NAB's Rob Henderson:
"Australian Dwelling Starts (Q1) rose by 4.3% another solid
outcome, after a strong rise of 16.8% last quarter, thanks to the
RBA’s low rates and the Government’s First Home Buyer Grant
top-up, which ended in September last year. The number of
new starts annualised at 170K, well up on the 163K annualised
rate for Q4 2009. However, the fact remains that the number of
starts remains way below that required to service the high rate
of household formation in our community, due to strong
population growth.
On our estimates, Australia needs around 240K new dwellings
each year, to cope with new households being formed with the
current population growth. Hence, the annualised rate from Q1
of 170K is some 70K short. This will put underlying upwards
pressure on house prices and rents. State and local
governments need to hasten the release of low cost land to the
market to boost the supply side of the housing equation."
CBA had this view:
"There is a strong cyclical upswing underway in residential construction. And there is more to come according to the construction lending and building approvals data.
We expect annual dwelling starts to keep rising towards the 178k level by the end of 2010, then to 184k by the end of June 2011.
Dwelling starts rose by 4.3% in QIV, to be 34.7% higher than a year ago. The annualised rate for QI was 169.8k and should continue to rise. QI Starts were weaker than market, and our, expectations of a 7% rise. But history was revised higher. The December quarter starts were revised to a 16.8% rise from the previous 15.1%.
The composition of the QI outcome was a bit unusual. Private starts were flat in QI, with private houses down 2.4% while the multi-unit category rose by 7.9%. Public housing starts jumped by 117% in QI from 2.4k to 4.1k. The public sector dwelling starts are expected to stay near the QI level for a while yet. The Federal Government has committed to higher levels of social and defence housing as part of its stimulus program. The annual total for public sector starts is just over 9k, the highest level since 1993.
From a policy maker’s viewpoint the rise in dwelling starts will be welcome. But the construction response is painfully slow given the very strong demand conditions from the highest population growth since the 1960s. The Federal Government and business groups want higher skilled migration to help offset the wages pressures from the previous, and upcoming, mining booms. But there appears to be a fragmented response to lifting residential construction. Most of the recent lending for housing has contributed more to lifting prices of existing dwellings, especially in the high demand inner-city suburbs, rather than achieving an expansion of new supply where required."
