Housing affordability takes a cash rate hit
The West Australian
4 May 2022
The cash rate rise has heightened the need to boost the supply of housing, amid growing concerns about housing affordability.
The Urban Development Institute of Australia (WA) echoed a forecast from economist Jonathan Pain that there were likely to be “at least four rate rises before the end of this year”.
UDIA WA chief executive Tanya Steinbeck said the trend would create some short-term pain during the adjustment period, and longer-term issues with housing affordability as skilled migrants and residents from other more expensive States flocked to Perth.
“Here in WA and indeed in many parts of Australia we are experiencing a critical house and land supply shortage,” Ms Steinbeck warned.
“The WA economy in particular is performing extremely well and there is an expectation of strong population growth as borders are open and people come here for the job opportunities and affordable lifestyle.
“That means we must be prepared for ongoing pressure on our housing markets.”
Ms Steinbeck said part of the attraction was Perth’s record as the most affordable capital city in Australia. In Sydney for example, the housing median is more than $1 million, compared with about $520,000 in Perth.
“With critically low housing supply we are already seeing upwards pressure on the established housing market values and the new house and land market is likely to follow suit unless we take real strides to address the underlying supply issues,” Ms Steinbeck said.
UDIA WA’s State Budget Submission made several recommendations to boost housing supply to keep affordability in check.
This included creating a workforce attraction strategy to address critical skills shortages, extending the current “off the plan” duty rebate scheme across the budget forward estimates and encouraging institutional investment in the build-to-rent market.
UDIA has also called on the State Government to replicate NSW land tax exemptions for build-to-rent projects, and on the Commonwealth to amend GST settings in the sector.
It also wants higher Keystart threshold limits and for a boost to the affordable housing supply through a State-based version of the Federal National Rental Affordability Scheme.
“We need to learn from past property market cycles and ensure that this boom does not end in astronomical housing prices and many people priced out of the market simply because the market cannot deliver to meet the demand that we expect,” Ms Steinbeck said.
New figures from RP Data CoreLogic show Perth property prices increased 1.1 per cent in April. It appears to support a forecast from the Real Estate Institute of WA of a 10 per cent increase this year.
The figures also show sales activity increased 11 per cent in Perth last week, with REIWA members reporting 869 sales. This was based on an 11 per cent increase in house sales, a 5 per cent increase in the sale of units, and a 32 per cent drop in vacant lot sales.
At the same time, REIWA members reported only 2496 properties for rent in Perth at the end of last week. While this is 3 per cent more than the previous week, it is 12 per cent lower than the same time last year.
The chronic rental shortage is continuing to drive rental prices up, and boost purchasing demand.