Positive signs for the year ahead
The housing sector could finally be at the end of a downturn, however, recovery is predicted to be slow and homebuyers are likely to still enjoy favourable buying conditions throughout 2020, according to industry bodies.
The past 12 months have been difficult for Western Australia’s residential building sector, with the fallout from the Banking Royal Commission stifling hopes of a turnaround.
Banks tightened their lending standards, making it harder for prospective buyers to secure a loan than it was a few years ago.
This had flow-on effects for builders already operating in a challenging market, where things had been flat for some time.
“Over the year to March 2019, work started on 15,375 new homes across the state, which was the lowest result for any 12-month period since 2001,” Master Builders WA Housing Director Jason Robertson said.
“Building activity has fallen by 53 per cent since March 2015.”
It wasn’t just the builders. CommSec’s most recent State of the States report ranking WA seventh out of eight states for overall economic performance.
“2019 was one of the toughest on record with the perfect storm of soft conditions in the domestic economy, challenges accessing credit after the Royal Commission and consumer caution in the lead up to the May Federal Election,” Housing Industry Association WA Executive Director Cath Hart said.
“The big disruption for the market this year was around what the new normal would be, as banks, mortgage brokers and the development and construction sectors worked to recalibrate in a post-Royal Commission operating environment.”
While 2019 was a tough year, Ms Hart and Mr Robertson both believe WA has turned a corner as we start 2020.
“The biggest driver of activity in our sector is population growth and when it starts to rise, building activity will rise to meet the demand for homes,” Mr Robertson said.
While WA’s population growth has slowed considerably post-mining boom, things are starting to turn. From 2015-18, 114,600 people moved interstate to WA, while 156,650 people made the choice to head east – a net loss of 42,050 people, according to the Australian Bureau of Statistics (ABS).
Meanwhile, ABS figures show in the year to June 30, 2018, WA attracted just 5.4 per cent of all migrants to Australia.
However, WA’s current annual population growth of one per cent is its highest in four years, according to the CommSec report.
Mining investment is also on the up, with the Pilbara region experiencing a resurgence in mining construction activity over the past year.
On a policy front, the State Government announced significant reforms in 2019 aimed at kickstarting the residential building sector.
“The WA Government’s recently announced $150 million Housing Investment Package and stamp duty relief for off-the-plan purchases will help the industry retain staff and train apprentices in relevant trades so we have enough suppliers and skills for when the broader market recovers,” Ms Hart said.
Changes to Keystart also came into effect, with income threshold increases applied mid-2019 extended to the middle of 2020.
The income limits to access low deposit Keystart loans are $15,000 higher for singles and $20,000 higher for families until June 30.
“This is a move which allows more Western Australians to get on the property ladder, as well as giving the new homebuilding sector a boost,” Mr Robertson said.
What does this all mean for the consumer?
While a housing recovery could be on the cards, it’s expected to be moderate in the short term, which means budding new homebuilders are still in the box seat for 2020.
“WA remains one of the most affordable places for homeownership in the country. Over the past six months, things have settled down as the industry has adjusted to new regulatory and policy settings,” Ms Hart said.
“The fundamentals in the WA economy are sound – confidence is the key now. We expect consumer activity will slowly but surely rise again throughout 2020.”
Mr Robertson shared this optimism.
“Great deals are available, but they will start to disappear as population growth takes hold, employment gets stronger and momentum increases in the resources sector.”
Source: The West Australian
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