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Housing Demand

Minor Recovery for New Home Sales

October 2011 has brought with it a minor recover in the number of new home sales in Australia. This was at least a small improvement from the lowest result in more than a decade.

The latest HIA – JELD-WEN New Home Sales Report found the number of new homes sold in the month of October 2011 increased by 5.5 %, although sales remained down by 8.0 % over the quarter to October.

A lift in demand for new home sales, no matter how small is positive news for the Australian Construction industry.The recent drop in the cost of fixed rate home loans as well as decline in variable rates, in conjunction with a competitive building market, and a greater availability of skilled trades makes now one of the best times in history to build a new home.

Housing Demand Set to Increase

22,771,649. That’s the estimated total of Australia’s population. According to the Australian bureau of statistics there is one birth every 1 minute and 46 seconds, and an Australian dies every 3 minutes and 40 seconds. Every 2 minutes and 44 seconds there is another international migrant crossing the Australian border. Overall, the Australian population increases by one person every 1 minute and 31 seconds.

Population is linked with housing demand. More importantly, the change in population is directly related to the demand for housing. To put it simply, more people means more homes.

Although this is an important indicator, we only see quarterly updates of Australia’s population estimates at a macro level. More geographically granular updates are released only annually. Additionally, there is a long time lag for updating population data. The official estimates at a state and national level are currently up to date as at March 2011 with the June quarter estimates due to be released on December 19th.

Total population growth has eased since peaking back in the March quarter of 2008. Part of this slow down can be attributed to the migration cuts brought in by the Federal Labor Government. Additinally we have seen a rise in the number of permanent and long term departures from Australia which ahs only recently started to reverse.

We are now seeing an ongoing trend of higher net migration rates; fewer residents leaving and more new or returning residents arriving. The migration data is also seasonal, with spikes being recorded during February and July each year. On a rolling annual basis, the September results for net migration were then highest since August 2010. This is likely the result of the improved migration intake, with the Federal Budget announcing a 10.5% uplift in the skilled migrant intake and a 7.4% increase in the number of migrant families. The trend of fewer long term and permanent resident departures is also assisting to drive the net migration figures upwards.

Without a doubt, as the ABS release the new demographic data for the June and September quarters of this year we will see an improvement in population growth figures. Theoretically the uplift in population growth should translate to greater housing demand, so we should start seeing that reflected in some improved dwelling approval and commencement figures. That will be a welcomed development by the residential building sector where the latest construction data from the ABS showed the value of residential construction was down 3.9% over the year.