The West Australian residential housing market is likely to make a comeback in the next 12 to 18 months, new analysis of WA property market cycles over the past 30 years shows.
UDIA WA chief executive Tanya Steinbeck says the institute tracked property market cycles in WA over the past three decades, revealing the average cycle length during that period was five years from ‘trough to trough’.
The research also showed a clear relationship between mining exploration expenditure and dwelling commencement figures, particularly since 2007.
The UDIA analysed ABS data about WA dwelling commencements, building approvals and dwelling finance commitments over the past three decades to gauge how the current market downturn compares with previous market cycles.
“We have noted that there has been a distinct two year lag between an uplift in mineral exploration expenditure and a corresponding uplift in dwelling commencement figures in WA,” Ms Steinbeck says.
“Therefore, based on the current mineral exploration expenditure figures, UDIA estimates the next market uplift will occur in the next 12 to 18 months.
“Based on our broader market cycles research, we can also expect that the next peak in dwelling commencements across the state to occur between mid-2020 and 2022.”
Perth prices have fallen 15.6% since mid-2014.
Ms Steinbeck says the UDIA analysis shows property market cycles in WA have spanned between 4.5 to 8.75 years, with an average of five years over the past 30 years.
“While the current downturn has extended for a longer period of time than many might have expected, it sits well within the average time range of historical market cycles,” she says.
“The length of the current downturn is, in part, due to the 2014 peak being the highest on record across the data examined.
“The positive signs and timing of a recovery is good news for the property industry, which has such a significant impact on the health of the broader WA economy.”
Ms Steinbeck says while the institute is confident about an uplift in the market, there are several factors, including the banking Royal Commission, potential changes to negative gearing and capital gains tax following the May Federal election, that may affect a recovery.
She says the impact of the introduction of a foreign buyers surcharge, introduced in WA on January 1, remains to be seen.
Last year, the WA Government announced that foreign investors would have to pay a 7% surcharge on residential property purchases in WA.
WA Treasurer and Finance Minister Ben Wyatt has said revenue raised from the surcharge would be channelled into the government’s plan to freeze TAFE fees and help Budget repair.