FALLING house prices and the potential for a rise in interest rate are causing the state’s home building market to stall, with the state government’s housing forecast group saying there will be no recovery in the next financial year.
FALLING house prices and the potential for a rise in interest rate are causing the state’s home building market to stall, with the state government’s housing forecast group saying there will be no recovery in the next financial year.
The Housing Industry Forecasting Group has predicted a dramatic fall in dwelling starts in WA to 20,000 this financial year, compared to 25,000 dwelling starts in the previous year.
“We have seen the group’s prediction of a 21 per cent fall in dwelling starts this financial year reflected in both approvals and commencements,” HIFG chair Stewart Darby said.
HIFG said with interest rates tipped to rise, low rental yields and falling housing prices, there was little to attract investors into the market to offset the absence of more than 5,000 first home buyers.
Mr Darby said the latest outlook suggested new housing starts would fall short of underlying demand in Perth over the next two years.
He said any growth in starts would be dependent on a lift in consumer confidence, no further interest rates rises and any funding boost the state government could provide for public sector housing and Keystart loans in its budget.
HIGF said while there was a shortage of affordable land for first home buyers, and in some preferred locations, a number of measures indicates that, overall, there was an adequate land supply to meet housing commencements into at least 2011-2012.
Final approvals for residential lots in the December quarter totalled 3,687 across WA, representing a 35 per cent increase from the previous quarter and 31 per cent from the same quarter of 2009.
Of the total, Perth accounted for 3,119 lots or 85 per cent of the WA total with 568 or 15 per cent in regional WA, including the Peel region.
Mr Darby said the Department of Planning’s latest initiative to collect information on dwelling demolitions was a necessary first step in understanding land supply and changes in the current housing stock.
Meanwhile, the release of the Real Estate Institute of Western Australia’s March quarter data has also shown that the housing construction sector is continuing to stall due to prospective ‘trade-up’ buyers finding it difficult to sell.
“It’s apparent across the economy that people are tightening their belts. This, along with weakening population growth, is the strongest factor currently influencing the housing sector,” REIWA president Alan Bourke said.
Despite these findings, REIWA’s data show that buyers are spoilt for choice, with about 17,800 properties listed, including more than 3,000 blocks of land.
With almost 50 per cent more properties than usual and the average number of selling days at 76, Mr Bourke said sellers must get their price right if they wanted a sale.
“Most sellers are dropping their asking price by around 7.5 per cent to get the deal done, while those who need a quick sale simply adjust their expectations and asking price before going to market,” he said.
Despite the sluggish market conditions, REIWA said the fall in median house price from December would only be 1 per cent and would settle at around $485,000 once all sales data were received.
REIWA said flats, units, apartments, villas and townhouses saw very little sales activity in the March quarter, which was largely attributed to a lack of investor interest.
“Multi-residential properties are often preferred by investors, but they are thin on the ground,” Mr Bourke said.
“As a result, the median price for a grouped dwelling in Perth has dropped by around $7,000 to $402,000 and in the regions by about $2,000 to $325,000.”
