Western Australia’s residential market faces tough challenges ahead despite a continuing economic boom, according to the latest Housing Industry Association WA State Outlook report, released this week.
Western Australia’s residential market faces tough challenges ahead despite a continuing economic boom, according to the latest Housing Industry Association WA State Outlook report, released this week.
The September quarter 2006 report reveals WA is running a different race to the rest of the country, creating a clear two-track economy.
Rapidly industrialising China is undoubtedly prolonging the conditions, helping state final demand to grow by 14 per cent over 2005-06, 2.7 percentage points faster than China and 6.7 points faster than Queensland, the report said.
Dwelling investment in new housing was up by 5.8 per cent over the June quarter, and 18.8 per cent over the financial year.
Corresponding dwelling approvals were still strong, up by 27.8 per cent from January to July 2006, compared with the same time last year.
In August, total dwelling approvals reached 2,157, down from 2,585 in July, which resulted from a spike in multi-unit approvals to 820.
Responding to the report, HIA (WA) executive director John Dastlik said in the past three years, national housing starts had fallen by 14 per cent, with a savage drop recorded in New South Wales of 40 per cent, in stark contrast to WA’s growth of 25 per cent.
Mr Dastlik claimed rampant price growth, exacerbated by a lack of available land, was eroding housing affordability at an alarming rate.
“The only part of Australia with a worse affordability situation is Sydney, and the crisis there sent the new home building market into a recession,” he said.
“The boom has seen us caught napping with land supply, and we now face a chronic shortage. This is going to take some time to rectify, and over the next couple of years there will be a negative impact on the new detached house market.”
A HIA Commonwealth Bank affordability report confirms the upward pricing trend of established houses across WA, charting the price of established houses rising 6.3 per cent to $356,000 from June 2005 to June 2006.
In Perth, the median price for established houses rose 26.6 per cent over the same period to $445,000, the report said.
At the same time, WA’s first home buyer market is also suffering, with the proportion of first home buyers falling from 16.8 per cent in April, to a historical low of 13.5 per cent in July, which is well below the five-year average of 18.2 per cent.
Rental markets have responded in turn, with the report showing a vacancy rate of just 1.8 per cent in the June 2006 quarter, which is 0.4 per cent higher than the previous quarter but 0.7 per cent down on a year ago.
Mr Dastlik said housing starts were forecast to fall by eight per cent in 2006/07, and a further 13 per cent in 2007/08
Renovations spending, on the other hand, is forecast to grow by a further two per cent this financial year after reaching a record high in 2005/06 of $2.64 billion, before declining by an estimated six per cent in 2007/08.
The HIA believes this forecast of a decline is a reflection of an approaching peak in the house price cycle.
