Strong housing demand in South Australia won't last: Westpac

Strong housing demand in South Australia is expected to wane due to a likely slowdown in jobs growth, according to Westpac’s September Coast-to-Coast report. 

“While the fundamentals for South Australia housing demand and consumption are somewhat supportive, partial data indicates momentum is waning,” the report says.

“Specifically, although the SA unemployment rate has, as yet, not followed the national series higher, employment growth has slowed markedly through mid-2011.” 

Furthermore, the report notes that the state’s population growth moderated through 2010 to about 1% annually, below the1.5% national growth. 

While the report forecasts demand for housing to drop, it notes that dwelling investment was one of the “hotspots of the second quarter in South Australia, rising by 13% on the back of double-digit gains for new housing and alterations and additions”.

 Source: Westpac

Over the year, housing investment is up 12% in South Australia, compared with a broadly flat outcome for the nation as a whole. 

“The strength of housing demand is quite a contrast to the recent growth in SA household consumption which was weak in the second quarter ( down 0.4%) and is little changed over the year – compared to 3.2% annual growth for the nation as a whole,” the report says. 

Of particurlar concern for Westpac going forward is a lack of major infrastructure projects planned for the state. 

“While the immediate outlook for investment activity is positive, the absence of material planned (or even mooted) projects is a serious concern. 

“Yes it is true that the Olympic Dam expansion may happen (at some point), but other than that there is little else on the horizon – that certainly gives cause for concern.”