2008 Spring

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Developments in financing activity and in the established housing market generally point to a more subdued demand this year. Young Australians, who by previous generations standards, would normally be opting for home ownership at this stage in their lives, are turning to renting instead. This demographic, along with older owner occupiers, are being deterred by the current high interest rates, stamp duties and the lack of any signs of capital gains to be accrued from participating in the housing market, despite the current trend for rising rents. HIA Chief Economist, Harley Dale, believes the Junes figures, which register a seventh consecutive trend decline for building approvals, signal a weakening in residential construction over the second half of <strong>2008</strong> and an inability of the housing industry to keep up with demand. “The responsiveness of supply to growing demand has been crippled by draconian regulation, ridiculous tax grabs, restrictive land release programs, and a failure to deliver required industry skill packages,” added Mr Dale. A look at building approvals from late 2007 to the present shows a repetitive pattern of decline. Most pronounced are the low figures recorded for units. This is perhaps a reflection of the waning confidence developers have over the return of investors to the market, particularly those who buy big chunks off the plan. According to the Housing Industry Association (HIA), building approvals weakened last June, following a big drop in May. These figures have reached their lowest level since the end of 2006. On a seasonally adjusted basis, total building approvals fell by 0.7 per cent in June, following a drop of 7.8 per cent in May. The number of detached house approvals was down by 0.8 per cent and approvals for the more volatile multi-unit segment eased by 0.5 per cent following a 20 per cent drop the previous month. Over the six months leading up to June <strong>2008</strong>, detached house approvals fell 2.4 per cent and multi-unit sector the decline was a sharper 13.3 per cent. Photograph courtesy of constructionphotographs.com On a state by state basis, the number of seasonally adjusted building approvals in June fell by 34.5 per cent in Tasmania; 16.5 per cent in New South Wales, 7.6 per cent in South Australia and 6.5 per cent in Western Australia. Similarly, the trend number of building approvals fell by 6.4 per cent in the Northern Territory and 1.5 per cent in Queensland. Only Victoria and the Australian Capital Territory saw some improvements, with recorded figures up by 9.9 per cent and 17.4 per cent respectively. Page 4
The preliminary estimated resident population (ERP) of Australia at 31 December 2007 was 21,181,000 persons. This is an increase of 331,900 from the figure estimated at the same time the previous year. The increase is the largest recorded for a 12 month period since the ERP concept was introduced in 1971. According to the demographic statistics provided by ABS, this puts the rate at 1.59 per cent, making it the fastest annual growth rate recorded since 1.78 per cent in 1988. The growth of Australia's population has two components: natural increase (number of births minus number of deaths) and net overseas migration (number of arrivals minus number of permanent departures). Natural Increase: at the end of 2007, this was estimated to be around 147,400 persons. This figure is a whopping 15,000 higher than the 132,400, which was recorded for 2006. Net Overseas Migration (NOM): for the year ended 31 December 2007, it was estimated 410,900 persons arrived into Australia while 226,400 departed. The contribution made to the population growth by NOM (55.6%) was higher than that of natural increase (44.4%). This population increase puts a constant strain on the housing market, particularly affecting rental vacancy rates and the average cost of renting. There are 1.6 million renter households in Australia. The current shortage of well positioned and affordable housing suggests that a very large section of the population can be described experiencing some level of ‘housing stress’. The Federal Government, aware of the shortage of reasonably priced properties, has launched the National Rental affordability Scheme, which promises to provide 50,000 new and affordable homes for renters at 20 per cent below the market rate. The Government also promises to supply a further 50,000 homes if this does not appropriately ease the strains of the shortage. These recent increases suffered by renters have been big news items in the media. The rising costs of living and renting is presented through numerous ‘hard luck’ stories that depict desperate families and young Australians queuing up at opens and battling a bidding war in order to find suitable housing. Australian Property Monitors recently reported that Australian capital cities had experienced double digit rent increases over the past year and judged Sydney and Perth as the least affordable places to live in Australia. The average rent for a two bedroom apartment is Sydney is now $400 per week compared with $360 per for the same period last year, similar increases are typical for three bedroom houses. The Real Estate Institute of NSW (REINSW), estimates Sydney’s July vacancy r a t e s i n p r i m e residential areas (within 10 kilometres of the city), to be around 1.2. have been fluctuating between 1.5 and 0.8 per cent over the past 12 months and have rested at 1.2 in the latest July figures. REINSW believes a vacancy rate of around 3 per cent is most desirable as this is when supply adequately meets demand. Page 5
Page 1 and 2: PROPERTY REVIEW A Quarterly Journal
Page 3 and 4: C o n t e n t s Rent hikes explaine
Page 5: A mortgage is often the biggest fin
Page 9 and 10: G e n e r a t i o n Matilda Haddad,
Page 11 and 12: With these escalating house prices,
Page 13 and 14: Lower North Shore Median House Pric
Page 15 and 16: 2 Dind Street Milsons Point C u r r
Page 17 and 18: 2 Dind St, Milsons Point C u r r e
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2008 Spring

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