DETACHED MULTI-UNIT APPROVALS

HIA New Home Sales DETACHED MULTI-UNIT APPROVALS SALES MULTI-UNIT DETACHED A monthly update on the sales of new homes December 217

TAX BURDEN TAKES TOLL ON New Home Sales during 217 Sales still post modest recovery in final quarter Confidential Information: This report is confidential to the addressee. It may not be copied or transmitted in whole or in part in any form, including by photocopying, facsimile, scanning or by manual or electronic means. Multiple copies can be supplied by arrangement/for an additional charge. Unauthorised copying is a breach of HIA s copyright and may make you liable to pay damages. Disclaimer: This publication is produced by HIA Economics based on information available at the time of publishing. All opinions, conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. Neither HIA nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this report. While detached house sales fell back by 5.7 per cent during 217 as a whole, the year finished relatively strongly with a 7.1 per cent jump in sales in the final quarter. Given that sales volumes are a leading indicator of new building activity, the new home sales figures still imply a relatively healthy start to 218 although we are still likely to see fewer new houses being built over the course of the year as a whole. The HIA New Home Sales report s results are based on a monthly survey of the largest volume home builders in the five largest states. Across Australia, new home building activity reached its highest ever level during 216. New home starts are estimated to have declined by 8.8 per cent in 217. The reduction in detached house starts was more measured, falling by about 4 per cent last year. The geographic variation in conditions for residential building has been very wide over recent years. NSW and Victoria have been the engine of activity while other markets including South Australia and Western Australia have struggled against the backdrop of more difficult economic conditions. During 217, Victoria was the only state to experience an increase in the sale of new houses (+5.8 per cent). The largest reduction occurred in NSW (- 14.5 per cent) followed by Queensland (-14.1 per cent). There were also falls in new house sales in Western Australia (-8.8 per cent) and South Australia (-2.7 per cent) during 217. As noted above, new house sales saw growth of some 7.1 per cent during the final quarter of 217. This was replicated this in most states although both Victoria and WA were affected by falls in house sales during the final three months of 217. The fact that new home building activity in Australia is now moving lower can be traced to several factors. First, APRA again tightening mortgage lending requirements early in 217. This was to the detriment of the interest-only portion of the market in particular and had disproportionately adverse effects on domestic investors. Last year was also marked by a further raising of the hurdles to foreign investors in the form of stamp duty surcharges. Foreign investors now pay over $9, in transaction taxes alone on the purchase of a typical unit in Sydney, with those in Melbourne facing bills of around $75,. As well as depressing new home building activity in their own markets, state-imposed obstacles to market participation by investors (both domestic and foreign) risk stemming the supply of homes to rental markets which would put upward pressure on rental prices and ultimately depress the living standards of those reliant on rental accommodation. P2 HIA NEW HOMES SALES 12.217

Dec-14 Dec-14 12.217 HIGHLIGHTS PRIVATE NEW HOUSE SALES - AUSTRALIA (SEASONALLY ADJUSTED) 6,5 6, +.7% 5,5 5, 4,5 11, 1,5 1, 9,5 9, 8,5 National sales of new houses dropped by 5.7 per cent during 217 as the burden of tax grew significantly heavier During the final quarter of 217 new detached house sales bounced back by 7.1 per cent compared with the previous three-months ABS private detached house approvals decreased by 2. per cent during November 217 4, HIA New Home Sales (LHS) ABS Seasonally Adjusted Approvals - Private Sector (RHS) 8, This month's sample captures 2.8 per cent of Australia's new detached home building sector. Along with Victoria, NSW was one of the twin engines of Australia s new home building upturn between 212 and 216. During 217, new detached house sales in the state fell by 14.5 per cent compared with the previous year. Nonetheless, 217 ended on a high note with sales up by 5.9 per cent during the month of December and activity 12.6 per cent higher in the final quarter of the year compared with a year earlier. ABS data indicate that approvals for new detached houses in NSW increased by 2.6 per cent during the month of November over the three months to November, however, approvals were down by 2.3 per cent compared with the previous quarter. Foreign investors have been particularly active in NSW the doubling of the stamp duty surcharge (from 4 to 8 per cent) for this category of buyer during 217 is likely to have contributed to the softening of activity during the year. Foreign investors in Sydney now face transaction taxes of $91,115 on the acquisition of a typical unit priced at $725,. More broadly, pressure on new home building in NSW has been placed under gradually increasingly pressure by the incidence of stamp duty bracket creep whereby gains in dwelling prices translate into disproportionately large escalations in stamp duty bills. In the case of NSW, the failure of the government to update stamp duty price brackets since 1985 has ensured that the burden of the tax has grown increasingly heavy for homebuyers in the state. 3, 2,5 2, 1,5 1, 5 NEW SOUTH WALES HIA New Home Sales (21 PER CENT SAMPLE COVERAGE) PRIVATE NEW HOUSE SALES - NEW SOUTH WALES (SEASONALLY ADJUSTED) ABS Seasonally Adjusted Approvals - Private Sector +5.9% HIA NEW HOMES SALES P3 12.217

Dec-14 Dec-14 Victoria was the only state to experience growth in new detached house sales during 217. The volume of sales rose by 5.8 per cent last year on top of an 11.9 per cent expansion in market turnover during 216. During December 217 itself, new house sales were up by.9 per cent compared with the previous month. The final quarter of 217 showed some signs of weakness, with new home sales in Victoria down by 7. per cent compared with the previous quarter. In November, approvals for new detached houses in Victoria fell by 1.1 per cent compared with October, but the three months to November saw approvals rise by 3.6 per cent on a year earlier. Like NSW, foreign investor demand has been instrumental in lifting new dwelling starts higher in Victoria recently. The state was the first to introduce a stamp duty surcharge on foreign buyers in 215. On the purchase of a typical $552,5 unit in Melbourne, foreign purchasers now face transaction taxes amounting to $75,. Despite this, new home building in Victoria is performing strongly thanks to remarkably robust rates of population growth, solid dwelling price gains and a substantial expansion in full-time employment. Short term indicators suggest that dwelling construction activity on the ground will remain elevated during the opening months of 218. Jan-1 PRIVATE NEW HOUSE SALES - VICTORIA (SEASONALLY ADJUSTED) 4, 3,5 3, 2,5.9% 2, 1,5 1, 5 HIA New Home Sales ABS Seasonally Adjusted Approvals - Private Sector (21 PER CENT SAMPLE COVERAGE) VICTORIA PRIVATE NEW HOUSE SALES - QUEENSLAND (SEASONALLY ADJUSTED) 2,5 2, 1,5-2.6% 1, 5 HIA New Home Sales ABS Seasonally Adjusted Approvals - Private Sector (12 PER CENT SAMPLE COVERAGE) In Queensland, new detached house sales slumped by 14.1 per cent during 217 following growth of 3.2 per cent during 216. The month of December saw sales drop by 2.6 per cent. Data from the ABS indicate that approvals for new detached houses fell by 6.7 per cent during November although the three months to November saw approvals edge up (+.5 per cent) compared with the previous quarter. In Queensland, new detached house starts were essentially unchanged during 217 but the downward movement of house sales over the past year strongly suggests that activity on the ground is likely to move backwards in 218. QUEENSLAND P4 HIA NEW HOMES SALES 12.217

Dec-14 Dec-14 SOUTH AUSTRALIA 9 8 7 6 5 (11 PER CENT SAMPLE COVERAGE) PRIVATE NEW HOUSE SALES - SOUTH AUSTRALIA (SEASONALLY ADJUSTED) In SA, new detached house sales suffered a modest reduction during 217 with turnover in this part of the market falling by 2.7 per cent compared with a year earlier. During the month of December itself, sales volumes were down slightly (-1.6 per cent) compared with November. The profile for the December 217 quarter was more positive with sales up by 2.2 per cent during that three-month period. The pipeline of approvals in SA during late 217 was quite positive: new detached house approvals rose by 4.4 per cent during November and growth averaged 5.3 per cent over the three months to November. Unlike the larger states on the east coast, SA missed out on the new home building boom of recent years as a result of challenging economic conditions, including a weak labour market and below par population growth. 4 3-1.6% 2 1 HIA New Home Sales ABS Seasonally Adjusted Approvals - Private Sector New home building activity in WA has been on the way down since 214. New detached house sales in the state fell back by 8.8 per cent during 217 a more measured pace of decline compared with 216 when house sales dropped by 2.5 per cent. During the month of December itself, new detached house sales were largely unchanged (-.1 per cent). Figures from the ABS indicate that new detached house approvals fell by 8.7 per cent during the month of November. Over the three months to November, new dwelling approvals fell by 1.9 per cent compared with the previous quarter. Even though sales of new houses fell further during 217, there are some indications that new home building activity in WA is bottoming out. This view is corroborated by wider economic indicators: employment in the state has started to gather momentum and the unemployment rate appears to have peaked. Crucially, population growth has accelerated a little a key driver of demand for new dwellings. (41 PER CENT SAMPLE COVERAGE) 2,5 2, 1,5 1, WESTERN AUSTRALIA 5 PRIVATE NEW HOUSE SALES - WESTERN AUSTRALIA (SEASONALLY ADJUSTED) -.1% HIA New Home Sales ABS Seasonally Adjusted Approvals - Private Sector HIA NEW HOMES SALES P5 12.217

Dec-14 Dec-14 In this edition of the HIA New Home Sales report we have not published sales data for total dwellings. These results will be updated in future editions of this report. PRIVATE (13 PER CENT SAMPLE COVERAGE) NEW DWELLING SALES PRIVATE NEW HOUSE SALES - AUSTRALIA (SEASONALLY ADJUSTED) 6,5 11, 6, 5,5 5, +.7% 1,5 1, 9,5 9, 4,5 8,5 4, 8, HIA New Home Sales (LHS) ABS Seasonally Adjusted Approvals - Private Sector (RHS) MULTI-UNIT SALES In this edition of the HIA New Home Sales report we have not published sales data for multi-unit dwellings. This is because the market consists of a relatively small number of builders in metropolitan areas. In the absence of sufficient reporting of data we have refrained from publishing multi-unit sales for October, November and December. These results will be updated in future editions of this report when the data become available. PRIVATE NEW MULTI-UNIT SALES - AUSTRALIA (SEASONALLY ADJUSTED) 2,5 14, 2, 1,5 12, 1, 8, 1, 6, 4, 5 2, HIA New Home Sales (LHS) ABS Seasonally Adjusted Approvals - Private Sector (RHS) P6 HIA NEW HOMES SALES 12.217

NEW HOME SALES: PERCENTAGE CHANGE Private Houses Multi-Units NSW VIC QLD SA WA AUS AUS AUS 3 months to Dec 16 3,597 5,632 4,34 881 2,835 16,979 N/A N/A 3 months to Sep 17 2,84 6,875 2,292 899 2,742 15,76 N/A N/A 3 months to Dec 17 3,156 6,395 3,947 1,81 2,34 16,883 N/A N/A % change on previous 3 months 12.6% -7.% 72.2% 2.2% -16.% 7.1% N/A N/A % change on same 3 months of previous year -12.3% 13.6% -2.2% 22.7% -18.7% -.6% N/A N/A Note: All comments and percentage movements relating to Net Sales refer to data that have been calculated after allowing for seasonal influences. Total PRIVATE HOUSES AND UNITS: SALES AND APPROVALS (a) NSW VIC QLD SA WA Total(b) Total(b) Total(b) Private House Sales (Seasonally Adjusted) Unit Sales (c) Total Sales (c) 28-9 13,259 27,776 18,2 5,483 14,293 79,17 9,795 88,812 29-1 14,537 32,18 2,66 5,688 14,51 87,417 9,31 96,727 21-11 13,924 31,768 14,686 5,58 12,726 78,31 8,782 86,813 211-12 11,81 23,173 13,28 3,698 12,892 65,153 8,241 73,395 212-13 11,795 17,911 9,67 3,662 15,436 58,53 11,726 7,229 213-14 15,863 22,638 11,518 5,739 16,948 72,76 12,654 85,36 214-15 15,266 2,784 14,5 5,368 17,498 73,57 18,279 91,786 215-16 15,92 22,355 15,771 4,123 13,412 71,563 2,239 91,82 216-17 13,94 23,418 15,2 3,392 12,221 67,952 2,449 88,42 216/17 Jul 1,124 1,948 1,234 286 1,17 5,69 1,52 7,11 Aug 1,222 1,85 1,286 32 1,96 5,774 1,768 7,543 Sep 1,275 2,243 1,188 286 1,4 5,995 1,754 7,749 Oct 1,239 1,785 1,241 288 948 5,51 1,592 7,94 Nov 1,165 1,869 1,463 299 988 5,785 1,74 7,525 Dec 1,193 1,978 1,329 294 899 5,693 1,851 7,543 Jan 1,111 1,897 1,33 29 1,8 5,67 1,772 7,379 Feb 971 1,993 1,229 289 1,121 5,63 1,789 7,392 Mar 1,72 1,91 1,162 284 1,18 5,527 1,787 7,313 Apr 1,96 2,173 1,17 34 967 5,647 1,721 7,369 May 1,28 1,853 1,451 257 934 5,774 1,676 7,451 Jun 1,156 1,928 1,26 196 1,131 5,437 1,497 6,934 217/18 Jul 1,96 2,118 861 164 1,29 5,416 1,262 6,678 Aug 838 2,46 748 371 927 5,29 835 6,125 Sep 869 2,351 683 364 787 5,54 696 5,75 Oct 997 2,126 1,276 377 779 5,555 N/A N/A Nov 1,49 2,125 1,353 355 763 5,645 N/A N/A Dec 1,11 2,144 1,318 349 762 5,683 N/A N/A Private House Approvals (Seasonally Adjusted) Unit Approvals Total Private Dwelling Approvals 28-9 13,349 3,328 19,471 8,882 15,445 91,999 35,947 127,949 29-1 16,888 38,578 22,342 8,821 19,494 111,413 44,84 156,253 21-11 16,315 35,31 17,541 7,567 16,621 97,781 6,365 158,15 211-12 16,447 29,62 18,53 6,457 15,132 89,737 57,477 147,212 212-13 18,59 27,55 17,876 6,545 18,35 92,14 64,822 156,963 213-14 22,87 3,2 19,829 8,19 23,291 17,838 84,417 192,254 214-15 26,281 32,968 22,841 7,669 22,893 117,56 19,688 226,745 215-16 28,981 35,98 24,26 8,238 17,222 118,417 116,614 235,28 216/17 Jul 2,263 3,27 2,34 647 1,233 9,516 11,193 2,79 Aug 2,512 3,48 1,828 653 1,185 9,537 12,328 21,865 Sep 2,474 2,96 1,996 68 1,26 9,665 9,5 18,715 Oct 2,423 2,877 2,64 628 1,194 9,455 6,26 15,715 Nov 2,411 2,951 2,61 635 1,216 9,569 8,15 17,718 Dec 2,358 2,976 2,7 614 1,141 9,382 7,995 17,377 Jan 2,215 2,957 2,3 63 1,166 9,251 8,46 17,657 Feb 2,56 2,93 2,88 66 1,164 9,493 9,528 19,21 Mar 2,387 2,948 1,893 667 1,275 9,41 7,273 16,674 Apr 2,362 3,22 1,94 686 1,151 9,382 8,226 17,68 May 2,417 2,994 2,41 652 1,175 9,546 7,394 16,94 Jun 2,5 3,49 2,213 65 1,16 9,839 8,925 18,764 217/18 Jul 2,49 3,171 2,48 712 1,215 9,914 8,46 18,32 Aug 2,355 3,13 2,169 711 1,16 9,823 8,831 18,654 Sep 2,467 3,15 2,172 73 1,97 9,871 8,773 18,643 Oct 2,326 3,311 2,22 711 1,73 9,983 8,54 18,524 Nov 2,386 3,274 2,72 742 98 9,779 11,153 2,932 Notes: (a) New information on state market shares had led to an upward revision to sales levels, but has not substantially altered the new home sales cycle. Survey results have been obtained from State-wide estimates using weights based on financial year market shares of private dwelling commencements. Due to different weighting, state totals may not necessarily add to the national figure. (b) Does not include Tasmania, ACT or the Northern Territory. (c) The survey sample includes multi-unit builders who only sell direct. na: insufficient sample size HIA NEW HOMES SALES P7 12.217