In the wake of the Housing Roundtable held in Perth on Thursday, the latest data from the Urban Development Institute of Australia (UDIA WA) shows that demand for land in Perth continues to grow as supply constraints put upward pressure on prices.
The September 2023 quarter Urban Development Index figures show an 11% increase in the number of new lots sold in the Perth Metro area over the quarter and a 70% rise compared to the same quarter last year.
“Strong sales activity in the new land market is reflective of broader demand for new housing due to a range of factors including strong population growth and high employment in WA,” UDIA WA CEO Tanya Steinbeck said.
“Given record low rental vacancy rates and a growing number of people wanting to call Perth and WA home, we are going to see demand continue to remain strong across the housing continuum for some time,” Ms Steinbeck said.
“We need to adequately meet that growing demand by ensuring a healthy future housing supply pipeline including new land as well as medium and higher density apartments in a whole range of areas,” Ms Steinbeck said.
While Perth remains one of the most affordable capital cities in Australia, pressure on prices due to supply constraints is becoming evident, with a 6% increase in the average price of new land for the September quarter and a 10.5% increase compared with the same quarter last year.
The price of new land in Perth is now averaging $257,533.
“While the moderate price increases that have been recorded over the quarter are necessary for industry seeking to recoup escalating materials and skills costs, what we don’t want to see is prices escalating to the point that affordability is compromised due to a lack of supply,” Ms Steinbeck said.
UDIA WA has welcomed a range of measures that have been announced by both the Federal and State Governments in recent months to address housing supply issues and get more social and affordable housing ‘on the ground’ to meet market demand.
“Industry is working collaboratively with all levels of government to address constraints in the supply pipeline and that work needs to continue, with urgent measures still required,” Ms Steinbeck said.
UDIA WA Research Partner and Director of Urbis David Cresp reinforced UDIA WA’s perspective, stating that the number of new lots currently on the market and under construction has declined over the September quarter.
“According to UDIA’s figures, the number of lots on the market has reduced by 11% and the number of lots under construction due for release in the next 12 months has also fallen 11%,” Mr Cresp said.
“That clearly shows that we are going to continue to struggle to meet demand for housing moving forward. We are already seeing that there is very limited titled land on the market and buyers are regularly waiting six to 12 months to get a title for a lot that they are buying now and it is then taking another 9 to 18 months to get a house built.” Mr Cresp said.
“Whilst there is certainly strong demand for land now and this is increasing, it will take time for this new supply to actually be completed. The increases in construction costs are also meaning the future apartment supply is also limited with very few new developments commencing construction this year.”
Mr Cresp said that the supply vs demand ratio was at its tightest in the North East Metro corridor, which is historically an area that is extremely popular with new home buyers and families seeking affordable housing options.
“The North East Corridor, predominantly the City of Swan, has experienced a significant decline in construction activity, with less than 900 lots in the forward supply pipeline over the coming 12 months,” Mr Cresp said. “That is compared with a rolling five year average of close to 1,400 new land sales per year.”
The South West Metro Corridor, including Cities of Rockingham, Kwinana and Cockburn are also experiencing tight supply, as construction activity decreased 15% in that corridor.
“Both the North East and South West Metro Corridors have experienced price growth in direct correlation with falling supply in those areas. This pressure on pricing is only likely to increase further over the next 6 to 12 months given supply is struggling to keep up with demand,” Mr Cresp said.
To address constraints in the supply pipeline, UDIA WA has supported several government initiatives including planning reform measures and boosts to social and affordable housing in particular.
To address constraints in the supply pipeline, UDIA WA has supported several government initiatives including planning reform measures and boosts to social and affordable housing in particular.
“The government has been listening and that is encouraging,” Ms Steinbeck said.
UDIA WA attended a Housing Roundtable last Thursday with the Premier, relevant Ministers and industry stakeholders to further unpack solutions to the current housing crisis.
“There are important long-term reforms but there are also more short-term levers that can be pulled to keep chipping away at this critical issue,” Ms Steinbeck said.
At the roundtable, UDIA WA made several recommendations. The top four are:
- Facilitating greater speed to market and reducing friction points in the supply pipeline. For example, addressing the skills shortage more directly through further incentivising trades to choose WA over other States and prioritising approvals across all agencies.
- Moratorium on any further taxes and charges that impact housing feasibility and affordability. For example, minimising or avoiding further layering of regulations, policy and costs imposed on development and pausing the foreign buyers surcharge.
- Prioritise identification and release of State Government land that is feasibly able to be converted into housing supply. For example, consult with industry on what land can be realistically brought to market under the ‘lazy land’ policy.
- Shift from ‘just in time’ to ‘at the right time’ approach to infrastructure delivery. Understand the development ready pipeline and lead infrastructure required to unlock housing supply in key areas – commit funding well in advance. For example, East Wanneroo and North Ellenbrook must be prioritised for infrastructure delivery due to the high dwelling yields that can be achieved in these locations.
“UDIA WA is committed to working with all levels of government and relevant stakeholders to continue to unlock housing supply and ensure that more West Australians have access to affordable and appropriate housing to meet their needs,” Ms Steinbeck said.
“There is no one simple answer to this complex issue, it is a combination of measures that will both address critical issues in the short term and also ensure we avoid another crisis in the future.”
END.
TABLE 1: Executive Summary for Perth Metro Area (Quarter 3, 2023)
Source: UDIA WA Urban Development Index, September 2023
TABLE 2: Local Authority Breakdown (Quarter 3, 2023)
Source: UDIA WA Urban Development Index, September 2023
Contact: UDIA WAGemma OsiejakExecutive Manager Communications & EngagementP: 0421 506 819E: gosiejak@udiawa.com.au