Consumers  worry but  homes boom
In demand: Home building is booming in WA. Picture: The West Australian

WA is on track for a record number of new homes but the economy is facing increasing headwinds from spooked consumers as their personal finances get squeezed.

Housing Industry Association figures suggest that almost 27,000 houses and units will be built across the State this year.

It is being driven by demand for both forms of housing, with the surge expected in the current quarter.

At the peak of the WA property boom in 2006, a record of 26,500 houses and units were built in the State. Builders put up 26,200 dwellings last year.

And it may be as good as it gets, with the HIA forecasting a slowdown in construction in the next three years because of capacity constraints.

It is not just a problem in WA, with NSW facing similar issues.

"The impetus behind the recent strong growth in NSW and WA is likely to remain, although this will only be sufficient to hold activity at elevated levels rather than drive further fast growth in the face of capacity constraints," it said.

But the impetus continues to be under threat from dwindling consumer confidence, which has tumbled 15 per cent since the first leaks about the Federal Budget.

Dun and Bradstreet's measure of consumer financial stress is on track to have almost doubled since the start of the year.

A combination of slower wage rises, which are running below inflation, faltering consumer confidence and concern about overcall cost of living is behind the sharp rise.

The company's economic adviser, Stephen Koukoulas, said the fall also coincided with a slowdown in house values.

He said the positive impact of ultra-low interest rates was being overwhelmed by other negative pressures facing ordinary consumers.

"It is looming as a genuine threat to the recent strength in spending, if consumers respond to financial difficulty by paring back expenditure," he said.

The West Australian

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