Home building in Perth now waning as local economy bounces back

Latest Australian Bureau of Statistics building approval data reveals home building activity in Perth continues to weaken. 

Although the number of houses approved over July fell marginally over the month from 1488 to 1485, growth in the sector has continued to decline this year. The number of houses approved for building over the first 7 months of this year has fallen by 1246 to 10,494 compared to the same period last year  – a decrease of10.6 per cent.

While new house approvals in Perth are down this year so far, unit approvals have increased. 4504 units have been approved for building over the first seven months of this year – an increase of 458 or 11.3 per cent over the same period in 2014.

Overall however the total number of homes  approved for building in Perth this year so far is 788 fewer than approved over the first seven months of last year. Although the Reserve Bank has unsurprisingly decided to leave official interest rates on hold over September, the chances of another rate cut this year have recently increased. Rising unemployment and growing concerns over the prospects for the global economy – particularly China, may activate the bank to act to stimulate the local economy, particularly as the bank has conceded that underlying growth may now be lower than previously forecast.

Latest ABS data reporting near flat GDP growth over the June quarter reinforces rising pessimism over the future direction of the Australian economy and a downward bias for interest rates. A sharp fall in the Australian dollar this week is a positive however for Western Australia’s export-orientated industries. Western Australia reported the highest result of all the states for State final demand for the June quarter with an increase of 1.5 per cent following a 1.6 per cent fall over the March quarter. According to the ABS, non-residential construction was the strongest contributor to growth with an increase of 7.8 per cent.

Non-residential construction continues to rise in Western Australia with the ABS reporting an increase in the value of private sector work approved over the first seven months of this year 2.2 per cent higher than over the same period last year. $408 million in non-residential building was approved over July – the highest monthly total since January 2014.

Dr Andrew Wilson is Domain Group Senior Economist Twitter@DocAndrewWilson