We might be early in a housing upswing, especially in new home building, but we are a long way still from even the levels of 2008, let alone a bubble, despite the warnings this week from Reserve Bank Governor, Glenn Stevens.
His warnings were aimed at trying to get Governments alerted to the shortcomings that could trigger a bubble, not that there’s one coming, yet.
The June and 2009 financial figures on building approvals, released yesterday by the Australian Bureau of Statistics show a sector recovering, but still operating at less than capacity.
Thanks to low interest rates and the first home buyers’ grants, there has been a noticeable upturn from the lows of late 2008 and early this year.
On top of the solid rise in total and private home approvals in June, figures out yesterday showed home prices rising again, up 3.3% in the June quarter, according to Australian Property Monitors, and even at the top end of the market.
Other figures confirmed the recovery in new home sales (a small rise last month and a 13% rise over the first six months of the year, according to the Housing Industry Association).
The ABS released figures showing that building approvals bounced back strong in June after May’s one off plunge, especially in non-private dwellings, which completely skewed the figures in May.
The ABS said new home approvals hit a four-year high ‘in June, up 9.3%, with the seasonally adjusted rise in private sector houses rising by 4.9% from May.
The first home buyer’s and builder’s grant, plus low interest rates (and the rising belief they may not last) saw the weakness in May reversed.
The truth is that even though building approvals have picked up strongly from the multi-year lows of December and January, they are still below the levels of a year ago, and the number of approvals for all of the 2009 financial year fell almost 19% from 2008
And the Australian Bureau of Statistics said the fall in the number of approvals over 2009 also saw the value of those approvals drop by more than 19%.
"The value of total building approved in 2008-09 was $66,608.6m, a fall of 19.2% from the previous year with both residential and non-residential building approvals showing falls," the Bureau said.
Permits for total dwelling units jumped 9.3% after a 27.7% rise in the seasonally adjusted number of new private other dwellings (Home units, flats, apartments, townhouses).
The overall rise nearly reversed May’s 12.5% fall, according to the ABS.
The ABS said the performance in June meant the total number of dwelling units approved in 2008-09 fell 18.8% to 132,073, on 2008.
"Nationally, the number of house approvals fell 14.2% from the previous year while other dwellings fell 28.3%.
"The value of total building approved in 2008-09 was $66,608.6m, a fall of 19.2% from the previous year with both residential and non-residential building approvals showing falls," the ABS said.
But since the low of 9,420 approvals in January, the number of approvals has jumped by more than 16% to 11,086 in June.
That was still down more than 15% from June 2008, showing that while the first home buyers grants and low interest rates are having an impact, there’s still a way to go before we get to full recovery in the sector.
The ABS said that the "seasonally adjusted estimate for the value of total building approved rose 35.8% in June.
The seasonally adjusted estimate for the value of new residential building approved rose 4.1% while the value of alterations and additions approved fell 0.6%.
The seasonally adjusted estimate for the value of non-residential building rose 94.5%.
That’s obviously been skewed by some huge backlogs of approvals in some local government areas being rushed through by the end of the financial year.
That was part of the warning on housing from Governor Stevens this week; the role of local and state governments in hindering the availability of enough land to built enough houses without setting off a bubble-like boom in labour, materials and in home prices.
The rise in house prices in the June quarter seems to have been driven by a rebound in the Melbourne market (which is where many of the complaints about agents underbidding seem to be emanating from)
"While low interest rates, flat prices and first-home owner grants supported the affordable end of the market through the end of 2008 and early 2009, it’s been the upper end of the market that’s driven the strong growth in the major capitals in the June quarter," said Australian Property Monitors economist Matthew Bell, in a press release.
"For Sydney, Melbourne and Brisbane, median prices in the top 50% of suburbs grew by nearly double the rate of those of the bottom 50% in the June quarter," Mr Bell said.
Quarterly prices in Sydney gained 3.7%, while in Melbourne they grew 5.8%, he said.
And although new home sales struggled in June thanks to sluggish markets in NSW and Victoria, the biggest markets, there was a solid six month performance with a 13% rise overall.
The Housing industry Association said that nationally, the volume of home sales edged up 0.5% in June, following a 5.7% fall in May.
But in the six months to June, total new home sales rose 13% and HIA chief economist Harley Dale said the lift in activity over the first half of 2009 "clearly marked a healthy turnaround" in the market after a period of weakness at the end of 2008.
"To date, t
