Faint light at end of tunnel for building market

Stock image.
Stock image.

THERE is a light at the end of the tunnel for the WA building market, but a recovery is still some way off according to the Master Builders WA.

Executive director John Gelavis said positive indicators included signs the WA economy was slowly coming out of the tough years following the mining slump, and populations growth.

“The state economy has started to generate new jobs again, 20,500 of which were created over the year to June 2019,” he said.

“While the 5.8 per cent unemployment rate is still higher than desirable, there is evidence the resumption of jobs growth is contributing to a sustained reduction in unemployment.

“Population growth, which is a good guide of a state’s economic health, shows WA is improving.

“The pace of population growth has been slowly gathering momentum since bottoming out in mid-2016 and in 2018 we saw growth of 0.9 per cent, which is equivalent to an additional 23,960 people.”

Residential building

Mr Gelavis said population growth was the single biggest driver of activity in the building and construction sector, but when it came to new home building, there were few signs that the modest improvements in terms of population and employment growth were translating into activity on the ground.

According to the Master Builders latest Building & Construction report over the year to March 2019, work started on just 15,375 new homes in WA, the lowest result for any 12-month period since 2001.

Activity has fallen 53 per cent since the state’s new home building cycle peaked at 32,805 starts over the year to March 2015.

A solid and sustained upswing in new home building is expected in 2020/21.

Mr Gelavis said the depressed levels of new home building activity over recent years meant that medium term demand for housing in the state was not being fully met.

“As housing supply remains below demand over a prolonged period, house prices and rents will eventually stabilise and bring about growth in new home building activity,” he said.

“Home building is projected to shrink by a further 6.1 per cent during 2019/20 before a solid and sustained upswing takes hold in 2020/21.

“By the end of our forecast horizon in 2023/24, the number of new home starts will be 15.4 per cent higher than in 2018/19.”

The report forecast the WA home renovations market to perform well over the next few years, with activity projected to expand by 9.1 per cent to 2023/24.

Commercial building activity

“Like residential, commercial building activity in WA has been in decline for several years but there is light at the end of the tunnel,” Mr Gelavis said.

“Commercial building is expected to bounce back by 22.7 per cent in WA during the 2019/20 financial year and, while activity is anticipated to retreat a little from this high point over future years, the volume of work will still be quite elevated by the standards of recent times.

“Growth is expected in the important retail, offices and education sectors.”

Engineering construction activity

Mr Gelavis said engineering construction in WA was a shadow of its former self during the resources boom.

“The roll out of government infrastructure work means several years of sizeable growth, with a 20.9 per cent increase projected for 2019/20 and a further 15.5 per cent uplift anticipated in 2020/21,” he said.

“While growth is expected to peter out towards the end of the forecast horizon, we expect by 2023/24 the volume of engineering construction in WA will be 44.2 per cent larger than 2018/19.”

More real estate news