Western Australia is one of the states that benefited most from the mining industry boom, and the affect of this incredible level of activity was felt in the construction industry as well. In fact, it seems as though this is only really falling away now. According to research from the Housing Industry Association (HIA), housing starts in WA are set to reach a record high this financial year, before dropping back to more normal levels.
In the autumn edition of the State Outlook Report for Western Australia, the HIA found that new housing starts are expected to increase by 4.6 per cent for this financial year, before dropping down for two consecutive years after that. The renovations sector is anticipated to be worth around $3.43billion by the end of 2015-16, as declines in activity this year are followed by a rise in spending over the next 12 months.
John Gelavis, HIA executive director for WA notes that this correction to long-run levels of building starts could come as a shock to some businesses if they do not prepare for lower rates of activity. While new build commencements are tipped to break the 30,000 mark for this financial year, the Real Estate Institute of Western Australia (REIWA) notes that there are a number of factors that could hamper activity in the following year.
“With building approvals on a downward trend since October 2014, and home loan commitments, along with a number of other indicators, also on a downward path, dwelling starts are expected to fall to 23,000 in 2015-16,” said Stewart Darby, executive manager of research at REIWA.
Mr Darby did however, go on to note that this drop is not as severe as it might seem. in fact, the level of activity is still healthily above the long term average of 22,000 since 2000-1. He noted that a drop in 2016-17 to a level lower than the average should be followed by a rise in the following year, making for a relatively easy dip in activity levels over all.
While the federal budget may be seen as a boon for real estate and construction businesses, with the $5.5billion small businesses and jobs package, the state budget for WA was not so friendly to this sector. Key funding for first homebuyers has remained intact, including stamp duty exemptions and the first home owner grant (FHOG) for new builds, but other areas have suffered.
The FHOG of $3,000 for existing homes has been deleted but is still around for a little while, as reported by REIWA. The Property Council of Australia notes that a third increase to the land tax rate has not been tempered with concessions in other areas.
“This is the third consecutive increase in land tax rates in WA without any relief from other harsh measures, like the practice of aggregating land holdings into higher land tax thresholds for assessment purposes,” said Joe Lenzo, WA executive director for the Property Council, in a 21 May statement.
“Another urgent measure to offset the broadening of land taxes is the abolition of stamp duty on real estate purchases. Stamp duty is universally recognised as the most harmful tax because it makes property buying less affordable and it limits households moving into housing they need.”
Mr Lenzo went on to detail how stamp duty stands in the way of urban infill plans which are a key part of the state’s planning for Perth. With the second most expensive housing market, and third most expensive median price for units, according to data from SQM Research, the Western Australian capital is in desperate need of some impetus towards more affordable housing.