Our Local West Australian (WA) Housing Market

Like myself, if you’re tired of local real estate agencies’ fist pumping since the height of the housing market in 2014 and being continuously told “We’re only 18 months away from the next uplift in the property market”; well, 2020 may be the year the housing market starts to turn upward – but, don’t expect the booms of the past.

I’ve personally stopped attending property functions debating the property market and advocating community engagement, differing modes of living with State Government agencies, local developers, planners, architects and engineers all pushing positivity to facilitate engagement of their own services or developments, with no economist, demographer in attendance to correlate the market drivers to be worked upon.   

The Reserve Bank of Australia (RBA) cash rate was slashed to 0.75% on 1 October 2019, being the third rate cut this year, where one would expect a stimulation of the housing market when considered alongside the ‘record low’ borrowing costs according to the Reserve Bank.

Where this holds true in Sydney and Melbourne, where the median residential property price has uplifted 1.7%, we in Perth have fallen 0.8% on last month (September 2019) according to CoreLogic’s Home Price Index. Perth’s median property value falling to $436,008, being the largest decline of all State Capitals (Hobart declining 0.4% and Darwin 0.2%). Locally, our sub regions worst performer, being Mandurah with prices falling 11.5% in the past 12 months.

Although WA tourism numbers may be noted to be on the rise in recent West Australian publications, our decline in migration numbers, combined with residential oversupply in our Perth metropolitan suburbs and our flatlined resources industry, have placed hesitation and the brakes on our first home owners, upgraders and investors within our sandgroper State.  

We all remember the mining boom, and the times prior to the decline and GFC, where in 2007, Perth median housing prices were within 10-15% of Sydney prices. Leading economists are predicting at least another 6 months, prior to improvement in housing and apartment demand, noting attractive interest rates only being ‘one’ driver to spurring the market.

ABC’s recent interview with Real Estate Institute of Western Australia’s (REIWA) Lisa Joyce noted the key drivers to Perth’s property market to be cost of debt, affordability, job and population growth.

To place pressure on the supply of housing, we need to see migration, population and employment growth.

Perth’s population growth has declined since its peak in 2010, where tourism, resources, business investment and trade, health, education and services industries need a public and private review and collaborative plans and processes to increase the State’s economy.

Unemployment in WA being is one of the highest of all States, recording 5.9% EOFY 2019 with only South Australia (SA) ahead at 6.9% according to ABS data, where it is noted we have risen to a current 9.2% despite the State being in surplus and much hype on a mining industry turnaround and major infrastructure projects to spur-on our economy in the West.

Business investment may be showing slightly positive signs, but the State Government may need to review some stimulus to encourage more investment across all sectors of commerce and industry, that will support stronger population growth back into the State, that has been historically cyclical to mining, to get the economy back on track and more people back into the housing market.

On review of the ANZ House Price Index above, we do see a more positive recovery forecasted for Perth in 2020. Yet, the biggest risk is the debt accumulating to fund our homes, where mortgage repayments may well be the most affordable in history given our low interest rates, but most households hold high debt levels, leaving our average home-owner vulnerable into the future – should inflation and interest rates rise.

Our local home-owners and occupiers therefore, have higher debt levels than ever before and are concerned on their futures and the economy, so they’re spending less. Weaker consumer spending, contributing to job losses, and more debt will contribute to a more declining situation. Residential construction is down at least 20-30% in most cases or less on new-builds, many property / construction workers, like myself looking for jobs elsewhere and struggling to pay their mortgages, with employers committing only to part-time or contract type employment, mixed with FIFO, continuing into the resources and construction industries.

Combine our local concerns, with the external factors of the US and China trade wars, slowing Chinese economy, overseas rate cuts, the decline of iron ore and oil prices and global currency wars, then we have further negative influences driving our Australian economy and migration, unemployment further into the decline.

On the positive, WA is a State with positive government operating surplus of $553M for 2108/19 and a forecast of $1.5B for 2019/20. So, with expense growth limited to 1.3% per annum and WA forecasting net debt decreases into the next 5 years, can the McGowen government as well as lower household fees and charges look to the provision of some clever strategies to boost our economy, and we don’t mean simply building new roads and the Metro-Net, although light-rail is a positive step in the right direction.

It would be great to see focus on ‘cutting of the red tape’ to enable more housing to be provided in Perth and taken up within our community with a few suggestions listed:

• An update of Perth Vision 2030 (if it does indeed exist?);
• Councils to cross-communicate to the benefit of the State;
• Chartered planning certifications alongside Councils (governed by rotating panels);
• Regulatory driven market opportunities (considerate to community groups, but not dictated by them);
• Smarter and more sustainable developments to suit market demographics;
• Government rebates on sustainable initiatives – not just solar;
• Program for our homeless;
• On-line Building certifications;
• Smart contracts and an indefeasible title system with Landgate;
• Better collaboration and product delivered to our community;
• Stamp duty reductions;
• Tax benefits and incentives for new developments;
• FIRB considerations to treatment and existing stock; and
• Experienced Practitioners incentive / accreditations

What are we at QUAYCO doing, well, we’re pushing for developers and employers we’re associated to offer transparency, quality product that is sensitive to the community and environment with attractive returns to investors, with a speed up on execution. No GREED, simply a win-win for all involved, as with any cycle in the economy, we believe there’s opportunity, and opportunity only turns positive with hard work. 

We'd also appreciate your thoughts - keeping on the positive none the less!