Grant lag retards new home sector

THE WA home building sector is on the road to recovery but is unlikely to fully recover from the effects of the GST for a further two years.

The $14,000 first home buyers’ grant is only now beginning to boost the industry, taking more than three months to have an impact.

WA building activity figures from the Australian Bureau of Statistics for the June quarter show the housing construction sector was still in decline throughout the fourth quarter of the 2000-01 financial year, reporting a 3.4 per cent decrease in the total number of dwelling commencements from the previous quarter.

Only 3,286 residences were started in the June quarter, the lowest level since March 1991.

And the value of building work started fell by 4.9 per cent to $424 million.

But Housing Industry Association executive director John Dastlik said anecdotal evidence suggested the industry had turned around and expected the September quarter figures to reflect this.

Mr Dastlik said the low June figures were a result of a “lag time” between the increasing of the first home buyers’ grant and the time it took people to receive grant approval and source finance.

Real Estate Institute of WA public affairs director Lino Iacomella said the scheme for first home buyers had taken a little longer than expected to have an effect.

“The extra grant for home buyers was only made available in March this year and obviously it required several more months to have an effect,” Mr Iacomella said.

And while the housing industry was looking to a much more prosperous year than 2000-01, Mr Dastlik believed it would be two years before the industry would return to normal levels of activity.

“The September and December quarters will be much better than before and will continue that way until half-way through next year, now that the first home buyers’ grant has been extended,” he said.

Both the Liberal Party and the Australian Labor Party have pledged to extend the grant until the end of the financial year, although the amount will drop from $14,000 to $10,000 after December 31 this year.

“However, I still believe that, even with the grant, home building levels will be slightly lower than what we would expect in a normal year,” Mr Dastlik said.

“Once that grant is finished we are likely to see a slight decline in home building activity throughout the 2002-2003 financial year, we will lose some market share then.

“It is likely to be in the 2003-2004 financial year that we will see natural levels of home building activity return.”

Master Builders Association housing director Gavin Forster expected about 18,000 homes would be built this financial year, an increase of more than 35 per cent on the previous year.

However, he too predicted the industry would experience a slight drop in the number of new homes built in 2002-2003 before returning again to an average level of 18,000 in 2003-2004.

Mr Forster also noted the first home buyers’ grant had only affected a portion of the home building industry and that the number of second and third home builders had dropped markedly.

“This section of the market is not running as well … these people aren’t eligible for the grant and are usually cashed up, meaning interest rate cuts won’t have a huge impact on their decision to build,” Mr Forster said. “Plus, the psychological impact of recent events and the domestic economy has also deterred them from building now.”

Mr Iacomella said the home buyers’ grant had dragged forward a lot of demand and it would take some time for that demand to pick up again.

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