Property Council of Australia – Victoria Division
Economic Significance of the Property Industry to the Victorian Economy
The facts are black & white
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Disclaimer Whilst all care and diligence have been exercised in the preparation of this report, AEC Group Limited does not warrant the accuracy of the information contained within and accepts no liability for any loss or damage that may be suffered as a result of reliance on this information, whether or not there has been any error, omission or negligence on the part of AEC Group Limited or their employees. Any forecasts or projections used in the analysis can be affected by a number of unforeseen variables, and as such no warranty is given that a particular set of results will in fact be achieved.
ii
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Table of Contents Executive summary
iv
1.
Introduction
2
1.1 Background
2
1.2 Definition of the property industry
2
1.3 Geographic scope
3
1.4 Methodology
3
2.
Operating characteristics
4
2.1 Value of property industry activity and employment
4
2.2 Property industry building activity
5
2.2.1 Commenced and completed developments
5
2.2.2 Building approvals
10
2.3 Rateable properties
12
3.
13
Economic significance assessment
3.1 Contribution of the property industry to Victoria
13
3.2 Regional contribution of the property industry
15
3.3 Contribution of the property industry to Victoria by industry
20
3.4 Contribution of property sub-sectors to Victoria
22
4.
23
Taxation contribution
4.1 Contribution to Victoria’s state taxes
23
4.2 Local government rates and charges
24
5.
25
Comparisons with other industries
5.1 Economic contribution
25
5.1.1 Gross state product and gross value add
25
5.1.2 Incomes
28
5.1.3 Employment
29
5.2 State taxes
30
References
31
Appendix A - Definition of the property industry
32
Appendix B - Maps of geographic boundaries
40
Appendix C - Significance assessment methodology
42
Appendix D - Allocation of state taxes
46
iii
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Executive Summary
The Victorian property industry Victoria’s property industry consists of organisations and individuals involved in developing, operating and facilitating the activities within the property industry to meet the dwelling and non-dwelling needs of Victoria. Typically this includes residential and non-residential construction along with finance, property and business services associated with property development and operation. While many of these industries are also involved in non-property related activities, this report examines the contribution of the property related components of these industries to the Victorian economy only. The definition of the property industry used in this report does not include ownership of dwellings, which are rents paid by tenants to landlords and imputed rents to owner occupiers.
The property industry is the largest industry in Victoria The property industry is the largest industry in Victoria and is estimated to have contributed approximately $36.9 billion to total Victorian Gross State Product (GSP) in 2009-10. This represented 12.2% of GSP for the year of $301.4 billion.
Figure ES.1.
Direct contribution to gross state product by industry, 2009-10 Property industry Manufacturing
Financial and insurance services* Proessional, scientific and technical services* Health care and social assistance Wholesale trade Transport, postal and warehousing Retail trade Education and training Public administration and safety Information media and telecommunications Ownership of dwellings Administrative and support services Mining Accomodation and food services Agriculture, forestry and fishing Other services Electricity, gas, water and waste services Arts and recreation services Construction* Rental, hiring and real estate servcies* $0
$5
$10
$15
$20
$25
$30
$35
$40
Gross product ($ Billion) Note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
The contribution of the property industry to Victoria’s economy has increased in recent years. Between 2006-07 and 2009-10 property industry gross product increased by 18.1%, compared to a 16.0% increase in Victoria’s overall GSP. Property industry growth remained strong in the latter part of this period, with gross product growing by 6.5% between 2008-09 and 2009-10, compared to an overall Victorian GSP growth rate of 4.8%. This is likely to have been driven by significant growth in residential building activity since 2006-07. iv
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
The property industry is the second largest employer in Victoria The property industry is estimated to have directly employed 312,165 full time equivalent (FTE) employees in Victoria during 2009-10. This is equivalent to 12.2% of the total FTE employees in Victoria for the year. Manufacturing employed a slightly greater number of Victorian workers in 2009-10, with 313,791 FTE employees (also 12.2% of total Victorian employment).
Figure ES.2.
Direct contribution to employment by industry, 2009-10 Manufacturing Property industry
Health care and social assistance Retail trade Professional, scientific adn technical services* Education and training Accommodation and food services Public administration and safety Transport, postal and warehousing Wholesale trade Other services Financial and insurance services* Administrative and support services Agriculture, forestry and fishing Information media and telecommunications Arts and recreation services Electricity, gas, water and waste services Construction* Mining Rental, hiring and real estate services* Ownership of dwellings 0
50
100
150
200
250
300
350
Employment ('000 FTEs) Note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
The growth in property sector employment was slightly below the pace of employment growth in Victoria overall. Between 2006-07 and 2009-10 property industry employment increased by 11.4%, while overall Victorian employment increased by 11.7%. This could be partially attributable to the tightness of the Victorian labour market over this period.
The property industry is also a strong contributor to Victoria’s economy through flow-on activity In addition to the direct contribution of the property industry to the Victorian economy, the property industry is estimated to have contributed a further $54.5 billion to Victorian GSP through flow-on demand for goods and services, including production induced1 and consumption induced2 effects. The property industry also indirectly contributes to employment in the Victoria through flow-on demand for goods and services. The property industry supported jobs for some 431,503 FTE employees in 2009-10 through flow-on activity.
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Flow-on demand for goods and services resulting from property industry activity primarily supports activity in the industries of: • electricity, gas, water and waste services; • administrative and support services; • non-property related financial and insurance services; • other services; • accommodation and food services; and • non-property related rental, hiring and real estate services.
Table ES.1. Estimated direct and flow-on contribution of the property industry to the Victorian Economy, 2009-10 Contribution Direct contribution
Gross product ($M)
Gross value add ($M)
Incomes ($M)
Employment (FTE)
$36,900.1
$33,828.7
$15,685.5
312,165 157,419
Flow-on contribution Production induced (Type I)
$22,217.9
$20,489.8
$13,160.6
Consumption induced (Type II)
$32,323.4
$29,809.3
$16,371.0
274,084
Total flow-on contribution
$54,541.4
$50,299.1
$29,531.6
431,503
$1,045.0
$963.7
$280.2
11,970
$606.7
$559.5
$103.9
1,026
Manufacturing
$7,646.4
$7,051.7
$4,253.9
65,010
Electricity, gas, water and waste services
$1,862.8
$1,717.9
$676.4
8,046
Agriculture, forestry and fishing Mining
Construction
$20.1
$18.5
$12.9
113
Wholesale trade
$3,021.4
$2,786.4
$1,858.2
20,564
(a)
Retail trade
$3,475.0
$3,204.7
$2,202.3
57,717
Accommodation and food services
$2,001.8
$1,846.1
$1,198.6
35,416
Transport, postal and warehousing
$3,287.3
$3,031.6
$1,465.0
26,698
Information media and telecommunications
$2,800.5
$2,582.7
$952.0
15,463
$11,154.7
$10,287.1
$5,806.8
29,261
$641.4
$591.5
$270.7
2,796
Professional, scientific and technical services(a)
$4,379.6
$4,038.9
$3,104.9
44,931
Administrative and support services
$2,885.7
$2,661.3
$2,389.9
26,276
Financial and insurance services(a) Rental, hiring and real estate services(a)
Public administration and safety
$604.1
$557.1
$476.3
6,901
Education and training
$1,771.7
$1,633.9
$1,469.7
20,634
Health care and social assistance
$1,914.8
$1,765.9
$1,459.5
22,861
$670.6
$618.4
$393.7
8,838
Other services
$1,776.6
$1,638.4
$1,156.8
26,982
Ownership of dwellings
$2,975.2
$2,743.7
$0.0
0
$91,441.4
$84,127.8
$45,217.1
743,668
Arts and recreation services
Total contribution to Victoria
Note: Totals may not sum due to rounding. (a) Only non-property related activity is included for this industry classification. All property related activity is included in the direct contribution. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
vi
1
epresents the combination of activity required from all industries that supply goods and services to the property sector, as well as the induced R activity from all industries to support the production of industries supplying the property sector.
2
epresents the subsequent induced activity due to spending by the wage and salary earners across all industries arising from the compensation R received for their labour as part of the direct and production induced effects.
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
The property industry supports economic growth and employment throughout Victoria In line with its position as the principal population and business centre in Victoria, the Melbourne Statistical Division (SD) accounts for the majority (just over 80%) of total direct and flow-on property industry impacts in Victoria. However, the property industry’s contribution to regional Victoria should not be underestimated, as the industry accounts for over 12% of employment in the Barwon (13.3%), Gippsland (12.8%) and Loddon (12.6%) regions. In terms of the property industry in the major sub-regions, Greater Geelong accounts for the greatest proportion, contributing $2.7 billion, or 3% of Victorian property industry gross product. Other major sub-regions contributing a high proportion of gross product include Latrobe (1.3%) and Ballarat (1.2%).
Table ES.2. Estimated regional economic contribution of the property industry in Victoria, 2009-10 Region
Total contribution Gross product ($M)
Gross value add ($M)
Incomes ($M)
Employment (FTE) 9,735
Major sub-regions Ballarat
$1,129.6
$1,042.6
$544.6
Greater Bendigo
$855.4
$785.4
$388.0
7,088
Greater Geelong
$2,708.5
$2,498.2
$1,310.6
23,718
Greater Shepparton
$700.8
$644.0
$337.1
6,362
Horsham
$252.1
$231.8
$125.0
2,329
Latrobe
$1,168.3
$1,074.5
$562.4
10,044
Mildura
$255.3
$234.1
$108.4
2,345
Wangaratta
$550.9
$506.6
$264.0
4,843
Warrnambool
$425.0
$391.3
$199.6
3,631
Wodonga
$961.9
$885.0
$462.5
7,921
$9,007.8
$8,293.5
$4,302.2
78,015
Barwon
$3,761.5
$3,469.5
$1,803.4
33,527
Central Highlands
$1,692.1
$1,561.8
$821.8
15,260
$949.2
$876.2
$452.6
8,851
Gippsland
$2,590.2
$2,382.3
$1,235.3
23,192
Goulburn
$2,156.3
$1,981.7
$1,022.5
19,637
Loddon
$2,041.1
$1,876.2
$963.8
18,202
$975.1
$894.1
$405.5
4,111
$74,513.5
$68,544.4
$37,182.5
595,423
Total major sub-regions Statistical divisions
East Gippsland
Mallee Melbourne Ovens-Murray
$1,156.4
$1,063.6
$553.2
10,414
Western District
$1,175.7
$1,082.4
$560.0
10,928
$430.2
$395.6
$216.4
4,123
$91,441.4
$84,127.8
$45,217.1
743,668
Wimmera Victoria Note: Totals may not sum due to rounding.
Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
The residential property sub-sector provides the majority of property industry economic activity The property industry consists of a range of property type sub-sectors. Residential property is estimated to have provided the largest contribution to the Victorian economy of all property industry sub-sectors, accounting for approximately 61.2% of gross product in 2009-10, followed by commercial property (9.3%) and retail property (6.8%).
Table ES.3. Estimated direct contribution of the property industry to the Victorian economy by property sub-sector/type, 2009-10 Property sub-sector/type
Gross product ($M)
Gross value add ($M)
Incomes ($M)
Employment (FTE)
61.2%
61.2%
60.4%
62.5%
Retail
6.8%
6.8%
6.9%
6.5%
Commercial
9.3%
9.3%
9.5%
9.0%
Industrial
6.3%
6.3%
6.5%
6.1%
Health
4.2%
4.2%
4.3%
4.0%
Residential
Education
6.4%
6.4%
6.6%
6.2%
Entertainment/recreation
2.6%
2.6%
2.7%
2.5%
Other Total % of direct contribution
3.2%
3.2%
3.3%
3.1%
100.0%
100.0%
100.0%
100.0%
Note: Totals may not sum due to rounding. Source: AECgroup, ABS (2011a), ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Fact The property industry is the largest industry in Victoria of GSP
12.2%
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
The property industry is the largest single contributor to Victorian taxes Property related activities are estimated to have been the largest single industry contributing to Victoria’s state taxes and royalty revenues in 2009-10, contributing $5.4 billion or almost 40% of total state tax revenue for the year of $13.8 billion. In terms of contribution to taxes per dollar of gross product, property related activities are the second most highly taxed in Victoria (behind only the arts and recreation services industry which primarily involves taxes on gambling and gaming) providing $0.15 per dollar of gross product.
Table ES.4. Contribution to state taxes, comparison of property related activities to other industries of the economy, 2009-10 Industry
Tax estimates ($M)
Contribution to GSP ($M)
Tax per $1 of GSP contributed ($)
$5,446.6
$36,900.1
$0.15
Agriculture, forestry and fishing
$37.9
$6,240.2
$0.01
Mining
$73.9
$7,981.8
$0.01
$482.4
$35,746.5
$0.01
$44.3
$5,426.1
$0.01
Property related taxes
Manufacturing Electricity, gas, water and waste services Construction
$47.6
$2,959.0
$0.02
Wholesale trade
$271.3
$17,577.6
$0.02
Retail trade
$244.9
$15,395.4
$0.02
Accommodation and food services
$106.5
$7,133.6
$0.01
Transport, postal and warehousing
$171.7
$15,815.9
$0.01
Information media and telecommunications
$102.7
$12,175.9
$0.01
Financial and insurance services
$1,291.2
$35,718.1
$0.04
Rental, hiring and real estate services
$24.9
$2,353.0
$0.01
Professional, scientific and technical services
$373.2
$20,704.6
$0.02
Administrative and support services
$188.1
$9,051.4
$0.02
Public administration and safety
$243.6
$12,827.8
$0.02
Education and training
$320.3
$15,383.5
$0.02
Health care and social assistance
$393.6
$20,505.1
$0.02
Arts and recreation services Other services Ownership of dwellings Not allocated (a) Total Victoria
$1,679.9
$3,281.2
$0.51
$99.8
$6,105.5
$0.02 $0.00
$0.0
$12,155.7
$2,143.4
-
-
$13,788.0
$301,438.0
$0.05
Note: (a) Taxes that have not been allocated to an industry include stamp duties on motor vehicle, motor vehicle registrations, levies on statutory corporations and franchise taxes. While a part of these taxes are payable by industry, the majority of these taxes are paid by households. Due to data limitations it is not possible to allocate the portion of these taxes that are paid by industry. Source: AECgroup, ABS (2011c), DTF (2010).
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
1. Introduction 1.1 Background In 2011, the Property Council of Australia (Victoria Division) commissioned AEC Group Limited (AECgroup) to prepare estimates of the economic significance associated with the property industry in Victoria. The industry consists of organisations and individuals involved in developing, operating and facilitating the activities within the property industry to meet the dwelling and non-dwelling needs of Victoria.
1.2
Definition of the property industry or the purposes of this assessment the industry classifications as defined by the Australian F Bureau of Statistics (ABS) in the Australian and New Zealand Standard Industrial Classifications (ANZSIC), 2006 publication (ABS, 2008) were utilised. The property industry has been defined as incorporating: • P arts of the construction industry focussed on the development residential and non-residential building, as well as all construction services; • Architectural, engineering and professional services involved in the development of property; • Non-residential property operators and real estate services; and • P arts of banking, non-bank finance and other financial and insurance services that facilitate the development of property.
While many of these industries are also involved in non-property related activities, this report examines the contribution of the property related components of these industries to the Victorian economy only. The definition of the property industry used in this report does not include ownership of dwellings, which are rents paid by tenants to landlords and imputed rents to owner occupiers.
2
A full list of ANZSIC classes included in the definition of the property industry is provided in Appendix A.
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
1.3
Geographic scope The scope of this report is on the economic significance of the property industry in Victoria including the state of Victoria, its Statistical Divisions (SDs), and 10 identified major sub-regions. These are:
Victoria Statistical Divisions • Barwon
• Goulburn
• Ovens-Murray
• Central Highlands
• Loddon
• Western District
• East Gippsland
• Mallee
• Wimmera
• Gippsland
• Melbourne
Major sub-regions (defined by local government area boundaries in Victoria) • Ballarat
• Horsham
• Warrnambool
• Greater Bendigo
• Latrobe
• Wodonga
• Greater Geelong
• Mildura
• Greater Shepparton
• Wangaratta
Maps of the SDs and major sub-regions can be found in Appendix B.
1.4 Methodology The estimates in this report are produced using Input-Output transaction tables and models developed by AECgroup for the purposes of this assessment, combined with data from a range of sources, including State Accounts data and various industry specific data from the ABS. The Input-Output models were used to produce estimates of the direct and flow-on contributions of the property industry to the Victorian economy in terms of Gross State Product (GSP), gross value added (GVA) activity, employment and income (i.e. wages and salaries). A detailed description of the methodology employed in this report is provided in Appendix C. The information presented on the significance of the property industry in Victoria is for the 2009-10 financial year unless otherwise stated.
Fact Property industry contribution to state taxes
39.5%
3
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
2. Operating Characteristics This chapter provides an overview of the Victorian property industry in terms of its overall value and contribution to employment and incomes, as well as historic performance. An overview of building activity, approvals and rateable properties is also presented.
2.1
Value of property industry activity and employment In 2009-10 the Victorian property industry is estimated to have directly3 contributed approximately (refer to Appendix C for a description of the economic measures used in this section): • $36.9 billion towards Victoria’s GSP; • $33.8 billion in GVA activity; • $15.7 billion in income (wages and salaries); and • 312,165 full time equivalent4 (FTE) jobs.
Table 2.1. Estimated direct economic contribution of the property industry to the Victorian economy, 2009-2010 Property industry component
Gross product ($M)
Gross value add ($M)
Incomes ($M)
Employment (FTE)
Residential building construction
$4,026.7
$3,691.5
$1,124.3
35,377
Non-residential building construction(a)
$3,116.0
$2,856.7
$1,181.9
20,473
$13,315.3
$12,207.0
$6,258.6
162,608
$4,727.2
$4,333.7
$1,361.6
15,297
$649.3
$595.2
$272.9
1,619
Non-residential property operators and real estate services
$6,186.2
$5,671.3
$2,160.2
27,888
Professional, scientific and technical services
$4,879.5
$4,473.3
$3,326.0
48,904
$36,900.1
$33,828.7
$15,685.5
312,165
(a)
Construction services
(a)
Finance Insurance and superannuation funds
Total property industry direct contribution
Note: Totals may not sum due to rounding. (a) It should be noted that many construction industry employees work more than the standard FTE of 40 hours per week, and as such the total number of construction employees may be less than that depicted in the table. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Between 2006-07 and 2009-10 the property industry’s contribution to GSP increased from $31.2 billion to $36.9 billion, representing total growth of 18.1% over this period. The property industry grew faster than the overall Victorian economy during this period, which grew by 16.0% in GSP terms between 2006-07 and 2009-10 (refer to Table 2.2). Strong property market performance over this period can be attributed to a number of factors, including strong population growth driven by net overseas migration (DTF, 2008). However, in employment terms, employment growth in the property industry was slightly weaker than employment growth in Victoria overall between 2006-07 and 2009-10 (11.4% compared to 11.7%). Growth in wages and salaries was higher in the property industry than in Victoria overall between 2006-07 and 2009-10 (19.7% compared to 15.9%), perhaps due to the tight Victorian labour market. Between 2006-07 and 2009-10 Victoria’s labour market was strong with an unemployment rate between 4 and 6% (ABS, 2011e), suggesting that property industry may have increased wages and salaries offered to attract and retain employees.
4
3
he direct contribution of the property sector refers to the value of final products and services generated by the sector itself, as well as the jobs T and incomes of employees directly employed in the sector. However, the economic contribution of the property sector extends beyond the sector itself through flow-on effects, which are discussed in Chapter 3.
4
Where one FTE is equivalent to one person working full time for one year.
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
While both property industry growth and Victoria’s economic growth was weak between 2007-08 and 2008-09, the property industry grew relatively strongly between 2008-09 and 2009-10, at 6.5% in GSP terms. This was stronger than the growth of Victoria’s economy overall during this period, which was 4.8%. This is consistent with growth in GVA over the year, which was 5.7% in the property industry and 4.0% with Victoria’s overall economy. Income growth between 2008-09 and 2009-10 was again higher in the property industry (6.9%) compared to Victoria overall (4.5%). In terms of employment, the property industry recorded much stronger growth between 2008-09 and 2009-10 than Victoria overall (6.0% compared to 2.4%). This could be due to a number of factors. High income growth could have attracted more workers to the property industry, particularly as job opportunities in other sectors are likely to have decreased during the global economic downturn. In addition, public investment programs such as the Australian Government’s Nation Building – Economic Stimulus Plan (Australian Government, 2009) assisted in maintaining demand for property industry workers.
Table 2.2. Estimated property industry growth in Victoria compared to total Victorian economy growth Economic measure
2006-07
2007-08
2008-09
2009-10
% Change 2006-07 to 2009-10
% Change 2008-09 to 2009-10
Victoria property industry Gross product ($M)
$31,245.7
$34,322.7
$34,639.6
$36,900.1
18.1%
6.5%
Gross value add ($M)
$28,623.0
$31,389.3
$31,994.5
$33,828.7
18.2%
5.7%
Incomes ($M)
$13,099.7
$14,304.4
$14,666.7
$15,685.5
19.7%
6.9%
280,112
292,394
294,419
312,165
11.4%
6.0%
Employment (FTEs) Victoria total economy Gross state product ($M)
$259,789.0
$281,988.0
$287,619.0
$301,438.0
16.0%
4.8%
Gross value add ($M)
$237,983.0
$257,888.0
$265,656.0
$276,348.0
16.1%
4.0%
Incomes ($M)
$136,763.6
$147,108.8
$151,758.2
$158,558.6
15.9%
4.5%
2,298,642
2,469,891
2,507,527
2,567,165
11.7%
2.4%
Employment (FTEs) Note: Totals may not sum due to rounding.
Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
2.2
Property industry building activity
2.2.1 Commenced and completed developments Victoria recorded the highest number of commenced (54,424, or 32.9% of the total) and completed (46,218, or 31.4% of the total) residential developments in Australia in 2009-10. The value of commenced and completed residential developments in Victoria was $14.9 billion and $12.9 billion respectively, or 31.2% and 28.9% of the total value of residential developments in Australia for 2009-10.
Fact 312,165
full time Victorian jobs directly attributed to the property industry
Victoria recorded the second-highest value of non-residential commenced developments at $8.8 billion (22.8% of the total), behind New South Wales which recorded $10.4 billion (26.8%) of non-residential developments commenced in 2009-10. However, Victoria recorded the highest value of non-residential developments completed, at $9.2 billion, or 30.5% of the total. 5
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Table 2.3. Building activity – commenced and completed development, 2009-10 Region
Residential Commenced
Non-residential Completed
Commenced
Completed Value ($M)
Number
Value ($M)
Number
Value ($M)
Value ($M)
New South Wales
31,897
$10,683
25,663
$9,243
$10,365
$7,272
Victoria
54,424
$14,858
46,218
$12,932
$8,818
$9,217
Queensland
33,178
$9,539
33,628
$10,302
$7,975
$6,080
South Australia
11,989
$2,790
12,061
$2,866
$2,768
$1,814
Western Australia
$3,846
25,118
$7,290
22,293
$7,292
$6,363
Tasmania
3,120
$803
2,767
$725
$777
$547
Northern Territory
1,244
$464
1,304
$483
$473
$409
Australian Capital Territory
4,433
$1,235
3,334
$936
$1,117
$1,044
165,403
$47,662
147,268
$44,779
$38,656
$30,229
Australia Source: ABS (2011a).
Building activity commenced in Victoria grew strongly between 2006-07 and 2009-10, particularly for residential developments. Overall growth in the total value of buildings commenced for this period was 26.7%, which was stronger than the growth rate recorded for Australia overall during this period of 22.6%. Victoria recorded the second-highest growth in the value of residential developments commenced between 2006-07 and 2009-10, at 43.0%, behind only the Australian Capital Territory (79.8%). This was consistent with strong population and employment growth in both Melbourne and regional Victoria (DTF, 2007a). In addition, the Victorian Government allocated an additional $510 million for social and public housing in the 2007-08 Budget, increasing the value of residential developments commenced over the period (DTF, 2007b). However, the growth of non-residential building activity commenced over this period was the lowest of any state or territory, at 6.2%. This is despite a doubling of the annual expenditure on school construction and rebuilding between 2007 and 2011 (VAGO, 2008). However, in absolute terms, the value of non-residential building approvals commenced was relatively strong in 2009-10 (see Table 2.5). Figure 2.1 shows the value of different types of building work commenced in Victoria between 2001-02 and 2009-10. Residential buildings comprise the majority with almost two thirds (62.4%) of total value of works commenced. Of the non-residential buildings commenced, commercial buildings accounted for the largest value of total works commenced in Victoria between 2001-02 and 2009-10 (9.1%), followed by retail (6.6%), education (6.2%) and industrial (6.1%) buildings.
6
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Table 2.4. Comparison of building activity commenced, 2006-07 and 2009-10 Region
2006-07 ($M)
2009-10 ($M)
% Change, 2006-07 to 2009-10
Residential
$9,266
$10,683
15.3%
Non-residential
$8,067
$10,365
28.5%
$17,333
$21,048
21.4%
$10,393
$14,858
43.0%
$8,301
$8,818
6.2%
$18,694
$23,676
26.7%
$11,022
$9,539
-13.5%
$6,965
$7,975
14.5%
$17,987
$17,514
-2.6%
New South Wales
Total Victoria Residential Non-residential Total Queensland Residential Non-residential Total Australia Residential
$41,269
$47,662
15.5%
Non-residential
$29,128
$38,656
32.7%
Total
$70,397
$86,318
22.6%
Source: ABS (2011a).
Figure 2.1. Proportion of total value of works commenced by property industry type in Victoria, 2001-02 to 2009-10
Residential 62.4%
Source: ABS (2011a)
7
Fact Victorian wages and salaries generated by the property industry
$15.7 billion
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
2.2.2 Building approvals Consistent with the number of commencements and completions across Australia, building approvals data shows that in 2009-10 Victoria had the highest number (113,884) of residential building approvals across all states and territories. This represented 33.2% of the total, and was roughly 1.7 times higher than the number of residential building approvals in Queensland, which recorded the second highest number. The total value of residential approvals in Victoria was $30.2 billion, or 32.2% of the total across all states and territories for the year. The value per residential approval, at $264,911, was slightly below the Australian average of $274,025. The value of non-residential approvals in Victoria in 2009-10 was the second highest of all states and territories, at $17.8 billion (or 22.3% of the total). New South Wales recorded the highest value of non-residential approvals for the year, at $21.5 billion (27.0% of the total).
Table 2.5. Building approvals by state, 2009-10 Region
Residential
Non-residential
Number
Value ($M)
Value per approval ($)
66,622
$20,345.0
$305,379
$21,525.0
113,884
$30,169.1
$264,911
$17,793.0
Queensland
67,444
$18,965.8
$281,208
$17,263.5
South Australia
25,208
$5,386.4
$213,679
$5,354.8
Western Australia
50,660
$14,060.2
$277,540
$12,562.0
Tasmania
6,464
$1,602.8
$247,956
$1,506.2
Northern Territory
2,642
$925.7
$350,379
$1,246.1
Australian Capital Territory
9,074
$2,261.0
$249,174
$2,520.7
341,998
$93,716.0
$274,025
$79,771.4
New South Wales Victoria
Australia
Value ($M)
Note: Totals may not sum due to rounding Source: ABS (2011b).
As may be expected, the Melbourne SD, containing the capital city and primary population and service centre of Victoria, accounted for the majority of the total number of Victorian residential building approvals (74.4% of the total) and value (76.4% of the total) in 2009-10. The Melbourne SD also accounted for the majority of the total value of non-residential building approvals for the year (74.6%). Of the major sub-regions, Greater Geelong recorded the highest number and value of residential building approvals (4,298 approvals valued at $1,055 million), and also the highest value of non-residential approvals ($693.1 million). Ballarat accounted for the second highest number of residential building approvals in 2009-10, with 2,338, or 16.1% of the total, while Greater Bendigo accounted for 2,200 (15.1%). In value terms, Greater Bendigo recorded $483.3 million, while Ballarat recorded $481.6 million. Greater Bendigo had the second-highest value of non-residential building approvals after Greater Geelong, with $315.9 million, or 13.9% of the total for the non-Melbourne major sub-regions.
10
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Table 2.6. Building approvals in Victoria and major sub-regions, 2009-10 Region
Residential
Non-residential
Number
Value ($M)
Value ($M)
Major sub-regions (a) Ballarat
2,338
$481.6
$312.2
Greater Bendigo
2,200
$483.3
$315.9
Greater Geelong
4,298
$1,054.9
$693.1
Greater Shepparton
1,140
$265.4
$155.7
272
$68.4
$42.1
Latrobe
1,288
$322.3
$176.0
Mildura
992
$225.0
$133.2
Wangaratta
376
$93.0
$76.5
Warrnambool
568
$152.8
$257.3
Horsham
Wodonga
1,066
$236.5
$107.9
14,538
$3,383.2
$2,269.9
Barwon
6,014
$1,626.7
$902.9
Central Highlands
3,786
$806.6
$455.4
East Gippsland
1,604
$371.4
$219.7
Gippsland
4,624
$1,092.9
$482.0
Goulburn
4,604
$1,126.0
$685.9
Loddon
3,600
$847.8
$692.4
Mallee
1,354
$319.0
$225.0
84,728
$23,054.1
$13,280.5
Ovens-Murray
1,876
$452.2
$271.8
Western District
1,270
$364.6
$471.7
424
$107.9
$105.8
113,884
$30,169.1
$17,793.0
Total major sub-regions Statistical divisions
Melbourne
Wimmera Victoria
Note: Totals may not sum due to rounding. (a) Boundary definitions for the major sub-regions are outlined in section 1.3. Source: ABS (2011b).
Fact
33.2%
of Australia’s total building approvals in 2009-10 were in Victoria
11
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
2.3 Rateable properties Table 2.7 shows estimated unimproved capital values (UCVs) for residential, commercial, industrial and rural land in Victoria in 2009-10. In line with Melbourne’s position as Victoria’s capital, land values are highest in the Melbourne SD. Melbourne accounted for $633.4 billion, or 81.7% of the total UCV of land for Victoria, mainly due to the UCV of residential land. The Melbourne SD had the highest total land values across all land types. Of the other SDs, Barwon had the highest total land value, followed by Gippsland. Of the major sub-regions, Greater Geelong had the highest total UCV of land of $22.3 billion, mainly accounted for by the value of residential land. Greater Geelong recorded the highest land values across all land types compared to the other major sub-regions.
Table 2.7. Unimproved capital value of land, 2009-10 ($M) Region
Residential
Commercial
Industrial
Rural
Total
Ballarat
$4,783.0
$643.9
$274.1
$442.0
$6,143.1
Greater Bendigo
$4,875.0
$628.5
$280.3
$550.9
$6,334.8
Greater Geelong
$17,637.8
$1,320.5
$1,036.5
$2,354.2
$22,349.0
$2,000.2
$497.4
$179.0
$981.4
$3,658.0
$508.3
$4.0
$158.6
$779.9
$1,450.7
Latrobe
$2,795.0
$360.0
$219.9
$613.5
$3,988.4
Mildura
$1,598.7
$391.1
$125.7
$830.8
$2,946.3
$979.2
$198.5
$67.8
$1,026.9
$2,272.5
Warrnambool
$1,920.3
$439.2
$140.7
$261.5
$2,761.7
Wodonga
$1,380.4
$658.2
$0.0
$235.4
$2,274.0
$38,477.9
$5,141.4
$2,482.5
$8,076.6
$54,178.5
$27,384.0
$1,822.0
$1,150.7
$6,694.1
$37,050.9
$7,954.6
$827.5
$352.3
$3,639.7
$12,774.0
Major sub-regions
Greater Shepparton Horsham
Wangaratta
Total major sub-regions Statistical divisions Barwon Central Highlands East Gippsland Gippsland
$8,515.0
$5,975.7
$18,831.1
$7,310.7
$1,136.6
$423.4
$8,303.8
$17,174.5
$813.8
$331.4
$3,203.1
$14,081.4
Mallee
$2,282.9
$527.2
$168.3
$2,656.8
$5,635.2
$537,244.9
$49,527.7
$28,393.0
$18,215.4
$633,381.1
Ovens-Murray
$3,535.2
$1,002.6
$87.4
$3,350.0
$7,975.2
Western District
$4,703.2
$682.0
$249.5
$8,976.9
$14,611.6
Source: DSE (unpublished).
12
$2,707.6
$430.9
$9,733.0
Victoria
contributed to Victoria’s gross product in 2009-10
$143.4
Goulburn
Wimmera
$36.9 billion
$544.3 $1,100.3
Loddon Melbourne
Fact
$5,119.7 $11,324.2
$852.1
$48.3
$178.6
$4,192.0
$5,271.0
$617,44.6
$58,032.2
$31,908.9
$67,915.2
$775,301.0
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
3. Economic Significance Assessment This chapter describes the economic contribution (or significance) of the property industry to the Victorian economy, including estimates of the industry’s contribution to major sub-regions and SDs of Victoria. The flow-on contribution of property industry activity to other industries is also provided.
3.1 Contribution of the property industry to Victoria The economic contribution of the property industry to the Victorian economy has been estimated across four key measures: • G ross product: Refers to the value of all outputs of an industry including taxes/subsidies on its final products after deducting the cost of goods and services inputs in the production process. Gross State Product (GSP) is the measure of a state’s total gross production; ross value add (GVA): Refers to the value of all outputs of an industry excluding • G taxes/subsidies on its final products after deducting the cost of goods and services inputs in the production process; • Incomes: Measures the level of wages and salaries paid to employees of each industry; and mployment: Refers to the part-time and full-time employment positions supported by an • E industry, both directly and indirectly through flow-on activity, and is expressed in terms of full time equivalent (FTE) positions. In 2009-10 the property industry is estimated to have directly contributed $36.9 billion to gross product of Victoria, or 12.2% of the total GSP of $301.4 billion (refer to Table 3.1 and Table 3.2). Including flow-on activity, the total contribution of the property industry to Victoria’s economy is estimated to have been $91.4 billion in 2009-10, or 30.3% of total GSP. The property industry contributed $84.1 billion to Victoria’s GVA of $276.3 billion, or 30.4%. The property industry generated a total of 743,668 FTE employment positions in 2009-10; 312,165 directly and a further 431,503 through flow-on activity. This represented 29.0% of total employment in Victoria. These jobs generated approximately $45.2 billion in incomes (wages and salaries) for Victorian residents, representing 28.5% of total incomes in Victoria in 2009-10.
Table 3.1. Estimated direct and flow-on contribution of the property industry to the Victorian economy, 2009-10 Property industry component
Gross product ($M)
Gross value add ($M)
Incomes ($M)
Employment (FTE)
Residential building construction
$4,026.7
$3,691.5
$1,124.3
35,377
Non-residential building construction
$3,116.0
$2,856.7
$1,181.9
20,473
Construction services
$13,315.3
$12,207.0
$6,258.6
162,608
$4,727.2
$4,333.7
$1,361.6
15,297
$649.3
$595.2
$272.9
1,619
Non-residential property operators and real estate services
$6,186.2
$5,671.3
$2,160.2
27,888
Professional, scientific and technical services
$4,879.5
$4,473.3
$3,326.0
48,904
$36,900.1
$33,828.7
$15,685.5
312,165
Production induced (type I)
$22,217.9
$20,489.8
$13,160.6
157,419
Consumption induced (type II)
$32,323.4
$29,809.3
$16,371.0
274,084
Total flow-on contribution
$54,541.4
$50,299.1
$29,531.6
431,503
Total contribution to Victoria
$91,441.4
$84,127.8
$45,217.1
743,668
Direct contribution
Finance Insurance and superannuation funds
Total direct contribution Flow-on contribution
Note: Totals may not sum due to rounding. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
13
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Within the property industry, the largest direct contributors to the Victorian economy (in terms of GSP) for 2009-10 were: • Construction services: $13.3 billion in gross product (4.4% of GSP). on-residential property operators and real estate services: $6.2 billion in gross • N product (2.1% of GSP). rofessional, scientific and technical services: $4.9 billion in gross product • P (1.6% of GSP). • Finance: $4.7 billion in gross product (1.6% of GSP). Considering property industry employment, the largest contributors to the Victorian economy in 2009-10 were: • Construction services: 162,608 FTE jobs (6.3% of total Victorian FTE jobs). rofessional, scientific and technical services: 48,904 FTE jobs • P (1.9% of total Victorian FTE jobs). • Residential building construction: 35,377 FTE jobs (1.4% of total Victorian FTE jobs). • N on-residential property operators and real estate services: 27,888 FTE jobs (1.1% of total Victorian FTE jobs).
Table 3.2. Estimated % contribution of the property industry to the Victorian economy, 2009-10 Property industry component
Gross product (%)
Gross value add (%)
Incomes (%)
Employment (%)
Residential building construction
1.3%
1.3%
0.7%
1.4%
Non-residential building construction
1.0%
1.0%
0.7%
0.8%
Direct contribution
Construction services
4.4%
4.4%
3.9%
6.3%
Finance
1.6%
1.6%
0.9%
0.6%
Insurance and superannuation funds
0.2%
0.2%
0.2%
0.1%
Non-residential property operators and real estate services
2.1%
2.1%
1.4%
1.1%
Professional, scientific and technical services
1.6%
1.6%
2.1%
1.9%
12.2%
12.2%
9.9%
12.2%
Total direct contribution Flow-on contribution Production induced (type I) Consumption induced (type II)
7.4%
7.4%
8.3%
6.1%
10.7%
10.8%
10.3%
10.7%
Total flow-on contribution
18.1%
18.2%
18.6%
16.8%
Total contribution to Victoria
30.3%
30.4%
28.5%
29.0%
Note: Totals may not sum due to rounding. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
As outlined in Section 2.1, the property industry grew at a stronger rate than the Victorian economy overall between 2006-07 and 2009-10, representing an increase in the contribution of the property industry to the Victorian economy. Overall, the contribution of the property industry to the Victorian economy increased by around 0.4 percentage points (in GSP terms) between 2006-07 and 2009-10. The increase in GVA was similar, at 0.5 percentage points. The property industry’s contribution to Victorian incomes between 2006-07 and 2009-10 increased by 0.9 percentage points, while the property industry’s contribution to Victorian employment declined slightly by 0.1 percentage points. This could be due to tight labour market conditions disproportionately impacting the property industry, as outlined above. 14
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Table 3.3. Estimated change in property industry contribution to the Victorian economy, 2006 07 to 2009-10 Year/effect
Gross product (%)
Gross value add (%)
Incomes (%)
Employment (%)
Direct contribution
12.0%
12.0%
9.6%
12.2%
Production induced (type I) contribution
7.3%
7.3%
8.0%
6.1%
Consumption induced (type II) contribution
10.6%
10.6%
10.0%
10.7%
Total 2006-07 contribution
29.9%
29.9%
27.6%
29.0%
Direct contribution
12.2%
12.2%
9.9%
12.2%
Production induced (type I) contribution
7.4%
7.4%
8.3%
6.1%
Consumption induced (type II) contribution
10.7%
10.8%
10.3%
10.7%
Total 2009-10 contribution
30.3%
30.4%
28.5%
29.0%
Direct contribution
0.2%
0.2%
0.3%
0.0%
Production induced (type I) contribution
0.1%
0.1%
0.3%
0.0%
Consumption induced (type II) contribution
0.1%
0.2%
0.3%
0.0%
Total change in contribution
0.4%
0.5%
0.9%
-0.1%
2006-07
2009-10
Change, 2006-07 to 2009-10(a)
Note: Totals may not sum due to rounding. (a) The percentage change estimates represent percentage point differences between 2006-07 & 2009-10. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
3.2 Regional contribution of the property industry The economic contribution of the property industry to each of the SDs and major sub-regions in Victoria (as defined in Section 1.3) is outlined in Table 3.4, Table 3.5 and Table 3.6 below. The information described in each table is as follows: • T able 3.4 outlines the economic contribution of the property industry to major sub-regions and SDs in Victoria in value terms; • T able 3.5 outlines the economic contribution of the property industry in major sub-regions and SDs in Victoria as a percent of total Victorian economic activity; and able 3.6 outlines the per cent contribution of each major sub-region and SD to total direct • T and flow-on contributions of the property industry to the Victorian economy. The tables highlight that: • T he Melbourne SD accounts for more than three quarters of total direct and flow-on property industry impacts in Victoria, contributing $74.5 billion to GSP (81.5% of total property industry contribution to the state), $68.5 billion to gross value add (81.5%), $37.2 billion in incomes (82.2%) and 595,423 FTE jobs (80.1%); and • O f the non-Melbourne major sub-regions, Greater Geelong, Latrobe and Ballarat are the largest contributors to total property industry impacts in Victoria, accounting for 3.0%, 1.3% and 1.2% respectively of total property industry contributions to Victorian GSP.
15
16
$540.9
$255.3
$251.0
$207.1
$435.5
Latrobe
Mildura
Wangaratta
Warrnambool
Wodonga
$953.7
$975.1
Loddon
Mallee
$200.8
Wimmera
$33,828.7
$184.2
$512.6
$459.2
$26,253.6
$894.1
$874.2
$917.6
$1,081.0
$426.8
$695.1
$1,530.3
$4,087.4
$399.5
$190.3
$230.3
$234.1
$496.2
$108.8
$302.5
$1,108.5
$548.2
$468.9
$15,685.5
$84.7
$238.4
$215.0
$12,203.0
$405.5
$396.5
$425.0
$491.8
$197.2
$321.3
$707.1
$1,878.2
$186.3
$86.3
$107.0
$108.4
$226.1
$49.2
$141.4
$515.4
$243.8
$214.2
Incomes ($M)
Direct contribution
Gross value add ($M)
Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Note: Totals may not sum due to rounding.
$36,900.1
$557.9
Western District
Victoria
$500.5
Ovens-Murray
$28,652.1
$1,000.5
Goulburn
Melbourne
$1,178.2
$463.3
East Gippsland
Gippsland
$754.8
$1,663.1
Central Highlands
Barwon
Statistical divisions
$4,450.1
$118.6
Total major sub-regions
$329.8
$1,204.7
Greater Geelong
Horsham
$598.0
Greater Shepparton
$509.2
Greater Bendigo
Gross product ($M)
Ballarat
Major sub-regions
Region
312,165
1,864
5,486
4,798
239,341
4,111
8,742
9,549
10,886
4,507
7,136
15,745
40,338
3,835
1,860
2,287
2,345
4,790
1,058
3,117
11,203
5,234
4,610
Employment (FTE)
$54,541.4
$229.4
$617.8
$655.9
$45,861.4
$0.0
$1,087.4
$1,155.8
$1,411.9
$486.0
$937.3
$2,098.4
$4,557.8
$526.4
$217.9
$299.9
$0.0
$627.4
$133.5
$370.9
$1,503.8
$257.4
$620.5
Gross product ($M)
$50,299.1
$211.4
$569.7
$604.4
$42,290.8
$0.0
$1,002.0
$1,064.1
$1,301.4
$449.4
$866.7
$1,939.2
$4,206.1
$485.5
$201.0
$276.3
$0.0
$578.3
$123.0
$341.5
$1,389.6
$237.2
$573.7
Gross value add ($M)
$29,531.6
$131.7
$321.6
$338.2
$24,979.5
$0.0
$567.3
$597.5
$743.5
$255.4
$500.5
$1,096.3
$2,424.0
$276.2
$113.3
$157.0
$0.0
$336.3
$75.7
$195.7
$795.2
$144.1
$330.4
Incomes ($M)
431,503
2,258
5,442
5,616
356,082
0
9,461
10,089
12,306
4,344
8,124
17,782
37,677
4,086
1,771
2,556
0
5,255
1,270
3,245
12,515
1,854
5,125
Employment (FTE)
Flow-on (type I + type II) contribution
Table 3.4. Estimated regional economic contribution of the property industry in Victoria, 2009-10
$91,441.4
$430.2
$1,175.7
$1,156.4
$74,513.5
$975.1
$2,041.1
$2,156.3
$2,590.2
$949.2
$1,692.1
$3,761.5
$9,007.8
$961.9
$425.0
$550.9
$255.3
$1,168.3
$252.1
$700.8
$2,708.5
$855.4
$1,129.6
Gross product ($M)
$84,127.8
$395.6
$1,082.4
$1,063.6
$68,544.4
$894.1
$1,876.2
$1,981.7
$2,382.3
$876.2
$1,561.8
$3,469.5
$8,293.5
$885.0
$391.3
$506.6
$234.1
$1,074.5
$231.8
$644.0
$2,498.2
$785.4
$1,042.6
$45,217.1
$216.4
$560.0
$553.2
$37,182.5
$405.5
$963.8
$1,022.5
$1,235.3
$452.6
$821.8
$1,803.4
$4,302.2
$462.5
$199.6
$264.0
$108.4
$562.4
$125.0
$337.1
$1,310.6
$388.0
$544.6
Incomes ($M)
Total contribution Gross value add ($M)
743,668
4,123
10,928
10,414
595,423
4,111
18,202
19,637
23,192
8,851
15,260
33,527
78,015
7,921
3,631
4,843
2,345
10,044
2,329
6,362
23,718
7,088
9,735
Employment (FTE)
Economic Significance of the Property Industry to the Victorian Economy
The facts are black & white
0.1%
1.5%
Total major sub-regions
12.2%
0.1%
0.2%
0.3%
0.1%
9.9%
0.1%
0.2%
0.1%
7.7%
0.3%
0.3%
0.3%
0.3%
0.1%
0.2%
0.4%
1.2%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
0.1%
0.3%
0.2%
Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Note: Totals may not sum due to rounding.
0.1%
12.2%
Wimmera
Victoria
0.2%
0.2%
0.2%
Ovens-Murray
0.3%
9.5%
0.3%
9.5%
Mallee
Melbourne
Western District
0.3%
0.3%
0.3%
Goulburn
Loddon
0.2%
0.4%
0.2%
0.4%
East Gippsland
0.3%
0.6%
1.5%
0.1%
0.1%
0.1%
0.0%
Gippsland
0.6%
0.3%
Barwon
Central Highlands
Statistical divisions
0.1%
0.1%
Warrnambool
Wodonga
0.1%
0.1%
Mildura
Wangaratta
0.2%
0.0%
0.2%
Horsham
Latrobe
0.1%
0.4%
0.1%
Greater Geelong
Greater Shepparton
0.4%
0.2%
0.2%
0.2%
0.2%
Incomes (%)
Direct contribution
Gross value add (%)
Ballarat
Gross product (%)
Greater Bendigo
Major sub-regions
Region
12.2%
0.1%
0.2%
0.2%
9.3%
0.2%
0.3%
0.4%
0.4%
0.2%
0.3%
0.6%
1.6%
0.1%
0.1%
0.1%
0.1%
0.2%
0.0%
0.1%
0.4%
0.2%
0.2%
Employment (%)
18.1%
0.1%
0.2%
0.2%
15.2%
0.0%
0.4%
0.4%
0.5%
0.2%
0.3%
0.7%
1.5%
0.2%
0.1%
0.1%
0.0%
0.2%
0.0%
0.1%
0.5%
0.1%
0.2%
Gross product (%)
18.2%
0.1%
0.2%
0.2%
15.3%
0.0%
0.4%
0.4%
0.5%
0.2%
0.3%
0.7%
1.5%
0.2%
0.1%
0.1%
0.0%
0.2%
0.0%
0.1%
0.5%
0.1%
0.2%
Gross value add (%)
18.6%
0.1%
0.2%
0.2%
15.8%
0.0%
0.4%
0.4%
0.5%
0.2%
0.3%
0.7%
1.5%
0.2%
0.1%
0.1%
0.0%
0.2%
0.0%
0.1%
0.5%
0.1%
0.2%
Incomes (%)
16.8%
0.1%
0.2%
0.2%
13.9%
0.0%
0.4%
0.4%
0.5%
0.2%
0.3%
0.7%
1.5%
0.2%
0.1%
0.1%
0.0%
0.2%
0.0%
0.1%
0.5%
0.1%
0.2%
Employment (%)
Flow-on (type I + type II) contribution
30.3%
0.1%
0.4%
0.4%
24.7%
0.3%
0.7%
0.7%
0.9%
0.3%
0.6%
1.2%
3.0%
0.3%
0.1%
0.2%
0.1%
0.4%
0.1%
0.2%
0.9%
0.3%
0.4%
Gross product (%)
Table 3.5. Estimated % regional economic contribution of the property industry to the Victorian economy, 2009-10
0.4%
30.4%
0.1%
0.4%
0.4%
24.8%
0.3%
0.7%
0.7%
0.9%
0.3%
0.6%
1.3%
3.0%
0.3%
0.1%
0.2%
0.1%
0.4%
0.1%
0.2%
0.9%
0.3%
28.5%
0.1%
0.4%
0.3%
23.5%
0.3%
0.6%
0.6%
0.8%
0.3%
0.5%
1.1%
2.7%
0.3%
0.1%
0.2%
0.1%
0.4%
0.1%
0.2%
0.8%
0.2%
0.3%
Incomes (%)
Total contribution Gross value add (%)
29.0%
0.2%
0.4%
0.4%
23.2%
0.2%
0.7%
0.8%
0.9%
0.3%
0.6%
1.3%
3.0%
0.3%
0.1%
0.2%
0.1%
0.4%
0.1%
0.2%
0.9%
0.3%
0.4%
Employment (%)
Economic Significance of the Property Industry to the Victorian Economy Effective Play - The facts are black & white
17
18
0.3%
4.9%
Total major sub-regions
1.1%
1.1%
0.2%
40.2%
34.7%
0.2%
0.5%
0.5%
27.0%
0.9%
0.9%
0.9%
1.1%
0.4%
0.7%
1.6%
4.2%
0.4%
0.2%
0.2%
0.2%
0.5%
0.1%
0.3%
1.1%
0.5%
0.5%
Incomes (%)
Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Note: Totals may not sum due to rounding.
0.2%
40.4%
Wimmera
Victoria
0.6%
0.5%
0.5%
0.6%
Ovens-Murray
31.2%
1.1%
31.3%
Western District
Melbourne
Mallee
1.0%
1.1%
1.0%
Goulburn
Loddon
0.5%
1.3%
0.5%
1.3%
East Gippsland
0.8%
1.8%
4.9%
0.5%
0.2%
0.3%
0.1%
Gippsland
1.8%
0.8%
Barwon
Central Highlands
Statistical divisions
0.2%
0.5%
Warrnambool
Wodonga
0.3%
0.3%
Mildura
Wangaratta
0.6%
0.1%
0.6%
Horsham
Latrobe
1.3%
0.4%
1.3%
0.4%
Greater Geelong
Greater Shepparton
0.7%
0.6%
0.7%
0.6%
Gross value add (%)
Ballarat
Gross product (%)
Direct contribution
Greater Bendigo
Major sub-regions
Region
42.0%
0.3%
0.7%
0.6%
32.2%
0.6%
1.2%
1.3%
1.5%
0.6%
1.0%
2.1%
5.4%
0.5%
0.3%
0.3%
0.3%
0.6%
0.1%
0.4%
1.5%
0.7%
0.6%
Employment (%)
59.6%
0.3%
0.7%
0.7%
50.2%
0.0%
1.2%
1.3%
1.5%
0.5%
1.0%
2.3%
5.0%
0.6%
0.2%
0.3%
0.0%
0.7%
0.1%
0.4%
1.6%
0.3%
0.7%
Gross product (%)
59.8%
0.3%
0.7%
0.7%
50.3%
0.0%
1.2%
1.3%
1.5%
0.5%
1.0%
2.3%
5.0%
0.6%
0.2%
0.3%
0.0%
0.7%
0.1%
0.4%
1.7%
0.3%
0.7%
Gross value add (%)
65.3%
0.3%
0.7%
0.7%
55.2%
0.0%
1.3%
1.3%
1.6%
0.6%
1.1%
2.4%
5.4%
0.6%
0.3%
0.3%
0.0%
0.7%
0.2%
0.4%
1.8%
0.3%
0.7%
Incomes (%)
58.0%
0.3%
0.7%
0.8%
47.9%
0.0%
1.3%
1.4%
1.7%
0.6%
1.1%
2.4%
5.1%
0.5%
0.2%
0.3%
0.0%
0.7%
0.2%
0.4%
1.7%
0.2%
0.7%
Employment (%)
Flow-on (type I + type II) contribution
100.0%
0.5%
1.3%
1.3%
81.5%
1.1%
2.2%
2.4%
2.8%
1.0%
1.9%
4.1%
9.9%
1.1%
0.5%
0.6%
0.3%
1.3%
0.3%
0.8%
3.0%
0.9%
1.2%
Gross product (%) 1.2%
100.0%
0.5%
1.3%
1.3%
81.5%
1.1%
2.2%
2.4%
2.8%
1.0%
1.9%
4.1%
9.9%
1.1%
0.5%
0.6%
0.3%
1.3%
0.3%
0.8%
3.0%
0.9%
100.0%
0.5%
1.2%
1.2%
82.2%
0.9%
2.1%
2.3%
2.7%
1.0%
1.8%
4.0%
9.5%
1.0%
0.4%
0.6%
0.2%
1.2%
0.3%
0.7%
2.9%
0.9%
1.2%
Incomes (%)
Total contribution Gross value add (%)
Table 3.6. Estimated % regional contribution to total direct and flow-on Victorian property industry impacts, 2009-10
100.0%
0.6%
1.5%
1.4%
80.1%
0.6%
2.4%
2.6%
3.1%
1.2%
2.1%
4.5%
10.5%
1.1%
0.5%
0.7%
0.3%
1.4%
0.3%
0.9%
3.2%
1.0%
1.3%
Employment (%)
Economic Significance of the Property Industry to the Victorian Economy
The facts are black & white
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
The property industry is estimated to have directly employed 312,165 FTE employees in Victoria in 2009-10, representing 12.2% of total employment in the state. The Barwon SD is estimated to directly employ 13.3% of its workforce (or 118,671 workers) in the property industry – representing the largest proportional contribution to total employment by the property industry of any SD in Victoria. The Gippsland and Loddon SDs had the next highest shares of total employment in the property industry at 12.8% and 12.6% respectively, followed by the Melbourne SD with 12.2%. The Melbourne SDs share of employment in the property industry was equal to the state’s average (12.2%). The majority of the major sub-regions had a lower property industry employment share than the Victorian average. Exceptions to this included Warrnambool, which had the highest share of property industry employment of the major sub-regions with 1,860 FTE employees in the property industry, or 12.6% of the total workforce. Wodonga and Greater Bendigo also had a relatively high share of property industry employment, with 12.4% and 12.2% of the total workforce employed by the property industry respectively.
Table 3.7. Estimated % direct contribution of the property industry to regional employment, 2009-10 Region
Direct employment in property industry
Total employed
% Share of property industry 10.4%
Major sub-regions Ballarat
4,610
44,251
Greater Bendigo
5,234
42,757
12.2%
Greater Geelong
11,203
94,643
11.8% 11.0%
Greater Shepparton
3,117
28,314
Horsham
1,058
9,239
11.5%
Latrobe
4,790
42,325
11.3%
Mildura
2,345
23,445
10.0%
Wangaratta
2,287
21,053
10.9%
Warrnambool
1,860
14,778
12.6%
Wodonga
3,835
30,873
12.4%
40,338
351,677
11.5%
15,745
118,671
13.3%
7,136
62,609
11.4%
Total major sub-regions Statistical divisions Barwon Central Highlands
4,507
38,933
11.6%
Gippsland
East Gippsland
10,886
85,248
12.8%
Goulburn
9,549
82,079
11.6%
Loddon
8,742
69,425
12.6%
Mallee
4,111
41,567
9.9%
239,341
1,957,650
12.2%
Ovens-Murray
4,798
43,239
11.1%
Western District
5,486
46,044
11.9%
Melbourne
Wimmera Victoria
1,864
21,700
8.6%
312,165
2,567,165
12.2%
Note: Totals may not sum due to rounding. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
19
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
3.3 Contribution of the property industry to Victoria by industry Table 3.8 identifies the direct and flow-on contribution of the property industry to the Victorian economy by industry. In terms of flow-on contribution to gross product, the following is noted: • N on-property related financial activity and insurance services is the primary beneficiary of property industry activity, with property industry activity contributing to flow-on effects for financial and insurance services of approximately $11.2 billion in gross product, equating to 20.5% of total flow-on gross product effects of $54.5 billion in Victoria (or 31.2% of total Victorian financial and insurance services gross product). • M anufacturing and non-property related professional, scientific and technical services are the next largest beneficiaries of property industry activity, contributing $7.6 billion (14.0%) and $4.4 billion (8.0%) of total flow-on gross product effects respectively. • Other key beneficiaries of property industry flow-on activity include: −−retail trade (6.4%); −−transport, postal and warehousing (6.0%); −−wholesale trade (5.5%); and −−ownership of dwellings (5.5%). In terms of employment, the property industry primarily supports flow-on employment in the following industries: • manufacturing (65,010 FTE jobs, or 15.1% of total flow-on employment); • retail trade (57,717 FTE jobs, or 13.4% of total flow-on employment); • n on-property related professional, scientific or technical services (44,931 FTE jobs, or 10.4% of total flow-on employment); • accommodation and food services (35,416 FTE jobs, or 8.2% of total flow-on employment; and • n on-property related financial and insurance services (29,261 FTE jobs, or 6.8% of total flow-on employment). Table 3.8 highlights that the property industry is a key contributor of total demand for goods and services provided by industries of: • electricity, gas, water and waste services; • administrative and support services; • non-property related financial and insurance services; • other services; • accommodation and food services; and • n on-property related rental, hiring and real estate services. Flow-on activity generated by the property industry accounts for a quarter or more of total economic activity in each of these industries.
20
Fact
12.2% of total state employment in Victoria is represented by the property industry
$4,879.5
Professional, scientific and technical services
Flow-on (type I + II) non-property related industry contribution
$10,287.1
$11,154.7 $4,038.9
$91,441.4
Total contribution
$84,127.8
$50,299.1
$45,217.1
$29,531.6
$0.0
$1,156.8
$393.7
$1,459.5
$1,469.7
$476.3
$2,389.9
$3,104.9
$270.7
$5,806.8
$952.0
$1,465.0
$1,198.6
$2,202.3
$1,858.2
$12.9
$676.4
$4,253.9
$103.9
$280.2
$15,685.5
$3,326.0
$2,160.2
$272.9
$1,361.6
$6,258.6
$1,181.9
$1,124.3
Incomes ($M)
Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Notes: Totals may not sum due to rounding. (a) Only non-property related activity is included for this industry classification. All property related activity is included in the direct contribution.
$54,541.4
Total flow-on contribution
$1,638.4
$1,776.6 $2,975.2
Other services
Ownership of dwellings
$2,743.7
$618.4
$1,765.9
$1,633.9
$557.1
$2,661.3
$670.6
$1,914.8
Arts and recreation services
Health care and social assistance
$604.1 $1,771.7
Education and training
Public administration and safety
$4,379.6 $2,885.7
Professional, scientific and technical services (A)
Administrative and support services
Rental, hiring and real estate services (A)
$591.5
$3,031.6 $2,582.7
$3,287.3 $2,800.5
Transport, postal and warehousing
Information media and telecommunications $641.4
$3,204.7 $1,846.1
$3,475.0 $2,001.8
Retail trade
Accommodation and food services
Financial and insurance services (A)
$2,786.4
$3,021.4
Wholesale trade
$18.5
$1,717.9
$20.1
$1,862.8
Electricity, gas, water and waste services
$7,051.7
$559.5
$963.7
$33,828.7
$4,473.3
$5,671.3
$595.2
$4,333.7
$12,207.0
$2,856.7
$3,691.5
Gross value add ($M)
Value of contribution
Construction (A)
$7,646.4
$606.7
$1,045.0
Manufacturing
Mining
Agriculture, forestry and fishing
$36,900.1
$6,186.2
Non-residential property operators and real estate services
Total direct contribution
$649.3
$4,727.2
$13,315.3
Insurance and superannuation funds
Finance
Construction services
$4,026.7 $3,116.0
Residential building construction
Gross product ($M)
Non-residential building construction
Direct property industry contribution
Industry
743,668
431,503
0
26,982
8,838
22,861
20,634
6,901
26,276
44,931
2,796
29,261
15,463
26,698
35,416
57,717
20,564
113
8,046
65,010
1,026
11,970
312,165
48,904
27,888
1,619
15,297
162,608
20,473
35,377
Employment (FTE)
30.3%
20.6%
24.5%
29.1%
20.4%
9.3%
11.5%
4.7%
31.9%
21.2%
27.3%
31.2%
23.0%
20.8%
28.1%
22.6%
17.2%
0.7%
34.3%
21.4%
7.6%
16.7%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Gross product (%)
Table 3.8. Estimated contribution of the property industry to the Victorian economy by industry, 2009-10
30.4%
20.7%
24.6%
29.3%
20.6%
9.4%
11.6%
4.7%
32.1%
21.3%
27.4%
31.4%
23.1%
20.9%
28.2%
22.7%
17.3%
0.7%
34.5%
21.5%
7.6%
16.8%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Gross value add (%)
28.5%
20.7%
n.a.
29.6%
21.0%
9.5%
11.7%
5.0%
32.5%
21.3%
27.8%
34.9%
23.7%
21.8%
28.8%
23.0%
17.5%
0.7%
39.1%
22.6%
9.6%
18.9%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Incomes (%)
% of Total industry in Victoria
29.0%
19.1%
n.a.
26.7%
20.0%
8.8%
10.9%
5.3%
29.5%
21.3%
29.7%
32.0%
27.0%
20.7%
24.3%
23.8%
17.1%
0.7%
31.0%
20.7%
8.5%
18.7%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Employment (%)
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
21
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
3.4 Contribution of property sub-sectors to Victoria The property industry can be classified into sub-sectors by the range of property types that are developed and managed. In this section the property industry has been disaggregated into the following sub-sectors to examine the direct5 contribution of individual property sub-sectors to the Victorian economy: • Residential
• Health
• Retail
• Education
• Commercial
• Entertainment/recreation
• Industrial
• Other
The direct contribution of the property industry to the Victorian economy is disaggregated across each of its sub-sectors (or property type) in Table 3.9. The methodology applied in disaggregating the direct contribution of the property industry to its constituent sub-sectors is described in Appendix C. Table 3.9 shows that the residential subsector of the property industry directly contributed $22.6 billion (or 61.2%) of the total property industry gross product in 2009-10. The second highest contributor was the commercial sub-sector, which contributed $3.4 billion, or 9.3% of the total. Retail buildings accounted for a further $2.5 billion, or 6.8% of property industry gross product.
Table 3.9. Estimated direct contribution of the property industry to the Victorian economy by property sub-sector/type, 2009-10 Property sub-sector/type
Gross product ($M)
Gross value add ($M)
Incomes ($M)
Employment (FTE)
Direct contribution Residential
$22,587.2
$20,707.2
$9,469.3
195,247
Retail
$2,492.2
$2,284.7
$1,082.4
20,358
Commercial
$3,446.3
$3,159.5
$1,496.8
28,152
Industrial
$2,334.6
$2,140.3
$1,013.9
19,071
Health
$1,537.7
$1,409.8
$667.9
12,561
Education
$2,365.9
$2,168.9
$1,027.5
19,326
$957.8
$878.1
$416.0
7,824
$1,178.4
$1,080.3
$511.8
9,626
$36,900.1
$33,828.7
$15,685.5
312,165
Entertainment/recreation Other Total direct contribution Percent of total direct contribution Residential
61.2%
61.2%
60.4%
62.5%
Retail
6.8%
6.8%
6.9%
6.5%
Commercial
9.3%
9.3%
9.5%
9.0%
Industrial
6.3%
6.3%
6.5%
6.1%
Health
4.2%
4.2%
4.3%
4.0%
Education
6.4%
6.4%
6.6%
6.2%
Entertainment/recreation
2.6%
2.6%
2.7%
2.5%
Other
3.2%
3.2%
3.3%
3.1%
100.0%
100.0%
100.0%
100.0%
Total % of direct contribution Note: Totals may not sum due to rounding.
Source: AECgroup, ABS (2011a), ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d) 5
22
nly direct contributions have been examined as insufficient data is available to appropriately identify any variances between sub-sectors O contribution to flow-on effects.
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
4. Taxation Contribution This chapter outlines the direct contribution of property related activities to state and local government taxes, including estimates of the contribution to taxes from property related activities in major sub-regions and SDs of Victoria.
4.1 Contribution to Victoria’s state taxes Property related activities are estimated to have directly contributed approximately $5.4 billion to state taxes in 2009-10, or 39.5% of total Victorian state tax revenue for the year of $13.8 billion. The contribution of property related activity to state taxes was generated through a combination of $401.2 million in payroll tax (for business directly employed by the property industry), $3.6 billion in transfer duties (for property purchased), $1.2 billion in land tax and $263.4 million in other property related taxes. The Melbourne SD contributed 85.2% of total property related taxes, with the Barwon SD contributing the next highest share (4.5%). Of the major sub-regions, Greater Geelong contributed the most to state tax revenue, followed by Ballarat and Greater Bendigo. The approach utilised in allocating state taxes to property related activities is provided in Appendix D.
Table 4.1. Estimated regional contribution of property related activity to state taxes, 2009-10 Region
Payroll tax ($M)
Transfer duty ($M)
Land tax ($M)
Other property related taxes ($M)
Total ($M)
Ballarat
$5.5
$35.4
$9.3
$4.6
$54.8
Greater Bendigo
$6.2
$28.2
$9.6
$4.9
$49.0
Greater Geelong
$13.2
$113.8
$34.0
$10.5
$171.4
Greater Shepparton
$3.6
$10.8
$5.6
$3.0
$23.0
Horsham
$1.3
$3.5
$2.2
$1.0
$7.9
Latrobe
$5.8
$14.7
$6.1
$3.6
$30.1
Mildura
$2.8
$8.8
$4.5
$2.6
$18.6
Wangaratta
$2.7
$5.2
$3.5
$1.4
$12.7
Warrnambool
$2.2
$11.2
$4.2
$1.6
$19.3
Wodonga
$4.8
$8.6
$3.5
$1.7
$18.6
$48.0
$240.2
$82.3
$34.8
$405.4
Major sub-regions
Total major sub-regions Statistical divisions Barwon
$18.1
$157.8
$56.3
$13.8
$245.9
Central Highlands
$8.2
$50.1
$19.4
$7.5
$85.3
East Gippsland
$5.0
$18.6
$12.9
$4.2
$40.7
Gippsland
$12.6
$63.6
$28.6
$8.5
$113.3
Goulburn
$10.9
$37.1
$26.1
$10.1
$84.1
Loddon
$10.1
$51.4
$21.4
$8.8
$91.8
Mallee
$10.4
$11.9
$8.6
$4.5
$35.4
$312.2
$3,171.8
$962.4
$193.6
$4,640.0
Ovens-Murray
$5.5
$17.1
$12.1
$4.8
$39.5
Western District
$6.1
$19.8
$22.2
$5.1
$53.2
Wimmera
$2.2
$4.7
$8.0
$2.4
$17.3
$401.2
$3,604.0
$1,178.0
$263.4
$5,446.6
Melbourne
Victoria
Note: Other property related taxes includes duties on property (not including transfer duties), financial accommodation levies, congestion levies, metropolitan improvement levies and property owner contributions to fire brigades. Source: AECgroup, ABS (2011c), ABS (2011d), DTF (2010), DSE (2010a and 2010b), DSE (unpublished).
23
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
4.2 Local government rates and charges In addition to taxes collected by the Victorian Government, local governments in Victoria also charge various rates for the provision of services related to property. In 2009-10, $3.2 billion in total rates and charges revenue was estimated to have been collected by local governments across Victoria. As with state taxes, the majority (69.4%) of rates revenue was generated within the Melbourne SD.
Table 4.2. Local government rates and charges, 2009-10 Region
Rates revenue, municipal charges and waste management charges $M
%
Major sub-regions Ballarat
$60.2
1.9%
Greater Bendigo
$63.0
1.9%
Greater Geelong
$130.5
4.0%
Greater Shepparton
$45.1
1.4%
Horsham
$14.8
0.5%
Latrobe
$42.8
1.3%
Mildura
$42.6
1.3%
Wangaratta
$18.8
0.6%
Warrnambool
$22.0
0.7%
Wodonga
$26.3
0.8%
$466.2
14.4%
Barwon
$194.6
6.0%
Central Highlands
$107.8
3.3%
$67.9
2.1%
Gippsland
$128.9
4.0%
Goulburn
$130.7
4.0%
Loddon
$118.6
3.7%
Mallee
$50.6
1.6%
$2,253.4
69.4%
Ovens-Murray
$70.1
2.2%
Western District
$80.3
2.5%
Wimmera
$42.4
1.3%
$3,245.4
100.0%
Total major sub-regions Statistical divisions
East Gippsland
Melbourne
Victoria Source: AECgroup, MAV (2010).
Fact Direct annual contribution by the property sector to Victorian state taxation 24
$5.4 billion
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
5. Comparisons with Other Industries This chapter examines the direct contribution of the property industry to the Victorian economy and state taxes compared to the contributions of other industries within the economy.
5.1 Economic contribution 5.1.1
Gross state product and gross value add The property industry was the largest direct contributor to Victorian GSP in 2009-10, contributing $36.9 billion in gross product, or 12.2% of Victorian GSP for the year (which totalled $301.4 billion). Manufacturing was the second highest contributor, accounting for $35.7 billion in gross product, or 11.9% of Victorian GSP in 2009-10. Financial and insurance services closely followed manufacturing in terms of gross product contributions, also accounting for $35.7 billion in gross product for 2009-10, or 11.8% of total GSP for Victoria.
Figure 5.1.
Direct Contribution to Gross State Product by Industry, 2009-10 Property industry Manufacturing
Financial and insurance services* Professional, scientific and technical services* Health care and social assistance Wholesale trade Transport, postal and warehousing Retail trade Education and training Public administration and safety Information media and telecommunications Ownership of dwellings Administrative and support services Mining Accommodation and food services Agriculture, forestry and fishing Other services Electricity, gas, water and waste services Arts and recreation services Construction* Rental, hiring and real estate services* $0
$5
$10
$15
$20
$25
$30
$35
$40
Gross product ($ Billion) Note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
25
Fact The property industry is the largest contributor to Victorian gross state product
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
5.1.2 Incomes The property industry was the third highest contributing sector to incomes (wages and salaries) in Victoria in 2009-10, despite being the highest contributing sector to GSP for the year. Incomes of approximately $15.7 billion were paid by the property industry in 2009-10, or 9.9% of the total for Victoria. The sectors which paid higher incomes during 2009-10 were manufacturing, paying $18.9 billion (11.9% of the total) and financial and insurance services, paying $16.7 billion (10.5% of the total).
Figure 5.2.
Direct contribution to incomes by industry, 2009-10 Manufacturing
Financial and insurance services* Property industry Health care and social assistance Professional, scientific and technical services* Education and training Wholesale trade Retail trade Public administration and safety Administrative and support services Transport, postal and warehousing Accommodation and food services Information media and telecommunications Other services Arts and recreation services Construction* Electricity, gas, water and waste services Agriculture, forestry and fishing Mining Rental, hiring and real estate services* Ownership of dwellings $0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
Incomes ($ Billion) Note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
Fact The property industry is the second most highly taxed industry in Victoria, $0.15 for every dollar generated 28
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
5.1.3 Employment The property industry directly employed 312,165 FTE employees in 2009-10, accounting for 12.2% of the total FTE employees in Victoria for the year. This is significantly higher than the property industry’s contribution to incomes (9.9%) for the year, but in line with the property industry’s contribution to GSP (also 12.2%). The property industry was the second largest employer, just behind manufacturing, which employed 313,791 FTE employees in 2009-10 (12.2% of total Victorian employment). Figure 5.3.
Direct contribution to employment by industry, 2009-10 Manufacturing Property industry
Health care and social assistance Retail trade Professional, scientific and technical services* Education and training Accommodation and food services Public administration and safety Transport, postal and warehousing Wholesale trade Other services Financial and insurance services* Administrative and support services Agriculture, forestry and fishing Information media and telecommunications Arts and recreation services Electricity, gas, water and waste services Construction* Mining Rental, hiring and real estate services* Ownership of dwellings 0
50
100
150
200
250
300
350
Employment ('000 FTEs) Note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry. Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).
29
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
5.2 State taxes Property related taxes are estimated to be the highest contributing sector to Victorian tax revenue in 2009-10, contributing $5.4 billion of a total of $13.8 billion (39.5%). The next highest contributor was arts and recreation services, contributing $1.7 billion (12.2%) to state taxes for the year (primarily through taxes on gambling), followed by financial and insurance services with $1.3 billion (9.4%). In terms of contribution to tax revenue per dollar of gross product, the property industry is the second most highly taxed in the state, contributing $0.15 in tax revenue for every dollar of gross product generated. Arts and recreation services, which primarily involve taxes on gambling and gaming, are the most heavily taxed sector in the state, contributing $0.51 in revenue for every dollar of gross product generated (although this sector provides less than a third of the total tax revenue of the property industry in total). All other sectors contribute much less tax revenue per dollar of GSP, at $0.04 per dollar of gross product or less. The contribution to state taxes by property related activities and other industries of the economy has been estimated utilising the approach outlined in Appendix D. Table 5.1. Contribution to state taxes, comparison of property related activities to other industries of the economy, 2009-10 Industry Property related taxes
Tax estimates ($M)
Contribution to GSP ($M)
Tax per $1 of GSP contributed ($)
$5,446.6
$36,900.1
$0.15
Agriculture, forestry and fishing
$37.9
$6,240.2
$0.01
Mining
$73.9
$7,981.8
$0.01
$482.4
$35,746.5
$0.01
Electricity, gas, water and waste services
$44.3
$5,426.1
$0.01
Construction
$47.6
$2,959.0
$0.02
$271.3
$17,577.6
$0.02 $0.02
Manufacturing
Wholesale trade Retail trade
$244.9
$15,395.4
Accommodation and food services
$106.5
$7,133.6
$0.01
Transport, postal and warehousing
$171.7
$15,815.9
$0.01
Information media and telecommunications
$102.7
$12,175.9
$0.01
$1,291.2
$35,718.1
$0.04
$24.9
$2,353.0
$0.01
Professional, scientific and technical services
$373.2
$20,704.6
$0.02
Administrative and support services
$188.1
$9,051.4
$0.02
Public administration and safety
$243.6
$12,827.8
$0.02
Financial and insurance services Rental, hiring and real estate services
Education and training
$320.3
$15,383.5
$0.02
Health care and social assistance
$393.6
$20,505.1
$0.02
$1,679.9
$3,281.2
$0.51
$99.8
$6,105.5
$0.02
$0.0
$12,155.7
$0.00
Arts and recreation services Other services Ownership of dwellings Not allocated (a) Total Victoria
$2,143.4
-
-
$13,788.0
$301,438.0
$0.05
Note: (a) Taxes that have not been allocated to an industry include stamp duties on motor vehicle, motor vehicle registrations, levies on statutory corporations and franchise taxes. While a part of these taxes are payable by industry, the majority of these taxes are paid by households. Due to data limitations it is not possible to allocate the portion of these taxes that are paid by industry. Source: AECgroup, ABS (2011c), DTF (2010).
30
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
References ABS (2011a). Building Activity, Australia, Sep 2010. Cat. No. 8752.0, Australian Bureau of Statistics, Canberra. ABS (2011b). Building Approvals, Australia. Cat. No. 8731.0, Australian Bureau of Statistics, Canberra. ABS (2011c). Taxation Revenue, Australia, 2009-10. Cat. No. 5506.0, Australian Bureau of Statistics, Canberra. ABS (2011d). Regional Population Growth, Australia, 2009-10. Cat. No. 3218.0, Australian Bureau of Statistics, Canberra. ABS (2011e). Labour Force, Australia, May 2011. Cat. No. 6202.0, Australian Bureau of Statistics, Canberra. ABS (2010a). Australian National Accounts: Input-Output Tables – Electronic Publication, Final release 2006-07 tables. Cat. No. 5209.0.55.001, Australian Bureau of Statistics, Canberra. ABS (2010b). Number of Employed Persons by Industry of Employment (ANZSIC 93 all 4 digit classification levels) by all Place of Work LGAs in Australia. Data provided by Information Consultancy Services, Australian Bureau of Statistics, GPO Box 9817, Brisbane, QLD, 4001. ABS (2010c). Australian National Accounts: State Accounts, 2009-10. Cat. No. 5220.0, Australian Bureau of Statistics, Canberra. ABS (2010d). Experimental Estimates of Industry Multifactor Productivity, 2009-10. Cat. No. 5260.0.55.002, Australian Bureau of Statistics, Canberra. ABS (2010e). Counts of Australian Businesses, including Entries and Exits, Jun 2007 to Jun 2009, Business by Industry Class by Main State by Annual Turnover Size Ranges. Cat. No. 8165.0, Australian Bureau of Statistics, Canberra. ABS (2010f). Australian Standard Geographical Classification (ASGC) Digital Boundaries (Intercensal), Australia, July 2010. Cat. No. 1259.0.30.001, Australian Bureau of Statistics, Canberra. ABS (2008). Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (Revision 1.0). Cat. No. 1292.0, Australian Bureau of Statistics, Canberra. ABS (2007). 2006 Census of Population and Housing. Cat. No. 2068.0, Australian Bureau of Statistics, Canberra. APRA (2008). Statistics, Annual Superannuation Bulletin, June 2007. Australian Prudential Regulation Authority. Available from: http://www.apra.gov.au/statistics/annual-superannuation-publication.cfm. Last accessed: 4th March 2011.
Australian Government (2009). Nation Building - Economic Stimulus Plan. Australian Government, Canberra. Available from: http://www.economicstimulusplan.gov.au/pages/theplan.aspx. Last accessed: 15th June 2011. DSE (unpublished). Unimproved Capital Values by Local Government Area, 2010. Unpublished data provided via email by the Office of the Valuer-General, Victorian Government Department of Sustainability and Environment, Melbourne. DSE (2010a). Victorian Property Sales Report – Median House Prices. Victorian Government Department of Sustainability and Environment, Melbourne. DSE (2010b). Victorian Property Sales Report – Median Apartment/Unit Prices. Victorian Government Department of Sustainability and Environment, Melbourne. DTF (2010). Financial Report of the State of Victoria, 2009-10. Victorian Government Department of Treasury and Finance, Melbourne. DTF (2008). Budget Paper No. 2 – Chapter 2: Economic Conditions and Outlook. Victorian Government Department of Treasury and Finance, Melbourne. DTF (2007a). Budget Paper No. 2 – Chapter 2: Economic Conditions and Outlook. Victorian Government Department of Treasury and Finance, Melbourne. DTF (2007b). Budget Paper No. 1 – Treasurer’s Speech. Victorian Government Department of Treasury and Finance, Melbourne. MAV (2010). 2009-10 Victorian Local Government Rates Survey. Municipal Association of Victoria, Melbourne. RBA (2011a). Assets of Financial Institutions – B01. Bulletin Statistical Tables, Reserve Bank of Australia. Available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. Last accessed: 4th March 2011. RBA (2011b). Banks – Assets – B02. Bulletin Statistical Tables, Reserve Bank of Australia. Available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. Last accessed: 4th March 2011. RBA (2011c). Credit Unions – Selected Assets and Liabilities – B08. Bulletin Statistical Tables, Reserve Bank of Australia. Available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. Last accessed: 4th March 2011. RBA (2011d). Superannuation Funds – Outside Life Offices Table – B15. Bulletin Statistical Tables, Reserve Bank of Australia. Available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. Last accessed: 4th March 2011. VAGO (2008). School Buildings: Planning, Maintenance and Renewal. Victorian Auditor-General’s Office, Melbourne. West, G. R. (1993). User’s Guide, Input-Output Analysis for Practitioners An Interactive Input-Output Software Package Version 7.1. Department of Economics. University of Queensland, 1993.
31
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Appendix A Definition of the Property Industry The information contained in this report is obtained from published data produced by the Australian Bureau of Statistics (ABS) as well as other data sources as relevant. The ABS uses the Australian and New Zealand Standard Industrial Classification (ANZSIC) in the collection and publication of statistics. In 2006 the ABS began transitioning to a new ANZSIC system (2006 ANZSIC) from the previous classification system developed in 1993 (1993 ANSZIC). The 2006 ANZSIC (ABS, 2008) has therefore been used in this report in order to be consistent with most data sets recently produced by the ABS, including the Input-Output Transaction Tables used in this assessment (ABS, 2010a). The property industry as defined in this report consists of the following industries.
Construction Class 3011 – House construction This class consists of units mainly engaged in the construction of houses (except semi-detached houses) or in carrying out alterations, additions or renovations to houses, or in organising or managing these activities. Not included are units mainly engaging in: • O ff-site production of prefabricated buildings or building components are included in the appropriate classes of Group 222 Structural Metal Product Manufacturing; roviding special trade repair services such as electrical or plumbing repairs are included • P in the appropriate classes of Group 323 Building Installation Services; and • P roviding architectural or building consultancy services are included in the appropriate classes of Group 692 Architectural, Engineering and Technical Services.
Class 3019 – Other residential building construction This class consists of units mainly engaged in the construction of residential buildings (except freestanding houses) or in carrying out alterations, additions or renovations to such buildings or in organising or managing these activities. Not included are units mainly engaging in: • O ff-site production of prefabricated buildings or building components are included in the appropriate classes of Group 222 Structural Metal Product Manufacturing; • T he construction of hotels, hostels, hospitals and other public buildings are included in Class 3020 non-residential Building Construction; • P roviding special trade repair services such as electrical or plumbing repairs are included in the appropriate classes of Group 323 Building Installation Services; and • P roviding architectural or building consultancy services are included in the appropriate classes of Group 692 Architectural, Engineering and Technical Services.
Class 3020 – Non-residential building construction This class consists of units mainly engaged in the construction of non-residential buildings such as hotels, motels, hostels, hospitals, prisons or other buildings, in carrying out alterations, additions or renovation to such buildings, or in organising or managing these activities. Not included are units mainly engaging in: • O ff-site production of prefabricated metal buildings or metal building components are included in the appropriate classes of Group 222 Structural Metal Product Manufacturing;
32
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
• P roviding special trade repair services such as electrical or plumbing repairs are included in the appropriate classes of Group 323 Building Installation Services; and roviding architectural or building consultancy services are included in the appropriate • P classes of Group 692 Architectural, Engineering and Technical Services.
Class 3211 – Land development and subdivision This class consists of units primarily engaged in subdividing land into lots and servicing land (such as excavation work for the installation of roads and utility lines), for subsequent sale. Not included are units mainly engaging in: • C onstructing buildings on lots they subdivide or develop are included in the appropriate classes of Subdivision 30 Building Construction; onstruction of roads on a subcontract basis for land subdividers are included • C in Class 3101 Road and Bridge Construction; and egal subdivision of land without land preparation are included elsewhere • L in the classification system based on the primary activity of the unit.
Class 3212 – Site preparation services This class consists of units mainly engaged in earthmoving work such as levelling of construction sites, excavation of foundations, trench digging or removal of overburden. Not included are units mainly engaging in: • Quarrying sand or gravel are included in Class 0911 Gravel and Sand Quarrying; • Q uarrying earth soil or filling are included in Class 0919 Other Construction Material Mining; and • S elling sand, gravel or other quarried construction materials are included in Class 3339 Other Hardware Goods Wholesaling.
Class 3221 – Concreting services This class consists of units mainly engaged in concreting work, concrete pouring or other concrete work on construction projects. Not included are units mainly engaging in: • T errazzo laying are included in Class 3243 Tiling and Carpeting Services; • B rick paving are included in Class 3291 Landscape Construction Services.
Class 3222 – Bricklaying services This class consists of units mainly engaged in bricklaying or concrete block laying. Not included are units mainly engaging in: nits mainly engaged in brick paving are included in Class 3291 • U Landscape Construction Services;
33
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Class 3223 – Roofing services This class consists of units mainly engaged in roof tiling, metal roof fixing and the application of roof coatings. Not included are units mainly engaging in: • T he installation of insulation materials are included in Class 3239 Other Building Installation Services; • The installation of roof guttering are included in Class 3231 Plumbing Services; and • The installation of wooden roof trusses are included in Class 3242 Carpentry Services.
Class 3224 – Structural steel erection services This class consists of units mainly engaged in the erection (including on-site fabrication) of metal silos, storage tanks or structural steel components for buildings or other structures such as bridges, overhead cranes or electricity transmission towers. Not included are units mainly engaging in: • T he construction of buildings (which incorporate structural steel components) are included in the appropriate classes of Subdivision 30 Building Construction; and • T he construction of complete structures such as bridges, towers or oil refinery plants (which incorporate structural steel components) are included in the appropriate classes of Subdivision 31 Heavy and Civil Engineering Construction.
Class 3231 – Plumbing services This class consists of units mainly engaged in plumbing or drainage (except sewerage or stormwater drainage systems construction). Also included are units mainly engaged in septic tank and other plumbing installation and repair. Not included are units mainly engaging in: • T he construction of sewerage or stormwater drainage systems are included in Class 3109 Other Heavy and Civil Engineering Construction; • I nstallation of fire sprinkler systems are included in Class 3234 Fire and Security Alarm Installation Services; and • R epairing gas appliances are included in Class 9421 Domestic Appliance Repair and Maintenance • P umping or cleaning septic tanks are included in Class 2921 Waste Treatment and Disposal Services.
Class 3232 – Electrical services This class consists of units mainly engaged in the installation of electrical wiring or fittings in buildings or other construction projects. Electrical work arising from the installation of appliances is included in this class. Not included are units mainly engaging in: • R epairing electricity transmission or distribution lines are included in Class 3109 Other Heavy and Civil Engineering Construction; • I nstalling fire and/or security systems are included in Class 3234 Fire and Security Alarm Installation Services; and • R epairing electrical appliances are included in Class 9421 Domestic Appliance Repair and Maintenance. 34
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Class 3233 – Air conditioning and heating services This class consists of units mainly engaged in the installation of heating equipment, refrigeration equipment, air conditioning equipment, or in the installation of air conditioning duct work. Not included are units mainly engaging in: • M anufacturing air conditioning duct work are included in Class 2240 Sheet Metal Product Manufacturing (except Metal Structural and Container Products); • T he on-site assembly of industrial furnaces from prefabricated components are included in Class 3109 Other Heavy and Civil Engineering Construction; and • I nstalling motor vehicle air conditioning equipment are included in Class 9411 Automotive Electrical Services.
Class 3234 – Fire and security alarm installation services This class consists of units mainly engaged in the installation of fire protection, detection and control systems, and in installing security systems. Not included are units mainly engaging in: • U nits mainly engaged in the installation and monitoring of security systems are included in Class 7712 Investigation and Security Services.
Class 3239 – Other building installation services This class consists of units mainly engaged in building installation services not elsewhere classified.
Class 3241 – Plastering and ceiling services This class consists of units mainly engaged in plastering, plaster fixing or finishing.
Class 3242 – Carpentry services This class consists of units mainly engaged in carpentry work or the fixing of wooden formwork on construction projects. Not included are units mainly engaging in: • U nits mainly engaged in manufacturing prefabricated, wooden built-in cabinets, cupboards or shop fronts and their installation (except on-site fabrication) are included in Class 1492 Wooden Structural Fitting and Component Manufacturing.
Class 3243 – Tiling and carpeting services This class consists of units mainly engaged in laying carpet, or setting wall or floor tiles Not included are units mainly engaging in: • Installing roofing tiles are included in Class 3223 Roofing Services; and • Installing wooden flooring are included in Class 3242 Carpentry Services.
Class 3244 – Painting and decorating services This class consists of units mainly engaged in painting, decorating or wallpapering houses or other structures.
35
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Not included are units mainly engaging in: nits mainly engaged in roof painting, spraying or coating are included • U in Class 3223 Roofing Services.
Class 3245 – Glazing services This class consists of units mainly engaged in glazing, including glass installation and repair work. Not included are units mainly engaging in: • U nits mainly engaged in the fabrication of aluminium and timber framed glass products are included in the appropriate classes of Division C Manufacturing.
Class 3291 – Landscape construction services This class consists of units mainly engaged in constructing landscapes, including landforming and the provision of retaining walls and paths, decks, fences, ponds and similar structures. Units also engaged in garden planting or installation of sprinkler/drainage systems in conjunction with constructing landscapes are included. Not included are units mainly engaging in: • L andscape consultancy and design services are included in Class 6921 Architectural Services; and • G arden maintenance activities and maintenance of lawns are included in Class 7313 Gardening Services.
Class 3292 – Hire of construction machinery with operator This class consists of units mainly engaged in hiring construction machinery, plant or equipment with operator(s). Not included are units mainly engaging in: • U nits mainly engaged in hiring earthmoving plant and equipment with operator are included in Class 3212 Site Preparation Services.
Class 3299 – Other construction services (not elsewhere classified) This class consists of units mainly engaged in construction services not elsewhere classified.
Rental, hiring and real estate services
Class 6712 – Non-residential property operators This class consists of units mainly engaged in renting or leasing non-residential properties. Not included are units mainly engaging in: • U nits mainly engaged in land development and subdivision are included in Class 3211 Land Development and Subdivision.
Class 6720 – Real estate services This class consists of units mainly engaged in valuing, purchasing, selling (by auction or private treaty), managing or renting real estate for others.
36
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Not included are units mainly engaging in: • Providing title transfer or conveyancing service are included in Class 6931 Legal Services; and roviding engineering or structural property and house inspections are included in Class 6923 • P Engineering Design and Engineering Consulting Services.
Financial and insurance services Class 6221 – Banking (partial only) This class consists of units mainly engaged in operating banks (except merchant banks). Banks incur liabilities by accepting demand and other deposits and make commercial, industrial and consumer loans. Not included are units mainly engaging in: • Performing central banking functions are included in Class 6210 Central Banking; • Operating building societies are included in Class 6222 Building Society Operation; • Operating credit unions are included in Class 6223 Credit Union Operation; and • O perating merchant banks are included in Class 6229 Other Depository Financial Intermediation. Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of loans and advances to the residential sector in the banks’ total assets. Although part of loans to the commercial sector is property-related, data limitations regarding loans to the commercial sector precluded its inclusion.
Class 6222 – Building society operation This class consists of units mainly engaged in operating building societies which accept deposits and provide specialised financing for home building or purchasing purposes. Not included are units mainly engaging in: • Operating development, savings and trading banks are included in Class 6221 Banking; and • Operating credit unions are included in Class 6223 Credit Union Operation.
Class 6223 – Credit union operation (partial only) This class consists of units mainly engaged in operating credit unions which accept members’ share deposits and provide loans to their members for various purposes. Not included are units mainly engaging in: • Operating development, savings and trading banks are included in Class 6221 Banking; and • Operating building societies are included in Class 6222 Building Society Operation. Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of loans and advances to the residential sector in credit union’s total assets. Although part of loans to the commercial sector is property-related, data limitations regarding loans to the commercial sector precluded its inclusion.
Class 6322 – General insurance (partial only) This class consists of units mainly engaged in providing general insurance cover (except life and health insurance).
37
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Not included are units mainly engaging in: • Providing insurance broking services are included in Class 6420 Auxiliary Insurance Services; roviding insurance cover for hospital, medical, dental, pharmaceutical or funeral expenses • P or costs are included in Class 6321 Health Insurance; and • Providing life insurance and life reinsurance cover are included in Class 6310 Life Insurance. Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of property industry assets in the total assets of general insurance.
Class 6330 – Superannuation funds (partial only) This class consists of units of separately constituted funds mainly engaged in providing retirement benefits. Not included are units mainly engaging in: • I nvesting money on their own account in predominantly financial assets (e.g. shares, bonds, bills etc, including mortgages) are included in Class 6240 Financial Asset Investing; and anaging or in carrying out the operations of separately constituted superannuation funds • M on a commission or fee basis are included in Class 6419 Other Auxiliary Finance and Investment Services. Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of land and buildings in superannuation total investment. Although part of equities and units in trusts is property-related, data limitations regarding loans to the commercial sector precluded its inclusion.
Professional, scientific and technical services
Class 6921 – Architectural services This class consists of units mainly engaged in providing architectural services such as planning and designing buildings and structures; or planning and designing the development of land. Units apply knowledge of design, construction procedures, zoning regulations, location and land use, building codes and building materials. Not included are units mainly engaging in: • U nits mainly engaged in managing or organising construction projects as the prime contractor are included in the appropriate classes of Division E Construction.
Class 6922 – Surveying and mapping services This class consists of units mainly engaged in providing surveying and mapping services (including exploration surveying services on contract). Units in this class use a variety of surveying techniques depending on the purpose of the survey, including magnetic surveys, gravity surveys, seismic surveys or electrical and electromagnetic surveys. These services may also include surveying and mapping of areas above or below the surface of the earth. Not included are units mainly engaging in: • U nits mainly engaged in exploring for petroleum or minerals are included in the appropriate classes of Group 101 Exploration.
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Class 6923 – Engineering design and engineering consulting services This class consists of units mainly engaged in providing engineering consulting services. These units are primarily involved in applying physical laws and principles of engineering in the design, development and utilisation of machines, materials, instruments, structures, processes and systems. Units provide advice, prepare feasibility studies, prepare preliminary and final plans and designs, provide technical services during the construction or installation phase, inspect and evaluate engineering projects, and related services. Not included are units mainly engaging in: • T he physical or chemical transformation of materials into new products are included in the appropriate classes of Division C Manufacturing; • M anaging or organising construction projects as the prime contractor are included in the appropriate classes of Division E Construction; • Undertaking scientific research are included in Class 6910 Scientific Research Services; and roviding scientific or technical laboratory or testing services are included in Class 6925 • P Scientific Testing and Analysis Services.
Fact The property industry is the largest industry in Victoria
39
40
Source: ABS (2010f)
Horsham
Ararat
Colac
10 Geelong Barwon
Ballarat
Maryborough
35 Loddon
Swan Hill
20 Central Highlands
Warnambool
15 Western District
Hamilton
25 Wimmera
Mildura
Map of Victoria statistical-divisions
30 Mallee
Portland
Figure B.1.
Bendigo
Echuca
05 Melbourne
40 Goulburn
Benalla
Traralgon
55 Gippsland
Shepparton
Wodonga
Sale
45 Greater Murray
Wangaratta
Bairnsdale
50 East Gippsland
Economic Significance of the Property Industry to the Victorian Economy
The facts are black & white
Appendix B Maps of Geographic boundaries
Source: ABS (2010f)
Figure B.2.
9
Warnambool
5
Horsham
7
Mildura
1
Map of major sub-regions
Ballarat
Geelong
3
Bendigo
2
4
Shepparton
6 Morwell
8
Wangaratta
10
Wodonga Locality
10 Wodonga City Council
9 Warnambool City Council
8 Wangaratta Rural City Council
7 Mildura Rural City Council
6 Latrobe City Council
5 Horsham Rural City Council
4 Greater Shepparton City Council
3 City of Greater Geelong
2 City of Greater Bendigo
1 Ballarat City Council
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Appendix C Significance Assessment Methodology The economic significance estimates in this report are produced using Input-Output transaction tables and models developed by AECgroup for the purposes of this assessment, combined with data from a range of sources, including State Accounts data and various industry specific data from the ABS. The Input-Output models were used to produce estimates of the direct and flow-on contribution of the property industry to the Victorian economy in terms of output, gross value added activity, employment and income (i.e. wages and salaries).
Overview of I-O modelling Input-Output (I-O) analysis demonstrates inter-industry relationships within an economy, depicting how the output of one industry is purchased by other industries, households, the government and external parties (i.e. exports), as well as expenditure on other factors of production such as labour, capital and imports. I-O analysis shows the direct and indirect (flow-on) effects of one industry on other industries and the general economy. As such, I-O modelling can be used to demonstrate the economic contribution of an industry on the overall economy and how much the economy relies on this industry or to examine a change in final demand of any one industry and the resultant change in activity of its supporting industries. The economic contribution can be traced through the economic system via: irect impacts, which are the first round of effects from direct operational expenditure on • D goods and services; and • Flow-on impacts, which comprise the second and subsequent round effects of increased purchases by suppliers in response to increased sales. These effects can be identified through the examination of five types of impacts: utput: Refers to the gross value of goods and services transacted, including the costs of • O goods and services used in the development and provision of the final product. Output typically overstates the economic impacts as it counts all goods and services used in one stage of production as an input to later stages of production, hence counting their contribution more than once; alue added: Refers to the value of output after deducting the cost of goods and services inputs • V in the production process. Value added defines the true net contribution and is subsequently the preferred measure for assessing economic impacts; ross product: Gross product (or more commonly known as Gross Domestic/State/Regional • G Product) is a similar measure to value added, but also includes taxes less subsidies on the final goods and services produced. Gross product is the most commonly used headline measure of economic activity; • Income: Measures the level of wages and salaries paid to employees of the industry under consideration and to other industries through flow-on activity. mployment: Refers to the part-time and full-time employment positions generated by the • E economic shock, both directly and indirectly through flow-on activity, and is expressed in terms of full time equivalent (FTE) positions.
I-O assumptions The key assumptions and limitations of I-O analysis include: he inputs purchased by each industry are a function only of the level of output of that industry. • T The input function is generally assumed linear and homogenous of degree one (which implies constant returns to scale and no substitution between inputs); • E ach commodity (or group of commodities) is supplied by a single industry or sector of production. This implies that there is only one method used to produce each commodity and that each industry or sector has only one primary output; 42
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
• T he total effect of carrying on several types of production is the sum of the separate effects. This rules out external economies and diseconomies and is known simply as the additivity assumption. This generally does not reflect real world operations; he system is in equilibrium at given prices. This is not the case in an economic system • T subject to external influences; and • I n the static I-O model, there are no capacity constraints so that the supply of each good is perfectly elastic. Each industry can supply whatever quantity is demanded of it and there are no capital restrictions. This assumption would come into play depending upon the magnitude of the changes in quantities demanded. Despite these limitations, I-O techniques provide a solid approach for taking account of the inter-relationships between the various sectors of the economy in the short-term and provide useful insight into the quantum of final demand for goods and services, both directly and indirectly, generated by the property industry in Victoria.
Significance assessment versus impact assessment The framework employed in significance assessment differs from that employed in economic impact analysis in that economic significance assessment primarily seeks the contribution of an existing industry as opposed to the impact of a “stimulus” in a particular industry or in several industries (West, 1993). The usual approach of comparing what the economy would be with and without the industries whose contributions are to be assessed does not work because the inter-relationship between industries means whether or not the industries to be assessed exist, there will still be demand for their outputs (e.g., a complete vehicle needs tyres so that whether or not the entire tyre manufacturer is closed down, the car manufacturer’s demand for tyres still exists). From a modelling stance, this problem is solved by assuming that demand for outputs of the industries to be assessed will instead be met by imports.
Model development The models used in this assessment are derived from sub-regional transaction tables developed specifically for this project. The process of developing a sub-regional transaction table involves developing regional estimates of gross production and purchasing patterns based on a parent table, in this case the 2006-07 Australian transaction table (ABS, 2010a). Estimates of gross production (by industry) in the study areas (SDs and major sub-regions) and Victoria were developed based on the percent contribution to employment (by place of work) of the study areas and Victoria to the Australian economy (ABS, 2010b), and applied to Australian gross output identified in the 2006-07 Australian table. Industry purchasing patterns within study areas and Victoria were estimated using a process of cross industry location quotients and demand-supply pool production functions as described in West (1993). In addition to the general limitations of I-O analysis, there are two other factors that need to be considered when assessing the outputs of sub-regional transaction table developed using this approach, namely: • I t is assumed the sub-region has similar technology and demand/consumption patterns as the parent (Australia) table (e.g. the ratio of employee compensation to employees for each industry is held constant); and • I ntra-regional cross-industry purchasing patterns for a given industry vary from the national tables depending on the prominence of the industry in the regional economy compared to its input industries. Typically, industries that are more prominent in the region (compared to the national economy) will be assessed as purchasing a higher proportion of imports from input industries than at the national level, and vice versa. 43
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
I-O tables utilise an aggregated system of industry classifications based on the ANZSIC system. In total, the 2006-07 I-O tables produced by the ABS (2010a) define 111 distinct industries, some of which are aggregates of the industry classes outlined in Appendix A. Some of the property related industries in the I-O tables consist of both property and non-property related sub-sectors, and it is necessary to separate the property component from the non-property component in the related I-O industry. The industries defined in the I-O tables that are included in the property industry are as follows: • Residential building construction (all); • Non-residential building construction (all); • Construction services (all); • Finance (partially); • Insurance and superannuation funds (partially); • Non-residential property operators and real estate services (all); and • Professional, scientific and technical services (partially). The separation of property from non-property related operation for those I-O industries listed as “partially” included in the property industry is based on either: 1. The share of total income (revenue) of the sub-sectors listed in Appendix A in the total income (revenue) of all sub-sectors grouped under the same I-O industry classification code; 2. The share of asset (loans and advances to as well as investment in) in the property industry in the total assets of all sub-sectors grouped under the same I-O industry classification code . These shares are then utilised to expand the original I-O table to separate these industries into their property related and non-property related components to facilitate the economic significance assessment of the property industry in isolation. Once the transaction table is complete, the significance model is developed through the development of coefficients as per West (1993).
Significance assessment approach Contribution to Victoria and its regions The significance assessment is initially undertaken for the 2006-07 financial year to be consistent with the I-O transaction tables utilised. These estimates are then “rebased” to 2009-10 values using: • D ata from the Victorian State Accounts (ABS, 2010c) to identify growth between 2006-07 and 2009-10 in gross product and gross value add for each industry of the economy; • D ata on labour productivity increases (ABS, 2010d) to identify changes in productivity per employee for each industry between 2006-07 and 2009-10. These estimates were then applied to 2009-10 production (estimated above) to identify 2009-10 employment for each industry; and • E stimates of incomes in 2009-10 were obtained assuming that the relationship between income and output in 2006-07 remains constant, which is consistent with the stylised fact of cost shares of output being close to constant over the long-term. Estimates of the flow-on effects of the property industry in 2009-10 are obtained assuming constant proportion between individual industries’ flow-on effects and the direct (total) effects (output, GVA, income and employment) in 2006-07. Since the relationship between industries is likely to have changed over this period, the estimates produced are indicative only. In the absence of a more recent I-O transaction table, which forms the basis to quantify 44
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
the inter-relationships between industries, the estimates produced represent the flow-on effects of the property industry assuming no significant structural changes in the relationship between industries. Regional allocation of the direct and flow-on effects is performed in three steps: 1. Individual I-O transaction tables and significance assessment models were developed for each Statistical Division in Victoria as well as each major sub-region examined (as described in the “Model Development” section of this Appendix). This approach produces regional estimates of direct and flow-on property industry contributions assuming each region operates in isolation, and therefore does not account for any inter-regional flow-on relationships (i.e., flow-on demand by the property industry in, for example, the Barwon SD for goods and services produced in the Melbourne SD are not captured in the regional models as this is considered an “import” to the Barwon SD economy). 2. To account for inter-regional flows of demand for goods and services between SDs, the difference between the total Victorian flow-on effects and the sum of flow-on effects for each SD by industry (the “inter-regional” flow-on effects) has been redistributed to each SD based on the proportion that each SD contributes to total Victorian activity in each industry (i.e., if Melbourne SD accounts for 50% of total Victorian output in retail trade, then 50% of the inter-regional retail trade flow-on effects have been allocated to Melbourne SD). 3. To allocate to each major sub-region the same approach is used as for SDs in redistributing inter-regional flows, but uses the proportional contribution of each major sub-region to the SD in which it is located to allocate inter-regional flows within the SD rather than the state (i.e., if Geelong accounts for 50% of total Barwon SD output in retail trade, then 50% of the inter-regional retail trade flow-on effects within Barwon SD have been allocated to Geelong).
Contribution to Victoria by property sub-sector The direct contribution of the property industry to the Victorian economy has also been disaggregated across the following property sub-sectors: • Residential
• Industrial
• Entertainment/recreation
• Retail
• Health
• Other
• Commercial
• Education
The direct contribution of each property sub-sector has been estimated based on allocation of each of the I-O industry contributions to the sub-sectors. Allocations have been based on: • Direct “Residential building construction” effects is entirely allocated to the Residential property sub-sector; • Direct “Non-residential building construction” effects is allocated across all non-residential property sub-sectors based on long term (2001-02 to 2009-10) proportional splits of value of non-residential building works commenced for each non-residential property sub-sector (ABS, 2011a); and • All other property related I-O industry effects are allocated based on long term (2001-02 to 2009-10) proportional splits of value of total building works commenced for each sub-sector (ABS, 2011a).
45
Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Appendix D Allocation of State Taxes Victorian Government taxation and royalty revenues have been allocated to property related activities and other industries based on the following allocation approach.
Table D.1. Allocation of 2009-10 state taxes to property related activities and other industries Tax item Payroll tax
Tax ($M)
How allocated
$4,056
Allocated across each industry based on contribution to incomes
$3,604
Property related activity
$7
Property related activity
Duties Transfer Other property duties Vehicle registration
$573
Not allocated
Insurance
$1,403
Financial and insurance services
Total duties
$5,587
Gambling taxes and levies
$1,632
Arts and recreation services
Other taxes Land tax
$1,178
Property related activity
Financial accommodation levy
$52
Property related activity
Congestion levy
$47
Property related activity
$123
Property related activity
$34
Property related activity
Metropolitan improvement levy Property owner contributions to fire brigades Motor vehicle registration
$864
Not allocated
Levies on statutory corporations
$69
Not allocated
Franchise taxes
$23
Not allocated
Other taxes
$76
Not allocated
Total other taxes Royalties from mining Total taxation and royalty revenue
$2,467 $46
Mining
$13,788
Source: AECgroup, ABS (2011c), DTF (2010).
Taxes attributable to property related activities were allocated across major sub-regions and SDs as follows: • P ayroll tax: Payroll tax of property related activities (estimated using the approach outlined in Table D.1) was allocated to each major sub-region/SD based on the share of each major sub-region/SD to total property industry incomes. • T ransfer duty: Indicative estimates of transfer duties were calculated based on the average value of property (house and unit/townhouse) sales in each major sub-region/SD during 2009-10 and the total number of sales in each major sub-region/SD during the year (DSE, 2010a and 2010b). The proportion each region provided to the indicative estimate of transfer duties was then applied to the actual transfer duty revenues outlined in Table D.1. • L and tax: Land tax was allocated to each major sub-region/SD based on the share of each major sub-region/SD to total Unimproved Capital Value of land (DSE, unpublished). • Other property related taxes: Other property related taxes primarily relate to emergency service levies and have been allocated to each major sub-region/SD based on their share of total Victorian population in 2010 as estimated by the ABS (2011d).
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Economic Significance of the Property Industry to the Victorian Economy The facts are black & white
Property Council of Australia Level 7, 136 Exhibition Street Melbourne, Victoria 3000 T: 03 9650 8300 F: 03 9650 8693 vic@propertyoz.com.au
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Property Council of Australia Level 7, 136 Exhibition Street Melbourne, Victoria 3000 T: 03 9650 8300 F: 03 9650 8693 vic@propertyoz.com.au www.propertyoz.com.au/vic ŠCopyright 2012