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  • WA housing sector remains soft, but positive signs emerge moving forward

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    Western Australia’s housing sector is expected to improve in 2017-18 despite continued weakness experienced in 2016-17, according to the Housing Industry Forecasting Group’s (HIFG) latest report.

    Dwelling commencements

    HIFG confirmed its forecast for 19,000 dwelling commencements for 2016-17. This figure represents a 25 per cent fall on 2015-16, which HIFG say is not unusual giving the cyclical nature of the housing sector.

    The Group is predicting 2016-17 will be the bottom of the cycle. Dwelling commencements are expected to recover to 21,000 in 2017-18, based on early indications of a moderate recovery in population growth, employment conditions and the general economic outlook. Stronger recovery within a range of 22,000 to 24,000 in 2018-19 and 2019-20 is predicted.

    Economic overview

    After more than a year of decline, WA’s State Final Demand (SFD) grew by 0.4 per cent in the December quarter 2016. However, over the year, SFD fell by 7.8 per cent, with business investment remaining the largest detractor to growth over the year.

    WA’s labour market appears to have stabilised, with the unemployment rate sitting at 6.4 per cent over the past few months, and there has been an increase in full-time employment levels over recent periods.

    According to the CCI Survey of Consumer Confidence, there are signs economic confidence is returning with people expecting the local economy to improve or remain unchanged in the short term.

    Population growth

    Population levels in the state continues to slow, with a growth rate of one per cent recorded for the year to September 2016. WA’s residential population is estimated to now sit at 2,623,164.

    Net interstate migration remains firmly in the negative, and net overseas migration grew by only 13,315 in the year to September 2016. However, the Group believe record low growth in population has now stabilised and expect a subdued pick-up over the forecast horizon.

    Established purchase and rental market

    House prices in Greater Perth rose by one per cent in the December quarter 2016, but were down three per cent when compared to the December quarter 2015. Overall, house prices in regional WA improved, but there were large variations between markets.

    The rental market remains soft, with the vacancy rate sitting at 6.4 per cent in the December quarter 2016. Listings for both houses and units in the sector remain at record highs, and rents have fallen by 10 per cent over the year to $355 per week in the March quarter 2017.

    First home owners

    Although the overall volume of first home owners in the market has declined (in line with general market trends), they continue to make up a significant proportion of the WA housing market.

    First home buyers in WA secured 22 per cent of total finance commitments in February 2017. This is in-line with the state’s decade average and notably above the national level of 13 per cent.

    Industry issues and challenges

    HIFG have concerns that any changes to the policy or regulatory environment at all levels of government are likely to impact heavily on the WA market and the Group’s forecast.

    The Group notes that regulatory measures, which are designed to cool price growth in the Sydney and Melbourne markets, would have an equal effect on WA’s already softer market. This presents a key risk to the outlook.

    Despite softer market conditions across both the residential sales and private rental sector, the Group recognise that housing affordability continues to be a significant issue for Western Australian households on low incomes.

    For more information about the HIFG forecast, view the official 2016-17 update.