Monday, February 3, 2014

Building momentum slows for the wet season

Building approvals were out today with some contradictory reporting again on weaker than expected seasonally adjusted numbers versus a trend which remains positive. Macrobusiness has a good post with numerous graphs on the national data, although they don't seem to have picked up the previous months revision in Qld. There is also some very positive comment from Stephen Koukoulas.

In the Far North a seasonal weak period can be expected as shown in an updated North v South graph for Cairns. Note: this is from the SA2 data and not the Cairns LGA.


More concerning is that the Conus Trend series is also showing some weakness:
Our own Conus Trend series confirms this slowing picture with Trend approvals falling to 48 in Dec (from a downwardly revised 50 in Nov). This is the lowest rate of Trend approvals we have seen since May. Although things are still looking more positive than they did back in 2011/12, it is clear that the seemingly robust recovery has run out of a great deal of steam in recent months.
Conus also notes a weaker trend down in Townsville.  In a recent post I did note rents in Cairns rising while both Townsville and Mackay were flat or weaker in the past year, quite substantially so in Mackay albeit from previously elevated levels.

That data from the RTA also includes total rental bonds held for each city since March quarter 2011 representing the number of rented properties. A comparison could be a tale of three tropical cities over the period. March 2011 indexed to 100 for comparison.

Mackay has shown growth of over 20% in that period while Cairns has grown by 11%.  I had intended a separate post with some further comparisons but it is also of interest when looking through the current building approvals data. Dwelling approvals for the first half of this FY so far have been: Cairns 314; Townsville 808; Mackay 687.

Cairns and Townsville are comparable in population while Mackay remains somewhat smaller. Cairns also has a higher proportion of rentals to owners then the other cities, and also a higher proportion of flats (units) to houses. Mackay rentals are weighted far more to houses.

There have been reports of higher rental vacancy rates in Mackay as well as the softer rents indicated. An interesting aspect here is that all that growth in number of rental properties over the past year in Mackay has been in houses. Rental bonds held for flats have actually declined over the period. Despite that there have been 169 units approved so far this year in Mackay while unit approvals in Cairns still remain stuck on zero.

Trends in both rentals and approvals seem to indicate there has been no problem with a supply response to the housing demand in either Townsville or Mackay.

REIQ: Queensland rental market easing

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