Experts warn Western Australia will face a crisis when the hard border falls this week – and no, it’s not the threat of Covid spreading.
The dismantling of Western Australia’s hard border this week has been widely welcomed, but experts are warning a ‘crisis’ is looming – and it’s not the threat of spreading Covid-19.
WA’s housing market has been so tight that demand massively outstrips supply, forcing prices to soar since residents emerged from the first pandemic lockdown.
When the state’s hard border falls on March 3, a surge of people is expected to arrive in Perth to return home or relocate to the sunny West Coast, which is expected to put further pressure on the micro-market.
Auctioneer and performance coach for estate agents Ryan Thompson told NCA NewsWire it was unclear how many people would come to WA, but it could be around 40,000.
There are currently only around 7,900 properties to buy in Perth and 2,000 houses to rent, so finding a place for everyone is going to be difficult.
“Availability is already extremely low and that’s before the borders open,” Mr Thompson said.
“I think it goes without saying that we are going to have an influx of people coming to WA.
“The exact number is hard to pinpoint…but you don’t have to be a mathematician to figure it out…if we have 40,000 people coming to Perth in the next six months then that’s a real problem.”
Australian Housing and Urban Research Institute director Steven Rowley agreed that supply was currently very low, with few homes to rent or buy.
“Demand is likely to increase when the border opens, putting pressure on rents and prices,” he told NCA NewsWire.
“The level of demand will determine the extent of the rise in rents and prices.”
But Professor Rowley, of Curtin University, said he did not yet believe there was a crisis in the homeownership market.
“We are already in a housing crisis in terms of the lack of housing available to rent and in terms of meeting the needs of those in need of social housing,” he said.
“Things could get worse before they get better in the rental market.”
Perth is expected to have around 13,000 properties on the market at any given time and Mr Thompson noted that during the global financial crisis there were up to 18,000 properties available.
“Right now, literally everything that comes into the market is selling out,” he said.
Real Estate Institute of WA president Damian Collins told NCA NewsWire there was no doubt the opening of the border would increase housing demand in Perth.
“We have already seen a large number of people returning to WA over the past few weeks, so we anticipate that the pressure will intensify once the borders open, as interstate and overseas migration resumes,” he said. -he declares.
REIWA expects house prices to grow by 10% in Perth this year and rent prices to grow by 10-15%.
Currently on the rental market, the vacancy rate is 0.9%, which is a slight improvement from 0.7% a few months ago, but still very low.
“In a balanced market, we would expect the vacancy rate to be between 2% and 3%,” Collins said.
He said WA’s housing shortage was being felt most acutely in the rental market.
“We anticipate there will be short-term challenges once the borders open as WA tenants face increased competition from overseas and interstate arrivals for rental stock,” Mr Collins said. .
“However, this is a necessary step to restore balance to the market.
“We need more investment in the state and need to attract people here who have business skills so that we can complete new construction to provide the housing stock we need.”
Mr. Thompson expected a gain of at least 10 to 20% on house prices.
He predicted that prices would continue to rise and then slow in 2023.
“There’s only one way and that’s up,” he said.
“It’s going to be outrageous… WA will be overwhelmed.
“Perth is recognized as a good place to live. Its isolation has gone from negative to positive and it is a good place to raise a family.
Prof Rowley said Perth’s level of housing affordability made it attractive to residents of the more expensive cities and could provide an incentive to move.
“However, the lack of rental housing can prevent households from moving, the lack of established housing on the market also limits choice, and construction times for new housing have exploded to levels that could deter people from building new ones. “, did he declare.
“There are also no large volumes of new apartments expected to hit the market anytime soon.”
Mr Thompson agreed, adding that it would take up to three years to build.
“Everything is blocked,” he said.
“Builders can’t get tradespeople or materials, and houses take two to three years to build.”
Prof Rowley said employment was generally a key driver of moves, but noted that the job market was quite strong across the country.
“Many of those due to arrive in WA may be former residents and only returning temporarily,” he said.
‘We also don’t have a clear picture of the number of people wanting to leave WA for other parts of Australia in the coming months.
“A strong economy is a key factor in creating jobs and mining is an important part of that, but not everyone works in mining.
“Covid-19 has changed what many people want from their housing, including location, and it’s a driver of new migration patterns, especially in regional areas.”
Mr Thompson, however, put more weight on the mining boom impacting prices going forward.
“If it stays strong, we will hold prices down,” he said.
Professor Rowley noted that house prices in Perth fell for almost five years between 2014 and mid-2020.
He said many locations still had median prices below 2014 levels, although the number of locations was down.
“Price growth has slowed in recent months as demand has waned, so it will be interesting to see what happens to prices after the borders open,” he said.
“It will depend on how much home buying demand comes down from those planes.
“The lack of available accommodation will moderate any potential influx, as too many households are unlikely to travel to WA without first booking accommodation, usually a rental property.
“If they can’t find one, they’re unlikely to make the move.”
Mr Collins noted Perth’s median property price of $525,000 was still significantly cheaper than cities like Melbourne, with the median price just over $1million in the September quarter 2021, and Sydney with a median price of around $1.5 million.
“In these big cities, the dream of owning a home is increasingly out of reach, but that’s not the case in WA,” he said.
“Our strong economy, high number of vacancies, affordable housing and great lifestyle choices make WA an enviable place to live, and is likely to be a major asset for interstate and foreign migrants. once the borders are open.
“We expect solid conditions to continue for at least the next two years.
“We have a healthy economy, the most affordable housing in the country and strong buyer demand, which is a recipe for continued growth.”
Mr Thompson agreed WA was “so far behind” other capital cities in Australia and even New Zealand.
“If there ever was a perfect storm, it’s now,” he said.
TOP 10 PERTH SUBURBS WITH HIGH POTENTIAL FOR PRICE GROWTH
1. Mount Nasura — median house price $475,000, median sales price growth of 0.6% last year, 50% growth in sales volume last year;
2. Wellard — median house price $415,000, median sales price growth of 4.0% last year, 80% growth in sales volume last year;
3. Ashby — median house price $484,000, median sales price growth of 4.1% last year, 50% growth in sales volume last year;
4. Madeley – median house price $610,000, median sales price growth of 5.2% last year, sales volume growth of 75% last year;
5. Bentley — median house price $455,250, median sales price growth of 5.9% last year, 65% growth in sales volume last year;
6. Kelmscott – median house price $350,000, median sales price growth of 6.1% last year, sales volume growth of 53% last year;
7. Alkimos — median house price of $430,000, median sales price growth of 6.2% last year, 78% growth in sales volume last year;
8. Seville Grove — median house price $355,000, median sales price growth of 6.8% last year, 89% growth in sales volume last year;
9. Mount Helena — median home price of $540,000, median sales price growth of 6.9% last year, sales volume growth of 67% last year; and
ten. East Cannington – median house price $452,500, median sales price growth of 7.7% last year, 62% growth in sales volume last year.