As new work slows to a trickle, residential construction conditions in Western Australia remain weak.
As office vacancy rates plummet, however, general levels of confidence regarding rents, capital values, investment returns and construction activity remain high and continuing strength in mining continues to underpin strength in the state’s civil construction sector.
Below is a snapshot of current market conditions in residential construction, commercial property and non-residential construction, and civil construction.
Current conditions in the state’s residential construction sector appear unpromising. At 1,432 and 1,518 respectively, the seasonally adjusted number of new housing and multi-residential units combined which were approved for construction was lower in both November and December last year than it had been for any other month since March 2009, meaning that the pace at which new residential work is coming in has slowed dramatically.
Outside of new homes, however, the market for renovations is picking up. In the three months to December last year, the dollar value of approvals for additions to or alterations of existing dwellings in the state rose by 10.53 per cent – admittedly from a low base number – from $149.9 million to $165.7 million.
Moreover, the multi-residential sector is set to receive a significant boost going forward from the residential component of huge mixed-use projects such as the $2.7 billion Perth Riverside Development and the $440 million Perth Waterfront Project.
- Perth Riverside Development
- Perth Waterfront Project
- ‘The Landing’ – 650 room Port Hedland hotel and apartment complex
Commercial Property/Non-Residential Construction
Overall, conditions in commercial property and non-residential construction appear to be reasonably buoyant. In the latest Property Council of Australia-ANZ Property Industry Confidence Survey, participants indicated an overall confidence level for WA of 127 – the second highest level of any state after Northern Territory – on a scale in which any level above 100 indicates net positive sentiment.
On the back of huge investment flowing through from mining projects, the state’s office sector is booming, with vacancy rates in the Perth CBD having fallen by more than half from 7.8 per cent to 3.3 per cent in the six months to December, according to the Property Council of Australia’s latest Office Market Report. Not surprisingly, then, expectations of participants in the Council’s confidence survey referred to above expect WA’s office market to far outstrip anywhere else in the country in terms of rents, capital growth and construction. A whopping 64 per cent of survey respondents, for example, described office construction levels as ‘increasing’, against only 7 per cent who spoke of a decrease.
Outside of offices, participants were also optimistic in their expectations for rents and capital growth in industrial property and retirement living, but were pessimistic about the retail and tourism/leisure sectors.
In terms of construction activity, too, the proportion of survey respondents who describe construction activity as ‘rising’ outnumber those who say that it is falling in every category except for tourism/leisure.
Construction activity in the office and retail sectors will benefit from the mixed use Riverside and Waterfront projects referred to in the residential section, as will the landscape construction sector.
Continued strong conditions in mining are set to persist and help keep overall levels of activity strong in civil construction throughout the state.
Outside of mining, the most significant new project coming in is a new solar power facility to be constructed in the state’s mid-west, regulatory approvals for which are currently being sought.
- Greater Western Flank Phase 1 Project
- Gindalbie Metals Ltd Karara Iron Ore Project
- CITIC Pacific $5 billion Sino Iron Ore Project
- Hyperion Energy 200MW Solar Uplift Tower