By Leith van Onselen
I noted last week how the RBA and Treasury?s hope that the void left by the unwinding of the mining boom will be filled by a pick-up in housing construction looks overly ambitious.
Even in Australia?s boom state ? Western Australia (WA) ? the housing construction outlook is weak, with data released by Landgate showing that land sales have tanked to their lowest level in the series? 11-year history, despite land prices coming off by -$30,000 from their November 2007 highs (see below chart).
The news for the established home market is better, with house sales rallying 30% from their January 2011 lows, but still highly subdued relative to pre-2006 levels.
Housing Industry Association (HIA) new home sales data is a little more optimistic for the construction industry, with new house sales rising this year, albeit from decade low levels. However, dwelling approvals data from the Australian Bureau of Statistics shows that house approvals continue to trend lower, suggesting that WA developers have been clearing excess inventories (see below chart).
With WA?s population currently growing by 3% per year, the construction industry will need to turn things around fast. WA rents are surging ? up 15.4% in the year to September, according to Australian Property Monitors ? suggesting that housing supply is extremely tight.
New house and land sales, along with dwelling approvals, will need to rise sharply from their current depressed levels in order to both alleviate the rental squeeze, as well as support the WA economy as the iron ore price boom, and related mining projects, come off the boil.
?Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia?s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
Source: http://www.macrobusiness.com.au/2012/10/wa-land-sales-fall/
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