THE HOUSING INDUSTRY FORECASTING GROUP (HIFG) RELEASED THEIR MEDIUM TERM FORECAST FOR DWELLING COMMENCEMENTS THIS WEEK. HIFG IS A JOINT INDUSTRY AND GOVERNMENT BODY THAT WAS ESTABLISHED BY THE STATE GOVERNMENT TO PROVIDE INDEPENDENT COMMENTARY ON THE HOUSING SECTOR IN WA. IT HAS A BROAD RANGE OF INDUSTRY REPRESENTATION, INCLUDING UDIA, ALONG WITH THE DEPARTMENTS OF PLANNING, HOUSING, AND PREMIER AND CABINET AS WELL AS TREASURY AND THE AUSTRALIAN BUREAU OF STATISTICS. THIS TEAM OF EXPERTS POOL ALL OF THE AVAILABLE DATA IN AN EFFORT TO GET INSIGHT INTO WHAT WILL HAPPEN OVER THE NEXT FOUR YEARS.
Forecasting is an art not a science so it is unsurprising that the dwelling commencements for 2013/14 were originally underestimated at 24,000, the same as 2012/13. The actual result was a staggering 28,966 dwelling commencements, a new record in Western Australia. This financial year, HIFG believes that the commencements will fall to around 25,000, with a further a fall in 2016/17 to 22,500.
There are a number of wild cards that could substantially impact on that outcome including the four-fold increase in the levy for taking construction and demolition waste to the tip. Another wild card is the new bushfire policy and regulations and UDIA is continuing to work with the government on the roll out of that policy which is likely to impact on both the location and cost of development.
Migration is the third wild card. Most people will be aware that the rate of migration has fallen in the wake of the slowdown in the mining sector. The fall had an immediate impact on the rental vacancy rate, which has doubled since 2012. What is harder to forecast is the medium term impact of migration as the flow of migrants washes through the rental market into home ownership as we don’t have the supporting data. The last peak in migration was in 2012/13 and it is estimated to take two to four years for migrants to transition into home ownership. That would mean that they should become more active in the market over the next eighteen months or so. If that plays out, the normal trough of the residential property cycle could be mitigated or even avoided, impacting on the HIFG forecast.
The art of forecasting is supported by great data and we still have gaps in our knowledge, but the report makes great reading for those interested in the property market. Download from: www.hifg.net.au