Starts to soften further

Western Australia’s housing industry appears to be struggling on most fronts, according to market indicators.

New house starts, home loans and the Perth median house price have all fallen in the past few months, while listings of homes and blocks of land have more than tripled in the past year and a half.

The Housing Industry Association’s March outlook report, released earlier this week, showed housing starts in WA were down 13 per cent in 2007, well above the national fall of 2 per cent. 

In its report, the HIA has revised down its forecast for the current financial year, by 1 per cent, bringing the expected fall in housing starts to 12 per cent.

More significantly, it has downgraded its prediction for the 2008-09 financial year, estimating a further fall in house starts of 3 per cent, rather than the flat year previously forecast. 

HIA WA executive director John Dastlik said while the cost of labour and materials had risen, the biggest impediment to housing starts was the risk of future interest rate rises.

“It’s really the interest rate regime and uncertainty as to where that’s going which is the major issue, causing people to delay their decision to build a house,” he said. 

However, the downward trend is likely to be arrested next year, according to the HIA, with 2008-09 expected to be the bottom of the housing starts cycle.

This is based on expectations of an interest rate reduction in 2009-10 and the introduction of national policies to address affordability.

Other indicators have pointed to a downturn in the market, with Perth’s median house price falling 2.7 per cent to $457,000 in the March quarter, according to data from the Real Estate Institute of Western Australia.

The organisation’s report also showed house and land listings jumped from 5,000 to 17,584 over the 18 months to the March quarter.

Home loans in WA are also down, with Australian Bureau of Statistics data showing an 11.6 per cent fall in loans for owner-occupiers in February – the biggest fall of all the states.

Mr Dastlik said the softening in the home building sector was likely to continue in the short term due to higher interest rates and construction costs.