Bleak outlook for WA property

03/09/2008 - 08:54

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Land and mortgage sales in Western Australia have plummeted to historic lows, as the Master Builders Association of WA forecasts a slow down in the residential property sector in the short-term despite yesterday's rate cuts.

Bleak outlook for WA property

Land and mortgage sales in Western Australia have plummeted to historic lows, as the Master Builders Association of WA forecasts a slow down in the residential property sector in the short-term despite yesterday's rate cuts.

Data published by Landgate showed that the total number of metropolitan land sales in March 2008 were at the lowest levels seen since 1997.

"The number of land sales have fallen to the lowest level since before the introduction of the GST, MBA housing director Gavan Forster said.

"Also, the declining market is reflected in the falling median Perth house price, with average house prices falling significantly over the past few months."

The falling land sales and house prices are being accompanied by increasing building costs. These increasing costs are being fuelled by a number of factors, including regulatory changes and supply limitations.

"In some instances, there have been 90% increases in the costs of some steel products," Mr Forster said.

"However, the number of dwellings being completed continues to lag behind forecasted long term demand for housing, based on demographic trends.

"At some stage, the number of dwellings completed will have to increase to meet demand for accommodation.

"The conflicting indicators of falling land sales, variable interest rates and building demand for housing has left considerable uncertainty about the residential property market outlook."

Meanwhile, the Australian Finance Group mortgage index showed that property buyers sat on the sidelines last month, with mortgage sales falling nearly 20 per cent in Western Australia.

The index shows the number of mortgages sold across the country fell by 17 per cent per cent to 5,770 in August, after robust growth in July.

Volumes slipped 20 per cent to $1.91 billion and fell below $2 billion for the first time since in almost two years, or since December 2006.

Mortgage sales in New South Wales fell 31 per cent in August, compared to July, AFG said in statement.

Western Australia sales fell by 19.9 per cent while Victoria recorded an 18.4 per cent fall.

Queensland was least affected, with sales falling by 10.8 per cent.

Property investors, who make up 30 per cent of new mortgage buyers, remained constant suggesting that long term confidence in the underlying value of property markets remains strong, AFG said.

AFG, Australia's largest mortgage brokers, said potential borrowers were waiting to see what the Reserve Bank of Australia (RBA) would do, amid speculation last month that it would cut interest rates.

The RBA yesterday lowered the official cash rate by 25 basis points to seven per cent.

The decision pushed the big bank lenders to reduce their standard variable home loan rates by the same amount.

"Yesterday's cut is a welcome signal that the rate cycle is on the way down and it was great that the banks have passed the full reduction on," AFG general manager of sales and operations Mark Hewitt said.

"But borrowers have suffered death by a thousand cuts over the last seven years of rate rises, and it will take more than one 25 basis point drop to see confidence return to property markets."

The AFG mortgage index also illustrated the high expectations of consumers about future rate cuts.

Only 4.9 per cent of new mortgage buyers opted for fixed rate mortgages in August.

That compared to a peak of 25.3 per cent for fixed rate mortgage sales in February.

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