Mixed expectations for housing recovery

HOUSING groups may differ on when the recovery in housing starts will take effect in Western Australia, but they seem to agree that supply side constraints will continue to present problems for the industry.

The Housing Industry Association doesn’t expect a significant recovery in housing starts until the 2010-11 financial year, a slightly longer time frame than that predicted by the Housing Industry Forecast Group.

The HIA’s state economic outlook for the September quarter indicated a recovery in new home building isn’t forecast to gather momentum until 2010-2011, with the number of starts growing by 14 per cent to 23,010 and a further 2 per cent to 23,470 in 2011-2012.

Earlier this month, the HIFG forecast dwelling commencements would improve in 2010 by 8.5 per cent, to 20,000.

The HIFG predicted commencement would either be steady, or rise slightly to 21,000 in 2010-11.

However, both outlooks indicated the most pertinent issue for growth in the sector was on the supply side, with concerns about the adequate and timely availability of land.

Relative to underlying demand, the level of housing starts forecast by the HIA is very weak, as housing completions for 2009 and 2010, based on very poor starts numbers, will remain significantly below demand levels.

On a calendar-year basis, the HIA said housing starts were forecast to decline by 10 per cent in 2009, to a level of 18,680, following a fall of 9 per cent last year.

In 2010 starts are forecast to grow by 15 per cent to a level of 21,570. 2011 should lead to further growth of 8 per cent, bringing starts to a healthier 23,240 dwellings, according to the HIA.

The HIFG said underlying demand for housing in WA was currently as high as 24,500 dwellings per year.

The HIA’s outlook did indicate a noticeable recovery was under way in total building approvals, which increased by 5.9 per cent in September, contributing to an 11.9 per cent increase over the September quarter.

But the HIA was concerned about the disconnect between the rate of growth in new home lending relative to building approvals, and the continuing weak state of the high density segment of residential construction due to a lack of available finance.

The HIA also reported a last-minute rush ahead of a cut to the First Home Owners Boost led to a surge in new home lending commitments in the September 2009 Quarter, but the total number of seasonally adjusted loans decreased by 0.9 per cent.