Soft landing tipped for housing

WITH building approvals for private sector houses and total dwelling units falling for the past four months, all indications suggest that WA’s housing boom is on the wane. Most industry analysts agree, however, that WA is well insulated from the dramatic oscillations of the east coast market.

With downturns of 12.6 per cent in NSW and 19 per cent in Queensland in the December 2002 ABS report card it is no wonder some WA investors are nervous the State’s more modest 5.6 per cent drop will take a similar turn.

Housing Industry Association executive director John Dastlik said WA did not have the same reliance on multi-residential developments and had a more conservative trend in regards to these developments.

“The WA multi-residential market was far better planned than [that] over east, in my opinion. Developers have been a little more cautious and the slowdown won’t have as big an impact,” he said.

Despite the gradual winding down of the housing industry, Mr Dastlik said the industry would continue to enjoy good health well into the calendar year.

“Interest rates have had a bearing and WA’s solid employment history is another factor that has kept the industry levels above normal,” he said.

Mr Dastlik expects to see bigger reductions in housing approvals at the tail end of 2003 and into 2004.

“WA is fortunate in that it has had a strong housing cycle for the past 12 months and I believe we are going into a strong engineering cycle, and the housing cycle will back that up,” he told WA Business News.

“Other States are not so lucky as they do not have the same level of resources as WA.”

Chamber of Commerce and Industry chief economist Nicky Cusworth said the deceleration of the housing industry in WA did not appear to be abrupt and looked like it was heading for a soft landing.

“NSW and Queensland have had this speculative boom with a lot of approvals for large multi-residential projects that came through in the second half of 2002,” she said.

“WA isn’t the same in that it hasn’t had the same level of over-building and speculation, so it won’t have the same rate of deflation.”

Ms Cusworth expects interest rates to hold for the next few months while inflation will continue to stay comfortably in range.

While the North West Shelf re-source projects would give WA fairly strong growth figures as they came on line in 2003 and 2004, Ms Cusworth said this was cold comfort to anyone in the housing industry.

“It will be good for the heavy fabrication-type industries but for the residential end of the market [it] won’t make much impact. The fact there is a boom in Burrup does not mean much to the bricklayer in suburban Perth,” she said.

Ms Cusworth said the good news was that the market had built up such momentum during the housing boom period that there still was a lot of outstanding work to be completed.

Residential and Commercial Total Development Solutions general manager Rohan Taylor said the same level of downturn on the east coast would not occur in Perth, as the housing industry had not experienced such a dramatic boom period.

“As we go into the downturn, States are developing their own individual characteristics,” he said.

Mr Taylor said rental yields had declined marginally in Perth but these were found to be more on a micro level, where a suburb had an oversupply after a period of high-level construction.

“Vacancy actually fell marginally in the last quarter and clearance rates are up,” he said.

FPD Savills research manager Chris Freeman said developers would have to pay more attention to positioning in the future housing climate. Well-positioned developments would still do well but developers would have to be smarter about what they did in a certain areas, Mr Freeman said.

“The Welllington Street side of East Perth is the only area you could compare to Sydney as there is more stock,” he said.

“You go to South Perth and look for a luxury apartment and there is no chance you will find one, everything has been sold that has come on line.”