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New home demand remains strong

DEMAND for new houses continues unabated with building commencements and approvals showing strong growth.

The affordability of established and new houses also remains positive despite a 3.7 per cent increase in new home prices over the September quarter.

After a very strong June quarter, WA experienced the highest State growth in total dwelling commencements during the September quarter.

Australian Bureau of Statistics figures show WA dwelling commencements increased 26.5 per cent during the September quarter compared with the June quarter.

This is the second quarter in succession that WA has led the field.

In the June quarter, WA dwelling commencements increased by more than 10 per cent. Australia-wide the level remained unchanged during the June quarter.

In the September quarter, 4,742 new homes were commenced in WA.

Seasonally adjusted, commencements in New South Wales during the September quarter increased 16.9 per cent, Queensland rose 8.8 per cent, South Australia was up 8.3 per cent, Victoria jumped 7.8 per cent and Tasmania climbed 6.1 per cent.

Only the ACT had a greater growth in commencements with a 42.5 per cent increase in the September quarter.

Responding to the positive news, Master Builders Australia chief economist and deputy national director Wilhelm Harnisch said the results still did not justify an increase in interest rates.

“The September quarter figures certainly present no evidence of a need for a further interest rate increase,” he said.

“The housing industry has the supply capability to meet the projected level of activity for 1999-2000 without exerting undue inflationary pressure.”

The high level of building activity looks set to continue with WA building approvals increasing by 19.3 per cent seasonally adjusted during November 1999 – the highest percentage growth rate in Australia after Tasmania.

The continued strength in demand comes despite a drop in the affordability of houses – albeit a small one – caused by increases in builders’ costs.

Affordability of established houses captured in the Challenge Bank Index of WA Housing Affordability eased only 0.8 per cent in the September quarter.

This leaves the index only 0.5 per cent down on the same period last year and at a level that is supportive for further upward momentum in the housing sector according to Westpac’s Market Insights.

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