- The supply-demand imbalance will continue to be a key driver of the market.
- Perth homes remain some of the most affordable in the country.
- East coast buyers are snapping up Perth property at significant rates.
Western Australia’s real estate market needs density and dollars, as the stark supply-demand imbalance remains a key feature of the state’s housing market.
The recent Housing Industry Association (HIA) WA economic outlook outlined several key observations and trends as we head into 2024, including how prices will rise, and how the building industry can meet the ambitious 1.2 million home target set earlier this year by the Albanese government.
Delivering the keynote was HIA chief economist, Tim Reardon, followed by a panel including Reardon; CEO of the Construction Training Fund, Tiffany Allen; managing director of Strategic Property Group, Trent Fleskens; and Urbis director, David Cresp, moderated by HIA WA executive director, Michael McGowan.
Setting the scene
The past few years have shown a clear need for a significant bolstering of the trades.
This has never been more apparent, particularly following the announcement made by National Cabinet, earlier this year, to create 1.2 million well located homes.
Doubts have been raised by some, whether the industry can meet those targets, but for Western Australia, the challenge may be greater.
In his keynote, HIA chief economist, Tim Reardon, said that when translating the 1.2 million into what Western Australia needs, it amounts to around 26,00 homes every year for the next five years. However:
“We know from what’s happening with the cash rate at the moment that Sydney and Melbourne aren’t going to achieve [their target], and WA is going to have to do more than its fair share.”
Challenging times for the trades
Several issues currently lie ahead of the construction industry, said Construction Training Fund CEO, Tiffany Allen, during the panel.
The training sector experienced some whiplash when student numbers leapt from 5,000 to 12,000.
There is also the multifaceted challenge of attracting and maintaining both lecturers and students.
Not only is there currently a 20% vacancy rate for lecturers, but many are leaving to teach in the resources sector where salaries are significantly more attractive.
Another challenge was the level of support that is required for the new group of students coming through. Allen noted that they require a lot more wrap-around support than before, hence fee-free TAFE and other initiatives and incentives.
Perth house prices to climb by 30%
In his presentation, Reardon said: “At some stage over the course of the next period of time, we’re going to see an increase in house prices here to the magnitude of about 30%. It’s not until house prices in Perth are about the same as they are, or higher than, in Brisbane that we hit a parity position.”
He noted that the acute shortage of housing stock and rental vacancies will be the key driver of price increases over the next three years.
While he was unsure of the time frame for the 30% increase, he noted that Perth is on a rapid house price growth cycle at the moment and it is going to continue for some time.
Perceived value of Perth property
The panel also discussed how Western Australians might deal with a 30% surge in house prices, the psyche of paying too much for a home, and perhaps holding back on purchases.
“I’m not sure anywhere else in the country has seen the cycle that WA has,” said Reardon.
“WA has forgotten house prices go up.”
Tim Reardon, HIA
Reardon and Cresp both noted the incredible affordability of the Perth market, with Cresp and Fleskens observing that east coast buyers are coming to Western Australia in droves.
On the cycle of emotion, Fleskens noted that a couple of years ago Western Australians saw it as an opportunistic time to buy. There was a feeling things might go up, that they were going to win the transaction as the buyer, and they were going to get value.
“In the last year, we’ve seen a lot of frustration that they’re not getting the price that they need in the established market. Then there’s anger,” said Fleskens.
“It’s turned in the last few months to just acceptance and it’s coming out in two ways: paying those new prices that breached the records of ten years ago, and significant uptake of land.”
He noted that while house and land prices are a bit higher than the established market, the negative experience of unsuccessfully trying to purchase one of the measly 2,000 or so homes on the Perth market means they were willing to pay a bit more.
