08/07/2010 - 00:00

Residential building recovery stalling: HIA

08/07/2010 - 00:00

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THE residential building sector is concerned about the sustainability of a new home building recovery in Western Australia, according to new industry research.

Residential building recovery stalling: HIA

THE residential building sector is concerned about the sustainability of a new home building recovery in Western Australia, according to new industry research.

In its latest residential building outlook, the Housing Industry Association (HIA) revised its latest new home building forecasts for financial year 2010-11, down from 23,480 residential construction starts to 22,170.

Following the downturn in new dwelling starts over 2007-08 and 2008-09, the HIA had long held a view that there would be healthy growth in housing starts this year.

HIA chief economist Harley Dale said there were “clear concerns” over the durability of that recovery, particularly issues pertaining to land supply.

“Unfortunately what’s becoming increasingly clear, and this is showing up in both official data and anecdotes we’re hearing on the ground, that those problems relating to lack of readily available land and the like that plagued the industry last cycle are looking like they’re going to come home to roost again next year,” Mr Dale said.

Opposition spokesperson for housing, Mark McGowan, announced early this week that final approvals for residential lots in WA had fallen by 20 per cent under the Barnett Government.

Mr McGowan said during calendar year 2008, the Western Australian Planning Commission granted approval to 14,793 residential lots across the state, while in 2009, that number dropped to 11,849.

Other factors that have slowed the recovery, Mr Dale said, include a lack of finance available for residential development, taxation and regulation on new homes stoking greater demand for existing properties, and a large proportion of households spooked by rising interest rates.

“We’ll continue to make progress in the area of planning delays and the like, but at the moment its looking like its all been too little too late to allow for a sustained recovery this time around,” Mr Dale said.

“Hopefully it will allow for one at some point later in the decade, that starts to emerge sooner rather than later but at the moment its not looking like we’ve done enough to make a stronger 2010 into a stronger again 2011.”

The HIA report showed that to satisfy underlying demand in WA, some 30,000 new dwellings need to be built each year.

In calendar year 2010, housing starts are forecast to total 23,500, leaving a shortfall of 6,500 homes.

“That is a very big concern because it implies that the accumulated shortage of housing stock in the west is only going to get worse before it gets better,” Mr Dale said.

“That has obvious implications for the tightness of rental markets and it has the potential, once the resource recovery gathers legs, of putting an unnecessary large amount of upward pressure on existing home values.”

That pressure is not yet apparent, however, as the latest median house price research by industry analysts RP Data revealed the value of homes in Perth fell 2.1 per cent in the three months to May.

Perth was the only capital city to record a price fall in the last quarter.

ABN Group chief executive, Dale Alcock, said interstate and international economic conditions had combined to create enough uncertainty to dampen enthusiasm in new home building.

“WA at the moment has been pretty sluggish, in the last three to four months there has been a lot of holding back by the public,” Mr Alcock said.

“We’ve received a lot of interest from people wanting to build, particularly at the middle and upper end of the market.

“But with all of the financial instability in Europe and also the talk over a number of months about the resource super profits tax, as well as that last interest rate rise, I think it put people in a bit of a flat spin.”

Mr Alcock said he believed the weak performance of the Perth residential property market in terms of house values would be short lived.

“I think we’ll see price growth as the demand side picks back up and you’re still seeing land supply short,” Mr Alcock said. “You’ll see the pressure on there in terms of land pricing, and the question mark remains, what demands are we going to have in an improving economy on the labour side, and that’s the real curve ball.

“If labour markets steady, then that will obviously be sympathetic to labour price growth on the building side, but if that breaks out that will grow the overall pricing pretty rapidly, which says to all in our industry: train more apprentices.”

 

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