No. 3 - Department of Treasury - The Western Australian Government
No. 3 - Department of Treasury - The Western Australian Government
No. 3 - Department of Treasury - The Western Australian Government
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<strong>Western</strong> <strong>Australian</strong> Economic Summary2006 <strong>No</strong>.3<strong>The</strong> increasing cost <strong>of</strong> land has been a significant driver <strong>of</strong> growth in theprice <strong>of</strong> new house and land packages. <strong>The</strong> Housing Industry Association <strong>of</strong>Australia recently released time-series data comparing typical new houseand land prices by capital city. A standardised 135sqm house on a 700square metre block in Perth cost a total <strong>of</strong> $140,974 in 1993, with the landcost comprising 57% <strong>of</strong> the this value. In 2006, this had risen to $379,000,with the land cost representing 71% <strong>of</strong> the total value.Despite the trend decline in building approvals and housing financecommitments, the amount <strong>of</strong> residential work yet to be started and the stock<strong>of</strong> dwellings currently under construction are still substantial (Figure 4). Thisshould support strong levels <strong>of</strong> construction activity over the short term.<strong>The</strong> trend number <strong>of</strong> residential buildings commenced in <strong>Western</strong> Australiahas exceeded completions in each quarter since September 2001, leading to astock <strong>of</strong> dwellings under construction rising to a record 21,791 in theJune quarter 2006. This equates to around one year’s worth <strong>of</strong> supply.Anecdotal evidence suggests that capacity constraints are a contributingfactor to the rise in the stock <strong>of</strong> dwellings under construction.Established HousingConditions appear to have s<strong>of</strong>tened in the established homes market inrecent months. REIWA data 1 indicate that the number <strong>of</strong> dwellings sold inthe September quarter 2006 fell by 9.3% to 14,700 (relative to the June quarter2006), while the number <strong>of</strong> dwellings available for sale at the end <strong>of</strong> thequarter in Perth increased by 84.2% to 8,829 2 .REIWA’s sales to listings ratio fell by 39.5 percentage points to 57.5%between the June and September quarters, while the average number <strong>of</strong>days taken to sell a residential property in Perth rose slightly (by one day to32 days).Unpublished data from the <strong>Department</strong> <strong>of</strong> Land Information shows that inannual average growth terms, the number <strong>of</strong> residential properties sold inPerth was 0.2% lower in the year to September 2006 compared to the12 months ending September 2005. Sales growth has slowed noticeably sinceMarch, with annual average growth in the number <strong>of</strong> residential propertiessold in Perth <strong>of</strong> 26.3% in the year to March and 12.8% in the year to June 3 .1 <strong>The</strong> REIWA Market Update, September Quarter 2006.2 Data released by REIWA in late <strong>No</strong>vember 2006 indicates that this figure had risenagain to approximately 11,000 (Source: September quarter figures released, REIWAmedia release, 24 <strong>No</strong>vember 2006).3 <strong>The</strong> <strong>Department</strong> <strong>of</strong> Land Information data records when a contract is lodged withthe <strong>Department</strong> for the sale <strong>of</strong> a property and is consequently subject to anindeterminable time lag (the date a property is sold and the subsequent lodging <strong>of</strong> acontract can be anywhere between 5 and 8 weeks). Using annual average growthterms helps ‘smooth out’ the effect <strong>of</strong> this lag but caution should nevertheless beexpressed when reviewing the results.8 <strong>Department</strong> <strong>of</strong> <strong>Treasury</strong> and Finance