Housing Supply

A key reason why fundamental problems in the housing market are never solved is because people seek to treat the symptoms rather than the cause.

This is true in business and in life, as much as it is in the housing market. It makes little sense to take medication for high blood pressure if the underlying cause is that you&rsquo;re overweight because you have a bad diet and you don&rsquo;t exercise.

People who hover around the sidelines of the real estate industry, sniping at things they don&rsquo;t like, are highly prone to demanding actions on the symptoms of a perceived problem when they should be addressing the underlying causes of the symptoms.

Treating symptoms, while ignoring causes, has a tendency to make problems worse. Right now, we have spectators to the housing market demanding controls on landlords because rents are rising.

Other spectators want draconian measures from regulatory authorities because prices are rising, bringing howls of outrage about housing affordability.

In both cases, their targets are investors, always a popular choice as scapegoats when there&rsquo;s growth in housing markets and it&rsquo;s characterised in media as a crisis.

[smartcode_project:default project_id=94542]

The natural impulse of the sideline whingers is to demand a crackdown aimed at investors, because they&rsquo;re always seen as the villains.

The reality for the issue of rapidly rising rents is that we need to be encouraging investors, not attacking them.

The symptoms of the problem are rising rents, but the cause is a chronic shortage of rental properties.

In my four decades of researching and writing about housing markets, I&rsquo;ve never seen vacancies so low in so many places.

Anyone genuine in their concerns (rather than having a whinge or grandstanding for political reasons) should be asking why we have such a shortage and how we can fix that fundamental problem.

Rental control is a quick fix medicine to treat the symptoms, while ignoring the underlying market health issues. It will make the problem worse by exacerbating the fundamental problem, which is that Australians have been massively discouraged from becoming investors.

Rental vacancies are a function of the activity of property investors. When people buy dwellings and make them available for rental in large numbers, there are ample properties for everyone who wants or needs to be a tenant, and rents are likely to be stable.

[smartcode_project:default project_id=600]

But investors have been largely absent from the market in recent years. There has been a growing raft of disincentives to property investment over the past five or six years &ndash; including a series of negative measures by APRA, negative changes to depreciation rules and menacing political rhetoric at the last two federal elections, notably from the ALP which has been intent on scrapping negative gearing and increasing capital gains tax.

We&rsquo;ve also had state governments discouraging investors by hitting them with new taxes, fees and charges. The impact of all those different milestone events since 2015 has been a profound discouragement to investment. Some sections of media have characterised property investment as something akin to a criminal activity, abetted by politicians who have claimed the average investor is a rich greedy bastard who owns 15 or 20 properties and is ripping off the system &ndash; a blatant lie (the official data shows 75% of investors have average incomes and own only one or two properties) but lapped up by a careless media.

The short-term consequences include a rental shortage crisis and the long-term outcomes include fewer Australians who will be self-funded in retirement and will need to be supported in growing numbers by taxpayers. If governments respond to the twits on the sidelines and enforce controls on rental levels, rather than allow market forces to set them, that will be yet another disincentive to investors &ndash; and the problem will get worse.

[smartcode_project:default project_id=100322]

Limiting how much a tenant has to pay in rent is worthless if the prospective tenant can&rsquo;t find a vacant property at any price. That&rsquo;s the reality at the moment. There are so few vacant properties that there are dozens of applicants for every listing and people who desperately need a home keep missing out. Rents are rising because people are offering more than the asking rent in an effort to out-bid their competitors, not because landlords are asking extortionate rents.

And, as an aside, increasingly businesses can&rsquo;t fill job vacancies because willing applicants can&rsquo;t find anywhere to live. The only answer to this problem is to increase the supply of rental properties. And that means introducing measures that encourage property investors.

That will elicit further howls of indignation from the chattering economists and other sideline snipers, but it&rsquo;s the only way to fix this problem.

Rental control is a quick fix medicine to treat the symptoms, It will make the problem worse by exacerbating the fundamental problem, which is that Australians have been massively discouraged from becoming investors

terryryder

Why is there a housing shortage and why will government controls make it worse? Hotspotting's Terry Ryder

<html><body>
Prosper Australia does not believe in the home ownership problem being due to lack of housing supply, rather data has been wrongly analysed and a tax reform should be put in place.
"A good way to examine whether an adequate supply of housing exists is to compare the flow of new dwellings to new net population. Many analyses simply look at the relative or absolute change in dwelling stock, which is pointless without first considering changes in population."
Prosper Australia understands several factors have not been taken into consideration. For example, the total population measure is used, when only adults should be considered.
"An increase in the natural population through births doesn’t automatically necessitate new dwellings be built, though it may result in families upgrading to larger dwellings. 
"Renovations and extensions of existing dwellings are overlooked, but generate additional housing capacity. Many immigrants arrive in groups, initially requiring only one dwelling per family/shared household. 
"Building completions do not take into consideration dwellings that are demolished, condemned or held off the market. The slow rise in sole occupant households, divorce and/or childless couples (demographic change) may drive a long-run trend toward lower occupancy rates in general.
"The inadequacy of the housing shortage argument is apparent for the trend in the NSW ratio. Sydney, which dominates the state’s housing market, experienced a massive price boom between 1996 and 2004, yet over this period, one new dwelling was built for every 1.4 new people.  
"At the peak in 2004, the ratio decreased to an insane 0.2. In other states and territories, the ratio turned negative, indicating negative population growth in the face of positive dwelling construction, even while prices remained steady or even rising.
"Australia would be much better served if investor attention was refocussed onto genuine investment that added to our national capacity and strength rather than idle ticket-clipping. 
"In conclusion, there is no housing shortage as is commonly claimed, though a temporary shortage did emerge during the GFC. Australia is a mirror of other countries where high housing prices were also blamed on a shortage, always revealed, in hindsight, to be a chimera."
In the submission to the House of Representatives Standing Committee on Economics, Prosper Australia recommended the Government to introduce a one per cent Federal Land Tax, fully rebatable on State Land Tax paid. 
"State governments could adjust their tax rules and keep every dollar the Federal Land Tax raises, to the great benefit of all Australians. The Commonwealth would be entitled to argue this intervention is for sound economic reasons and dissipate the political fallout.  
"Few state taxes have such economically useful and dynamic properties, except State Land Tax, which rises and retreats with land price changes. This rare and valuable quality is masked by biennial land valuations. 
"Prosper recommends government revalue all land annually, by interpolation. This is quite straightforward with computer-assisted mass appraisal. The economic benefit of this automatic stabiliser function is profound in eras of rapidly rising or falling land prices. 
"Reducing wage and business taxation and increasing land tax would not necessarily lower land prices, given the offset of increased final wages, profits, and real and imputed rents. This macro reform – urged on government by every independent tax review in living memory – would solidly correct the price/income and price/rent ratios. 
"Transitional arrangements would need to be considered. A logical solution is to credit all landowners with the amount of stamp duty paid and then deduct the hypothetical land tax they would have paid since the date of purchase. This would address much of the fairness question."
Prosper Australia claims that stamp duty deters property transactions and innovation.
"It inhibits the transfer of property to higher value uses, resulting in an inefficient allocation of resources. 
"This transaction tax falls on both land and buildings, whereas land tax falls solely on the underlying land. Thus, stamp duty lifts the cost of and constrains construction and construction employment. 
"Stamp duty inhibits transactions. If removed, we would see more and better construction, lower rents, better matching of households to housing stock, a greater propensity to buy (on ease of exit), less traffic congestion, and a deeper, more active land market.
"Prosper commends the Henry Review recommendation to tax on a per square meter basis, rather than aggregating holdings. The flatter the rate schedule, the less significance this question holds. 
"The proposed property tax should fall solely and utterly on the underlying land. Taxing structures discourages construction; land cannot be discouraged, it simply is."
</body></html>

jchancellor-FAypfDUnLy

Home ownership data wrongly analysed: Prosper Australia

<html><body><div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
The Housing Industry Association urges the Federal Government and Opposition to commit to actions targeting housing supply constraints in their election platforms. 
Providing affordable homes to house our growing, ageing and increasingly diverse population requires more than one line references about increasing supply.
Providing affordable homes that cater for families large and small, in capital cities and regional centres, in city centres and their suburbs requires vision and planning.
We don’t have a national housing plan.
Successive Federal Governments have failed to coalesce the roles, responsibilities and endeavours of state, territory and local governments. Governments at all levels, and their well-intentioned agencies, work outside of a national housing strategy. They don’t act in unison, towards a national goal.
It’s like attempting to piece together a jigsaw puzzle without knowing the image or landscape.
With an ageing workforce and mounting pressure on publicly funded services, the Federal Government cannot simply dismiss housing affordability as a supply problem for the states to solve.
An incoming Federal Government must do better. It needs to provide national leadership and vision, and the resources to support better targeted initiatives to increase the supply of both private and public housing.
Committing to a dedicated Federal Minister for Housing, within Cabinet, and establishing a national land planning council to provide national monitoring and reporting of land supply across each stage of the supply pipeline are high on the HIA’s list of imperatives. 
Instigating a holistic inquiry into the added cost of housing caused by taxes, excessive regulations and delays in planning assessments is also a priority for the housing industry. 
Graham Wolfe is chief executive industry policy and media, HIA and can be contacted <a href="https://hia.com.au/en/about.aspx" target="_blank">here</a>. 
</div>
</div>
</div></body></html>

New housing fuels affordability: HIA's Graham Wolfe

<html><body>
GUEST OBSERVER
Planning decisions across NSW need to be determined by different independent panels depending on project size.
The current suggestions that development applications should be determined by independent panels will take the politics out of decision making. 
But there need to be different panels depending on the scale of development. Small scale projects should remain with council planners to provide reports to a council independent panel but large projects over $20 million will need a different process.
The over $20 million projects inevitably involve state government agencies like roads and transport so these projects are determined by planning panels. 
In Sydney these are chaired by the Greater Sydney Commission’s District Commissioner. 
Under the current arrangements local council planners prepare a planning report which is provided to the panel to make their decision. 
However, the report often takes a negative position on the proposed development, reflecting the views of local councillors rather than providing an independent, merit based analysis of the proposal. A better process for large projects in
Sydney is to establish six District Planning Offices in each of the Greater Sydney Commission’s districts.
Currently only 1.3 percent of the Development Applications that are processed in Sydney are above $20 million but they are the big projects that represent 47.3 percent of the total construction value of DAs.
 These big projects currently take a massive 271 days on average to be approved and they need specialist planning skills to negotiate with government agencies. 
The six District Planning Offices could second skilled staff from councils in the district into a single office to prepare planning reports. 
The other 98.7 percent of DAs should be processed at the local council level by council planners. Both small and large projects can be assessed by independent panels.
If the NSW Government is going to reform the planning system to make it more independent it should do this in a manner that acknowledges the new governance structure established by the Greater Sydney Commission of six districts. 
A decade or so ago there were very few large precinct wide apartment projects involving hundreds of apartments as well as commercial, retail and open space but now these sophisticated and complex projects are far more common. 
The time is ripe for a more sophisticated planning system that supports larger projects that are ultimately the key to driving Sydney’s housing supply.
Chris Johnson is chief executive officer of property development industry group Urban Taskforce and can be contacted <a href="https://www.urbantaskforce.com.au/index.php?option=com_content&amp;view=article&amp;id=97&amp;Itemid=126#.Vdaart55dFI">here</a>.
 
</body></html>

Keep planning decisions for small projects with council panels and for large projects with regional panels

<html><body>
GUEST OBSERVER
Allowing first homebuyers to cash out their super to buy a home is a seductive idea with a long history. Like the nine-headed Hydra, which replaced each severed head with two more, each time the idea is cut down it seems to return even stronger.
Both sides of federal politics took proposals to the 1993 election to let Australians draw down their super. After re-election, then Prime Minister Paul Keating scrapped it amid widespread criticism. Former Treasurer Joe Hockey raised the idea again in March and was roundly criticised by academics and the media. This month the Committee for Economic Development of Australia (CEDA) has again resurrected the idea.
House prices have skyrocketed again over the past two years, particularly in Sydney. So politicians are attracted to any policy that appears to help first homebuyers to build a deposit. Unlike the various first homebuyers’ grants that cost billions each year, letting first homebuyers cash out their super would not hurt the budget bottom line – at least, not in the short term. But the change would worsen housing affordability, leave many people with less to retire on, and cost taxpayers in the long run.
It is a bad idea for five reasons.
First, measures to boost demand for housing, without addressing the well-documented restrictions on supply, do not make housing more affordable. Giving prospective first homebuyers access to their superannuation will help them build a house deposit, but it would worsen affordability for buyers overall. Unless supply increases, more people with deposits would simply bid up the price of existing homes, and the biggest winners would be the people who own them already.
Second, the proposal fails the test of superannuation being used solely to fund an adequate living standard in retirement. The government puts tax concessions on super to help workers provide their own retirement incomes. In return, workers can’t access their superannuation until they reach a certain age without incurring tax penalties.
While paying down a home is an investment, owner-occupiers also benefit from having somewhere to live without paying rent. These benefits that a house provides to the owner-occupier – which economists call housing services – are big, accounting for a sixth of total household consumption in Australia. Using super to buy a home they live in would allow people to consume a significant portion of the value of their superannuation savings as housing services well before they reach retirement.
Third, most first homebuyers who cash out their super would end up with lower overall retirement savings, even after accounting for any extra housing assets. Owner-occupiers give up the rent on their investment. With average gross rental yields sitting between 3% and 5% across major Australian cities, the impact on end retirement savings can be very large. Consequently, owner-occupiers will tend to have lower overall lifetime retirement savings than if the funds were left to compound in a superannuation fund.
Frugal homebuyers might maintain the value of their retirement savings if they save all the income they no longer have to pay as rent. In reality, few will have such self-discipline. Compulsory savings through superannuation have led many people to save more than they would otherwise. A recent Reserve Bank study found that each dollar of compulsory super savings added between 70 and 90 cents to total household wealth. If first homebuyers can cash out their super savings early to buy a home that they would have saved for anyway, then many will save less overall.
Fourth, the proposal would hurt government budgets in the long run. Superannuation fund balances are included in the Age Pension assets test. The family home is not. If people funnel some of their super savings into the family home, gaining more home equity but reducing their super fund balance, the government will pay more in pensions in the long-term.
Government would be spared this cost if any home purchased using super were included in the Age Pension assets test, but that would be very hard to implement. For example, do you only include the proportion of the home financed by superannuation? Or would the whole home, including principal repayments made from post-tax income, be included in the assets test? The problems go away if all housing were included in the pension assets test, but this would be a very difficult political reform.
Fifth, early access to super for first homebuyers could make the superannuation system even more unequal than it is today. Many first homebuyers are high-income earners. Allowing them to fund home purchases from concessionally-taxed super would simply add to the many tax mitigation strategies that already abound.
Consider the case of a prospective homebuyer earning A$200,000. Their concessional super contributions are taxed at 15%, rather than at their marginal tax rate of 47%. Once they buy a home, any capital gains that accrue as it appreciates are tax-free, as are the stream of housing services that it provides. Such attractive tax treatment of an investment – more generous than the already highly concessional tax treatment of either superannuation or owner occupied housing – would be prone to massive rorting by high-income earners keen to lower their income tax bills.
What, then, should the federal government do to make housing more affordable?
<h2>Helping fix our cities</h2>
Above all, new federal Minister for Cities Jamie Briggs should support policies to boost housing supply, especially in the inner and middle ring suburbs of major cities where most people want to live, and which have much better access to the centre of cities where most of the new jobs are being created. The federal government has little control over planning rules, which are administered by state and local governments. But it can use transparent performance reporting, rewards and incentives to stimulate state government action, using the same model as the National Competition Policy reforms of the 1990s.
Other reforms, such as reducing the 50% discount on capital gains tax and tightening negative gearing, would also reduce pressure on house prices and could be implemented straight away. Such favourable tax treatment drives up house prices because it increases the after-tax returns to housing investors. The number of negatively geared individuals doubled in the 10 years after the capital gains tax discount was introduced in 1999. More than 1.2 million Australian taxpayers own a negatively geared property, and they claimed A$14 billion in net rental losses in 2011-12.
There are no quick fixes to housing affordability in Australia. Yet any government that can solve the problem by boosting housing supply in inner and middle suburbs, while refraining from further measures to boost demand, will almost certainly find itself rewarded, by voters and by history.
Brendan Coates is senior associate, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/brendan-coates-154644" target="_blank">here</a>.
John Daley<a href="https://theconversation.com/profiles/john-daley-1870" rel="author"> </a>is chief executive officer, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>.
Both are authors for The Conversation.
</body></html>

Five reasons the Turnbull government shouldn’t let us spend super on a home

<html><body>
<div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
GUEST OBSERVER
The six district plans for Metropolitan Sydney must be amended to drive housing supply, says the Urban Taskforce. 
The district plans for Sydney along with the draft amendments to the Metropolitan Strategy contain a shift away from housing supply by reverting to single use zoning to focus on job.
The current Metropolitan Strategy (A Plan for Growing Sydney) clearly sees higher density housing as part of a mixed use approach to Strategic Centres but the draft amendment has removed housing in favour of commercial development.
The current focus by the NSW Government on housing affordability and the need to boost supply in Sydney must be enabled by the Greater Sydney Commission’s plans and how they influence decisions on planning proposals. With councils in Sydney going through an amalgamation process and the fact that it could be two years before Local Environmental Plans are completed it will be the District Plans that will influence planning decisions on new housing proposals. Sydney’s housing crisis needs urgent action.
A further shift away from housing supply has occurred with the use of the ‘precautionary approach’ to the rezoning of employment lands including inner city industrial sites that are becoming redundant. A number of planning proposals to develop mixed use precincts on these sites have been rejected over recent months by the Greater Sydney Commission’s Planning Panels because they do not conform with the draft District Plans.
The Urban Taskforce is concerned that there are now two conflicting planning documents for Sydney that both need to be considered to meet the Strategic Merit test for Planning Proposals. The existing Metropolitan Strategy clearly supports mixed use centres while the draft plans propose single use zoning. The confusion from these two planning documents is leading to significant risk for applicants of planning proposals.
The Greater Sydney Commission (GSC) has produced a significant amount of quality material that outlines the 20 and 40 year visions for Sydney in relation to the major growth that is predicted. There are many parts of the draft plans that contain excellent proposals. The Urban Taskforce’s submission to the GSC acknowledges the extent of the material produced and of the willingness of the commissioners and the staff to consult with the development industry. There are however a number of areas in the plans that we believe need further work and our submission focusses on these.
The Urban Taskforce submission contained 10 key issues which are listed below: 
1. Acknowledgement of the extent of the material
2. The legal status of the draft district plans in relation to ‘a plan for growing sydney’ is uncertain
3. The ‘three-city’ vision for sydney is supported 
4. A clear vision of the future built form of the greater sydney area is needed
5. Developers are increasingly becoming responsible for funding of infrastructure and affordable housing
6. Too many planning decisions are delegated to councils 
7. Housing supply must be given higher priority 
8. Community involvement must relate to the scale of the plan (local, district, metropolitan)
9. A mixed use cosmopolitan character should be promoted 
10. Affordable housing should be provided through an incentive-based system
The Urban Taskforce is keen to be involved in the amendment and refinement of the six District Plans and the Metropolitan Strategy - Towards Our Greater Sydney 2056 through discussions with the GSC.
We will also be producing research publications that add to the continuing dialogue between government, the community and the industry on Sydney’s future.
</div>
</div>
</div>
<div class="page" title="Page 2">
<div class="layoutArea">
<div class="column">
The full submission on the Draft District Plans and the Draft Amendment to A Plan for Growing Sydney by the Urban Taskforce is available <a href="https://www.urbantaskforce.com.au/index.php?option=com_phocadownload&amp;view=category&amp;downloa%20d=2180:submission-draft-sydney-district-plans-and-towards-our-greater-sydney-2056&amp;id=2:what-s-%20new&amp;Itemid=141%20" target="_blank">here</a>.
 
Chris Johnson is chief executive officer of property development industry group Urban Taskforce and can be contacted <a href="https://www.urbantaskforce.com.au/index.php?option=com_content&amp;view=article&amp;id=97&amp;Itemid=126#.Vdaart55dFI" target="_blank">here</a>.
</div>
</div>
</div>
</body></html>

Draft district plans must be amended to help solve Sydney’s housing crisis

<html><body>
<img src="https://counter.theconversation.edu.au/content/69612/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Although plenty of pundits seem to think a December rate hike by the US Federal Reserve is a lock, the intervening data would be very important.
With the most recent US GDP growth figures, it looks like the jury is largely in.
Third-quarter GDP growth was revised to an annualised rate of 3.2 percent on a seasonally adjusted basis. Consumer spending was a key component, with personal consumption up 2.8 percent. That indicates some underlying confidence that bodes well for future growth figures.
Adding to that, the Markit Flash US Services PMI Business Activity Index was at a preliminary 54.7 in November, almost the same as the 54.8 in October. This is the ninth consecutive month of an expansionary purchasing managers index. It’s a further sign that inventories are being worked down and assets put to productive use.
Absent some other negative news, it will be hard for the FOMC to resist raising rates at their December meeting.
Here in Australia, the ABS released figures on Wednesday showing another decline in residential building approvals – the third in as many months. Year-on-year approvals are down about nearly a quarter. That signals an uncomfortable dent in confidence, apart from in and of itself being a A$1.5 billion drop in economic activity.
<a href="/images/2016/12/06/Screen%20Shot%202016-12-06%20at%209.53.52%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/12/06/Screen%20Shot%202016-12-06%20at%209.53.52%20AM.png" alt="">
In a further sign that any cyclical upturn in residential construction looks to have come to an end, new home sales were down 8.5 percent in October, with the Melbourne market a key driver. Interestingly, this was not just a product of the much-vaunted boom in Melbourne apartment construction: multi-unit sales were down 9.2 percent nation-wide, but detached houses were down 8.2 percent.
Combined, this will do nothing to help the housing affordability crisis Australia has been facing for some years now. That crisis led to NSW Planning Minister Rob Stokes breaking ranks with the federal Liberal Party in suggesting that negative gearing reform should be considered as part of the solution to the housing crisis. That could not be written off as a slip of the tongue after Premier Mike Baird reiterated the sentiment in his remarks to the National Press Club on Tuesday.
My stance on the matter is well known to readers of this column, given my report for the McKell Institute 18 months ago, advocating the gradual elimination of negative gearing for existing properties. I didn’t fire the starter’s pistol on negative gearing reform, but, to push the athletics analogy, it’s beginning to look like I rang the bell for the last lap.
<a href="/images/2016/12/06/Screen%20Shot%202016-12-06%20at%209.54.46%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/12/06/Screen%20Shot%202016-12-06%20at%209.54.46%20AM.png" alt="">
Italy is the world’s eighth-largest economy, with GDP of US$1.81 trillion. It has rarely grown, and often shrunk, since the financial crisis, with the most recent growth rate at 0.3 percent.
Like much of the Eurozone, Italy is teetering on the precipice of a Japan-like deflationary spiral, with inflation at -0.2 percent.
It shares a high unemployment rate with many other European countries. Italy’s is at 11.7 percent, while its youth unemployment rate is a staggering and alarming 37.1 percent. As I wrote about France last week, that’s simply not compatible with the social compact of a liberal democracy in the medium term.
Italy’s balance sheet doesn’t look much better. Italy’s debt/GDP ratio is 132.7 percent, the fourth highest in the world, which leaves little wiggle room with its budget deficit of 2.6 percent of GDP. That has been improving since the financial crisis, but balance is still far from in sight. And because Italy is in the euro zone, it cannot simply inflate its debts away.
In many ways, Italy is the poster child of the European dilemma. It entered into a currency union without becoming part of a fiscal union. It is stuck with the euro, but it would be calamitous to go off it.
No wonder, then, that there is a referendum this weekend to consider amending the constitution to try to reduce the power of the Senate and reduce gridlock. Prime Minister Matteo Renzi, a pro-European, has essentially staked his reputation on it.
Should it fail to pass, there is the very real possibility of a Grexit-cum-Brexit moment in the weeks to come.
Richard Holden is professor of economics and PLuS Alliance Fellow, UNSW Australia and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/richard-holden-118107" target="_blank">here</a>.
 
</body></html>

The data that won’t help the government on housing supply

<html><body>
GUEST OBSERVER
Despite repeated warnings around apartment oversupply and settlement risk, the number of dwellings being approved for construction across the capital cities remains unquestionably strong.
In July 2016, there were 17,380 capital city dwelling approvals which was the highest number of approvals since October 2015.  It was also the third highest monthly number of capital city dwelling approvals on record.  Despite a recent slowdown in capital city dwelling approvals there was a substantial rebound in July 2016.
<div>
<h3>Monthly and 6 month average number of capital city house and unit approvals</h3>
<a href="/images/2016/10/04/2016-09-26--image1.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/04/2016-09-26--image1.png" alt="">
<h3>6 month average number of capital city dwelling approvals</h3>
<a href="/images/2016/10/04/2016-09-26--image2.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/04/2016-09-26--image2.png" alt="">
Looking at the split between houses and units over the month, there were 6,482 houses and 10,898 units approved for construction across the combined capital cities.  There have now been more units approved for construction than houses across the combined capital cities for 22 consecutive months.  Over the 12 months to July 2016, 57.9% of all capital city dwelling approvals were for units.
<h3>6 month average number of capital city house approvals</h3>
<a href="/images/2016/10/04/2016-09-26--image3.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/04/2016-09-26--image3.png" alt="">
<h3>6 month average number of capital city unit approvals</h3>
<a href="/images/2016/10/04/2016-09-26--image4.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/04/2016-09-26--image4.png" alt="">
Over the past year, there have been 76,356 capital city houses and 104,835 capital city units approved for construction.  In each of: Sydney, Melbourne, Brisbane and Canberra there have been more units than houses approved for construction over the past year.
Sydney - there were 54,667 dwelling approvals over the past year which is 7.3% higher than the previous year.  This figure comprised of 16,360 house approvals (+3.2% yoy) and 38,307 unit approvals (+9.1% yoy).
Melbourne – over the year to July 2016 there were 57,428 dwellings approvals which was -0.2% lower over the year.  25,880 of these approvals were for houses and 31,548 were units, with the year-on-year changes recorded at +11.2% and  -7.9% respectively.
Brisbane – The 30,901 dwelling approvals over the past year consisted of 11,210 houses and 19,691 units.  Overall approvals are 4.0% higher over the year with house approvals -1.4% lower and unit approvals 7.4% higher. 
Adelaide – there were 6,119 houses and 3,899 units approved over the past year resulting in 10,018 total approvals.  Over the past year, dwelling approvals are 10.9% higher with house approvals up 9.3% and unit approvals 13.5% higher.
Perth – the number of annual dwellings approvals fell by -24.3% over the year to 20,963.  Over the year, the 14,202 house approvals were -26.7% fewer than the previous year and the 6,761 unit approvals were -18.6% less than a year ago.
Hobart – there were only 989 new dwellings approved for construction over the year, 799 of which were houses and 190 units.  House approvals were -22.7% lower year-on-year and unit approvals were down -10.8%.
Darwin – there were 1,304 dwelling approvals over the past year which was -12.7% lower year-on-year.  Over the year, the 657 house approvals was -22.8% lower than the previous year and the 647 unit approvals were 0.6% higher than the previous year.
Canberra – there were 1,129 houses and 3,792 units approved for construction over the past 12 months.  There were -8.1% fewer house approvals than over the previous year while unit approvals were 24.7% higher over the year.
Despite policy makers and analysts (including CoreLogic) voicing concerns about the level of housing construction currently underway, particularly for units, approvals in capital cities generally remain unquestionably strong.  From here it will be interesting to see how many of these approvals immediately progress to commencement and ultimately through to a completion.  Tighter lending conditions for both developers and purchasers for off-the-plan units is likely to result in a larger proportion of approvals that don’t proceed through to a finished product.  The data also reiterates why purchasers of off-the-plan units in major capital city housing markets should be very selective with regard to the types of units they purchase.
Importantly, oversupply concerns are most visible across specific and well defined geographic areas and product types. CoreLogic’s Settlement Risk Report identifies the Melbourne inner city and Brisbane inner city as the two markets where the largest amount of unit supply is likely to be delivered over the next 24 months.
Cameron Kusher is research analyst for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
</div>
</body></html>

ckusher-ujnxiKuFQs

Capital city dwelling approvals rebounding: Cameron Kusher

<html><body><div title="Page 1">
<div>
<div>
<div>
Based on the relationship between demonstrated housing demand and advertised stock levels we are seeing relatively more stock available for sale compared to demand for that stock across the capital cities at the moment.
The months of supply figure compares the number of unique properties advertised for sale to the number of transactions in the market. The analysis provides unique insight into how long it should take to clear the volume of stock currently available for sale. It is important to note that off-the-plan housing stock is typically not advertised for sale as individual properties and as a result is not included within this analysis.
Across the combined capital cities, there is currently 4.4 months’ worth of residential properties being advertised for sale. As the first chart shows, the months of supply is currently higher at this point of the year than it has been each year since 2012. The increasing months of supply is largely due to the slowing rate of transaction activity rather than a spike in properties available for sale, indicating demand has diminished relative to advertised supply levels which is pushing the figure higher. <a href="https://www.corelogic.com.au/resources/property-pulse/article-graphs-img/2017-05-15--image1.jpg" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/05/19/rsz_kusherchart.png" width="700" height="425">
Sydney – there is currently 3.0 months of established housing supply available for sale across the city. The city has seen consistently low months of supply over recent years however, the figure is currently at its highest level for this time of year since 2012.
Melbourne – established housing stock currently sits at 4.2 months of supply for the city. Supply levels remain quite low but are at their highest levels for this time of year in five years.
Brisbane – the city currently has 5.1 months of established housing stock available for sale. The months of supply figure is higher than it has been at this time of year for each of the past five years.
Adelaide – there is currently 3.7 months of established housing stock available for sale. Although stock levels are higher than they were at this time over the past two years, stock levels were higher over the three years previous to that.
Perth – at the moment there is 8.3 months of established housing stock available for sale throughout the city. This is a high months of supply figure relative to other capital but it is well down on the 8.7 months at the same time last year.
Hobart – the months of supply figure for Hobart is the lowest it has been for many years. There is currently 4.1 months’ worth of established stock available for sale which is down from 5.0 months a year ago and the 7.2 months the year previous.
Darwin – across the city there is currently 6.7 months of established housing supply which is well down on the 10.5 months at the same time a year ago and 7.5 months over the previous year.
Canberra – there is currently 2.6 months of supply of established housing stock for sale in Canberra. The months of supply level is the same as what it was a year ago but lower than the previous years highlighted.
Based on these figures it seems that the supply of stock for sale relative to demand is increasing in Sydney, Melbourne and Brisbane. Meanwhile demand is outweighing supply in Hobart and Canberra leading to a decline in the months of supply. In Perth and Darwin supply continues to dramatically outweigh demand but the balance is slowly improving. In Adelaide there has been little change in months of supply over recent years suggesting the market is in relative equilibrium.
Cameron Kusher is a research analyst for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/" target="_blank">here</a>.
</div>
</div>
</div>
</div></body></html>

Fewer buyers results in greater months of supply: Cameron Kusher

<html><body>
<div>Now the construction sector is expanding again per AIG.</div>
<div> </div>
<div>Some good analysis from AIG that is well worth a read - apartment construction is an obvious strong point, which makes the drag on second quarter GDP by dwelling construction something of a mystery.</div>
<div> </div>
<div>Perhaps the residential construction industry is operating at or close to its full capacity?</div>
<div> </div>
<div>In any case, I expect dwelling construction to contribute to the economic growth in the third quarter.</div>
<a href="/images/2015/09/09/PCI.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/PCI.jpg" alt="">
 
All three of AIG's Performance Indices are now in expansion territory - manufacturing, construction and services.
<a href="/images/2015/09/09/AIG.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/09/09/AIG.jpg" alt="">
Source: AIG
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>. 
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>.
</body></html>

Housing Supply

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Housing Supply

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News