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GST-driven building boom is set to peak

THE rise in housing sales and building resulting from the GST is approaching a peak says the Real Estate Institute of WA economist Lino Iacomella.

Mr Iacomella said home loan lending data showed the number of home loans had soared since the confirmation of the introduction of a GST earlier this year.

“In WA there were 5,946 new home loans issued in August 1999, which is a monthly increase of 6.9 per cent and an annual increase of 12.1 per cent,” Mr Iacomella said.

“The latest monthly rise in new home loan numbers reverses a decline in an earlier month. This indicates we are approaching a peak in lending activity for this cycle.”

Mr Iacomella said the peak was to be expected as the point appoached when completion of new homes before the GST commences was unlikely.

WA building approvals increased by 2.6 per cent in August, a total of 27.2 per cent since October 1998.

The results for WA are positive when compared with Australia-wide figures.

The number of dwelling approvals across Australia increased by 1.9 per cent. Victoria recorded the highest increase, climbing 3.8 per cent while approvals in Queensland and the Northern Territory fell.

Building demand injected $347 million into the WA economy for August – 33 per cent higher then the month of April when the value of approvals was about $260 million.

For the 1998-99 year the number of houses approved was 17,399.

The WA Chamber of Commerce and Industry, in its just-released WA Economic Review, forecasts that housing sector commencements will rise to around 19,800 in 1999/2000 before

easing to around 17,600 in 2000/01.

The chamber believes the housing sector is to continue the robust growth recorded over the past two years, with dwelling investment predicted to rise by 9 per cent in 1999/2000.

A chamber spokesman said the increase in activity was due in part to the pre-GST rush and also explained the forecast decline in residential building over 2000/01.

Mr Iacomella said the surge in new home lending was only partly due to the GST.

“Low interest rates and soaring consumer confidence are also major factors behind the home loan lending spree,” he said.

BIS Shrapnel chief economist Frank Gelber said there was strong underlying demand in WA for dwellings that would continue to drive the market.

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