Sales activity and general confidence in buying new dwellings has improved substantially over the last two years in Western Australia, with the industry experiencing strong conditions over the past year, particularly in Perth.

According to the Institute’s biannual survey of urban development professionals in around 100 private businesses, public utilities, Local Government Authorities and State Government departments, industry conditions have improved for the third consecutive survey. Our key indicator of industry conditions was in positive territory for all professions, indicating that a greater proportion of respondents experienced increased workloads compared to those that experienced decreased workloads.

More than three out of five respondents reported increased residential development sector workloads compared to six months ago while just eight per cent of respondents said workloads decreased. These results were consistent with the Institute’s other research that indicated strong sales volumes increased development activity.

Figure 1 – Industry conditions compared to six months ago

Conditions improved across all geographic locations in WA, with particular strengthening in the South West. In the South West, where the new dwelling market experienced a deeper downturn than Perth, we are seeing a number of positive indicators. Amid falling stock levels and strengthening sales volumes, three quarters of respondents believed that their residential workloads increased over the past six months, with more than 85 per cent of developers and builders in the region experiencing increased workloads.

In Perth, consistent with improving dwelling construction, more than 80 per cent of builders experienced increased workloads. Developers were more likely to have added staff over the past six months as they increase supply to meet strong demand. Land developers were especially busy and this is in line with our research showing land developers brought 55 per cent more lots to the market in the September quarter compared to 12 months ago.

Looking ahead, it is no surprise that urban development professionals are sanguine. The sector has experienced improving conditions for 12 months and over half of respondents expect workloads to increase further over summer. Only six per cent of respondents expect their workloads to decline.

Respondents were largely of the view that sales volumes would stay the same or strengthen over the summer. Many of the respondents that believed new dwelling sales would stay the same in Perth referred to supply concerns; low levels of stock would limit a strong lift in sales. A number of developers are already pre-selling lots up to nine months ahead of title issue. Builders also reported difficulty finding blocks for their clients.

Figure 2 – New dwelling sales expectations over next six months

A majority of respondents, however, expect new dwelling prices to increase over the next six months as demand picks up and stock levels remain low. Just over half of respondents expect prices to increase ‘somewhat’ (<10 per cent), but no respondents expect price growth in excess of 10 per cent.

We also survey industry challenges and the provision and funding of infrastructure received the most significant negative ratings for the third consecutive survey. The provision of land for dwelling construction as well as infill development is heavily reliant on the timely provision of infrastructure and services.

The most significant outcome of the survey, however, was the deterioration in the availability of developable sites. With a strong lift in sales and a rush to bring forward projects, developers are increasingly looking for appropriate sites; and a majority of respondents reported that it is getting more difficult, up from under a third one year ago.

Moreover, many respondents commented that the planning and approvals system has not adequately responded to the lift in demand, and they are experiencing increased delays bringing projects to the market.

Overall, the survey was one of optimism. At this stage, tight supply conditions are expected to continue but importantly respondents don’t expect a significant lift in prices.