Consumer confidence in WA weakened during December 2015 according to Westpac–Melbourne Institute as a result of future job cuts announcements and anticipated weaker mining conditions.
Sales and listings activity
Total sales volume declined over the December quarter as the market experienced a significant increase in listings in November 2015, almost crossing the 17,000 mark before retreating to around 14,500 across the festive season.
First home owner grants
On a positive note, there were a total of 8,984 first home owner grants for new dwellings approved in the year to December 2015, which is the highest number of grants approved on an annual basis since year 2000.
This is an increase of 1,093 grants for new dwellings approved compared to a year ago. Despite a quarterly decline, the historical high new dwellings grants paid as of the year 2015 further reinstates the fact that first home buyers are taking advantage of the softening market to secure a good deal.
Net overseas migration to the state dropped by 37.3 per cent over the year and 63.6 per cent on a quarterly basis, according to data released by the Australian Bureau of Statistics as of June 2015.
Net interstate migration in Western Australia declined by 18.4 per cent over the quarter to June 2015 and declined even more significantly over the year.
This slowdown in population has impacted Perth’s rental market with the vacancy rate recording a historical high of six per cent as of the December 2015 quarter. The vacancy rate is expected to increase further as the record level of new dwellings commenced in the booming years of 2013 and 2014 are completed in 2016 and 2017.
Interest rate impact
Record low interest rates have done little to stimulate activity over the past 12 months. Any further rate reductions in the first half of 2016 are unlikely to lift activity due to the strength of socio-economic forces that are stifling investment and confidence in WA.
The year ahead
As we move further into 2016, the big challenge confronting the Perth market will be the impact that the completion of record levels of new dwelling construction will have over the next two years.
The impending supply of dwellings, coupled with the downturn in population may lead to a surplus supply of houses in the short term. Nevertheless, the market welcomed a favourable decline in WA’s building approvals once again this quarter by 14.5 per cent.
This will allow the market to work on the sizeable backlog of dwellings that have previously been approved and avoid exerting additional pressure on the market.