Western Australia’s residential property market is set for further growth in the year ahead but commercial construction is expected to soften, industry experts say.
Speaking at a conference hosted by the Master Builders Association and the Australian Institute of Building in Fremantle today, MBA chief economist Peter Jones said that low interest rates, population growth and a tight rental market had driven pent-up housing demand, particularly amongst first home buyers.
“Residential construction is set for a strong upturn, following several years of weak or declining activity,” Mr Jones told guests.
“This is all about low interest rates finally fuelling pent-up demand from previously strong state population growth.”
While final growth figures are yet to be confirmed, Mr Jones expects the state’s total residential starts for 2012-13 to come in at around 23,000, compared to just 17,548 in 2011-12.
Real Estate Institute of Western Australia director of policy and research Stewart Darby warned however that recent reports of declining consumer confidence indicated the upturn might not be sustained.
“I think there are a few headwinds out there,” Mr Darby said.
“I think 2013-14 is going to be good but in 2015-16 (and beyond), I think it’s going to be somewhat murky.”
The MBA’s research reveals the number of advertised building jobs and calls for subcontractors has increased in recent months, indicating strong demand for residential construction work.
The commercial construction market is expected to continue to trend downwards after a strong growth phase but Mr Jones said there was still a healthy amount of work to be done.
“There’s still some work around but margins have tightened and the tenders are pretty competitive, particularly for the small bread and butter jobs,” Mr Jones said.
“The market is dominated by mega-projects.”
“One concern we have is with the unfortunate demise of some commercial builders, it’ll have some flow-on effects to some of the subbies,” Mr Allingame said.
“That’s an issue I think that will probably play out over the next three to six months.”