National Land Survey Perth Greenfield Perth Greenfield Cycle Sales - - PowerPoint PPT Presentation

National Land Survey

Perth Greenfield

200 400 600 800 1000 1200 1400

Q2-2008 Q2-2010 Q2-2012 Q2-2014 Q2-2016 Q2-2018 Q2-2020

Lots Per Month Peak at 1,247 Q1-2013

Perth Greenfield Cycle – Sales PCM

Bottom at 327 Q4-2018

Q1-2020 443 lots pcm +20%

Pre C19 Demand Range 550-600

20% lift for the quarter in terms of sales.

105, -16% 75, +49% 109, +40% 120, +30%

Net Activity

Q1-2020 Net lot Sales and Change Per Month

29, +75%

MARKET NET SALES NEW RELEASES RETURN RATE APRIL RETURN RATE MARCH Melbourne

• 61% Drop
• 59%

38% 7% Sydney

• 80% Drop
• 38%

62% 9% SEQ

• 78% Drop
• 94%

60% 6% Perth

• 11% Drop

+197% 49% 28%

April 2020 Sample Survey – Change in Sales

Population based Demand

NOM

LOCAL NIM

The Demand Pipe Line

Perth Western Australia

NOM

LOCAL NIM

The Demand Pipe Line

Perth Western Australia

58%

49%

• 7%

Pipeline of Demand by Market

49% 58% -7% 41% 88% -30% 41% 41% 18% 44% 70% -14% 33% 60% 7%

Local NOM NIM Local NOM NIM Local NOM NIM Local NOM NIM Local NOM NIM

COVID on Net Overseas Migration

Net Overseas Migration- Forecast National 85% reduction in NOM for 2019/2020 year

The annual growth was 371,100 people (1.5%)- [Sep 2019]

62.5% was due to net

• verseas migration

Headline Underlying Demand is

142,000 Dwellings per year.

89,000 Dwellings are

driven by NOM *4,500-7,000 per year for WA

“The coronavirus crisis brings to an end 20 years of high migration to Australia. On current policy settings, net migration in 2020 and 2021 will be close to zero, if not negative.” ABUL RIZVI

Existing Temporary Visa Stock

Stock Dec 2019 2.43 million persons Stock Dec 2020 1.82 million persons

• No. of existing Dwellings impacted by the

drop in the stock of Temp Visa holders over the 2020 year…

90,000 dwellings

Student; Skilled temporary, Bridging Visa, NZ citizens included – excluded are Visitor, Working Holiday, temp Graduates and Parents, Crew and Other Source: data.gov.au

Stock March 2020 2.17 million persons

Annual Intake of Temporary Visas

Educational

• 85% drop in 19/20
• 50% drop in 20/21
• Normal in 21/22

457 Visa

• 85% drop in 19/20
• 85% drop in 20/21
• 25% drop in 21/22

Temporary Visas – Impact on New Demand

Foreign Investment in New Property driven by either those living here or sponsored by parents buying from off shore Residential Property Only….

Equates to 5.4% of the Temporary Visa’s issued

11,000

Dwellings over a year at risk

Source: Foreign Investment review Board Annual report 2017-18

Permanent Visas – Impact on New Demand

176,000 Visa’s processed per year

since 2008

• 55% of these are for people already living

in Australia; 35,000 possible change of housing preference not new

• 45% for people not living in Australia;

29,000 additional dwellings per

• year. [est 1,500 pa wa]

Source: Various Population flows publications and annual reports–Migration Reporting, Department of Home Affairs

Permanent Visas – Impact on New Demand

• 25% reduction 2019/20
• Assumed that the Federal

Government will continue to process existing applications; although at a lower level.

• 50% reduction in 2020/21
• Assuming processing times reducing

the number of applications being approved.

• 25% above Normal levels 2021/22
• Effort to fast track PR intake and to
• ffset prior year deficit

Timing – Deferral or Lost Demand

Students 457 Visa Permanent NZ Citizens AU Citizens

2020 2021 2022

Loss of Demand through to Mid 2021- No Catch-up Loss of Demand through to Mid 2021- No Catch-up Possible Deferral of Demand out to Mid 2021 Possible NZ Deferral till late 2020 Benefit from forced capture till Mid 2021

COVID on Net Interstate Migration

0.0 2.0 4.0 6.0 8.0 10.0 12.0

• 5000
• 4000
• 3000
• 2000
• 1000

1000 2000 3000 4000 Jun-1981 Apr-1983 Feb-1985 Dec-1986 Oct-1988 Aug-1990 Jun-1992 Apr-1994 Feb-1996 Dec-1997 Oct-1999 Aug-2001 Jun-2003 Apr-2005 Feb-2007 Dec-2008 Oct-2010 Aug-2012 Jun-2014 Apr-2016 Feb-2018 Dec-2019 Oct-2021 Aug-2023

Unemployment Rate NIM- State

State NIM & Unemployment

NIM Forecast NIM FORECAST UNEMPLOYMENT UNEMPLOYMENT - STATE [RHA]

Net Interstate Migration & Unemployment

Sustained high levels

• f unemployment will

drive a net loss in NIM. NIM is being influenced by boarder closures. The forecast assumes that NIM will remain at current levels.

Unemployment NIM

Net Interstate Migration & Unemployment

The long term loss of employment will drive NIM into a deeper loss, A loss of demand of 2,500 – 3,000 person per quarter or 925-1,111 dwellings pa. Moderate unemployment- forecasting loss of 1,000 p per qtr from late 2021.

COVID on Local Demand

First Home Buyers

• Most reliable source of demand- need a
• home. Knows the market
• Responsive to Buyer Grants, will be

watching- hence high levels of inquiry

• Limited depth of demand, can be brought

forward.– cannot bring anything forward as this has already taken place across Perth

Second Plus Home Buyers

• Less need to move; already have a home
• Driven by broader housing market, prices
• House prices will influence activity
• Best product for lowest price filter; knows

the market Once again, Perth Market has being dealing with low level demand for several years.

How many houses do we need?

500 1000 1500 2000 2500 3000

Q2-2008 Q2-2009 Q2-2010 Q2-2011 Q2-2012 Q2-2013 Q2-2014 Q2-2015 Q2-2016 Q2-2017 Q2-2018 Q2-2019 Q2-2020 Q2-2021 Q2-2022 Q2-2023

All Private Dwellings per Month

Modelled Underlying Housing Demand - All Types

Perth All Dwelling Demand [pcm]

786 pcm

Next 12 months

Total Dwelling Demand

1,181 pcm

2008-2020

871 pcm

2020-2023

Modest lift in “captured” demand over next 12 months.

200 400 600 800 1000 1200 1400 1600 1800

Q2-08 Q2-09 Q2-10 Q2-11 Q2-12 Q2-13 Q2-14 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 Q2-21 Q2-22 Lots Per Month Market Cycle & Forecast Demand Net Monthly Land Sales Monthly Demand

Underlying Demand Land – Perth

Sales Now 2020/21 2021/22 2022/23

442 +20% 527 609 620

Demand Forecast

Land Sales PCM Demand

Economic Impact on Timing

0.0 2.0 4.0 6.0 8.0 10.0 12.0 50 100 150 200 250 300 350 Jun-1981 Oct-1982 Feb-1984 Jun-1985 Oct-1986 Feb-1988 Jun-1989 Oct-1990 Feb-1992 Jun-1993 Oct-1994 Feb-1996 Jun-1997 Oct-1998 Feb-2000 Jun-2001 Oct-2002 Feb-2004 Jun-2005 Oct-2006 Feb-2008 Jun-2009 Oct-2010 Feb-2012 Jun-2013 Oct-2014 Feb-2016 Jun-2017 Oct-2018 Feb-2020 Jun-2021 Oct-2022

Unemployment Rate

INDEX [ 100 DEC 2003]

Approvals Houses Unemployment 4 per. Mov. Avg. (Population Change)

Expected Unemployment Spike is unlikely to significantly change or alter timing of current demand. Impact = 18-20% reduction in underlying demand

Population House Approvals Unemployment

Overlay Unemployment

A B

Greenfield Market Cycle – Perth

2020/21 2021/22 2022/23

527 609 620

Scenario 1 Underlying Demand PCM

Assuming that NIM is not impacted by high unemployment

Timing of Underlying demand adjusted by 18% for unemployment- leading to unmet demand

432 499 352 482 514

Underlying Demand PCM

Assuming NIM falls away due to employment issues [ lost demand from interstate ]

Timing of Underlying demand adjusted by 18% for unemployment- leading to unmet demand

432 499 288 395

Q2-08 Q2-09 Q2-10 Q2-11 Q2-12 Q2-13 Q2-14 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 Q2-21 Q2-22 Lots Per Month Market Cycle & Forecast Demand Net Monthly Land Sales Monthly Demand

Greenfield Market Cycle-Underlying Demand

Scenario 1

Underlying demand – NIM no change

Scenario 2

Underlying demand – NIM Impacted

50 100 150 200 250 50 100 150 200 250 300 350 400 50 100 150 200 250 300 350 400 50 100 150 200 250 300 350 400

South West 105 pcm [q120] 97 pcm [f] West 75 pcm 116 pcm [f] South West 138 pcm [q120] South West 119 pcm [q120] North East North West South East South West

Q1-2014 Q1-2020. Q1-2014 Q1-2020. Q1-2014 Q1-2020. Q1-2014 Q1-2020.

Forecast Demand – Scenario 1

119 pcm [f] 85 pcm [af] 181 pcm [f] 104 pcm [af] 158 pcm [af] 101 pcm [af]

Production Capacity

The combined development capacity of all land estate

200 400 600 800 1000 1200 1400 50 100 150 200 250 Q2-08 Q2-10 Q2-12 Q2-14 Q2-16 Q2-18 Land Sales PCM Count of Estates

Number of Trading Estates & Market Cycle

Maxi Large Moderate Small Micro Land Sales PCM

Number of Estates & Sales

221

estates NOW 3.6 New Estates per Quarter

90 estates during

GFC

500 1000 1500 2000 2500 3000

50 100 150 200 250 300 Q2-08 Q2-09 Q2-10 Q2-11 Q2-12 Q2-13 Q2-14 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 Q2-21 Q2-22

Production Capacity [Lots] Land Estates per Quarter

Greenfield Development Capacity - Historic & Forecast

[Number of lots per month from all active land estates ] Current Quarter Land Estates Development Capacity

Capacity – New Estates / Lots Per Month

Current 2,280

Lots Per Month Capacity By 2023

2,645

Lots per Month Capacity 262 estates 16% increase

50 100 150 200 250

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Q2-2008 Q2-2009 Q2-2010 Q2-2011 Q2-2012 Q2-2013 Q2-2014 Q2-2015 Q2-2016 Q2-2017 Q2-2018 Q2-2019 Q2-2020 Q2-2021 Q2-2022

GDC Ratio

Market Setting Metric

[Greenfield Development Capacity Ratio] Current Quarter GDC Benchmark 2:1 4 per. Mov. Avg. (GDC)

Capacity to Demand Ratio - Competition

Over the coming 3 years the level

• f competition is

likely to hold or improve.

Extreme Comp High Comp Low Competition

282, 13% 527, 24% 492, 23% 677, 31%

Distribution of Capacity

Total production capacity of Greenfield industry in lots per month as at September 2019. Share of total Production capacity by Local Market.

[2:1] [5:1] [4:1] [4:1]

Development Capacity to Demand Ratio

North East Perth Greenfield currently considered “balanced” Level of competition between estates provides a balance between developer and customer.

Clearance Rate & Stock of Lots ready For Sale

0% 20% 40% 60% 80% 100% 120% 140% 160% 0.0 0.5 1.0 1.5 2.0 2.5 Q2-08 Q2-09 Q2-10 Q2-11 Q2-12 Q2-13 Q2-14 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 Q2-21 Q2-22

Clearance Rate

Greenfield Clearance

Clearance Rate

Clearance Rate - %of Releases Sold

Q1-20

Clearance Rate 90% [very good]

April 2020

+197% lift in releases 70% of estates increased in April

0% 20% 40% 60% 80% 100% 120% 140% 160% 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Q2-08 Q2-09 Q2-10 Q2-11 Q2-12 Q2-13 Q2-14 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 Q2-21 Q2-22

Clearance Rate

GDC Ratio

Greenfield Development Capacity Ratio & Clearance

Clearance Rate GDC Ratio GDC-Benchmark 4 per. Mov. Avg. (GDC Ratio)

Clearance Rate - % of Releases Sold

Levels of competition are closing the gap; underscoring a better clearance rate

150 650 1,150 1,650 2,150 2,650 3,150 3,650 4,150 4,650

Q2-08 Q2-10 Q2-12 Q2-14 Q2-16 Q2-18

Lots

2 4 6 8 10 12

Q2-08 Q2-10 Q2-12 Q2-14 Q2-16 Q2-18

Months

Stock Ready – Lots on a Price List

3,200 lots Trading Months 8

Now You See it! Now You Don’t! Now You see it Again!

50 100 150 200 250

Q2-08 Q2-10 Q2-12 Q2-14 Q2-16 Q2-18

Lots Returned

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Q2-08 Q2-10 Q2-12 Q2-14 Q2-16 Q2-18

Return Rate

Return Rate - Perth

152 Lots pcm 26% 49%

Based on Mini National Survey Findings for April

Established House Prices & Land

$0 $100 $200 $300 $400 $500 $600 $700 $800 Q1-02 Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17 Q1-18 Q1-19 Q1-20 Q1-21 Q1-22 Q1-23 Q1-24 Q1-25

Established House Price [$,000}

House Prices - Benchmark & Actual

ABS House Price Benchmark House Price Actual & Forecast Hse Price

Perth House Prices

ABS Median House Price Benchmark Median House Price

$500,000 Q4-19 $520,695 Q4-19

Forecast Median House Price

$462,000 Q4-20

7.5% drop in median house price over 12 months before returning to holding

$100 $150 $200 $250 $300 Q2-08 Q2-09 Q2-10 Q2-11 Q2-12 Q2-13 Q2-14 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 Q2-21

$,000

Median Lot Price

Actual Land Price Forecast 2

Land Prices & Fair Value & Forecast

CURRENT

Median Lot Price $215,000 Fair Value $230,000 Under by $15,000

FORECAST Q4-20

Median Lot Price $211,000

Movement -2%

4% 9% 0% 30% 86%90% 1% 28% 4% 5% 16%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Incentives

84% of estates offered an incentive in Q1-2020 $12,775 was the average value of an incentive No Change over 3 months

Have you seen the Price?

New land prices and fair value

Market Pricing & Fair Value

Current BM $250,295 Current Price $242,000 Under Over

• 3.3%

$150 $170 $190 $210 $230 $250 $270 $290 $310

Q2-2008 Q2-2010 Q2-2012 Q2-2014 Q2-2016 Q2-2018 Q2-2020

Lot Price ($,000)

North East

Net Lot Sales per month – Sub Markets

North West

Market Pricing & Fair Value

Current BM $250,409 Current Price $219,000 Under Over

• 12.5%

Q2-2008 Q2-2010 Q2-2012 Q2-2014 Q2-2016 Q2-2018 Q2-2020

Lot Price ($,000)

Under/Over BM Price

South West South East

Net Lot Sales per month – Sub Markets

Market Pricing & Fair Value

Current BM $218,113 Current Price $230,000 Under Over 5.4%

$150 $170 $190 $210 $230 $250 $270

Q2-2008 Q2-2010 Q2-2012 Q2-2014 Q2-2016 Q2-2018

Lot Price ($,000)

Market Pricing & Fair Value

Current BM $221,324 Current Price $200,000 Under Over

• 9.6%

Q2-2008 Q2-2010 Q2-2012 Q2-2014 Q2-2016 Q2-2018 Q2-2020

Lot Price ($,000)

Under/Over BM Price

Perth Greenfield & COVID

• Underlying demand for new land to remain unchanged;

slightly higher over short term

• Expressed demand to reduce by 18% over the 2020 year.
• New land values to under valued by 7 percent
• Industry capacity utilisation to hold at 37 percent; slight

improvement over next 24 months. Perth has a window of opportunity to leverage its lead in managing COVID 19 through promoting the state to business, education and tourism – to reset- market awareness and lay foundation for greater intake of demand

Colin Keane – Director of Research4 colin.keane@researchfour.com Keep updated

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Colin Keane is Director of Research4

[www.researchfour.com] Research4 conduct detailed market research pertaining to Australia's Greenfield Land Markets. Established in 2005, Research4's national survey is Australia’s longest running and most detailed audit of the nation's Greenfield land estates. Colin's main focus is to better understand every aspect of the Greenfield market. The survey to date has monitored in excess of 2,000 land estates delivered by 850 land developers across 44 new land markets. The research program monitors 50% of Australia's new housing sector on a full time basis. Research4 is founded upon a proprietary database created through extensive, ongoing field and remote surveying of active residential land projects [R4 CoreDatabase]. Research4's survey outputs are used by industry, government and financial sectors. Research4 : R4 Insights 2017 www.researchfour.com research@researchfour.com