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HIA Housing 100 unveiled

Our Housing 100 report shows that 2017/18 was one of the strongest years on record for detached house building.

Author

Kristin Brookfield

The nation’s top 100 builders had another bumper year in 2017/18 with the largest 100 residential builders commencing 74,565 new homes during the year. This represents 33 per cent of new builds.

These figures come from the latest HIA–COLORBOND® steel Housing 100. The report was released in Melbourne to a packed audience on the first stop of the HIA Construction Outlook breakfast series. Presenting the results was HIA Principal Economist, Tim Reardon. Attendees also heard from Victorian Treasurer, Tim Pallas, and Westpac’s Chief Economist, Bill Evans.

The 2017/18 financial year was one of the strongest on record for detached house building with an estimated 120,800 starts. The market for higher density dwellings held up well and defied the widely-held expectation that the softening conditions during 2017 heralded a correction. The number of dwellings in multi-unit projects that commenced during the 2017/18 year rose by around 1.6 per cent to an estimated 107,700.

Metricon topped the Housing 100 with a total of 4,764 starts nationally. This comprised 4,495 detached houses and 269 semi-detached dwellings. Victoria was already the largest market in the country for new detached houses and the state has posted a near-record number of starts in 2017/18. Every detached house builder in the Housing 100 who operated in Victoria increased their volume in 2017/18.

Building
The market for higher density dwellings held up well and defied the widely-held expectation that the softening conditions during 2017 heralded a correction.
Construction site
The 2017/18 financial year was one of the strongest on record for detached house building

Dyldam flew the flag for multi-unit builders, starting a total of 4,306 dwellings, which ranked this builder second overall. Their increase of 701 dwellings over last year’s total was an impressive feat. Most of the apartment builders on the Housing 100 built less than in 2017/18.

The three largest detached house builders were: Metricon, ABN Group and Simonds Homes. The three largest semi-detached house builders were: Impact Group Aus Pty Ltd, Phillip Usher Constructions and ABN Group. Dyldam Developments was the number one multi-unit builder, followed by Multiplex and Meriton Apartments.

In a sign of the strong year that the industry experienced last year, the Housing 100 ‘biggest movers’ list had fourteen entrants, each increasing their housing starts by 100 homes or more. Nine of these companies increased their housing starts by 200 homes or more.

So what will 2018/19 hold for the nation’s largest builders? Conditions are unlikely to be as buoyant as they were last year and the industry is likely to have worked through the backlog of presales that accumulated during 2016 and 2017.

The Australian Prudential Regulation Authority (APRA) interventions in credit markets, along with the banks reacting to concerning revelations during Royal Commission hearings mean that households are able to borrow less than in the past. Home prices are adjusting downward to reflect buyers’ capacity to borrow. Investors are responding to the declining prices by withdrawing from the market even further (they were already stepping back after APRA directed banks to limit interest-only lending).

The timing of housing cycles has typically coincided with broader economic cycles

The timing of housing cycles has typically coincided with broader economic cycles. In a typical economic downturn, growth would slow, labour market conditions would weaken, households would cut back their spending, residential property prices would ease and building activity would follow suit. The Reserve Bank of Australia (RBA) would anticipate easing inflationary pressures and cut the official cash rate as a means of stabilising economic activity. Back in the days when mortgage rates were essentially pegged to the RBA cash rate, the lowering of interest rates provided direct support for the housing market and residential building.

This time around the housing cycle has decoupled from the broader economic cycle. The downturn is actually occurring at a time when Australia’s broader economic growth is beginning to strengthen. In the context of this and APRA’s efforts to rein in the recent escalation in household debt, the RBA is unlikely to be compelled by the deterioration in the housing market to cut rates.

The residential building industry has always been cyclical and the tailwinds that have driven activity to all-time highs are now waning. This aspect isn’t too different from downturns that the residential building industry has endured in the past. Conditions for residential building will become more challenging in the years ahead but the stronger trajectory for economic growth and a healthy rate of population growth should result in a relatively modest cyclical downturn.

Purchase the HIA-COLORBOND® steel Housing 100 2017/18 at www.hia.com.au/shop

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