GST spending frenzy draws to a close

DWELLING approvals turned in a solid result in February defying expectations of a 3 per cent decline to fall only 1.1 per cent after a strong 6 per cent rise in January.

The private sector house component rose 4.3 per cent – the fifth rise in the past six months.

Westpac economist Harley Dale said approvals remained 16.8 per cent higher than year ago.

“We doubt we have yet seen the peak in the housing cycle,” Mr Dale said.

“We regard this as a strong result for the housing sector, confirming the continued strength in this sector of the economy,” he said.

Real Estate Institute of WA president Neville Fox said the results marked the beginning of the end of the GST-induced building frenzy.

“Demand for new housing is now more related to long-term factors such as population growth and home loan affordability,” Mr Fox said.

The latest monthly housing report by REIWA also showed that the market could be returning to normal conditions.

Property values increased to a median $152,800 which is up 1.6 per cent on the previous month and 6 per cent up on the same time last year.

“The increase in property values in February was the largest monthly increase since 1995,” Mr Fox said.

“The latest increase in property values is mostly a reaction to the very large increase in sales that occurred late last year,” he said.

The average time to sell a home lengthened slightly in February. The average selling time was fifty days, which is up by four days on January.

“The busiest sectors were redevelopment zones where home unit construction is popular, including suburbs such as Innaloo, Yokine, Rivervale and Melville.

“In the rental market, the proportion of vacant rental properties in Perth was 2.7 per cent, which is the first fall in vacancies for over twelve months.

“However the median weekly rent was little changed in February at $148, which is only up $1 on the previous month,” he said.

BIS Shrapnel chief economist Frank Gelber, speaking in Perth recently, said he expected WA building commencements to fall by 15 per cent in the 2000-01 year after a 12 per cent increase in the current financial year.

He said underlying demand remained strong in WA but had slipped by 4 per cent to 17,800 dwellings per annum for the forecast period 2000-05.

The net interstate inflow during the past two years from the effects of the Asian crisis had impacted on underlying demand, he said.

BIS Shrapnel expects dwelling commencements to increase by 23 per cent in the current year with a sharp 25 per cent decline next year.

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