15/09/2009 - 12:02

WA housing starts slump 18.1% in FY09

15/09/2009 - 12:02

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Low interest rates and a more generous government housing grant have failed to lift the rate of new home building, with housing starts in WA falling by a larger than forecast 18.1 per cent in 2008/09.

Low interest rates and a more generous government housing grant have failed to lift the rate of new home building, with housing starts in WA falling by a larger than forecast 18.1 per cent in 2008/09.

The Australian Bureau of Statistics dwelling commencements report for the June quarter showed that home starts in WA fell by a seasonally adjusted 6.3 per cent to 4,345 units.

Over the 2009 financial year, housing starts fell 18.1 per cent in WA, according to CommSec. The Housing Industry Association had yesterday forecast a fall of 15 per cent

Queensland suffered the largest annual fall in dwelling starts with a fall of 35.7 per cent followed by New South Wales with a 25.7 per cent drop to 23,282, its lowest level in 56 years.

Nationally, housing starts fell by a seasonally-adjusted 3.7 per cent to 30,411 units, when economists had expected a 1 per cent rise.

It was the fourth consecutive quarterly fall and the lowest result for the series since the June quarter of 2001, when 30,150 dwelling units were commenced.

Private new houses did rise by 3.7 per cent in the quarter, the first increase in a year, but other private residential building - such as flats and apartments - slumped a further 22.9 per cent in the quarter.

"What we're seeing is the lagged effects of earlier rate rises, the rate rises we saw through to the middle of 2008," ANZ senior economist Ange Montalti said.

"We've seen four quarters of decline in housing starts and we figure the June quarter is probably at the bottom in the market."

Between February and March 2008 the Reserve Bank of Australia raised interest rates by 50 basis points in two moves to 7.25 per cent.

The bank then slashed rates by 4.25 basis points to 3 per cent - a 49-year low - in six moves between September 2008 and April this year.

Mr Montalti said the effects of those interest rate cuts should be felt over the next year.

"We'll see the lagged effects of that coming through the next 12 months," he said.

The volatile private sector other category, which includes apartments, fell 22.9 per cent in the quarter to 6,741.

It was down 44.4 per cent since June last year and was the lowest result since the December quarter 1995 when it touched 6,799.

"It's difficult to get that sector going until they feel confident about the outlook for prices and until we have financiers with greater preparedness to lend to these projects," Mr Montalti said.

Meanwhile, total dwelling commencements fell by a seasonally adjusted 24.1 per cent in the year to June 2009.

JPMorgan economist Helen Kevans noted that dwelling commencements remained weak despite the federal government's decision to expand the first home buyers grant.

Last October, the federal government boosted the first home owners grant to $14,000 for existing dwellings and to $21,000 for new properties.

"It appears the sluggishness of starts, stemming mostly from other residential building owes mainly to supply bottlenecks, rather than a dearth of demand or profitable prospects in the housing sector."

"Indeed, approvals for residential housing rose an average of 11 per cent month on month over the June quarter."

The dwelling construction data follows the release of the June quarter national accounts on September 2, which showed Australia's gross domestic product grew by a seasonally adjusted 0.6 per cent.

 

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