The Australian states play a very competitive game each month when the Australian Bureau of Statistics (ABS) issues data on building approvals for new dwellings.
Here are the latest headlines from media releases from the Eastern states:
- VICTORIAN BUILDING APPROVALS LEAD THE NATION
- QUEENSLAND LEADS THE NATION IN BUILDING APPROVALS
- NSW BUILDING APPROVALS AT HISTORIC HIGH
Most readers would assume all of the states are winners. Our own Urban Taskforce media release headline was a modest NSW BUILDING APPROVALS SLOWING DOWN. The different headlines, of course, are more about spin based on an interpretation of the statistics and making sure the performance is compared to the worst previous number in recent years. So what is an objective measure of residential building performance?
The Urban Taskforce has been measuring the relative performance of residential approvals of the states since 1987 and we add the latest data each month. For December 2015, our leader is Victoria with 5,423 homes approved adjusted for trend. New South Wales, which is 20 per cent larger in population, had 5,245 approvals, with Queensland third at 3,929.
Victoria correctly claims its leadership with the highest number of new home approvals. On reading the Queensland media release in more detail, it appears that its leadership is in having the highest percentage increase in overall approvals for 2015 compared to 2014. Their increase was 26.9 per cent compared to NSW at 26.7 per cent and Victoria way down at a 11.9 per cent increase.
NSW Treasurer Gladys Berejiklian said the state’s achievement “is a reminder that NSW was the standout economy in the nation in 2015.”
Most of the state governments were focussed on demonstrating that confidence was high in their state and most unsurprisingly were able to demonstrate how much better their performance was compared to the previous state government from the other side of politics. Our interest from the property industry perspective was to look at the recent trends which indicated in NSW a consistent drop in approvals over the last six months of 2015. The message to the state government, therefore, was to ensure that policies did not encourage continuation of the downturn in housing approvals. Talk of adding a value capture tax to new housing or a confusion in the planning system through forced amalgamations of councils, could both contribute to a slowdown in approvals.
Some measures of housing performance concentrate on a comparison with decade averages. CommSec puts out quarterly State of the States reports that put NSW at the top of the rankings in housing starts, yet Victoria has clearly had significantly more housing starts. The reason NSW leads is that their latest quarterly performance is 71.6 per cent above the decade average while Victoria is only 38.3 per cent above its decade average. On straight numbers, Victoria clearly leads with 17,251 dwelling commencements in the January 2016 quarter compared to NSW's 15,515 commencements in the same quarter.
It seems that the fact that Victoria has managed dwelling commencements well over the last decade works against them in CommSec’s eyes. A similar difference occurs with population growth, where CommSec has NSW leading with 1.37 per cent growth in population compared to Victoria’s 1.70 per cent. The difference is that NSW has grown slowly over the last decade, so its current growth looks good. Victoria, which is growing faster, has in fact slowed down a little from its decade average and is therefore not seen as leading.
To complicate matters further, the performance of each state could be divided by their population. This would change again the actual performance. The Urban Taskforce takes the ABS data on total building value by quarter and graphs this by dividing by state population. New South Wales now drops down the list and Queensland ranks just above NSW. Victoria and Western Australia are well above on a per capita measure. Remarkably, NSW has been trailing the other states since 2004 and only in recent years has it moved upwards to now being close to Queensland's performance.
So what should we make of all of this? Firstly, it is important that residential approval data is available from the Australian Bureau of Statistics to enable all stakeholders to assess actual performance. It is also important that groups outside government analyse the data and produce their interpretation of trends. Australia’s state structure enables a comparative measure of performance but population size would seem to be important in measuring like with like. Using current performance compared to the last 10 years only really measures current trends, not overall performance.
Missing in all these measures is performance against targets. Sydney for instance, according to the Department of Planning, needs 33,200 new homes each year over 20 years, yet last financial year only 27,348 were completed. This may well be an historic high, but it is still more than 5,000 homes below what is needed. The Urban Taskforce highlights this shortfall in media releases but government seems more interested in the performance against past numbers than in the shortfall to targets.
Ultimately, it seems the interpretation of ABS residential statistics is in the eye of the beholder and how they want to convey their own message.