A growing shortage of construction timbers in Australia’s building sector is not helped by reports this week that very significant tonnages of prime-grade sawlogs from the Green Triangle region continue to head offshore to Asia – India in particular.
The decision to export is perfectly within the trading rights of forest growers. But it does irk some Australian manufacturers scrambling to meet the domestic demand for engineered wood, which is particularly worrying as state governments in Victoria and Western Australia rush to shut down sustainable native forest operations.
An industry authority in South Australia says the export of domestic logs has been going on for some time, with volumes arriving at Victoria’s Port of Portland at 2000 tonnes a week.
“The magnet for this resource is surely India,” he said.
Indian demand for roundwood is forecast to jump 70% by 2030
Although India’s forest cover has increased steadily for nearly two decades, timber production is substantially less than consumption, and an increasingly large proportion of demand is being met by imports.
According to research commissioned by the ITTO, demand for roundwood is expected to increase by 70% over the next decade, from 57 million cubic metres in 2020 to 98 million cubic metres in 2030, driven largely by demand from the construction sector.
Without a political policy change, India will need to rely heavily on imports to meet this surge in demand because domestic production is restricted by the country’s conservation-oriented forest policy.
The substantial increase in wood consumption in India by 2030 is exacerbated by an existing shortfall between wood production and demand and increasing the country’s reliance on wood imports, says ITTO.
Housing is a major driver of demand
The head of one of India’s biggest private mortgage providers has forecast that the country’s youth bulge will propel demand for housing for years as rising incomes in the world’s most populous country make homes more affordable.
“What gives me confidence that the growth will remain strong for a number of years is the fact that India has a young population,” says Keki Mistry, chief executive of India’s Housing Development Finance Corporation.
“Well over half of India’s population is aged under 30, while the average first-time home buyer is aged 37-38,” he said.
“These younger people will get to an age where they will necessarily need to buy a home. To my mind, there will be a structural demand for housing and therefore demand for housing financing well into the future.”
While India’s urban population share has grown more than threefold in over a century from around 10% in the 1900s to the current levels of more than 34%, annual interstate migration is estimated to grow at around 9-10 million annually.
Meanwhile, the cost of house ownership across India has shown a combined annual growth rate of around 5% in the past few years.
Contributing 34% to India’s entire population are 440 million millennials, a big consumer segment, even in a relatively young country.
As this demographic looks for more flexible work hours, there has been an exponential rise in the demand for bigger homes (2, 2.5, or 3 bedrooms), with clear demarcation between work and living areas. Work-from-home became a norm during the pandemic and this trend is likely to continue as millennials explore possibilities to work remotely, either part or full-time.
Regarding the most desirable asset classes across the Indian real estate market, luxury residences have remained relatively resistant to any market downturn and have made a remarkable return.
Not reliant on mortgage fluctuations, the luxury home market is driven by affluent homebuyers and has traditionally been an attractive investment option. Additionally, because they offer a better and more personalised lifestyle, developers have been able to market luxury projects better than other asset classes successfully.
The advent of new technologies, coupled with a shift in the conventional working norms in the wake of the pandemic, has fuelled a rise in the quality of life in India. Investing in luxury homes – a symbol of affluence and status – has become more financially feasible.
Note: The Australia-India Economic Cooperation and Trade Agreement is helping to secure Australia’s foothold in India, enabling businesses to benefit through tariff elimination or reduction on a wide range of Australian goods in demand in India.
From December 29 last year, more than 85% of Australian goods exports by value to India became tariff-free, rising to 90% in six years, a stepping stone towards a full Australia-India agreement.
Also, high tariffs will be substantially reduced on some agricultural products. In addition, 96% of imports from India are now tariff-free, rising to 100% cent in four years.