What will it take to turn the ailing Perth property market around?
PERTH is in the midst of its longest property downturn in 30 years, with prices having fallen 20.2 per cent since their peak in 2014 and home building numbers down significantly.
There was talk of greenshoots and a tentative recovery last year, but the credit crunch put that on hold.
Interest rates are now at record lows, housing is affordable, financing conditions are easing and a number of measures have been put in place to help stimulate the market including changes to Keystart, yet while national experts think the east coast market has found a floor, Perth continues to fall, down another 0.5 per cent in July according to CoreLogic data.
Community News asked some of Perth’s property experts what they thought was needed to turn the market around.
Residential real estate
Reiwa president Damian Collins
Population growth – put Perth back on the Regional Migration Scheme
Population is a huge factor in driving growth for WA’s economy and property market.
The State and Federal Governments have control of key levers of economic growth that directly link to the health and sustainability of local property markets. The main lever is population growth.
There is no doubt that the recent housing boom on the east coast was linked to their increasing population, placing a high demand on property prices.
According to the ABS, we were the only state to record a negative net migration figure in 2016-17. Of the 13,384 people who came to WA in 2016-17, we lost 550 more to other states.
We must encourage more people to come to WA and ensure those that live here are here to stay.
An increase in migrants would create jobs, improve our local housing market and make the economy stronger.
This is why Reiwa will continue to advocate for Perth to be put back on the Regional Migration Scheme to ensure we have the population to support a strong property market and wider economy.
Reintroduction of the FHOG for established homes
As is currently stands, the WA First Home Owner Grant unfairly penalises buyers wanting to purchase established properties by only providing assistance to those who choose to build.
Initially, this had the effect of skewing first-home buyer preferences towards new builds, but reiwa.com analysis shows that more first-home buyers are choosing to buy established properties rather than build new, and the FHOG is deterring a lot of first home buyers from entering the market at all, if they can’t use the grant for established homes.
Increasing the demand for established housing will have a knock-on effect to other areas of the market.
This would allow more WA households to right-size into accommodation that suits their changing needs, resulting in more transfer duty revenue for the state as well as enabling more West Australians to make the dream of home ownership a reality.
Stamp duty relief for downsizers
A key issue that would assist with the improvement of the WA housing market is the need for diversity in our housing stock.
We know the current stock of housing does not meet the needs of society now, let alone in the future.
Over 70 per cent of listings for sale are for dwellings with three or more bedrooms – this is not ideal.
It is well understood that transfer duty prohibits people from making better housing choices. For example, often older households struggle to raise the upfront cost of the transfer duty in order to allow them to right size into a house that is more appropriate for their needs.
We have previously recommended that those households should be given the opportunity to right-size and free-up their existing house by obtaining a rebate or concession on their transfer duty cost.
In order to ensure that WA has the right mix of housing options and diversity needed to meet the changing needs of the community, we have encouraged the State Government to look at ways in which to reduce the impact of transfer duty on the mobility of housing stock.
Longer term, replace stamp duty with a broader based land tax
Replacing stamp duty with a broader-based land tax is a long-term strategy that would have immense benefits for the WA housing market.
It is currently one of the biggest imposts to home ownership, and many West Australians still find themselves priced out of the market or unable to move homes due to the heavy tax burden.
By abolishing stamp duty altogether, the cost of property taxes would be spread across many years creating a steady stream of reliable income for state and territory governments.
Building
Master Builders WA housing director Jason Robertson
We’ve been hearing about signs of recovery in the WA economy for months, so why is the building industry still struggling? The answer largely comes down to confidence.
Builders are the last to benefit from an economic upswing because it takes a while for people to pay off their debts, gather some savings and feel safe that the good times have returned before they’re ready to spend money on that new home or renovation they’ve been planning.
In WA, the resources sector creates wealth but it only starts to filter through the economy when people use it to build, extend or splash out on an investment property.
The best sign of a healthy economy is when new home building takes off but it won’t happen until we start to feel the effect of wages growth and population growth.
Until then, we need builders and sub-contractors to survive the tough times so they’re ready to get started when the turnaround happens.
Master Builders estimate there are 120,000 people working in the building and construction industry today, down from an all-time high of 150,000 about four years ago (2015-2016) as construction activity levels have contracted in WA.
Losing 30,000 people, along with all their skills, has an impact on the capability of our industry to build future projects.
This is why Master Builders’ commends the collaboration between the State and Federal Government on infrastructure works and the Perth City Deal because these major projects are the foundation of a more efficient economy which builds consumer confidence and leads to an uplift.
Infrastructure projects help keep capacity and flexibility in the industry. Metronet, for example, will develop residential hubs around train stations, which means residential construction and then we will really see an improvement in the industry.
Shopping centre upgrades like Karrinyup also give a welcome boost but some have been delayed, damping down the expected benefits from this segment of the market.
Master Builders is asking the State Government to support the building industry by going ahead with capital works projects such as schools, hospitals, police stations and community centres to provide work and assist the sector ride out the continuing low level of activity. These projects will retain industry jobs, in line with the government’s focus on employment.
While the news about major resource projects in the North West is welcome, these projects are still a couple of years away from really kicking off and it will take another two years for the effects to flow on to the metro area so the building industry needs help to pull through now.
However, Perth is predicted to grow significantly in the next three decades, which means a future demand for new homes.
Land
UDIA WA chief executive Tanya Steinbeck
There is no doubt that the WA property market still has some way to go before we see any major positive movement, however looking at UDIA’s latest new land sales data there are some bright spots.
New land sales were up in the June 2019 quarter by 16.5 per cent across the Perth metropolitan area.
The North West corridor, which is the biggest growth corridor, had a lift of 35 per cent in sales volumes for the quarter and sales were also up 10 per cent in the North East corridor.
While the year-on-year figures are still recording declines, these quarterly results are particularly positive given the period from April to June was relatively uncertain due to the Federal election in May and the continuation of tight lending restrictions impacting on people’s access to finance.
We hope that the next quarter will see further stabilisation in the market as the Keystart changes come into effect (they didn’t come into effect until July 1), interest rates remain low, and finance restrictions start to loosen.
Realistically, to see stronger positive growth, we also need further growth and diversification in the state economy, more significant wage price increases and stronger population growth.
That will give buyers more confidence in the market and provide the impetus that some people need to get into the market.
In terms of strengthening the WA economy, we need to see greater overseas investment in the state by promoting WA as a safe and stable place to invest.
The State Government has provided a level of leadership in this regard, with the launch of Diversify WA that provides a framework for economic diversification in order to attract greater investment in WA. Investment in sectors such as education and tourism are welcomed.
UDIA would also like to see the abolishment of the Foreign Buyers Surcharge given this is a detractor for investors looking at our property market at a time where we need to be promoting ourselves as a viable option.
UDIA would also welcome a stamp duty concession introduced for seniors looking to downsize into more liveable homes that could work to further stimulate the market.
As well as ensuring that seniors live in homes more suitable to their needs, broader government revenues would benefit from a concession on stamp duty given the greater market activity it would generate. Not to mention that it will free up more homes for younger families to access.
Overall, while it has taken longer than many in the industry anticipated, WA is on the right track and we are working toward a market recovery.
