29/10/2008 - 22:00

Housing boom goes bust over crisis

29/10/2008 - 22:00

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THE global financial crisis continues to take its toll on the construction industry, with more than half of the state's builders indicating they will be reducing subcontractor numbers in the next 12 months.

THE global financial crisis continues to take its toll on the construction industry, with more than half of the state's builders indicating they will be reducing subcontractor numbers in the next 12 months.

A poll conducted of Master Builders Association of WA members last week found that about 56 per cent of businesses surveyed said they would be reducing subcontractor numbers in the next 12 months.

22 per cent said they wouldn't be cutting subcontractors in the next 12 months, with 22 per cent unsure.

The survey also found that one in four respondents had experienced tightening in credit conditions, with 61 per cent saying the credit crunch will have an impact on building commencements or completions.

The dramatic turnaround has been the culmination of a general slowdown in demand since the start of the year, with the global economic crisis fuelling a further reduction in consumer confidence.

MBAWA director Gavan Forster said the boom was over and the industry was now going into a bust cycle.

"12 months ago, building was having a shortage of trades. Now people are looking at retrenchments. And that's spread across all trades now," he said.

He said builders would be completing jobs over the next year or two, but after that there wasn't much in the pipeline.

"Builders now have got plenty of work. The downturn won't be manifested onsite for another year."

Mr Forster said there had been some builders hit by clients deferring or cancelling jobs, including one residential builder who had a $12 million project cancelled.

Anecdotal evidence suggested that delays and cancellations were mostly hitting larger jobs, with luxury home-builders among the hardest hit.

Luxury home-builder Artique Homes director Malcolm Goode said clients were now holding off because of the double whammy of falling share prices and property values.

"There's no movement in the mid to top level of the market," he said.

Mr Goode said while the first homeowners grant did not directly affect the luxury market, it could create a knock-on effect by stimulating buying and selling and giving homebuyers the option to buy up.

Plunkett Homes managing director Tony Pritchett said confidence in the market had taken a battering.

"We're in the second and third home buyer market, and a lot of clients are very hesitant and there's reluctance to make decisions in the normal time frame," he said.

But, Mr Pritchett was confident of a recovery in about mid-2009.

"There's still people who want to build, but their confidence has been hit."

Data from the Housing Industry Association, released earlier this month, showed housing starts fell by close to 10 per cent in 2007-08, compared with the previous financial year.

The number of finance commitments for new owner-occupied dwellings in WA has been falling since mid 2007, with commitments for the three months to June 2008 down 20.6 per cent compared to the three months to June 2007.

Lots sales have also been trending down, with lots sold reaching 1,062 in the June 2008 quarter, the lowest result in eight years.

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