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Housing Australians :The Challenges Ahead

Shane GoodwinManaging Director

Housing Industry Association

1 July 2010

John Curtin Institute of Public Policy

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“In respect to ageing, between now and 2050, people aged 65 to 84 years will more than double and the number of people aged 85 and over will more than quadruple. By

2050, there will be only 2.7 people of working age for every person aged 65 and over. Today there is five.”

Wayne Swan, Treasurer

Changing Demographic Profile

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Australian Population Projections

Percentage of total population 2010 2050 - Low 2050 - Base0-14 19.1 15.1 17.215-64 67.4 58.9 60.265-84 11.7 20.0 17.685 and over 1.8 6.0 5.1Low = popn. growth of 0.8% p.a.Base = popn. growth of 1.2% p.a.

2050Low and Base case

Source: Treasury projections

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1 Whittlesea (C) - North VIC 484,029 18.3

2 Wyndham (C) - South VIC 283,717 12.8

3 Griffin-Mango Hill QLD 149,930 12.8

4 Cardinia (S) - Pakenham VIC 241,553 10.0

5 Melton (S) - East VIC 285,195 9.5

6 Wanneroo (C) - North-East WA 163,165 8.6

7 Wanneroo (C) - North-West WA 205,488 8.6

8 Wyndham (C) - West VIC 112,474 7.9

9 Condon-Rasmussen-Bohle Basin QLD 145,866 7.9

10 Central Pine West QLD 114,463 7.8

11 Canada Bay (A) - Concord NSW 111,469 7.4

12 Ipswich (C) - East QLD 260,177 7.3

13 Wyndham (C) - North VIC 368,605 6.9

14 Casey (C) - Cranbourne VIC 333,762 6.4

15 Melton (S) Bal VIC 161,328 6.1

16 Hume (C) - Craigieburn VIC 187,488 5.9

17 Onkaparinga (C) - South Coast SA 117,129 5.6

18 Brisbane City - Inner QLD 149,069 5.5

19 Melbourne (C) - S'bank-D'lands VIC 335,165 5.3

20 Caloundra South QLD 121,760 5.1

*SLAs with in excess of $100 million in residential building work approved in 2008/09 and with an annual population growth rate in excess of the national average

Statistical Local Area State / TerritoryResidential Building Approved,

2008/09 ($'000)

Annual Population

Growth Rate (%)

National top 20 Building & Population Hotspots*

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1 Wanneroo (C) - North-West Perth 205,488 8.6

2 Wanneroo (C) - North-East Perth 163,165 8.6

3 Mandurah (C) South West 188,511 5.1

4 Port Hedland (T) Pilbara 138,002 4.9

5 Armadale (C) Perth 251,948 4.6

6 Cockburn (C) Perth 255,129 4.5

7 Busselton (S) South West 142,604 4.3

8 Swan (C) Perth 241,569 4.1

9 Rockingham (C) Perth 242,543 4.1

10 Gosnells (C) Perth 172,573 3.1

11 Stirling (C) - Coastal Perth 233,484 2.7

12 Stirling (C) - Central Perth 218,341 2.6

13 Cambridge (T) Perth 115,795 2.4

14 Canning (C) Perth 113,397 2.4

Statistical Local Area Statistical Divison Residential Building Approved, 2008/09, ($'000)Annual Population

Growth Rate (%)

**SLAs with in excess of $100 million in residential building work approved in 2008/09 and with an annual population growth rate in excess of the national average

WA Building & Population Hotspots**

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Acknowledgement : Bernard Salt - Address to HIA National Policy Congress, Gold Coast, May 2010

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0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

Sep-

89

Sep-

90

Sep-

91

Sep-

92

Sep-

93

Sep-

94

Sep-

95

Sep-

96

Sep-

97

Sep-

98

Sep-

99

Sep-

00

Sep-

01

Sep-

02

Sep-

03

Sep-

04

Sep-

05

Sep-

06

Sep-

07

Sep-

08

Sep-

09

Australia's Population Growth by Component - Moving Annual TotalSource: ABS

Total MAT Natural Increase MAT Net Overseas Migration MAT

Australian Population Growth

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Dwelling Requirements

0

50,000

100,000

150,000

200,000

250,000

300,000

Current projections Small Australia Big Australia Current trend

New Dwelling Requirements to 2020

Average annual starts required Housing Starts based on current trend

Source: HIA

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Dwelling Requirements

1,920,000 1,819,8112,059,811

2,419,811

0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000

Current projections Small Australia Big Australia Current trend

Total Dwelling Requirements to 2020

Total new dwellings required Current Capacity Potential Capacity

Source: ABS,HIA

Current Trend

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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Current projections Natural growth Big Australia Current trend

Num

ber

Average annual shortfall in Housing Starts

Average annual shortage

Source: HIA

Housing Shortfall

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150,000

160,000

170,000

180,000

190,000

200,000

210,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Num

ber

Dwelling Requirements versus Industry Capacity

Dwelling requirement Potential Capacity

Capacity with modest improvement on supply side Current Capacity

Source: HIA

Housing Shortfall

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Housing Affordability Decline

50.0

75.0

100.0

125.0

150.0

175.0

200.0

225.0

250.0

275.0

300.0

Mar

-88

Mar

-89

Mar

-90

Mar

-91

Mar

-92

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Housing Affordability in AustraliaSource: HIA Affordability Report

Australia Capital Cities Rest of State

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160,000

165,000

170,000

175,000

180,000

185,000

190,000

195,000

200,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Num

ber

How Many Homes can People Afford to Build?

Dwelling requirement Actual (affordable) demand

Source: HIA

Housing Shortfall

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2.69 2.68 2.672.65

2.62

2.58

2.53 2.532.51

2.56

2.40

2.45

2.50

2.55

2.60

2.65

2.70

2.75

1994

–95

1995

–96

1996

–97

1997

–98

1999

–00

2000

–01

2002

–03

2003

–04

2005

–06

2007

–08

Num

ber o

f per

sons

Average number of persons in household - AustraliaSource: ABS 4130.0

Average number of persons in household

Average number of persons in household - Australia

Source: ABS4130.0

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Obstacles to boosting supply

Systemic obstacles to boosting Australia’s supply ofhousing stock:

Lack of readily available land

Planning delays

Infrastructure tax and charges

Finance constraints

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State Planning & Building processes for Detached Housing Approvals (1 May 2010)

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1990 2000 2010 1990 2000 2010 1990 2000 2010Land $50,000 $75,000 $160,000 $46,000 $64,000 $130,000 $49,000 $74,000 $150,000House $80,000 $145,000 $259,000 $85,000 $153,232 $242,000 $75,000 $132,791 $263,000Levies and Charges* $5,000 $19,000 $110,000 $1,900 $7,080 $27,000 $1,500 $4,522 $41,550*Infrastructure charges, local government regulations, compliance costs. Excludes stamp dutySource: HIA

Sydney Melbourne Brisbane

House and Land Package Examples

House and Land

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House and Land

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Capping of Levies in NSW

Pre December 2008 December 2008 to June 2010 After 7 June 2010Local Council (s94) $58,970 $58,970 $20,000State Infrastructure Up to $33,000 $11,000 $11,000Water Charges $18,000 $0 $0

Total $109,970 $69,970 $31,000

Notes:

1. No exemptions existed prior to December 2008

2. The state Infrastructure Charge (SIC) of $33,000 was reduced to $11,000 in the December 2008 announcement. (HIA is currentlylobbying to retain this cap beyond July 2011.)

3. The water charge was also removed in the December 2008 announcement

4. The majority of councils in the SW growth area were granted an exemption to the December 2008 ($20,000) cap

Example of Reduction in Section 94 Charges

20Source : 2005 Australian Infrastructure, Report Card, Institution of Engineers Australia

Infrastructure Backlogs

Significant infrastructure investment backlogs (2005):

Electricity has an under-investment of $1.15 billion

Gas has an under-investment of $2.6 billion

Road has an under-investment of $10 billion

Rail has an under-investment of $8.06 billion

Water has a potential under-investment of $3 billion

The total estimated under-investment is $24.81 billion

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5.0

12.0

25.0

27.8

19.9

10.3

0

5

10

15

20

25

30

15-19 20-24 25-34 35-44 45-54 Over 55

Ag

e

Age Profile of the Workforce: Construction IndustrySource: HIA

Workforce Profile

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Trade & Non-Trade Commencements

Seasonally adjusted, 1999-2009 (‘000)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Dec 1999 Dec 2000 Dec 2001 Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009

Nu

mbe

r ('0

00)

Trade Non-trade

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Apprentice Commencements Commencements

Qtr Year Year total 31 Mar 2005 7,400 30 June 2005 3,300 30 Sept 2005 4,200 31 Dec 2005 3,400 2005 18,267 31 Mar 2006 7,500 30 June 2006 3,500 30 Sept 2006 4,200 31 Dec 2006 4,200 2006 19,392 31 Mar 2007 8,400 30 June 2007 4,400 30 Sept 2007 5,200 31 Dec 2007 4,500 2007 22,460 31 Mar 2008 9,700 30 June 2008 4,800 30 Sept 2008 4,300 31 Dec 2008 3,500 2008 22,276 31 March 2009 6,300 30 June 2009 3,300 30 Sept 2009 3,400 31 Dec 2009 5,780 2009 18,877 I

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3.0

8.7

15.1

25.4

39.7

46.949.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1 month 3 months 6 months 1 year 2 years 3 years More than 3 years

Pe

rce

nt (

%)

Time Frame

Apprentice and Trainee Attrition rates from Contracts, by Occupation(sub-major groups) and times of withdrawal, 2003 commencing cohort

Source: NCVER

Apprentice and Trainee Attrition Rates from Contracts, by Occupation

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Commonwealth Skilled Occupation List

Skills Shortages 1 July 2010 Air-conditioning mechanic Architect Bricklayer Carpenter Carpenter & Joiner Construction project manager Drainer Electrician Fibrous plasterer Gasfitter Geotechnical engineer

Glazier Joiner Painter Plumber Project builder Quantity surveyor Roof plumber Solid plasterer Stonemason Structural engineer Wall & floor tiler

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Summary of Commonwealth Incentive Payments for Apprentices in Building Industry

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Summary of State Incentive Payments for Apprentices in Building Industry

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