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Wednesday, 15 February 2017

Commercial lending falling in WA

Commercial downturn

The recovery in commercial finance commitments has largely been driven by New South Wales and Victoria through this easing cycle. 



Looking in more detail at the figures for Western Australia and the challenge for the resources states becomes clearer.

One of the key problems is simply that the economy is so pro-cyclical.

When resources construction was booming in WA, so too were dwelling construction, home-buying, and property investor loans. 

In fact, through to 2014 demand for everything seemed to be exceptionally high as the state population swelled at pace. 

Unfortunately, all of these sectors are now in decline together, and this will likely remain the case through 2017. 


The figures for engineering construction activity are already rising again in the eastern states, but it looks as though the downturn has another year or so to run out west, and possibly in the Northern Territory. 

As the economy in WA has slowed, some workers have opted to move (or return home) interstate.

A few property price indicators and indexes have recorded moderate gains for Perth in recent months.

However, with vacancy rates as high as they are, it still doesn't feel much as though the bottom is in.

Similarly, the economy isn't showing too many vital signs either just yet.

Probably the turning point for dwelling prices will come when it becomes cheaper for new market entrants to buy than it is for them to rent. 

Perth, Western Australia, City