WA outperforms on UDIA Housing Index

The Urban Development Institute of Australia (UDIA) has revealed its Housing Index for the March quarter of 2024 (ended 31 March 2024) and found that Western Australia was the only state to perform above the long-running national average of UDIA’s Housing Index.

UDIA’s index was created in partnership with CoreLogic and provides a quarterly “health check” on the new-build Australian housing market, drawing on demand, construction costs, and supply indicators.

The Housing Index for Western Australia was 111.88 index points (ips), which was 20 per cent higher than the national long-running average of 101 ips. While Western Australia’s Housing Index decreased by 2.5 per cent from the December quarter, it was still the only state to perform above the long-running average.

UDIA said that the Western Australia’s index score was driven by its upward trend in the housing supply subindex.

All other states and territories performed below the long-running average, with Tasmania having the lowest index measure of 74.62 ips. Queensland (98.47 ips), NSW (92.91 ips), and South Australia (92.52 ips) were the only states to have an index measure in the 90s.

Nationally, UDIA’s Housing Index was 93.47 ips (in seasonally adjusted terms), a decrease of 4 index points from the December quarter. UDIA revealed that the March quarter index was the lowest index reading since September 2020 and was 8 per cent below the national average.

UDIA said that index readings of below 100 implied that demand is outweighing supply and, if it moves well below 100, it would suggest that the housing market is struggling against higher costs.

The industry association’s national demand subindex was 124.65 ips, a drop of 9.2 index points from the previous quarter; however, it remained above UDIA’s national long-run average of 109.7 ips.

Speaking on the above-average demand index, UDIA said: “The UDIA Housing Demand Sub-Index’s strong performance has been underpinned by the maintenance of historically high rates of population growth and a doggedly tight national rental vacancy rate.”

In the March quarter, UDIA’s supply index reached 89.57 ips, its lowest level since June 2020 (when the index was 87.57 ips and international and domestic borders had closed during the pandemic). UDIA described the supply index results as “alarmingly low”, as it was 11 per cent lower than the long-running average of 100.3 ips.

UDIA forecast the direction of supply pressures: “With the forward supply pipeline looking increasingly challenged due to ongoing cost and capacity pressures impacting the new-build sector there is no expectation of a marked improvement in the performance of the UDIA Supply Sub-Index over the coming four quarters.”

The association’s cost subindex also reflected the current cost pressures that the housing market faces. The cost index for the March quarter was 160.6 ips, a slight increase of 0.2 per cent from the December quarter.

The index, however, was still significantly above the national long-running average of 114.9 ips.

UDIA said that construction costs may have reached a “new floor”. The association said: “While many developers nationwide are now reporting a (relative) stability in building material cost growth pressures, it is assumed that rather than input costs retracting we may have instead found a new ‘floor’ and new residential project pricing will need to adjust to a ‘new normal’ cost base.”

[Related: Rapid population growth worsening housing supply shortage: UDIA]