18/01/2005 - 21:00

Consolidation tipped for residential sector

18/01/2005 - 21:00

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Consolidation tipped for residential sector

PERTH property industry pundits are expecting a steady year for the residential property market in 2005 and a consolidation of last year’s market position.

Housing sales and established house prices levelled off towards the end of 2004 and expected to remain steady in the coming year.

Real Estate Institute of WA president Greg Rossen said $18.8 billion of residential property transactions were undertaken in Western Australia in the year to September 2004, down 7 per cent from the previous year.

“There were some outstanding achievements in the local market in 2004, particularly in the residential land sales market,” Mr Rossen told WA Business News.

“By September 2004 the median price of vacant residential land sales in WA reached $124,400, which was 18 per cent higher than at the same time 2003, and the median price of established houses for the same period was $236,700, which is 10 per cent higher than 2003.

“The most likely scenario for real estate in 2005 is consolidation of the gains achieved over the last three years.

“Most of Western Australia experienced strong growth in property values between 2002 and 2004. These gains are proving to be more sustainable than the huge growth in property values in the eastern States.”

Mr Rossen said the western suburbs and the inner-city area were likely to regain their position as higher growth rate markets when more “normal” market conditions returned.

“But we still have a market adjustment process to follow after the boom and interest rate volatility may play an important part in the first half of the year,” he said.

The WA Housing Industry Forecast Group has forecast 21,000 dwelling commencements for Perth for 2004-05, down 6 per cent from starts recorded in 2003-04.

Chairman Warwick Hemsley said industry capacity was the key issue confronting the housing sector, which may have long-term implications for housing production and affordability in the State.

“The outlook for the next two years remains solid with the backlog of work potentially becoming a limiting factor despite anticipated new activity on the back of strengthening population growth in WA,” he told WA Business News.

A substantial increase in labour and material costs over the past 12 months was largely unexpected by the market, and although these costs are not anticipated to return to former levels, they are expected to moderate in 2005.

Master Builders Association director Michael McLean said while there was a downward trend in the level of housing activity, the industry would remain buoyant, given the backlog of work.

“Costs could still increase in some areas, but for the foreseeable future costs will probably taper off,” he said.

Housing Industry Association WA executive director John Dastlik expects a moderate slowdown over the next year in WA, but said 2005 would still be a very active year.

“There is a lot of work in the system, and any drop in sales will be underpinned by current levels of activity,” Mr Dastlik said.

“There will be some cost increases, but hopefully the market will be able to contain construction costs through activity moderation.

“We view 2005 as a down year, but expect that to pick up again in 2006.”

Mr Dastlik added that there had been a 4 per cent increase to housing alterations over the last year, amounting to $1.8 billion.

“New housing starts in the 2003-04 period amounted to $2.65 billion, so the alterations market is worth an enormous amount of money, and by 2010 we predict that the two will be worth equal value,” Mr Dastlik said.

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