Matusik Missive

Shovel ready projects is the latest government catchcry.

Of late most of these shovel-ready projects involve new civic construction.

There are two basic types of construction: civic construction (roads, rail, utilities, etc.) or building construction (private dwellings, schools, hospitals, offices, factories, social housing, etc).

When it comes to building construction there are two basic types – residential construction and commercial or ‘non-residential’ activity.

The two charts below show the amount of construction work approved but yet started across Australia.

Chart 1 shows that building work yet to commence totals $100 billion, compared to $47 billion work of yet started civic work, whilst chart 2 shows that waiting home building totals $68 billion compared to $33 billion worth of lingering commercial building works.

So, in short, the amount of anticipated building construction is twice as large as the potential civic work and the awaited home building is double the size of the commercial building work waiting in the wings.

One would think that the main aim of any COVID19 construction-related stimulus is to help with employment.

Building accounts for the lion’s share of the construction industry’s employment, while the civic sector has a much smaller labour force.

There are around seven builder tradies for every one civic construction worker in Australia, so a dollar spent on civil works creates far fewer jobs than a dollar spent on building.

Yet the government is focusing on civic projects not building construction.

Also, building activity was already falling prior to the pandemic, suggesting that there was surplus capacity already developing among builders even before COVID19 hit our shores.

As well, building activity is almost entirely privately funded, so it is far more sensitive to a recession than the public sector.

This makes a pretty strong case for favouring the building sector with any construction specific inducements.

We should be stimulating the whole building industry and not just new house and land packages or top end renovations for a quick six-month boost as per the HomeBuilder package.

We need a more evenly spread building package – covering all building types and geographic locations – plus one that covers several years not just months.

Moreover, stimulating via the civic segment may actually do more harm than good as this sector is already operating close to capacity.  Pumping more money into any industry that is operating close to full capacity will create labour shortages and inflate prices.

Some think this focus on new civic work will create much-needed employment for workers displaced from other industries.  This should be a concern.  Reallocating workers between sectors as a short-term fix can create long-term problems.

The mining boom was a classic example.  Workers were diverted into a boom that was temporary.  When the bust came, many of those workers found it very hard to relocate back to their previous work.  A decade later and many of these workers still remain underemployed.  Some are even unemployed.

Another aim of any government stimulus should be to preserve workers’ attachment to their pre-COVID19 occupations wherever possible.

That’s why JobKeeper was designed as a business subsidy and one of the biggest recipients of JobKeeper has been the building industry.

Shovel ready?  I do wonder.

I am grateful to Robert Sobyra, Director, Research & Digital at Construction Skills Queensland for this words of wisdom in putting together this post.

…..

Furthermore, governments, more often than not, build the wrong infrastructure i.e. Cross River Rail rather than new bridges crossing the Brisbane River.  It speaks volumes when the top ten infrastructure projects in Queensland are all located in, or converge on, inner Brisbane.

Yet it pays to understand why such things keep happening.  You may have also missed my thoughts on why I think Brisbane needs more bridges.

As noted last week, this is the third post of three about the potential future shape of new jobs.

The same caveats apply as noted in my last two posts.

This post I have covered two topics – construction jobs and the proposed future distribution of new jobs by small area (SA4) in Sydney, Melbourne, Perth and Adelaide.

Go here to revisit the distribution of new jobs in south east Queensland.

Remember, to work out the SA4 regional boundaries, click here, and select 2016 Statistical Area Level 4 (SA4) in the ‘Choose a boundary type’ area and off you go.

Construction jobs

HomeBuilder has been released because the government knows that new construction activity is a major economic driver and employer.

I think that this scheme misses the mark, but enough has been said by me and others in this space.  Except to say that why backyard homes or granny flats are excluded from this package escapes me.  Such new builds go a long way to providing sensible and affordable accommodation.

Australia’s residential construction sector has weighed in estimating that new housing boosts the nation’s GDP by about 5% per year and directly employs some 134,000 people.

A recent report from the National Housing Finance & Investment Corporation has stated that every $1m spend on residential construction supports 9 jobs and about $2.9m of industry output and consumption across the economy.

I do think this multiplier is too high, as our work, based on the Queensland state govt housing strategy, found since 2018, 312 new dwellings have been created and 1,307 jobs supported, which suggest 4 jobs per new dwelling.

The overall package – a five year programme – is expected to delivery 4,000 new homes and 1,800 new jobs = 2.3 new jobs per home.

I think the latter is a more applicable multiplier.

Table 1 below is a long one and shows those areas across Australia most (and least) dependent on new construction jobs.

Table 1: Forecast construction job growth over next five years

SA4 Region	Location	New jobs
		Construction	Total jobs	%
Moreton Bay	Brisbane	3,094	12,539	59%
East	Brisbane	2,151	7,078	30%
South East	Tas	186	618	30%
Coffs Harbour – Grafton	NSW	979	3,899	25%
Richmond – Tweed	NSW	2,334	9,395	25%
Hunter Valley	NSW	2,597	10,573	25%
Outback (North and South)	WA	737	3,097	24%
Ipswich	Brisbane	4,465	19,194	23%
Far West and Orana	NSW	571	2,518	23%
Logan – Beaudesert	Brisbane	2,619	11,681	22%
North	Adelaide	3,272	14,685	22%
Warrnambool + South West	Vic	395	1,782	22%
Geelong	Vic	2,364	11,502	21%
Bunbury	WA	935	4,796	19%
Wheat Belt	WA	602	3,095	19%
New England + North West	NSW	832	4,285	19%
Mornington Peninsula	Melbourne	1,765	9,266	19%
South West	Sydney	2,918	15,469	19%
Outer South West	Sydney	1,880	10,131	19%
Bendigo	Vic	1,316	7,250	18%
South East	Melbourne	8,856	49,396	18%
Launceston + North East	Tas	678	4,131	16%
North East	Melbourne	5,087	31,816	16%
West	Adelaide	1,077	7,009	15%
Hobart	Tas	1,171	7,767	15%
Parramatta	Sydney	4,237	28,186	15%
South	Adelaide	1,846	12,780	14%
Hume	Vic	608	4,217	14%
Inner	Perth	869	6,172	14%
Illawarra	NSW	1,538	11,502	13%
Inner South West	Sydney	4,711	35,406	13%
Latrobe – Gippsland	Vic	995	7,546	13%
Canberra	ACT	1,802	13,994	13%
Barossa – Yorke – Mid North	SA	177	1,382	13%
North West	Vic	328	2,645	12%
Outer East	Melbourne	3,012	24,652	12%
Baulkham Hills + Hawkesbury	Sydney	1,435	11,782	12%
West and North West	Tas	199	1,666	12%
North West	Melbourne	2,388	20,420	12%
Newcastle + Lake Macquarie	NSW	2,324	21,082	11%
Outer West + Blue Mountains	Sydney	1,467	13,329	11%
Australia		113,662	1,075,045	11%
Central + Hills	Adelaide	838	8,716	10%
Central Coast	Sydney	1,156	12,610	9%
Darling Downs – Maranoa	Qld	254	2,812	9%
Gold Coast	Qld	4,218	47,258	9%
Blacktown	Sydney	1,701	19,317	9%
Inner	Melbourne	4,096	47,846	9%
Northern Beaches	Sydney	896	11,126	8%
Riverina	NSW	471	6,094	8%
Shepparton	Vic	340	4,648	7%
Cairns	Qld	689	9,569	7%
Central West	NSW	425	6,208	7%
West	Melbourne	3,946	58,301	7%
North Sydney + Hornsby	Sydney	1,552	23,236	7%
North	Brisbane	620	9,476	7%
Sunshine Coast	Qld	1,395	21,577	6%
West	Brisbane	372	5,765	6%
Inner East	Melbourne	911	14,414	6%
South	Brisbane	997	16,689	6%
Ballarat	Vic	252	4,293	6%
City + Inner South	Sydney	1,844	32,333	6%
Inner West	Sydney	1,032	19,486	5%
Ryde	Sydney	420	8,148	5%
Inner City	Brisbane	909	18,845	5%
Inner South	Melbourne	1,377	29,915	5%
Eastern Suburbs	Sydney	830	18,334	5%
Mandurah	Perth	103	2,327	4%
Mid North Coast	NSW	258	6,179	4%
South West	Perth	656	16,851	4%
South East	Perth	471	13,032	4%
Capital Region	NSW	276	8,230	3%
Sutherland	Sydney	321	10,760	3%
Darwin	NT	140	5,067	3%
Murray	NSW	64	3,992	2%
Southern Highlands – Shoalhaven	NSW	46	4,349	1%
South Australia – South East	SA	36	3,594	1%
Mackay – Isaac – Whitsunday	Qld	24	8,178	0%
Toowoomba	Qld	8	5,783	0%
Outback	SA	0	1,061	0%
North West	Perth	-331	23,568	-1%
North East	Perth	-123	8,094	-2%
Townsville	Qld	-94	4,971	-2%
Outback	Qld	-42	1,724	-2%
Central Queensland	Qld	-191	6,569	-3%
Outback	NT	-67	1,974	-3%
Wide Bay	Qld	-250	1,995	-13%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

New jobs distribution by capital cities

Four tables follow.

Again, to revisit south east Queensland’s future job spread go here.

Table 2: Forecast job growth over next five years within Sydney

Sydney region	Number of new jobs	% Sydney
Central Coast	12,600	5%
Baulkham Hills and Hawkesbury	11,800	4%
Blacktown	19,300	7%
City and Inner South	32,300	12%
Eastern Suburbs	18,300	7%
Inner South West	35,400	13%
Inner West	19,500	7%
North Sydney and Hornsby	23,200	9%
Northern Beaches	11,100	4%
Outer South West	10,100	4%
Outer West and Blue Mountains	13,300	5%
Parramatta	28,200	10%
Ryde	8,100	3%
South West	15,500	6%
Sutherland	10,800	4%
Sydney region	269,500	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 3: Forecast job growth over next five years within Melbourne

Melbourne region	Number of new jobs	% Sydney
Inner	47,800	17%
Inner East	14,400	5%
Inner South	29,900	11%
North East	31,800	11%
North West	20,400	7%
Outer East	24,700	9%
South East	43,400	16%
West	58,300	21%
Mornington Peninsula	9,300	3%
Melbourne region	280,000	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 4: Forecast job growth over next five years within Perth

Perth region	Number of new jobs	% Sydney
Mandurah	2,300	3%
Inner	6,200	9%
North East	8,100	12%
North West	23,600	33%
South East	13,000	19%
South West	16,800	24%
Perth region	70,000	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 5: Forecast job growth over next five years within Adelaide

Adelaide region	Number of new jobs	% Sydney
Central and Hills	8,700	20%
North	14,700	34%
South	12,800	30%
West	7,000	16%
Adelaide region	43,200	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

These tables tell me: that Melbourne is expected to create more new jobs than Sydney over the next five years.

Also, most new jobs – around 90% – when including SEQld, Canberra and Newcastle/Wollongong – are expected to be held in our six largest urban areas.

In addition, some 70% of these new jobs are in suburban locations.

Yet many of the new big-ticket infrastructure projects being fast-tracked across the country are situated in, or focused on, inner city locations.

As noted last week, this is the second post of three about the potential future shape of new jobs.

The same caveats apply as noted last week too.

I have combined the originally planned second and third job Missive posts together in this communique.

Several have asked me if I would post the proposed future distribution of new jobs by small area (SA4) in Australia’s major urban areas.  This information will be posted next week and will close out this Missive job series.

Three tables follow.

Table 1: Average individual annual total earnings by industry type

Industry type	Average annual total earnings
Higher paying jobs
Mining	$137,500
Utility services	$100,250
Financial/Insurance services	$90,250
Media/Telecommunications	$86,250
Professional/Scientific services	$86,000
Transport/Warehousing	$83,250
Middle paying jobs
Construction	$82,250
Public administration	$82,000
Wholesale trade	$72,000
Manufacturing	$70,250
Education	$64,500
Real Estate	$62,500
Lower paying jobs
Health care	$59,000
Private administration	$55,000
Other services	$49,250
Arts + recreation	$44,500
Retail trade	$42,250
Agriculture	$37,500
Tourism	$30,000
Average	$65,500
Matusik + ABS 6302.0.  Total average individual annual total earnings as at November 2019.

Table 1 tells me: that the highest paying job in Australia involves working in the mining industry, whilst the lowest paid work is serving tourists.  As a side bar here is that there is something wrong when our teachers and medical staff get around half the brass paid to folks working in mineral resources.

Table 2: Forecast job growth over next five years by capital city + industry type

Industry type	Number of new jobs	% Capitals
Higher paying jobs
Mining	10,800	1%
Utility services	4,600	1%
Financial/Insurance services	16,900	2%
Media/Telecommunications	-1,100	0%
Professional/Scientific services	154,700	19%
Transport/Warehousing	37,200	5%
Total higher paying jobs	223,100	28%
Middle earning jobs
Construction	84,900	11%
Public administration	37,000	5%
Wholesale trade	8,000	1%
Manufacturing	-5,700	-1%
Education	89,400	11%
Real Estate	11,800	1%
Total middle paying jobs	225,400	28%
Lower earning jobs
Health care	158,200	20%
Private administration	27,100	3%
Other services	25,000	3%
Arts + recreation	21,600	3%
Retail trade	54,000	7%
Agriculture	-1,300	0%
Tourism	64,000	8%
Total lower paying jobs	348,600	44%
Total capital cities	797,100	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 2 tells me: that some 44% of the new jobs created in our capital cities over the next five years are expected to be lower paying ones.  The share of expected higher and middle-income jobs are 28% each.  The top five capital city job growth types are health care, professional/scientific services, construction, education and tourism.

Table 3: Forecast job growth over next five years, regional Australia + industry type

Industry type	Number of new jobs	% Capitals
Higher paying jobs
Mining	4,600	2%
Utility services	2,200	1%
Financial/Insurance services	3,500	1%
Media/Telecommunications	500	0%
Professional/Scientific services	17,700	6%
Transport/Warehousing	6,600	2%
Total higher paying jobs	35,100	13%
Middle earning jobs
Construction	28,800	10%
Public administration	15,100	5%
Wholesale trade	2,500	1%
Manufacturing	2,300	1%
Education	39,900	14%
Real Estate	500	0%
Total middle paying jobs	89,100	32%
Lower earning jobs
Health care	94,400	34%
Private administration	7,700	3%
Other services	13,300	5%
Arts + recreation	5,100	2%
Retail trade	8,400	3%
Agriculture	-2,600	-1%
Tourism	27,500	10%
Total lower paying jobs	153,800	55%
Total capital cities	278,000	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 3 tells me: that over half of the new work across regional Australia is expected to be in lower paying jobs.  The regions are expected to create limited new higher paying jobs.  The top five future job types include health care (with a high 34% of new regional jobs over the next five years), education, tourism, construction and professional/scientific services.

End comments

As noted last week there has been some commentary about more people moving out of the major capitals and living/working in regional centres.

If this eventuates it might see a change in regional employment types, but it would take wide-ranging economic reforms including decentralisation, overhaul of taxes, red tape, industrial relations and research and development incentives.

As they say, “pigs might fly”.

Yet, for mine, we will need such economic reform if we are to see a lift in the number of better paying jobs in the future. This applies to our capital cities as well.

Let’s hope that Reserve Bank of Australia governor Philip Lowe thought bubble about such reforms are taken seriously.

Nevertheless, the key finding here – again reiterating my thesis – is that future work in Australia (and for that matter across much of the western world) is lower paying jobs.  This changes the type of property people can afford; the way they live, travel to work and what they do in their leisure time.

For mine, new housing essentially takes two forms – small digs lodging individuals and couples near employment nodes and multiple families/unrelated people sharing accommodation in most other locales, including regional Australia.

A somewhat contentious post given recent events and COVID19’s potential impact on employment.

Last year the Australian Government’s released new five-year forecasts for employment via its Labour Market Information Portal.  Heavy caveats have subsequently been added to this dataset.

We have been using this information for some time and my regular review of the statistics have shown them to quite accurate.

So I have posted this information to your consideration and potential use.

I do think that what they suggest is still likely to come true.  More so the distribution of new jobs rather than the actual quantum as there will no doubt be changes to Australia’s job creation capability over the short-term given COVID19-related impacts and restrictions.

So maybe ignore the actual number of projected jobs and focus on the potential future distribution of new work.

Four tables follow.

Table 1: Forecast job growth over next five years by state and territory

State or territory	Number of new jobs	% Australia
New South Wales	368,000	34%
Victoria	330,000	30%
Queensland	212,000	20%
South Australia	49,000	5%
Western Australia	81,000	8%
Tasmania	14,000	1%
Northern Territory	7,000	1%
Australian Capital Territory	14,000	1%
Australia	1,075,000	100%
Capital Cities	797,000	74%
Regional Australia	278,000	26%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 1 tells me: that most new jobs with be created in the three major eastern states and three-quarters of this new work is expected to be in our capitals.

Table 2: Forecast job growth over next five years by capital city

Capital city	Number of new jobs	% Capitals
Sydney	270,000	33%
Melbourne	286,000	36%
Brisbane	101,000	13%
Adelaide	43,000	5%
Perth	70,000	9%
Hobart	8,000	1%
Darwin	5,000	1%
Canberra	14,000	2%
Capital Cities	797,000	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 2 tells me: that most of the new jobs in the capitals should be in Melbourne, Sydney and then Brisbane.

Table 3: Forecast job growth over next five years by major Australian region

Region	State	Number of new jobs	% Regional Australia
Newcastle	New South Wales	32,000	12%
Wollongong	New South Wales	12,000	4%
Richmond-Tweed	New South Wales	9,000	3%
Geelong	Victoria	12,000	4%
Bendigo	Victoria	7,000	3%
Ballarat	Victoria	4,000	1%
Gold Coast	Queensland	47,000	17%
Sunshine Coast	Queensland	22,000	8%
Cairns	Queensland	10,000	4%
Mackay	Queensland	8,000	3%
Toowoomba	Queensland	6,000	2%
Townsville	Queensland	5,000	2%
Bunbury	Western Australia	5,000	2%
Launceston	Tasmania	4,000	1%
Regional Australia		278,000	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 3 tells me: that when it comes to new regional employment, the Gold Coast, Newcastle and the Sunshine Coast are expected to dominate.

Table 4: Forecast job growth over next five years within South East Queensland

SEQld region	Number of new jobs	% SEQld
Sunshine Coast	22,000	13%
Moreton Bay	13,000	8%
Brisbane north	10,000	6%
Inner Brisbane	19,000	11%
Brisbane East + Redland	7,000	4%
Brisbane south	17,000	10%
Brisbane west	6,000	3%
Ipswich	19,000	11%
Logan	12,000	7%
Gold Coast	47,000	27%
SEQld	172,000	100%
Matusik + lmip.gov.au.  Employment projections for five years to May 2024.

Table 4 tells me: that when it comes to new jobs across south-east Queensland, inner Brisbane’s share is expected to be just 11%, equal to Ipswich’s projected new job creation.  The Gold and Sunshine Coast are expected to create many more jobs as are the Brisbane suburbs, especially those in the south.

End comments

I think that little will actually change – assuming restrictions ease and no further major outbreaks occur – when it comes to our working environment.  Most – if not almost all – will snap back into their established pattern and distribution of work.

Adding weight to this argument is that nearly all of my recent work-related communiques focus on returning to pre-COVID19 behaviour.

Examples include: “When can we meet?” “Looking forward to the master class.”  “Can you give us a presentation?” “We want you to meet our board and present your findings.” “Your suggested workshopping your recommendations with recent buyers is a good idea, how do we implement this.”

There has been some commentary about more people moving out of the major capitals and living in regional centres.  This has been already happening when it comes to people downsizing or retiring, but it isn’t commonplace when it comes to the most working households.  Nor, for mine, is this going to change.

I think that actually fewer new jobs will be created in regional towns over the forecast five-year period as outlined in the tables in this post.  This will especially be the case if the coronavirus impact sees regional tertiary education facilities close; less overseas tourists and our fracas with China escalates limiting the economic viability of certain resource operations.

On an almost daily basis there is another housing price growth forecast.  They range widely and, at present, mostly in the negative.  Some commentators have changed their tune, with one or two having done so within a month.

Almost all talk about ‘Australian’ house prices, a few break down their prognoses by capital city or region, but very few define what they are actually measuring.

Here is an example from the weekend papers:

“We still see Australia’s house prices falling, but now only -5 to -10 per cent.”

We know that the median is not the same as the average, but in describing a statistic, it also pays to differentiate between the median or average and a more relevant sample.

For example: The ‘median’ house price in Brisbane is $495,000, the ‘average’ price is $550,000 but a recently renovated four bedroom house on a 500m2 to 600m2 lot in Brisbane’s northern suburbs is currently selling for between $900,000 and $950,000.

The values in the first two sets are declining but in the third they are rising, as demand is high whilst supply of that property type is short in Brisbane.

The reason the numbers are different is that the samples are different.

We chop off the outliers in the third set.  This is really useful, because it enables us to be clear about what property or housing market segment we are talking about.

There are many housing market segments, some are doing it tough right now, others aren’t.

As suggested above how a housing market is preforming, more often than not, comes down to supply versus demand in the relevant subset or segment is question.

There is no national housing market, there is no capital city or regional town market neither.  There are really only subsets and they often differ substantially from each other.

It is best to clearly define which housing market segment you are looking at and start from there.  Ignore the generalisations and the talking heads that use such misleading parameters.

Sadly, in real estate, it is the easy things that get measured, and not the things that should.

As the title says, three things this post.

1. Land tax

Below are two media summaries, the first published earlier this year and the second this week.

Victorian Treasurer Tim Pallas and his New South Wales counterpart Dom­in­ic Perrottet are investigating the phasing out of stamp duty on property sales, with stamp duty to be replaced an annual land tax. The NSW government has estimated stamp duty costs the economy $2.35 for every collected dollar, compared to just $0.16 for land tax, while land taxes would provide state governments with a much more reliable revenue stream than stamp duties. Getting rid of stamp duty could boost property transactions in NSW by 25%, according to a 2017 report commissioned by the NSW Treasury.

New South Wales and Victoria have been talking for some months about the possibility of getting rid of stamp duty; the two states get around 25% of their annual revenue from the duty. The property industry contends that now is an ideal time to get rid of stamp duty, given the depressed state of the housing market. Stamp duty would be replaced by an annual tax based on land value, and the ACT government is currently involved in a long-term initiative along these lines. EY’s head of tax policy Alf Capito says any system to replace stamp duty needs to have bipartisan support and needs to be something that is very hard to change once put in place.

To review what I would do go here.

2. Buyer profiles

Much has been written about the apparent fluctuation in overseas apartment buying in recent months.  Also, there seems to be expectation that a bit of magic dust sprinkled over potential property investors will see them toss caution to the wind and buy.  In addition, there seems to be a somewhat widespread belief that first home buyers aren’t active, and they also need further assistance.

Australia – Buyer type

Buyer type	5 years ago	Last year	Today
New development
First home buyer (owner resident)	15%	33%	36%
2nd and subsequent owner residents	34%	36%	30%
Foreign buyer	16%	6%	7%
First home buyer (investor)	10%	10%	11%
Investors (Australian resident/company)	25%	15%	16%
Established housing
First home buyer (owner resident)	17%	22%	27%
2nd and subsequent owner residents	42%	47%	43%
Foreign buyer	9%	5%	2%
First home buyer (investor)	10%	9%	10%
Investors (Australian resident/company)	22%	17%	18%
Matusik + NAB Residential Property Survey Q1-2020

3. Constraints

Regardless of what you think of NAB, their economic team and the regular email posts are very good.  Mandatory reading if you ask me.  Go here to find out more.

One of the things NAB does well – in the residential research space – is undertake a national quarterly survey about housing constraints.  For March quarter they found the largest constraints by order of magnitude were:

New development

1. Tight credit
2. Housing affordability
3. Sustainability of past dwelling price gains
4. Construction costs
5. Lack of development sites
6. Labour availability
7. Rising interest rates

Established property

1. Employment security
2. Access to credit
3. High level of prices
4. Better returns on other investments
5. Lack of stock
6. Rising interest rates

End comments

Do first home buyers really need another rebate?  And especially one linked to new construction, when a higher proportion of first home buyers are already buying new when compared to established digs?

If lifting short-term construction employment is the aim, then surely the recently floated ‘renovation grant’ would have more impact regarding helping the building trades secure more work.

But for mine it would be even better to spend this money on building more social housing.

Foreign buyers will return, given Australia’s low COVID-19 infection and death rates, plus as a means of buying future citizenship.  Ditto when it comes to tourism.  We will be stupid, economically speaking, not to plan for this.  But we need a national housing policy, which is clear, concise and enforced.

Rental yields are the new black when it comes to housing investment.

We have an aging demographic, especially when it comes to housing ownership and short-to-medium housing term demand.  We need to free up the ‘sales train’ encouraging older owners to downsize and sell their large homes to younger buyers.

Removing stamp duties will help, but so too will helping these older sellers actually sell their homes.  Many are asset rich but cash poor.

Consideration should be given by developers, especially of completed stock targeting downsizers and retirees, about how they can transact a sale by assisting the buyer sell their current abode.

A sensible COVID-19 government response would be to do likewise.

I am a town planner by qualification and some practice.  I have been employed numerous times to determine forward housing demand and best matched dwelling supply.  I have done this for both private clients and, increasingly, in the public realm of late.

I write this introduction as a segue to advocate that what the official forecasts suggest is going to happen when it comes to new housing supply is often miles off what is happening now and likely to take place in the future.

Housing affordability and dwelling suitability disparities can be misunderstood but more concerning is that environmental, development feasibility and even existing town planning constraints are often not factored into the equation at all.

The press clipping below indicates that my firm was involved in an in-depth housing supply and demand study regarding greenfield land on the Gold Coast late last year.

In short, the official forecasts are way off the mark.

This is major issue facing not only the Gold Coast, but many urban locations across Australia.

The impact of not having enough land available for development negatively impacts local jobs; housing affordability; infrastructure, service and lifestyle provisions and even resident satisfaction.

Supply: Matusik chance ratings

Before I outline what, we found, I need to outline how we analysis potential housing supply in a study like this.  What we do is provide a chance rating.

We score each potential development site based on a high, medium or low chance of development success.  For example, for our Gold Coast work we used the following benchmarks:

• High = 75% + likelihood of development between 2020 and 2041
• Medium = 35% to 75% likelihood of development between 2020 and 2041
• Low = Less than 35% likelihood of development between 2020 and 2041

See the postscript for more detail.

Greenfield dwelling demand

We also need to determine new housing demand.  Here we use annual dwelling registrations and we also break that analysis up by development density – typically by dwellings per hectare – as future housing supply outcomes are often set by such parameters.

On the Gold Coast and over the last five years, there has been a demand for some 2,375 new dwellings each year in the Gold Coast greenfield area.

Importantly most of this demand – some 85% or 2,022 housing starts per year – have been in new estates and projects with development densities under 20 dwellings per hectare.

Supply finding #1

Once you exclude the greenfield sites which are rendered undevelopable due to existing town planning and environmental constraints (this work was done by my study partners Zone Planning and BIOME Consulting) there are 22,673 potential dwellings available to be developed (in theory) across the greenfield areas on the Gold Coast.

These dwellings are hypothetically anticipated to be developed between now and 2041.

It is important to note here that some 23,000 potential dwellings (if you take the higher end of the official Gold Coast greenfield land supply forecast) have been excluded from development.  Much of this is to do with ‘desktop’ environmental constraints which when on the ground become irrelevant.

Of the 22,673 potential dwellings left, only 31% or 7,068 dwellings have a high chance of being developed over the 21 years.  A further 18% or 3,972 dwellings have a medium chance of development and a very high 51% or 11,633 dwellings have a low chance of development during the subject time frame.

Supply finding #2

The 22,673 potential dwellings are spread across 1,478 prospective development sites.

Only 4% or 55 sites have a high chance of being developed between now and 2041.  A further 13% or 188 sites have a medium chance of development.  An extremely high 84% or 1,235 sites have a low chance of development during the subject time frame.

Also, of note is the small size of the development sites, making it almost impossible for developers to amalgamate future sites and at feasible prices.

The high chance sites averaged just 9.3 hectares; medium chance sites averaged a low 0.9 hectares and the low chance sites averaged a piddling 0.24 hectares.

Supply finding #3

 When looking at the dwelling supply by expected dwelling density and limiting our efforts to those sites with a high and medium chance of happening between now and 2041 there are 4,134 dwellings under 20 dwellings per hectare and some 6,906 dwellings over 25 dwellings per hectare.

Our findings

There are 11,040 dwellings across the greenfield expansion area on the Gold Coast that have a high to medium chance of being developed over the next 21 years.

As noted above this breakdown of this potential dwelling supply by development density is 4,143 dwellings under 20 dwellings per hectare and 6,906 dwellings over 25 dwellings per hectare.

Over the past five years, there has been, on average, 2,375 new residential lots registered per annum across this greenfield area.

The breakdown of this annual average dwelling demand by development density was: 2,022 new lots registered under 20 dwellings per hectare and 353 new lots registered over 25 dwellings per hectare.

In summary, the 11,040 potential greenfield housing supply divided by the recent demand for 2,375 new dwellings each year equates to 4.6 years supply.

Yet the future supply of housing stock at development densities under 20 dwellings per hectare is tight (being 4,143) whilst the annual demand for such housing is very high, being 2,022 on average, over the past five years.

This equates to just 2 years supply.

End note

This, to me, is a real problem.

Many in the land development space have already left the Gold Coast and more will follow.  Jobs are being lost.

Many tradies and other Gold Coast employees are forced to live in more affordable and suitable accommodation some distance from where they work.  This means they are commuting long distances on the M1 and other major roads to get to and from work each day.

It seems to be getting worse on a daily basis.

Adding further angst is that much of the ‘real’ greenfield supply is in hands of a few developers and on just a few sites.

Price escalation is likely.  Home builders already face low margins, as the end house and land package price have a definite ceiling, yet land developers can (and are) increasing the price of the land.

The official reply to this issue has been its “up or out” – meaning “its high-rise housing or off to Logan or Ipswich you go” – but maybe that is the wrong attitude.

A better reaction might be to investigate the validity of the existing constraints to new housing supply in the greenfield areas, first, and secondly, look for ways to expand the greenfield land supply.

This should be done, not only on the Gold Coast, but throughout south east Queensland.

I have done enough similar work across this region in recent years to say, and with a high degree of confidence, that similar findings apply to most council areas across the south east corner of Queensland.

To get a copy of our report go here.

…..

Postscript: Matusik chance ratings explained

The high chance sites are either already owned by development companies or are in areas where similar urban development is well advanced.

The medium chance category includes sites that are held in private hands and makes – in our opinion – some economic sense to redevelop.  Of course, this doesn’t take into account the owner’s intent or their expectation as to profit or timing.

The low chance segment includes sites which contain a very high expectation with regards to density.  Such sites are already hard to develop near the beach, along the light rail corridor and/or in existing established urban centres on the Gold Coast.  The economic reality and past track record suggest that high density development across much of the Gold Coast greenfield area is very unlikely over the next decade or two.

Also, sites which have an existing land use – like a shopping centre – have also been placed in the low category.  The chance that an existing retail centre in a greenfield location – and especially one with multiple owners and tenants – will be redeveloped into dwellings is low.

Likewise, sites which have been reduced dramatically in terms of dwelling yield due to environmental and other town planning overlays has also been allocated to the low pile as well, as these are probably no longer economically viable.

Four charts this post.

Chart 1 tells me new housing approvals across the country are in decline.  They peaked in 2015, with 235,000 permits.  Over the last year, some 172,000 new dwellings were approved.

Chart 2 shows that 60% of the approvals, last year, were for detached houses, whilst 24% were for apartments and 16% were for townhouses and duplexes.  Apartment approvals have fallen from 36%, again in 2015, whilst detached housing permits have risen from 50% over the same time frame.  Whilst the chart scale hides it, new townhouse/duplex supply has almost trebled over the last ten years.

Chart 3 tells me that a third of new apartment approvals haven’t yet started construction.  This equates to some 24,000 apartments.  The proportion of approved detached houses waiting in the wings, so to speak, is just 9% or some 9,000 dwellings across Australia.  The number and proportion of non-apartment starts has risen sharply over the past five years.

Chart 4 outlines that just 1% of the new homes built in Australia last year were supplied by the government or a ‘public’ housing supplier.  This has been the trend since the GFC, where for one year, the proportion of public housing supply – after much hand wringing (like is happening now) – rose to 6% in 2010.  Back in Whitlam’s short rule, it jumped to 17%, and during the 1980s, it averaged 10%.

My comments

Over the next decade there will be an underlying demand to build some 150,000 new homes each year.We are still overbuilding – mostly the wrong housing stock, hence the increase in approved apartments not starting construction – and housing demand is likely to be less over the next 12 to 24 months due to COVID-19 related restrictions.

But the want to visit and live Downunder is likely to be even higher in the future, and we will need these extra young heads too.

Our forecasts suggest that detached homes will make up half of the housing demand over the next decade, whilst apartments and townhouses will have a 20% market share. Our research shows that 10% of the new demand – it maybe more now due to the coronavirus – will be satisfied by renovations, extensions and backyard housing solutions.

Personally, the “stay put and maximise our existing asset” mindset is likely to hold a 20% market share of ‘new’ housing supply in coming years.

Many of the non-start apartment projects need a major design and pricing overhaul. Regardless, lots of them are very unlikely to be built and especially in their approval timeframe, and hence shouldn’t be included in government new housing supply targets.

In addition, if we are to believe the COVID-19 commentary, then the demand for centralised workspace and accommodation is set to wane, replaced by bigger suburban homes (and yards), each with dedicated workspaces and drone landing pads.

Hmm once and hmm again.

There is little doubt that we have major problems with housing affordability. The debate here – I am guilty too – often is focused on deposits needed/interest payments required etc. by the middle-class and not where the want is the most acute, being those on minimum wage and government payments like Jobseeker.

Also, of importance is not only affordability, but suitability also.

A one-bedroom apartment might be affordable for a family of four with a parent on the minimum wage or Newstart (now Jobseeker) payments, but it is not suitable.

A March 2020 Anglicare survey found 70,000 places to rent across Australia, but just nine – that’s not a typo – were affordable and suitable for a one income household receiving the Jobseeker payments.  And doubling the Jobseeker payment or having two adults receiving the payment lifts the rental supply to just 1,000 places.

This has been a problem for some time, and the impact of the coronavirus, will most likely make it worse.

Maybe some good might come out of COVID-19 – shining a light on the need for public and social housing.  But we need more than a quick fix.  A bump in public housing starts for a year or two isn’t the answer, we need a long-term housing strategy.

This concluding post in the population missive series includes two charts and two tables.  Click on these links if you missed part 1 and part 2 of this short series.

Chart 1 tells me that Australia’s baby boom, albeit at a slowing pace, continues (see the red line and left-hand scale on chart 1) despite the removal of the baby bonus a few years back.  Deaths are also rising (grey line and right-hand scale) due mostly to our aging population.  As a result, natural increase – see chart 2 – is on the slide.  Natural increase is simply births minus deaths.

Table 1

Australia: Population growth by state/territory

State/Territory	Total population	Annual population growth
		Total population growth	Natural increase
New South Wales	8,089,817	109,649	45,557
Victoria	6,596,039	134,020	37,343
Queensland	5,094,510	85,086	29,882
South Australia	1,751,963	15,436	5,335
Western Australia	2,621,509	27,328	18,064
Tasmania	534,457	6,159	1,159
Northern Territory	245,929	-1,129	2,524
ACT	426,704	6,325	3,409
Australia	25,365,571	382,883	143,281
Matusik + ABS.  Fiscal 2019.

Table 1 tells me that natural increase is largely concentrated in our bigger urban areas – the Sydney region, Melbourne, south east Queensland and Perth.

Table 2

Top 25 Australian LGAs ranked by natural increase

Local Authority Area, State and Rank			Annual population growth
			Total growth	Natural increase	% total growth
1	Brisbane (C)	Qld	23,044	8,244	36%
2	Blacktown (C)	NSW	8,373	4,380	52%
3	Wyndham (C)	Vic	15,120	4,039	27%
4	Casey (C)	Vic	13,429	3,823	28%
5	Canterbury-Bankstown (A)	NSW	4,431	3,518	79%
6	Logan (C)	Qld	7,864	3,465	44%
7	Gold Coast (C)	Qld	13,990	3,121	22%
8	Moreton Bay (R)	Qld	10,009	2,897	29%
9	Cumberland (A)	NSW	4,922	2,871	58%
10	Hume (C)	Vic	9,048	2,698	30%
11	Ipswich (C)	Qld	8,739	2,570	29%
12	Parramatta (C)	NSW	6,132	2,483	40%
13	Liverpool (C)	NSW	4,560	2,478	54%
14	Whittlesea (C)	Vic	6,891	2,270	33%
15	Wanneroo (C)	WA	4,628	2,212	48%
16	Penrith (C)	NSW	4,030	2,187	54%
17	Melton (C)	Vic	8,177	1,985	24%
18	Campbelltown (C) (NSW)	NSW	3,013	1,799	60%
19	Sydney (C)	NSW	6,241	1,594	26%
20	Swan (C)	WA	4,020	1,557	39%
21	Camden (A)	NSW	7,408	1,531	21%
22	Stirling (C)	WA	905	1,501	166%
23	Brimbank (C)	Vic	779	1,495	192%
24	Townsville (C)	Qld	1,013	1,371	135%
25	Moreland (C)	Vic	3,987	1,364	34%
Matusik + ABS.  Fiscal 2019.

Table 2 outlines the top 25 local authority areas across Australia ranked by natural increase during fiscal 2019.  Most of these areas are outer suburbs or in the outer conurbations of our four largest cities.   Townsville is a rare exception.

My comments

Australia’s fertility rate is currently 1.7, which is below 2.1.  Here 2.1 is commonly referred to as the replacement rate.  So, without overseas migration Australia’s population would, in due course, start to shrink.  Many might think that is a good thing.  Sadly, our economy – as it is currently structured – won’t like it at all.  Nor would most people’s bank balance.

Maybe part of any COVID-19 recovery package should include the reinstatement of the baby bonus?

If not, then further pressure will build to increase our overseas migrant intake.  As outlined last week we will need immigrants to help keep our economy afloat and to help cover our debt.

Whatever the outcome, most births will continue to take place in our suburbs and increasing young families will live further away from downtown.  There is nothing wrong with this.  What’s wrong is trying to change this trend.  How we plan for, and handle this growth, is what really matters.