1. September 2011 No. 490
New construction
Stronger headwinds ahead.
RBS Morgans recently completed a great detailed survey of 40 Australian
home builders. The table and charts overleaf provide a summary.
This study confirms that new housing activity is soft and likely to soften
further over the next twelve months. Whilst current conditions are mixed –
with Victoria enjoying the most strength, New South Wales and Western
Australia broadly neutral and Queensland subdued – three out of five
participants indicated that sales inquires have dropped in recent months.
Limited availability and low affordability of land; buyers having difficulty
securing finance; withdrawal of significant government stimulus support
and a general lack of confidence were cited as the major headwinds for
Australian home builders. A relevant Queensland quote is, “the market is
cautious and constrained with higher utility bills, recent natural disasters, the
potential for higher interest rates and a looming carbon tax”.
Six out of ten participants have had to lift the level of incentives offered to
secure a sale. Builders who target the second and subsequent owner-
occupier market appear to have weathered the storm better than those
selling to investors or first home buyers.
This survey also found that 57% of home builders think that a lift in interest
rates would have a “very material” impact on housing activity. Western
Australia and New South Wales, this survey suggests, would be worst hit,
with each state scoring a 70% “very material” impact if rates were to rise.
Queensland scored 60% and Victoria just 30%.
In addition, two out of three respondents indicated buyers are already
having difficulty getting finance and this is overwhelmingly (90%) the reason
for lost sales. Also, note that close to half of the survey participants feel that
financing conditions are deteriorating.
This survey suggests that new housing starts will continue to fall. This
financial year’s 162,000 national starts are projected to drop to 145,000
during 2011/12, before rising to 167,000 in 2012/13 and to 186,000 within
three years. Over the longer term, RBS Morgans forecast new housing
activity to average about 158,000, which is about 7% higher than the
historical average.
Things look like they will get better – we just have to do keep doing our best
and hold on until then.
The Matusik Snapshot is opinion and not advice. Readers should seek their own professional advice
on the subject being discussed. Comments are welcome, contact me on michael@matusik.com.au

2. RBS Morgans
Australian construction industry survey
NSW Vic Qld WA Australia
How do you rate current sales? 60% average 60% average 40% average 40% average 49% average
20% poor 40% good 30% poor 20% goog 20% good
10% good 20% good 20% very poor 15% poor
How does this compare to 60% same 50% down a bit 50% same 70% down a bit 40% same
six months ago? 20% up a bit 40% same 20% down a bit 20% up a lot 35% down a bit
20% down a bit 10% up a bit 20% up a bit 10% up a bit 15% up a bit
How do you rate your level 80% average 60% good 50% poor 50% average 44% average
of inquiry? 10% good 30% average 20% good 20% poor 27% good
10% poor 10% poor 20% average 20% good 23% poor
How does this compare to 50% down a bit 70% down a bit 40% down a bit 40% down a bit 49% down a bit
six months ago? 30% same 20% same 30% up a bit 20% same 20% up a bit
20% up a bit 10% up a bit 20% down a lot 20% up a bit 20% same
How do you rate your confidence 60% average 80% good 50% good 50% poor 42% good
level for the next six months? 30% good 20% average 20% average 30% average 33% average
10% poor 20% poor 10% good 20% poor
How material would another 70% very 30% slightly 60% very 70% very 57% very
0.5% to 1% lift in interest rates be? 30% material 30% very 20% material 20% material 23% material
20% material 20% slightly 10% slightly 10% slightly
Are buyers having issues 60% no 70% yes 60% yes 80% yes 60% yes
obtaining finance? 40% yes 30% no 40% no 20% no 40% no
Is this getting better 60% better 60% worse 50% better 70% worse 47% worse
or worse? 30% worse 20% better 30% worse 30% better 40% better
10% no change 20% no change 20% no change 13% no change
Source: RBS Morgans . April survey of 40 of the top 100 Australian home builders.
Housing starts Share of national starts
Australian states/territories Queensland
30%
Victoria 35%
28%
26%
24%
New South Wales 19%
22%
20%
18%
Tas, NT & ACT 6%
Queensland 18% 16%
Jun-1984
Jun-1985
Jun-1986
Jun-1987
Jun-1988
Jun-1989
Jun-1990
Jun-1991
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Jun-1997
Jun-1998
Jun-1999
Jun-2000
Jun-2001
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Jun-2003
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Jun-2008
Jun-2009
Jun-2010
Jun-2011
South Australia 7%
Western Australia 15%
Matusik Property Insights, ABS. Matusik Property Insights & ABS.
2011 financial year. Annualised total housing approvals, seasonally adjusted.
Michael Matusik
Queensland’s leading independent property analyst
Courier Mail columnist | ABC radio commentator | Author & digital
broadcaster | Public presenter
Michael Matusik is no stranger to the residential property sector. He
has worked in the industry for over 25 years and his firm has helped
around 550 residential projects come to fruition. independent – perceptive - to the point
we make residential work
Michael authors the Matusik Snapshot, a fortnightly subscription
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