The Urban Development Institute of Australia (UDIA WA) says that while the decision to increase the official cash rate today is not a surprise, the concern it has caused many home owners and buyers is a catalyst for a broader discussion around housing affordability.
“Today’s decision has been in the making for some time, it was inevitable,” UDIA WA CEO Tanya Steinbeck said. “I would suggest that most home owners would be prepared for this move given the years of record low rates we have experienced that were just not sustainable moving forward.”
Ms Steinbeck warns this is likely to be the first of several rate rises before the end of the year, and home owners and potential buyers need to be prepared.
“Earlier this year, our members received a presentation from well-respected, independent Economist Jonathan Pain, who predicted we would experience at least four rate rises before the end of this year,” Ms Steinbeck said.
Mr Pain is known to be eerily accurate with his predictions, having predicted the significant fall in interest rates back in 2019, and in early 2020 he foretold the unprecedented impact of COVID-19 around the world.
“Mr Pain explained clearly why rate rises have to happen and that it is a positive sign that our economy is normalizing following the upheaval of the last two years,” Ms Steinbeck said.
“There will no doubt be some short-term pain as we adjust to higher interest rates,” Ms Steinbeck said. “But I think there are bigger issues at play here in relation to housing affordability.”
“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,” Ms Steinbeck said.
“That means we must be prepared for ongoing pressure on our housing markets.”
“At the moment, Perth is one of the most affordable capital cities in Australia,” Ms Steinbeck said.
“But with critically low housing supply we are already seeing upward 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.
In UDIA WA’s State Budget Submission, we made several recommendations around boosting housing supply that the State Government must consider implementing to keep a lid on housing affordability in the longer term.
UDIA WA’s key recommendations in relation to housing supply include:
- A workforce attraction strategy to address critical skills shortages
- Extend the current ‘off the plan’ duty rebate scheme across the budget forward estimates
- Encourage institutional investment in Build to Rent (BTR):
- Replicate NSW land tax exemptions for BTR projects
- Encourage the Commonwealth to amend MIT and GST settings for BTR
- Increase Keystart threshold limits and index against median house price
- Boost affordable housing supply by funding a state based version of the federal NRAS 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.
End.
To download our State Budget Submission, click here.
Contact:
Gemma Osiejak
Executive Manager Communications & Marketing
P: 0421 506 819
E: gosiejak@udiawa.com.au