuts. That said, it appears the reaction from low income earners has been fairly muted.</p>
<p>CommSec expects interest rates to be unchanged for the foreseeable future. But the loss of momentum across global economies means central banks are skewed to more accommodative monetary policies.</p>
<p><em><span>RYAN FELSMAN is a Senior Economist for CommSec</span></em></p>
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Home building hits three year low: CommSec's Ryan Felsman

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<p>GUEST OBSERVATION</p>
<p>Regulation of the Australian building industry is broken, according to the <a href="https://www.industry.gov.au/data-and-publications/building-confidence-building-ministers-forum-expert-assessment" target="_blank">Shergold-Weir report</a> to the <a href="https://www.industry.gov.au/regulation-and-standards/building-and-construction/building-ministers-forum" target="_blank">Building Ministers’ Forum</a> (BMF).</p>
<p>"[…] we have concluded that [the] nature and extent [of problems] are significant and concerning. The problems have led to diminishing public confidence that the building and construction industry can deliver compliant, safe buildings which will perform to the expected standards over the long term."</p>
<p>You can say that again.</p>
<p>Just one of the issues identified in the report, combustible cladding, <a href="https://www.theaustralian.com.au/national-affairs/hit-list-identifies-10000-potential-grenfellstyle-buildings/news-story/65aaf99088ead16bd3e0947a6e242770" target="_blank">could affect over 1,000 buildings across Australia</a>. An unknown proportion of these are tall (four storey and above) residential strata buildings. Fears of rectification costs are starting to have <a href="https://www.afr.com/real-estate/melbourne-apartment-buildings-face-extra-scrutiny-over-combustible-cladding-20190205-h1avoi" target="_blank">severe impacts on the apartment market</a>.</p>
<p>The cost of replacing combustible panels at the Lacrosse Apartments in Melbourne, which caught fire in 2014, will be <a href="https://theconversation.com/lacrosse-fire-ruling-sends-shudders-through-building-industry-consultants-and-governments-112777" target="_blank">at least A$5.7 million, plus A$6 million or so in consequential damages</a>. The total cost of replacing combustible panels across Australia is unknown at this point, but is likely to run to billions of dollars.</p>
<p>The <a href="https://www.industry.gov.au/data-and-publications/building-confidence-building-ministers-forum-expert-assessment" target="_blank">Shergold-Weir report</a> identifies a catalogue of other problems, including water leaks, structurally unsound roof construction and poorly constructed fire-resisting elements. Faults appear to be widespread.</p>
<p>A <a href="https://cityfutures.be.unsw.edu.au/documents/44/Governing_the_Compact_City_EXECUTIVE_SUMMARY.pdf" target="_blank">2012 study by UNSW City Futures</a> surveyed 1,020 strata owners across New South Wales and found 72% of respondents (85% in buildings built since 2000) knew of at least one significant defect in their complex. Fixing these problems will cost billions more.</p>
<p>Regulatory failures are not only “diminishing public confidence”, they have a direct impact on the hip pockets of many Australians who own a residential apartment. In short, building defects resulting from lax regulation are a multi-billion dollar disaster.</p>
<p><strong>How could authorities let this happen?</strong></p>
<p>A web of regulations and standards enacted by governments cover construction in Australia, but this regulation is centred on the <a href="https://ncc.abcb.gov.au/ncc-online/About" target="_blank">National Construction Code</a> (NCC). The <a href="https://www.abcb.gov.au/ABCB/The-Board" target="_blank">Australian Building Codes Board</a> (ABCB), a body controlled by the Building Ministers’ Forum, manages the NCC. The ABCB board comprises appointed representatives from the Commonwealth plus all the states and territories and a few industry groups.</p>
<p>It is such a complicated system that it is hard to identify any government, organisation or person that is directly responsible for its performance.</p>
<p>The NCC is supposed to create “benefits to society that outweigh costs” but it appears the ABCB may have been more focused on the need to “consider the competitive effects of regulation” and “not be unnecessarily restrictive” (Introduction to NCC Volume 1).</p>
<p>The BMF’s <a href="https://www.industry.gov.au/sites/default/files/bmf-communique-8-february-2019.pdf" target="_blank">February 8 communique</a>, issued <em>after</em> the <a href="https://www.industry.gov.au/sites/default/files/bmf-communique-8-february-2019.pdf" target="_blank">fire in the Neo200 building</a> in Melbourne, is straight out of the Yes Minister playbook:</p>
<p>"Ministers agreed in principle to a national ban on the unsafe use of combustible ACPs (aluminium composite panels) in new construction, subject to a cost/benefit analysis being undertaken on the proposed ban, including impacts on the supply chain, potential impacts on the building industry, any unintended consequences, and a proposed timeline for implementation. Ministers will further consider this at their next meeting [in May this year]."</p>
<p>This suggests the ministers are more concerned about possible impacts on the panel suppliers and the building industry than the consumer. The earliest a ban can take effect is in May. In the meantime, anecdotal evidence suggests buildings are still being clad in combustible ACP.</p>
<p>Thanks to the journalist Michael Bleby, we know <a href="https://www.afr.com/real-estate/governments-failed-to-act-on-warnings-of-combustible-cladding-dangers-20190226-h1br6n" target="_blank">governments and the ABCB failed to act in 2010</a> when presented with evidence that combustible ACP was not only a danger, but was also being widely used on tall residential buildings.</p>
<p>Bleby quoted ABCB general manager Neil Savery as saying neither his organisation, nor any of the states, was aware that builders were using the product incorrectly.</p>
<p>We also know that panel manufacturers, including the Australian supplier of Alucobond, actively lobbied building ministers. At the July 2011 BMF meeting, the ACT representative effectively vetoed an ABCB proposal to issue an advisory note on the use of combustible ACP.</p>
<p>We are entitled to ask why the ABCB and its staff, or the downstream regulators and their staff, did not know about serious fire problems with ACP that the technical press <a href="http://www.cookeonfire.com/pdfs/eurisolgreenreport.pdf" target="_blank">identified as long ago as 2000</a>. The answer will be of particular interest to residents of tall apartment buildings clad in these panels, all of whom are now living with an active threat to their safety.</p>
<p><strong>Consumers are owed better protection</strong></p>
<p>While both Labor and Coalition governments have worked to improve consumer protection for people buying consumer goods, their record on housing, particularly apartments, is awful. While a consumer can be reasonably sure of getting restitution if they buy a faulty fridge, <a href="https://www.smh.com.au/business/consumer-affairs/victims-suffer-as-combustible-cladding-crisis-rages-on-20190402-p519yy" target="_blank">no such certainty exists if they buy a faulty house or apartment</a>.</p>
<p>At the moment, the NCC does not have any focus on providing protection for buyers of houses or apartments. There are few requirements for the durability of components and astonishingly weak requirements for waterproofing. Under the NCC and its attached Australian Standards, particularly AS 4654.1 and 2-2012, a waterproof membrane could last, in practice, five minutes or 50 years.</p>
<p>Given the magnitude of the economic loss, it would be appropriate for the BMF and ABCB board to publicly admit they have failed. Since their appointments in November 2017 and January 2013 respectively, neither ABCB chair John Fahey nor Savery as general manager has remedied the situation. The Shergold-Weir report has not been implemented and the combustible cladding issues remain unresolved. It would be reasonable for Fahey to step down and for Savery to consider his future.</p>
<p>The next federal government should consider what further action should be taken, particularly in relation to individuals on the BMF and within the ABCB involved in the 2010-2011 decision not to issue the proposed advisory note on the use of ACP. Since the ABCB does not publish minutes and none of its deliberations are in the public domain no one knows what actually happened or who did what.</p>
<p>The new board should consider moving residential apartment buildings (Class 2 buildings in the NCC classification) from Volume 1 of the NCC to Volume 2, which controls detached and semi-detached housing. Volume 2 should then have as its overriding objective the protection of consumers.</p>
<p>The downstream regulators should focus on requiring builders to deliver residential buildings with no serious faults and providing simple mechanisms for redress if they don’t.</p>
<p>Surely this is not too much to ask.<em><img src="https://counter.theconversation.com/content/113115/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;"></em></p>
<p><em><strong>Geoff Hanmer</strong>, Adjunct Lecturer in Architecture, UNSW</em></p>
<p><em>This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/housing-with-buyer-protection-and-no-serious-faults-is-that-too-much-to-ask-of-builders-and-regulators-113115" target="_blank">original article</a>.</em></p>
<p><em>This article has been updated to correct a reference to NCC volumes 1 and 2 – the latter controls detached and semi-detached housing.</em></p>
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Housing with no serious faults and buyer protection – is that too much to ask of builders and regulators?

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<p class="x_MsoNormal">New home building held up well during the September 2018 quarter despite the tougher market conditions, according to Master Builders Australia’s chief economist Shane Garrett. </p>
<p class="x_MsoNormal">The ABS figures on Construction Work Done released this morning indicate that new residential building work eased back by 1.8% during the quarter but was still some 4.7% higher than a year earlier. </p>
<p class="x_MsoNormal">“Surprisingly, the apartment/unit side of the market put in a strong performance and came close to surpassing its busiest quarter on record. Work on detached houses fell by 3.2% compared with the previous quarter,” Shane Garrett said. </p>
<p class="x_MsoNormal">“The performance of residential building has proven more resilient than expected in light of the unfolding credit crunch and less favourable conditions in Australia’s largest housing markets,” he said. </p>
<p class="x_MsoNormal">“Going forward, we do expect the tougher financial environment to take its toll on the volume of new home building over the next few years.</p>
<p class="x_MsoNormal">"Larger apartment projects will probably see the biggest reduction,” Shane Garrett said. </p>
<p class="x_MsoNormal">Today’s figures also indicate that non-residential building declined by 2.4% during the September 2018 quarter and that engineering construction fell by 4.5%. </p>
<p class="x_MsoNormal">“With the federal Budget set be delivered earlier next year, it is important that it includes measures to support our sector’s capacity to meet the building needs of a steadily growing population,” Shane Garret said.</p>
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New home building holds up

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<p class="x_Default"><span>EXPERT OBSERVER</span></p>
<p class="x_Default"><span>With home prices falling, access to finance more difficult and fewer people now entering the country, the number of new homes approved for construction has declined.</span></p>
<p class="x_Default"><span>ABS data released today show that 16,447 homes (seasonally adjusted) were approved for construction in August – a level that is 9.4 per cent lower than in July and 13.6 per cent lower than in August 2017. The latest level of approvals is the lowest since October 2016.<span class="Apple-converted-space"> </span></span></p>
<p class="x_Default">The new home building sector has been cooling modestly over the past year after reaching all-time high levels of activity during 2015 through to 2017.</p>
<p class="x_Default">Just as apartment construction drove the increase in home building to record levels, approvals data is signalling that apartments will lead the decline.</p>
<p class="x_Default"><span>Approvals for units fell by 17.2 per cent in August, to be 23.7 per cent lower than a year earlier.</span> </p>
<p class="x_Default"><span>The key risks that we’re watching relate to credit conditions and population growth.</span></p>
<p class="x_Default">Constraints on the availability of finance through APRA and increased prudential constraints by banks are restricting investment in new homes.</p>
<p class="x_Default">Population growth has slowed since the government introduced stricter visa requirements last year. As global economic conditions improve, skilled migrants who might otherwise consider immigrating to Australia could be more inclined<span class="Apple-converted-space"> </span>to look to other similar advanced economies where entry requirements are less restrictive.</p>
<p class="x_Default">The outlook for detached house building is better than for units, with the latest approvals data indicating declines likely to be much more modest,” added Ms Hopkins.</p>
<p class="x_Default">Detached house approvals declined by 1.7 per cent in August and are a modest 4.2 per cent lower than a year previously,” concluded Ms Hopkins.</p>
<p class="x_Default"><span>Total seasonally adjusted dwelling approvals in August fell across the eastern seaboard states: Victoria (-12.0 per cent); Queensland (-8.4 per cent), and; New South Wales (-2.7 per cent). Tasmania experienced the largest monthly fall (-18.6 per cent). Elsewhere approvals increased: Western Australia (+14.7 per cent) and South Australia (+9.6 per cent). </span></p>
<p class="x_Default"><span>In trend terms, total dwelling approvals in August increased by 1.5 per cent in the Northern Territory and was virtually unchanged (up by 0.1 per cent) in the Australian Capital Territory.</span></p>
<p class="x_Default"><span>Diwa Hopkins is an economist at the Housing Industry Association.</span></p>
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Fewer homes approved for construction: HIA

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<p>In Victoria, the cost of constructing a house accelerated by 5% in 2017 according to the CoreLogic CHIP index December quarter results. According to the measure, this is now higher than the national pace of 4% across Australia, and the highest growth rate of all of the states for the year.</p>
<p>Several factors have contributed to this rapid increase in construction costs in the state. Namely, Victoria’s strong housing growth in the last few years which has delivered increased demand for housing construction materials and labour as developers seek to capitalise on high capital growth rates.</p>
<p>Along with increases in building input values and labour, CoreLogic development data indicates that 11.1% of residential subdivision commencements across Victoria were located in the state’s regional areas. Furthermore, 48.6% of residential subdivisions commenced on the fringes of the Melbourne metropolitan area and included Hume, Whittlesea and Wyndham. As a result, higher freight costs are likely to be built into the delivery of materials to regional sites.</p>
<p>Note: The CoreLogic CHIP index uses a standard house model over time to isolate changes in the cost of building materials and labour that go into constructing a house. CoreLogic tracks a separate index for Australia, New South Wales, Victoria, Queensland, South Australia and Western Australia.<br><br>The National CHIP index rose 4% over 2017 and has diverged significantly from growth in CPI since around 2003. Since this time, inflation has averaged 0.62%, while quarterly nominal growth in the building price index has averaged 1.1%. Furthermore, as subdued wages have maintained a low inflationary environment in Australia, the gap between building costs and general living costs have increasingly diverged. Eliza Owen said, “This suggests that inflation accounts less and less for the growth in the CHIP index.”</p>
<p>CoreLogic’s construction and development data has been powered by the acquisition of Cordell in 2015. The CHIP index began in 1990. The Queensland CHIP index has grown the highest of the states since 1990, at 190%. Particular divergence occurred between Queensland and the rest of Australia from the time of the 2011 Queensland floods, when rebuilding accelerated building costs in the state, as well as inflation generally. Find the full CHIP index report for Q4 here.</p>
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<p><span class="s1">Eliza Owen is </span><span class="s2">Commerical Property Research Analyst with ‎CoreLogic and can be contacted <a href="https://www.corelogic.com.au/" target="_blank"><span class="s3">here</span></a>.</span></p>
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House construction cost in Victoria rise five percent in 2017: Eliza Owen

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<p>Dwelling investment appears to have peaked earlier than previously anticipated, according to the RBA's latest statement on monetary policy.</p>
<p>"Although the significant pipeline of work still to be done should mean that the level of residential construction activity remains high over the next year or so, dwelling investment is not likely to contribute to GDP growth over the forecast period," it advised. </p>
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<p>Bank liaison with developers indicates that demand for off-the-plan apartments in the major east-coast cities has moderated, reflecting weaker demand from foreign buyers and domestic investors.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/11/10/growth.jpg" alt="" style="font-size: 12.16px;"></p>
<p>Developers’ access to bank finance – which is secured before obtaining a building approval – has tightened over the past year or so, particularly in areas where there have been very large increases in the supply of apartments, such as inner-city Brisbane, the statement noted.  </p>
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<p>The statement acknowledged one of the key sources of uncertainty for the forecasts is the outlook for the labour market.  </p>
<p>It also suggested weaker-than-expected growth in housing prices or changes in expectations about the likely path of interest rates could also lead to weaker consumption growth than is currently forecast.</p>
<p>The statement sets out the Bank's assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth.</p>
<p>It noted conditions in established housing markets have eased in recent months.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/11/10/Price%20Growth.jpg" alt=""></p>
<p>"The Sydney market has slowed noticeably; auction clearance rates have fallen and housing price growth has been relatively subdued over the past few months, although this follows very strong increases in housing prices over the second half of 2016 and early 2017."</p>
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<p>Conditions remain strongest in Melbourne; vendor discounts and days on market continue to point to very strong conditions, although housing price inflation and the auction clearance rate have declined a little.</p>
<p>"The more pronounced slowing in the Sydney housing market relative to Melbourne may reflect the higher share of investors in the Sydney market; the flow of loan approvals to these buyers has slowed since the beginning of the year."</p>
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<p>Housing prices in Sydney are also higher, so affordability could be more of a constraint than in Melbourne.</p>
<p>Higher migration flows to Victoria, both from overseas and interstate, are also supporting the demand for housing, it noted.</p>
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<p>Housing prices have declined a little further in Perth, where the rental vacancy rate has increased to its highest level since 1990, driven by the slowing in population growth.</p>
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<p>In Brisbane, apartment prices have been little changed in recent months following earlier declines, while detached house prices have increased. </p>
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<p>The bank noted overall household indebtedness is high and debt levels relative to income have continued to edge higher because household credit growth has continued to outpace income growth.</p>
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<p>"Steps taken by regulators have seen the growth in riskier types of lending to households moderate, but some risks remain.</p>
<p>"For example, a highly indebted household sector is likely to be more sensitive to changes in income or wealth, which could have implications for consumption growth.</p>
<p>"Also, consumption growth could be weaker for a time if indebted households choose to pay down debt more quickly rather than spend additional income."</p>
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Dwelling investment has peaked earlier than previously anticipated: RBA 

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<p>The Australian Institute of Architects has opened voting for the public to choose from 14 shortlisted residential projects to celebrate World Architecture Day on October 3.</p>
<p>Selected by a national jury, the 14 projects range from discreet alterations to grand works of art, showcasing the best residential architecture – both new builds and alterations and additions – from around the country.</p>
<p>Voting for the National Architecture Awards' 2016 People's Choice Award is open until October 27.</p>
<p>The winning project will be announced at the National Architecture Awards ceremony on November 3 in Sydney along with all the winners as chosen by the panel of judges.</p>
<p>People who choose to cast their vote also stand a chance to win prizes by writing a short summary in 25 words justifying their choice.</p>
<p>More information on the 2016 National Architecture Awards and access to voting in the People's Choice Award is available via <a href="https://wp.architecture.com.au/awards-2016/" target="_blank">wp.architecture.com.au/awards-2016/</a> </p>
<p>Projects vying for the vote are:</p>
<p>Camino House (WA) by Bosske Architecture (above)</p>
<p>Chapel Hill House (QLD) by Reddog Architects Pty Ltd</p>
<p>Darlinghurst Rooftop (NSW) by CO-AP (Architects)</p>
<p>Deepdene House (VIC) by Kennedy Nolan</p>
<p>Deepwater (NSW) by Tobias Partners</p>
<p>Five Yards House (TAS) by Archier</p>
<p>Granville Residence (QLD) by Richard Kirk Architect</p>
<p>House in Hamilton (QLD) by phorm architecture + design with Tato Architects</p>
<p>Indigo Slam (NSW) by Smart Design Studio</p>
<p>Jenny's House (TAS) by Rosevear Stephenson</p>
<p>Mills, The Toy Management House (VIC) by Austin Maynard Architects</p>
<p>Point Lonsdale House (VIC) by NMBW Architecture Studio</p>
<p>Project Zero (QLD) by BVN</p>
<p>Rosalie House (QLD) by Owen Architecture</p>
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