Housing recovery hard to predict

Western Australia's declining residential building sector will bottom out by next year, however the state government's official forecaster says the speed of any potential recovery beyond 2016-17 would be difficult to predict.

The Housing Industry Forecasting Group today released its updated forecasts for the building industry, maintaining its view that there will be around 19,000 dwelling starts in 2016-17.

That level of activity represents a 26 per cent fall on 2015-16, a year when commencements also fell by a similar percentage from record highs of activity in 2014-15.

HIFG chair Steven Rowley said the figures remained in the normal cyclical range for the state's housing industry.

Dr Rowley said the expectation that population growth in WA would remain subdued was key to the HIFG outlook, with the state growing by just 1.2 per cent in the year to the end of March.

He said the availability of established homes and falling rents would also dampen demand for new housing.

For 2017-18, the HIFG predicted 21,000 starts, growing to between 22,000 and 24,000 in 2018-19 and 2019-20.

"Given these figures, the HIFG foresees no difficulty in meeting the predicted need for serviced residential lots in the forecast period," the HIFG said.

Also today, the Housing Industry Association released its annual outlook for the state, predicting similar levels of activity for the upcoming years.

The HIA said there were 25,498 new dwellings commenced in 2015-16, with 17,974 of those detached houses.

It also predicted another significant fall of activity in 2016-17, predicting 14,954 detached houses to be started.

“While the WA economy is currently racked by poor sentiment as it works through a number of the excesses that built up during the mining investment boom era, we expected the post-boom slump in detached house commencements is likely to reach its nadir in 2016-17,” the HIA said.

“However, after the cycle bottoms out, we expect the recovery to take more of an ‘L-shape’ than a ‘V-shape’, i.e. a gradual recovery, rather than a quick rebound.”

For units and apartments, the HIA expected a higher amount of supply than historically, however it also flagged a large contraction in commencements in 2016-17.

The HIA said multi-residential commencements were set to drop by 35.1 per cent in 2016-17, compared with the previous year.