We're building towards a home construction boom

02-08-2008, 12:08 AM
As interest rates fall, the credit crunch eases, and house prices start rising again, I expect a new construction-led boom to kick off in Australia, probably around 2010-2011.

It looks like somebody agrees with me...


We're building towards a home construction boom

http://www.hotspotting.com.au/index.php?act=viewArticle&productId=428

By Bob Wilson, 8th August 2008

At some point in the next decade, Australia will experience a massive residential building boom, according to analyst Michael Matusik. In a perfect world, he says, Australia would produce one million new homes in the next five years to meet the underlying demand for owner-occupied, rental, community and social housing.

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Hi Shadow,

Interesting article.

What do you reckon which part of Australia will trigger the construction boom first? And what's your prediction on which cities should we keep an eye on?

I can guess Sydney should be among the top 2 if not the top 1.

Cheers,
Oracle.
 
So a building boom next decade timed to increase supply right before the baby boomers start dying off - 2020 onwards. Their homes will get dumped on the market to create a huge oversupply.
So the D&G guys aren't wrong about a massive nationwide house price crash, they just might be 15 years too early.
Scott
 
Hi all,
Putting my unexpert futurist cap on and thinking about future demand for oz property.....wouldnt it be plausible that as the boomers get older, we will start to import more and more younger taxpayers to help keep things ticking over hence keeping up the demand for property?

what about the growing number of cashed up chinese/indian families that have heard about our little island down in the pacific where you can live an uncrowded life in the greatest country in the world :)

They want to shift over here, they are already sending thier kids here to go to school in droves, this is a huge potential market (obviously dependant on government immigration laws).

Just thoughts....
 
Ohh it's almost a definate that we will see a constuction led boom at or around that time up until 2015(ish) because its a fact that we need many more than we can build in that timeframe, therefore it looks like there are good times ahead for investors,
 
Hi Shadow,

All music to my ears! :D

My modest little development will probably kick off mid next year (June 2009-ish) and take 9 months to complete. So, will be on the market early to mid 2010. Sounds like a pretty good timeframe to me.

Just waiting for market stability in both yields, prices and interest rates. Any downward movement in interest rates or upward movement in rental yields makes my project very close to neutral cash flow upon completion. A little bit of either (or both) and I'm underway. Sounds like I won't be alone!

Would like to get this one done, then borrow against the created equity as deposit on the next development site. Wouldn't mind having a few of these under my belt before 2015.

Cheers,
Michael
 
Before you call for a construction led boom you might want to take into consideration likely building costs in 2015.
Yep. The cost of construction is stopping people building now because it's hard to turn a profit. As housing prices creep up in some areas, developers will get back into the market I guess.
But steel etc isn't going to get any cheaper.
Immigration might bring some cheap skilled labour?
 
Boom Boom Boom!

Why are people so utterly obsessed with booms? :confused:

With every boom there must be a bust and I for one would much prefer to see our economy, and the property market in particular become more sustainable and stable.

Booms are good for the few and I'd be the first to admit I've had a once in a lifetime run with CG's in the last few years here in WA, but given I held on through the early 90's and still remember the long hard grind of holding costs, nil returns, and watching the innocent as well as the inexperienced and greedy go to the wall, I'd much prefer stability.

Surely we would all be better off with a steady 5% CG and a corresponding 5% yield. We'd all sleep better at nights and more of us would still end up doing extremely well if we really are focused on the long term.

I'm finding that it's getting equally as boring to constantly see the Boom Boom ramping threads as it is to read the D&G 40+++% house crash opinions, especially when they both fly in the face of what is really happening. This obsession with constantly wishing for the next boom makes me wonder, are we really in it for the long term, or is it just dreaming of the elusive get rich quick fast buck?

Cheers,
Beef.
 
Hi Beef Hooked,

I agree mate!

Why are people so utterly obsessed with booms? :confused:

With every boom there must be a bust and I for one would much prefer to see our economy, and the property market in particular become more sustainable and stable.
Just waiting for market stability in both yields, prices and interest rates. Any downward movement in interest rates or upward movement in rental yields makes my project very close to neutral cash flow upon completion. A little bit of either (or both) and I'm underway. Sounds like I won't be alone!
I'm not really looking for signs of the next "boom". All I want to see is prices and yields flat with a little bit of an ease in interest rates. That's enough to make my project viable and get me across the start line. Long term, all I need is inflation based capital growth and yield growth. In fact, its more sustainable that way. If it does boom again then I might have to rethink my strategy and sell down more to take the bonus cash off the table before we really do have a massive crash. And, on the flip side, if it does crash in the short term then I'm just locked into a longer term hold strategy. Would be a setback, but the yield on completion would still cover my interest expense so CF+ regardless of capital valuation.

Cheers,
Michael
 
Why are people so utterly obsessed with booms?

With every boom there must be a bust and I for one would much prefer to see our economy, and the property market in particular become more sustainable and stable.
Because cycles are the reality. It's sort of what happens whether we like it or not. People with property are happy when it booms and sad when it busts. People without property are happy when it busts and sad when it booms. We're all so predictable.
Scott
 
what about the growing number of cashed up chinese/indian families that have heard about our little island down in the pacific where you can live an uncrowded life in the greatest country in the world :)

They want to shift over here, they are already sending thier kids here to go to school in droves, this is a huge potential market (obviously dependant on government immigration laws).

Just thoughts....
Just what we need...another country with over a billion people in it.

Thank god I'll be long gone by the time it happens.

I feel sorry for my son though.
 
The cost of construction is stopping people building now because it's hard to turn a profit. As housing prices creep up in some areas, developers will get back into the market I guess.
But steel etc isn't going to get any cheaper.
Immigration might bring some cheap skilled labour?
That’s the real kicker!

We need to import cheap skilled labour to facilitate the required supply of housing. However, importing such labour will also add to demand. The supply/demand equation seams heavily weighted in favour of those who currently own property.

This thought brings great SANF.
 
Hi Shadow,

Interesting article.

What do you reckon which part of Australia will trigger the construction boom first? And what's your prediction on which cities should we keep an eye on?

I can guess Sydney should be among the top 2 if not the top 1.

Cheers,
Oracle.
Hi Oracle,

Yes, I reckon Sydney is set to boom next. Sydney has gone nowhere for the past 5 years... prices are well below trend... the median house price is 15% down on the 2003/2004 peak in real terms. Construction activity is currently at record lows and population growth is very strong.

2010-2011... that's my prediction for when it will all begin...

More here: http://www.somersoft.com/forums/showthread.php?p=441496#post441496

Cheers,

Shadow.
 
My modest little development will probably kick off mid next year (June 2009-ish) and take 9 months to complete. So, will be on the market early to mid 2010. Sounds like a pretty good timeframe to me.
See, how do people predict building booms when building takes SO long? I am getting told 18 months to get my development happening (assuming I can talk my way around the magic missing metre) and 6-10 weeks to actually build it, which seems mildly ridiculous. Add to that I can't even start until I've fattened up my personal equity fairy by shovelling it full of new kitchen so that'll take me till almost 2011 :eek: But with it looking to cost ~$95,000 and with rental return of $250+ a week until I get around to moving into it myself (or not, still haven't decided, I'd still rather hold off until I can get that castle) it's pretty hard to lose.

How do they measure building anyway? Approvals, starts, completions, what?
 
Ohh it's almost a definate that we will see a constuction led boom at or around that time up until 2015(ish) because its a fact that we need many more than we can build in that timeframe, therefore it looks like there are good times ahead for investors,
How can it be a fact if it hasn't occured yet.:confused:
 
I'm just curious, where are we getting this cheap labour from to build all these new houses in the near future.
Sorry to change the subject here.
I would have thought any imigrant labour (temporary of permanent) would be intilted to minum wage, super, etc as we are. So how is this going to happen?
I'd hate to see a situation like the USA now where they are more so relying on the ilegal Mexicans for the construction and factory work due to costs, if all these people were rounded up and sent home, the USA ecconomy would greatly suffer for it. This was explained to me by US imigration people over a friendly conversation once.
Also in western Europe a similar situation is happening now with the eastern block countries, they have the cheap labour available, helpful for renovating your house etc, but the workmanship is not up to standard at all.
"If you think is expensive to hire a proffessional to do a job, wait till you hire an amature", that is a well known fact in the Oil & Gas industry where I work now.
These people who would be our cheap labour, they would most likely be from Indonesia, Phillipeans etc, how would it be cheap to fly them over, accommadation etc. I just can't see how it works. Then there is the level of skill also, sure we have our share of bad tradesman, but there is still a minimum of skill learned in trade school.
Not being racist here either, I like working with these guys, I think they can do the job, just lack the same trades skill I was taught.
I like the system the Kiwi's have now, instead of foriegn aide, bring them over and earn a wage. This is a great idea, it gives these people some pride in them selves for the abaility to learn something and earn a decent days wage, so perhaps that is an answer?
Anyway, just some thoughts for you.
 
I agree completely.

Having experienced first hand how the American quarter horse industry relies almost exclusively on Mexican labour (they get around minimum wage by putting them on a salary of 14k per year) - and those are legals !

Its my guess that a lot of the US surplus homes were built by Mexicans earning 2 dollars an hour which is still twice as much as they can earn in Mexico.
 
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