The number of dwellings expected to be built in Perth this year has increased to 22,500, and is forecast to stay around that level for the next three years.
The Housing Industry Forecasting Group’s new estimates build upon a range of data, such as building approvals, dwelling commencements and housing loan commitments, that all points to a strong recovery from last year’s very weak levels.
Dwelling commencements were just 17,785 in 2011-12, the lowest level in more than a decade and way down from the near-record level of 25,092 achieved in 2009-10.
The latest forecasts point to a much smoother pattern in future years.
The HIFG has upped its 2012-13 forecast from 21,000 starts to 22.500 starts; the latter equates to growth of 27 per cent.
It has added 500 starts to its out-years forecasts, which are now 22,500 in 2013-24 and 21,000-23,000 in the following two years.
The HIFG said its previous forecasts, prepared in October 2012, were based on several negative factors (such as continuing low levels of consumer confidence, overseas turmoil in financial markets and the end of the social housing stimulus) damping down the positive factors (such as continuing population growth and easing interest rates).
It has since adopted a more optimistic stance.
Continuing low interest rates, high rents in Perth and increased investment in the rental sector should contribute to the upside potential remaining stronger than the downside risks, the HIFG report stated.
Its report also noted some concerns about the supply of land to meet the increased demand.
“Whilst there is no measure of a shortage at this stage as building applications move through the system and approvals continue to trend up, the industry has indicated the availability of titled lots is emerging as a short term issue for commencements,” the report said.
This has occurred due to a shift in policy associated with the new Building Act, which allows for a building approval to be granted on a land sale contract whereas previously it required a titled lot, it said.
“We estimate WA will need around 17,300 serviced lots per annum over the period of our forecast, some of which will be sourced from demolitions and vacant land listings,” the report concluded.
Urban Development Institute of Australia (WA Division) CEO Debra Goostrey said the increased dwelling construction forecasts were a reflection of record population growth and the prospect of ongoing low mortgage rates encouraging both first home buyers and investors to enter the market.
“These first home buyers and investors are not necessarily buying new properties but they are freeing up existing owners to buy new homes, many of which may have been sitting on their hands since the middle of last decade,” she said.
Ms Goostrey said previous interest rate cuts had been a catalyst for the upswing in residential construction in Western Australia, and last Tuesday’s cut would further encourage land sales and residential construction.
“Since the beginning of the rate cut cycle in November 2011, residential land sales in Perth have more than doubled and we have also seen a substantial decline in the amount of land for sale,” she said.
