28/05/2019 - 15:32

Housing construction outlook continues to worsen

28/05/2019 - 15:32

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The Housing Industry Forecasting Group has downgraded its forecast for new house builds in Western Australia for this year financial year to a record low, tipping a 13.9 per cent decrease from its previous forecast.

Housing construction outlook continues to worsen
HIFG says several factors, including low population growth, have contributed to the weak residential construction market.

The Housing Industry Forecasting Group has downgraded its forecast for new house builds in Western Australia for this year financial year to a record low, tipping a 13.9 per cent decrease from its previous forecast.

However, the HIFG believes conditions will improve next financial year as the market bounces back from the current trough.

In November, the HIFG expected the commencement of 18,000 dwellings for this financial year, but it now anticipates that figure to fall to 15,500.

The forecast figure would be a 14.48 per cent reduction from the 18,124 of new builds last financial year.

It would also be the lowest figure for at least 15 years, according to the HIFG's statistics. 

The market peaked during the 2014-15 financial year, when over 31,000 new dwellings commenced construction.

In February, the Housing Industry Association downgraded its forecast for new house builds in Western Australia for the 2019 calendar year, tipping a decrease of 0.9 per cent, compared with its previous estimate in May 2018 of an 11.8 per cent rise.

The decrease would take house starts to 12,261, down from HIA's prior forecast of 14,592.

HIFG said the weak residential construction market was due to several factors.

“Population growth, one of the key drivers of dwelling demand, has improved but remains soft,” it said.

“Subdued labour market conditions, with low wages growth, have also dampened demand for new housing, along with good availability of stock in the established market.”

The WA domestic economy contracted over the 2018 calendar year, with state final demand falling by 0.5 per cent in annual average terms.

This has had an impact on wages, with the wage price index increasing by just 1.7 per cent in the year to December 2018.

HIFG also cited the financial service Royal Commission as a key influence, as well as the state government’s recently announced planning initiative, Design WA.

“Members highlighted the high degree of uncertainty in the residential market and the economy, with access to finance post the Royal Commission a key constraint on activity,” it said.

“Along with the soft conditions in the industry, the cumulative impact of a number of proposed policy and planning settings which impact the development industry, such as Design WA, are adding to concerns.”

As part of the Design WA initiative, a State Design Review Panel comprised of 50 experts was appointed by the state government last week to oversee the design quality of major new development proposals.

New apartment developments will need to adhere to Design WA codes, which the state government said is to ensure all development is underpinned by good design, from the concept stage through to delivery.

The HIFG forecasts 17,000 new builds next financial year, and between 18,000 and 21,000 in the following financial year as the economy begins to recover.

"Despite the relatively low level of commencements, members noted that there are signs some aspects of the Western Australian economy have bottomed, with this trend expected to support dwelling commencements in the medium-term," it said.

 

 

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