HIA Housing Scorecard - Winter 2022

HIAHousing Scorecard

South Australia and Queensland battle it out for pandemic supremacy

The HIA Housing Scorecard provides a half yearly review of residential building conditions in each state and territory. Across a range of activity indicators, the most recent performance in each state is benchmarked against the state’s longer term average. This analysis is aggregated in a scoring system which provides a ranking that highlights the relative strength or weakness of residential building activity in each state and territory.

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Australia is still making its way through the single biggest detached home building and renovations boom on record. This has been driven by the combination of the pandemicdriven desire for more space and amenity at home, government stimulus and rockbottom interest rates.

All states and territories have been riding this wave.

South Australia has topped the HIA Housing Scorecard with the strongest housing market in the nation. The state took the title from Queensland, with the two trading first and second place over the last year.

This is consistent with South Australia’s strong capitalisation on the HomeBuilder grant. Queensland and South Australia have also been on the receiving end of a lot of interstate migrants leaving Victoria and New South Wales, further supporting housing activity.

With all markets booming, there is very little separating the middle five jurisdictions. Honourable mention must go to Western Australia. While it still sits in seventh place nationally, it has seen the most marked improvement in its Housing Score over the last couple of years. This recovery has been a long time coming after the protracted mining downturn that led to years of under-building in the housing industry.

Victoria’s housing market, on the other hand, has been hit harder by the pandemic than any other jurisdiction. The top-ranked state just two years earlier, Victoria has slipped to fifth place. Despite also enjoying record-breaking detached booms in home building and renovations, Victoria has lost a lot of residents to other states. This has been compounded by the loss of the overseas migrants, students and tourists it depended upon.

The Australian Capital Territory lost some of the gains that sent it to the top of the rankings early in the pandemic. It was dragged down by its renovations sector and an exodus of migrants but has recently climbed back to claim third place in the rankings. New South Wales has performed relatively well during the pandemic, rounding out the top half of the rankings in fourth place.

Tasmania has slipped in the rankings during the pandemic. After trading top spot with Victoria in 2019, it has fallen to sixth place.

The Northern Territory remains at the bottom of the table. Despite no improvement in its ranking, the Territory has seen an improvement in its overall score over the course of the pandemic.

In May, the Reserve Bank began its steepest interest rate hiking cycle in almost 30 years but it will take longer than usual to weigh on the housing industry.

At the end of 2021, there were 75.7 per cent more detached homes under construction across Australia than in the previous year. There was also a record number of detached homes approved but not yet commenced, as well as a large number sold but not yet approved.

This enormous pipeline of work has been driven not just by the significant catalysation of housing demand across Australia, but also the significant constraints on the supply of land, labour and building materials.

The result is that new housing commencements will remain elevated for longer in the face of this hiking cycle. Builders will remain at capacity until at least June 2023 and building activity will remain historically elevated for even longer.

Housing Scorecard benchmarks contemporary levels of activity in each state and territory against long term averages across 13 indicators of:

• Detached house building

• Multi-unit dwelling building

• Renovation

• Housing finance and

• Overseas and interstate migration.

State Scores

Score - A state score of 13 is the lowest possible and would arise if a state posted the lowest indicator score of 1 for all 13 indicators, 104 is the maximum possible and would arise if a state recorded the strongest possible score of 8 across all 13 indicators.`

National Ranking Summary

*A decline in a state score of more than five is considered to be indicative of declining momentum, an increase of more than five is considered positive momentum and any positive or negative movement of less than five is considered neutral.

Indicator Scores - National Summary

New South Wales

New South Wales has slipped to fourth ranking, after being equal second in the previous edition of this Report. The state has, nonetheless, performed relatively well during the pandemic, supported recently by renovations activity Recent quarters have also seen a net inflow of overseas migrants, where other states have continued to lose people overseas. New South Wales was also the stand-out performer in terms of new home sales after the HomeBuilder grant.

New South Wales has the equal strongest renovations sector in the nation, tied with South Australia. The value of approvals for renovations in New South Wales was 49.3 per cent above the decade average in the latest quarter. Actual expenditure on renovations was also strong, up by 25.4 per cent on the decade average.

Approvals for detached houses in New South Wales in the latest quarter were up by 14.6 per cent on the decade average, higher than most other jurisdictions New South Wales has continued to see new detached work enter the pipeline after the end of HomeBuilder. Detached homes commenced and under construction at the end of 2021, while still up on their decade averages by 12.4 per cent and 46.1 per cent, respectively, was still weaker than most other states.

New South Wales is one of the weaker states for multi-units activity. The loss of overseas migrants, students and tourists has been especially bad for high-rise apartments. In the latest three months, approvals for, and commencements of, multi-units in New South Wales were down by 49.4 per cent and 21.6 per cent on their decade averages, respectively. The volume of multiunits under construction is performing better, up by 10.7 per cent on the decade average. The sector should also be supported as affordability constraints and higher interest rates push buyers into multi-units, and re-opened borders bring back overseas arrivals.

First home buyers have been particularly active in New South Wales relative to other jurisdictions. In the latest three months, loans to first home buyers were up by 27.5 per cent on their decade average, compared to just +0.3 per cent for non-first home buyers. Loans to investors were up on their decade average by an even more impressive 45.7 per cent, but this was still much weaker than all other jurisdictions except Western Australia and the Northern Territory.

In the September 2021 quarter, New South Wales was the only jurisdiction to see a net inflow of overseas migrants, of 924. This is still a long way from the almost-20,000 quarterly net overseas migrants New South Wales received immediately before the pandemic but was still enough to make it the strongest jurisdiction in this indicator. New South Wales did, however, see an accelerated outflow of interstate migrants in the September 2021 quarter, coinciding with the Delta lockdowns in the state

Victoria

Victoria has came in in fifth place in the Scorecard, as it did in the previous edition of this Report Victoria has been hit harder by the pandemic than any other jurisdiction, suffering repeated lockdowns and losing a lot of residents to other states, especially Queensland but also Western Australia and South Australia. This is in addition to the loss of the overseas migrants, students and tourists that it depended upon more than any other jurisdiction.

While some other states are even stronger, Victoria’s renovations sector is still performing well. The value of approvals for renovations in Victoria was 37.6 per cent above the decade average in the latest quarter. This was, remarkably, one of the weaker performances nationally. Actual expenditure on renovations was up by 17.7 per cent compared to the decade average Victoria’s renovations sector was held back by repeated lockdowns but the significant pipeline of work is progressing.

Similar to the renovations sector, Victoria’s record-breaking detached home building boom is actually less impressive than in other jurisdictions. The volume of detached homes under construction in Victoria at the end of 2021 was 48.8 per cent above its decade average and yet, this was weaker than five other jurisdictions Detached homes were also continuing to be approved and commenced, respectively, at 6.3 per cent and 12.5 per cent above the decade average. But this is less impressive as many other jurisdictions

Victoria’s multi-units sector has been recently supported by medium density units and townhouses. Multi-unit approvals in the latest quarter were 2.1 per cent up on the decade average, second only to South Australia. This is particularly impressive given Victoria’s dependence on overseas arrivals – demographics that tend to favour higher density living. The volume of multi-units actually under construction at the end of 2021, however, was just 0.2 per cent above the decade average, beating out only Western Australia and the Northern Territory. New multi-unit commencements at the end of 2021 were also down by 6.0 per cent on the decade average. Construction of multi-units in Victoria is expected to grow from here. This is driven by a return of migration, and affordability constraints in the detached market and rising interest rates pushing people into multi-units

Loans to first and non-first home buyers in Victoria have come back from their pandemic peaks But these loans are still up by 24.7 per cent and 15.8 per cent on their decade averages, respectively. This is stronger than most other jurisdictions. In Victoria, the value of loans to investors is still up by 64.1 per cent on the decade average, though investor activity as surged more in other jurisdictions

The exodus of Victorians overseas and to other states has been a significant loss for Victoria It is remarkable how this has been more than offset by other factors driving housing demand during the pandemic. Victoria is the only jurisdiction whose population declined over the 21 months of the pandemic to September 2021. Victoria experienced a net outflow of 10,828 people overseas in the latest quarter, compared to the greater-than-20,000 net quarterly inflow the state got before the pandemic. Similarly, Victoria lost a net 2,148 interstate migrants in the latest quarter, compared to almost 3,000 per quarter before the pandemic.

Queensland

Queensland is the second placed state in the Scorecard, having been overtaken by South Australia since the last edition of this Report. Queensland has benefited greatly from the exodus of residents from New South Wales and Victoria

Queensland has a very strong renovations market, supported by the combination of HomeBuilder, the pandemic trend towards space and amenity, and ongoing storm repairs. The value of approvals for renovations in Queensland have moderated recently, but is still 39.7 per cent above its decade average. Actual expenditure on renovations in the latest quarter was also 39.7 per cent up on the decade average, which ranks Queensland on top of the nation in this indicator While the renovations sector is already at capacity, recent flooding will also ensure that activity remains elevated for longer.

Queensland has the equal strongest detached housing market in the nation, tied with South Australia. In the final quarter of 2021, the volume of detached work commenced was up by 16.5 per cent on the decade average. The volume under construction was up by 97.6 per cent on the decade average. Despite this enormous pipeline, new work is still entering the pipeline, with detached approvals in the latest quarter up by 17.3 per cent on the decade average – higher than any other jurisdiction.

Queensland has mixed results in terms of multi-unit activity The volume of multi-units under construction at the end of 2021 was 13.2 per cent above the decade average, which was one of the strongest performances in the nation. The volumes of multi-units being approved and commencing construction in the latest quarter, however, were down by 48.9 per cent and 11.3 per cent on their decade averages, respectively. Affordability constraints and rising interest rates are pushing some people out of the detached market into the multi-unit market. The return of overseas migrants, students and tourists, should also help bring new work into the pipeline Despite moderating recently, loans to first and non-first home buyers in Queensland are still up by 11.4 per cent and 11.7 per cent on their decade averages. This is around the middle of the pack on both indicators. Loans to investors started surging in late 2020 and were double (+97.8 per cent) their decade average in the most recent quarter. This makes Queensland one of the strongest markets for investor activity.

Queensland is the strongest destination for interstate migrants, absorbing much of the exodus from New South Wales and Victoria. Over 16,600 net interstate migrants came to Queensland in the September 2021 quarter, more than four times greater (+343.4 per cent) than the decade average. This was thanks to a tremendous spike in residents leaving New South Wales, which appears to be related to Delta lockdowns Queensland still lost a net 4,901 overseas migrants in the latest quarter, compared to a net gain of over 8,000 per quarter before the pandemic, representing one of the sharpest deteriorations in the nation

South Australia

South Australia has taken out top place in the Scorecard rankings, overtaking Queensland since the last edition of this Report This consistent with South Australia having one of the strongest per-capita uptakes of HomeBuilder in the country, behind only Western Australia Housing demand in the state was also supported by some of the exodus of residents from New South Wales and Victoria.

South Australia had the equal strongest renovations sector in the nation, tied with New South Wales. The value of approvals for renovations in the latest quarter was 50.9 per cent above the decade average. Actual expenditure on renovations was also 22.2 per cent higher than the decade average.

South Australia also had the equal strongest detached housing market in the nation, tied with Queensland Even though the volume of detached houses being approved has recently moderated, it is still up by 9.7 per cent on decade averages. Moreover, the volume of detached homes that commenced construction in the final quarter of 2021 was 60.1 per cent up on decade averages. This brought the volume of detached work under construction to a new record high, more than double (+108.1 per cent) the decade average.

South Australia also has the equal strongest multi-units sector in the nation, tied with the Australian Capital Territory. The volume of multi-units approved in the latest quarter was more than three times higher (+235.1 per cent) than the decade average. In the final quarter of 2021, the volume of multi-units commenced was up by 4.6 per cent on the decade average. This pushed the volume under construction 14.2 per cent above the decade average. These are far from record highs, which goes to show how hard the multi-units sector has been hit in other jurisdictions for South Australia to rank so high in these indicators.

Loans to first and non-first home buyers in South Australia have moderated recently, especially relative to other jurisdictions, though first home buyer loans are still up by 6.5 per cent on the decade average. Non-first home buyer loans are also consistent with decade averages (-0.6 per cent). Investor activiy is more impressive, with the value of loans to investors in South Australia up by 67.6 per cent on the decade average. This makes South Australia one of the stronger jurisdictions for investor activity

South Australia has been benefitting from residents leaving New South Wales and Victoria as well as residents choosing to stay in the state. Net interstate migration in the September 2021 quarter was 79.5 per cent higher than the decade average. There was still a net outflow of 1,385 overseas migrants from South Austrlalia in the quarter, compared to a net quarterly inflow of more than 4,000 overseas migrants the state saw before the pandemic The re-opening of international borders should improvethese flows for South Australia.

State Scores: South Australia

Western Australia

Western Australia remains in seventh place in the Scorecard rankings, as it was in the previous edition of this Report This disguises the remarkable recovery of the state from its post-mining boom doldrums. Western Australia’s Housing Score is still having to compete against the heights of its mining boom. If each state and territory in Australia were assessed against a five-year historical average, instead of a 10-year historical average, Western Australia would be battling it out for first place with Queensland and South Australia. On two separate occasions in the last year, Western Australia would have been the strongest housing market in the nation.

Western Australia has the weakest renovations market in the nation. While the value of approvals for renovations in the latest quarter was 15.2 per cent above the decade average, this is still weaker than almost every other jurisdiction. Actual expenditure on renovations was also 13.6 per cent below the decade average, which is the single weakest performance in the nation on this indicator After a strong and rapid response to HomeBuilder and the State Building Bonus, new approvals for detached home building have moderated and most recently sat 16.3 per cent below Western Australia’s decade average. This still leaves the state with an enormous pipeline of detached work to commence and complete. At the end of 2021, detached commencements were still up by 15.2 per cent on the decade average, and the volume of work under construction was almost double (+81.6 per cent) the decade average. This was one of the biggest expansions of a detached pipeline in the nation

Western Australia has one of the weaker multi-units markets in the nation. Approvals for multi-units in the latest quarter were down by 83.3 per cent on the decade average. At the end of 2021, new commencements were down by 60.2 per cent and multi-units under construction were down by 8.3 per cent. The only jurisdiction that was weaker on these indicators was the Northern Territory.

Housing finance indicators are mixed in Western Australia against the decade average, but are overall the strongest in the nation against a five-year average Loans to non-first home buyers, regardless of the benchmark, are the strongest in the nation, up by 31.3 per cent on the decade average and 47.3 per cent on the five-year average. Loans to first home buyers have moderated but remain up by 13.2 per cent (fourth ranking) on the decade average and 15.5 per cent (second ranking) on the five-year average. Loans to investors continue to surge, up by 35.3 per cent (seventh ranking) on the decade average and 123.1 per cent (second ranking) on the five-year average.

Western Australia is benefitting from residents leaving New South Wales and Victoria, as well as residents choosing to stay in the state. Net interstate migration in the September 2021 quarter was the second strongest in the nation, behind Queensland, over four times higher (+332.2 per cent) than the decade average. There was still a net outflow of 2,584 overseas migrants, compared to an average quarterly net inflow of more than 6,000 per quarter in the year before the pandemic. This is, nonetheless, far from the worst performance in the nation in this indicator, with other jurisdictions hit harder by the closure of international borders

State Scores: Western Australia

Tasmania

Tasmania has slipped to sixth position in the Scorecard, down from fourth in the previous edition of this Report Tasmania has seen some of its residents leave for other jurisdictions, and a deterioration in owneroccupier activity. The state has, nonetheless, been supported by strong investor activity and the continued flow of detached home building work into the pipeline.

The value of approvals for renovations in Tasmania in the latest quarter was 43.5 per cent above its decade average This is one of the stronger performances nationally. Actual expenditure on renovations, however, was 7.1 per cent below the decade average. This was stronger than only Western Australia

Tasmania still has a significant volume of detached home building work entering the pipeline. Detached home approvals in the latest quarter were 14.7 per cent above the decade average, which was weaker than only Queensland. Detached home commencements at the end of 2021 ranked lower, just 6.6 per cent above the decade average. The volume of detached homes under construction, however, was 76.8 per cent above the decade average – one of the stronger performances nationally

Tasmania has one of the stronger multi-units markets nationally, though this sector is only a small share of state housing activity. Approvals for multi-units in the latest quarter were down by 24.3 per cent on the decade average, yet still ranked in the top half of jurisdictions. This shows how hard other multi-units sectors have been hit by the pandemic. Furthermore, commencements of multi-units at the end of 2021 in Tasmania were up by 3.4 per cent on the decade average, and the volume under construction was up by 10.7 per cent

Tasmania has the second strongest market for investors in the nation, behind only the Australian Capital Territory. The value of loans to investors in Tasmania in the latest quarter was double (+100.2 per cent) its decade average. Loans to first and non-first home buyers, however, ranked much lower. These loans were 6.5 per cent and 13.6 per cent below their respective decade averages

Tasmania lost 160 net overseas migrants in the September 2021 quarter, down from a net quarterly inflow of around 1,000 overseas migrants before the pandemic. While this was far less severe than most other states, it was compounded by the loss of interstate migrants. Tasmania lost 513 net interstate migrants in the September 2021 quarter, compared to a net quarterly inflow of 300-400 interstate migrants before the pandemic. Unlike with the loss of overseas migrants, this was the weakest interstate migration performance in the nation

State Scores: Tasmania

Northern Territory

The Northern Territory continues to round out the rankings at the bottom of the Scorecard. Like Western Australia, this disguises the fact that the Northern Territory has still been a participant in the same pandemic boom as the rest of the nation. But beyond the current boom, the Northern Territory still requires a major source of employment growth outside of mining.

The Northern Territory has one of the stronger renovations markets in the nation. The value of approvals for renovations in the latest quarter was 65.0 per cent above the decade average – the strongest performance in the nation Actual expenditure on renovations in this quarter was also 14.9 per cent above the decade average.

The Northern Territory, unfortunately, has unambiguously the weakest detached home market in the nation. Approvals for detached houses in the latest quarter were down by 46.5 per cent on the decade average, falling back down from their HomeBuilder heights. Detached homes commenced in the final quarter of 2021 were also down by 50.7 per cent on the decade average. The Territory still has its significant HomeBuilder/pandemic pipeline to work through, though, with detached homes under construction being 7.7 per cent above the decade average – though this was still weaker than any other state or territory.

The Northern Territory also had unambiguously the weakest multi-units market in the nation. In the latest quarter, there were no new multi-unit approvals in the Northern Territory. Moreover, at the end of 2021, just four multi-units commenced construction, down by 97.5 per cent on the decade average. The volume under construction was also down by 45.5 per cent.

A bright spot for the Northern Territory is non-first home buyer finance. Loans to non-first home buyers were up by 16.8 per cent on the decade average, higher than all jurisdictions except Western Australia. Loans to first home buyers, however, have fallen back from recent heights, down by 18.1 per cent on the decade average, the weakest in the nation. The value of loans to investors was also down by 12.1 per cent on the decade average, the weakest in the nation

The Northern Territory’s migration flows have been the strongest/least weak in the nation. The Territory lost a net 50 overseas migrants in the September 2021 quarter, compared to a usual net inflow of over 200 per quarter before the pandemic. This was, nonetheless, one of the least severe deteriorations in the nation, behind only New South Wales. The Northern Territory also lost 637 net interstate migrants in the September 2021 quarter. This was actually a smaller outflow than what was occurring before the pandemic, allowing the Northern Territory to out-rank most other states on this indicator too

Australian Capital Territory

The Australian Capital Territory has taken out third spot in the Scorecard, up from fifth place in the previous edition of this Report. This is still down from its performance early in the pandemic, dragged down by its renovations sector and an exodus of migrants

In the Australian Capital Territory renovations have dropped back to “normal”, while they are still booming in other states. The value of approvals for renovations in the latest quarter was 3.8 per cent above the decade average, which was lower than all other jurisdictions Actual expenditure on renovations in this quarter was also just 6.5 per cent above the decade average, weaker than most others

Detached home approvals in the latest quarter were just 1.5 per cent above the decade average, which was one of the weaker performances. The volume of detached homes that commenced construction at the end of 2021, however, was up by 24.6 per cent on the decade average –stronger than all except South Australia. There were also 53.1 per cent more detached homes under construction in the Australian Capital Territory than the decade average.

The Australian Capital Territory’s larger multi-unit market was the strongest in the nation, tied with South Australia. Approvals for new multi-units in the latest quarter were down by 14.4 per cent on the decade average, which was a less severe result than all except Victoria and South Australia. At the end of 2021, the number of multi-units that commenced construction was 40.6 per cent above the decade average. The number under construction was up by 43.4 per cent against the decade average. On both indicators, this was the strongest in the nation.

The Australian Capital Territory is also the strongest housing market in the nation for first home buyers and investors. Loans to first home buyers were up by 43.2 per cent on the decade average. The value of loans to investors was more than double the decade average, up by 110.3 per cent. Loans to non-first home buyers were up by 9.0 per cent, though this was a relatively weak performance compared to other states

The Australian Capital Territory had the worst overall migration figures in the nation. The Territory lost 958 net overseas migrants in the September 2021 quarter, compared to a net quarterly inflow of around 600 before the pandemic. This was the most severe shift in overseas migration in the nation. Interstate migrants also left in the September 2021 quarter, with a net outflow of 1,036 compared to net quarterly flows of closer to zero before the pandemic. This was similarly the second most severe shift in interstate migration in the nation, ahead of only Tasmania.

State Scores: Australian Capital Territory

Data Sources

Methodology:

This report benchmarks contemporary levels of activity in each state and territory against long term averages across indicators of detached home building, multi-unit dwelling building, renovations, construction labour force, housing finance, and turnover of established homes.

This analysis is aggregated in a scoring system to generate a league table ranking the relative strength/weakness of residential building conditions in each jurisdiction.

The scoring system is based on the percentage by which the most recent record of activity in a state deviated from the state’s long term average. For each indicator, each state is assigned an indicator score where a state receives a score of eight if they are the strongest relative to their long term average and progressively lower scores assigned for the weaker states. A score of one is assigned to the state with the weakest level of activity relative to their long term average.

The indicator scores assigned for each state are summed together which becomes the state score. The state score provides the basis for the overall ranking of the states. The states are ranked in descending order based on the state score. The highest scoring state is ranked number one and each state is ranked in descending order with the state achieving the lowest score ranking eighth.