Residential Construction in Perth Hits a Brick Wall 1

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Monday, May 11th, 2015
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As WA’s housing market goes into oversupply, construction employers and suppliers brace for impact.

Dozens of workers are believed to have been laid off by leading home building outfit on May 5, and there are fears this could be the tip of the iceberg.

Geoff Cooper, housing director for the Master Builders Association of Western Australia, said the number of people employed throughout the industry will diminish as the demand for new housing sags.

“Demand is easing back across most residential building sectors,” Cooper is quoted as saying in a PerthNow report. “Alterations and additions might hold up better than others, but certainly new home construction markets we expect to weaken.”

Until recently, workers in trades such as bricklaying, carpentry, and wall and floor tiling have been in hot demand as the number of new homes upon which ground broke surged from 20,130 in calendar 2012 to decade highs of 32,080 last year.

In the bricklaying trade, rates roughly doubled from $1 per brick to around $2 per brick over the two-year period to October 2014, and the practice of poaching bricklayers became so entrenched that some builders are reported to have turned to alternative building methods such as modular construction purely to overcome the shortfall.

Now, signs of oversupply and a pullback in new housing construction are everywhere.

Around 7,080 houses and apartments were advertised as being available for rent, according to Real Estate Institute of Western Australia figures, up from 5,140 at the same time last year.

In the building space, the number of new houses and apartments approved for construction in the first three months of this year was down 12.5 per cent compared to its peak in the June quarter of last year, while the Housing Industry Forecasting Group (HIFG) says sales of new homes are now 14 per cent below their peak reached last October.

Because of this, the Housing Industry Association said in its latest quarterly report that it expects the number of new housing starts throughout Western Australia to drop back by 14.7 per cent this year and 11 per cent the following year. HIFG reckons starts will drop back to 23 per cent from expected levels in 2014/15 to just 23,000 in 2015/16.

While Western Australia’s construction sector employed more than 150,000 workers at its peak last year, the Australian Construction Industry Forum reckons the sector will drop by over 10,000 workers or next year or so.

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  1. Grant

    As the former mining employees find their incomes reduced or absent, this must affect the resource states. When over 100,000 high income earners are now without work, eventually this must filter into the residential market for housing. The bubble that has emerged in Sydney and Melbourne seems more vulnerable than ever. How will banks react as the number of defaulting loans spikes? Are we looking at a major correction in home values across Australia?