No. 3 - Department of Treasury - The Western Australian Government

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Western Australian Economic Summary2006 No.3The increasing cost of land has been a significant driver of growth in theprice of new house and land packages. The Housing Industry Association ofAustralia 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 of $140,974 in 1993, with the landcost comprising 57% of the this value. In 2006, this had risen to $379,000,with the land cost representing 71% of the total value.Despite the trend decline in building approvals and housing financecommitments, the amount of residential work yet to be started and the stockof dwellings currently under construction are still substantial (Figure 4). Thisshould support strong levels of construction activity over the short term.The trend number of residential buildings commenced in Western Australiahas exceeded completions in each quarter since September 2001, leading to astock of dwellings under construction rising to a record 21,791 in theJune quarter 2006. This equates to around one year’s worth of supply.Anecdotal evidence suggests that capacity constraints are a contributingfactor to the rise in the stock of dwellings under construction.Established HousingConditions appear to have softened in the established homes market inrecent months. REIWA data 1 indicate that the number of dwellings sold inthe September quarter 2006 fell by 9.3% to 14,700 (relative to the June quarter2006), while the number of dwellings available for sale at the end of 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 ofdays taken to sell a residential property in Perth rose slightly (by one day to32 days).Unpublished data from the Department of Land Information shows that inannual average growth terms, the number of residential properties sold inPerth was 0.2% lower in the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 of residential propertiessold in Perth of 26.3% in the year to March and 12.8% in the year to June 3 .1 The REIWA Market Update, September Quarter 2006.2 Data released by REIWA in late November 2006 indicates that this figure had risenagain to approximately 11,000 (Source: September quarter figures released, REIWAmedia release, 24 November 2006).3 The Department of Land Information data records when a contract is lodged withthe Department for the sale of a property and is consequently subject to anindeterminable time lag (the date a property is sold and the subsequent lodging of acontract can be anywhere between 5 and 8 weeks). Using annual average growthterms helps ‘smooth out’ the effect of this lag but caution should nevertheless beexpressed when reviewing the results.8 Department of Treasury and Finance
2006 No.3 Western Australian Economic Summary100%80%60%40%20%0%-20%-40%-60%Figure 5HOUSING FINANCE COMMITMENTSNumber, Original, 3 Monthly Year-Ended ChangeSep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06Newly ConstructedEstablishedSource: ABS Cat.5609.0Growth in the number of finance commitments for established housing inWestern Australia has also eased in recent months. The number of financecommitments for established houses (excluding refinancing) was 2.5%higher in the three months to September 2006 (relative to the correspondingperiod of 2005), compared to growth of 9.3% in the three months to August,and 17.1% in the three months to July (Figure 5).House PricesPerth’s median house price rose by 6.2% to $430, 000 in theSeptember quarter 2006, according to REIWA estimates. This represents a38.7% increase since September 2005.Data from Australian Property Monitors present a similar picture, indicatingthat the median house price in Perth for the September quarter 2006 was$491,587, up 5% on the June quarter 2006 and 39% since theSeptember quarter 2005. Perth’s median house price is the second highest inthe country, after Sydney 1 .Table 2MEDIAN HOUSE PRICESSeptember Quarter 2006Value ChangeQuarter Year, %Sydney $520,300 0.6Melb $377,000 6.2Bris $330,000 1.2Perth $430,000 38.7Adel $285,000 3.6Hob $290,000 8.8Canb $375,000 7.1Darwin $385,000 28.3Source: REIA Market Facts1 Source: Australian Property Monitors, September Quarter 2006 Housing PriceSeries.Department of Treasury and Finance 9
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No. 3 - Department of Treasury - The Western Australian Government

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