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Trying times but future’s brighter 14/03/2016

UDIA at a national level released the annual State of the Land Report on Tuesday, which provides a comprehensive snapshot of land markets across the country. In terms of WA, the report found that while we are preparing for a recovery in the property market by late 2016 or early 2017, the latest data reflects the trying times that we have faced over the past couple of years.

UDIA at a national level released the annual State of the Land Report on Tuesday, which provides a comprehensive snapshot of land markets across the country.

In terms of WA, the report found that while we are preparing for a recovery in the property market by late 2016 or early 2017, the latest data reflects the trying times that we have faced over the past couple of years.

The report shows that the land market continues to contract as sales numbers for developer lots have fallen since late 2013. In particular, there was a sharp fall in lot sales during the December 2015 quarter which was partly a result of new Australian Prudential Regulation Authority requirements for the banks to hold more capital, which in turn has driven an increase in home-loan interest rates.

Interestingly, market conditions remain much healthier than during the GFC, with current sales numbers 66 per cent above the low point in sales recorded in the September 2008 quarter.

It is also important to consider that 2015 was somewhat of a return to “normal” market conditions after a massive peak in activity the previous year when a record number of lots received final approval from WAPC and housing approvals also reached record highs in 2014-15.

We expect housing data to follow the contraction in land sales in the next year before the recovery.

In terms of action that the development industry is taking to address market conditions, a focus has certainly been on value and finding the right product with an affordable price point to attract firsthomebuyers back into the market.

In this regard, lot sizes in 2015 were the smallest on record, down to an average 395sqm.

Despite the market downturn, lots decreased only 1.1 per cent in price per sqm in 2015, which is positive news for those who purchased during that time.

Developers have felt the pinch of slower times, as the total value of lots sold was down 118 per cent over the year. Again, this is still a 39.9 per cent improvement on GFC-era lows.

In terms of future prospects, the report suggests that an uplift in the residential property market can be expected to coincide with the State Government’s forecast return to budget surplus in 2017-18.

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