Has the Western Australian housing market turned the corner?

Having ridden the wave of the mineral’s sector construction boom, the Western Australia housing market contracted sharply from late 2014 and has fallen lower and lower for almost five years. However, dwelling approvals appear to have bottomed-out, with the latest data showing some small but welcome improvements.

Although Statistics Count didn’t say anything about it last month – one swallow does not a summer make! – the February 2019 annualised housing approvals data was good news for Western Australia. Good news in that despite being at a low 16,187 approvals, they were higher than the prior month. What makes us comment this month is that for the first time in more than four years, WA’s annualised dwelling approvals have moved up for two successive months.

At 16,430 separate approvals, the annualised decline of 11.7% is still pretty steep, but is at least showing signs it may have bottomed out.

As the chart below shows, the very earliest signs of a recovery to growth in dwelling approvals appear to have materialised in WA.

To go straight to the dashboard and take a closer look at the data, click here.

Although annualised approvals of free-standing houses remain fairly flat at 12,572 separate approvals (-8.7% compared with the prior corresponding period), the chart also shows they are tracking up. Given they account for 76.5% of approvals over the year-ended March, the health of houses, is closely approximated to the health of housing in WA.

While these might be the earliest signs of recovery, there is no certainty in the WA housing market, and it has a long way to go before real recovery, as the second chart shows. Over the same decade, it is observable that annualised approvals have not been lower. Moreover, unlike the eastern seaboard states, in WA, free-standing house approvals have been far less stable, rising and falling with the total market.

As we know, nationally, free-standing dwelling approvals have been far more resilient than the surging then collapsing 4+ Storey apartments, for instance. Not so in WA.  

To go straight to the dashboard and take a closer look at the data, click here.

To emphasise the role of free-standing houses in the WA housing economy, a simple analysis of their proportion of the total approvals over the decade. On an annualised basis (year-ended March), free-standing houses accounted for 82.1% of WA’s approvals in 2012, falling to 72.8% in 2016 and averaging 77.4% over the decade. That is way above the national proportion which currently sits at 58.1%.

Rounding this analysis out, the table below shows that the other dwelling formats experienced quite different growth over the last year. The second most significant format – 4+ Storey apartments – saw approvals down 19.3% to 2,121 separate approvals, with patchy performance for the other less significant formats.

Has the housing slump in WA ended? In truth, it is probably still too soon to tell. However, the signs are their most promising in some years.