|Construction slump adds to affordability pressures
Data from the Real Estate Institute of Western Australia are showing that the number of properties for sale in Perth has come down significantly and are now at their lowest level since April 2010.
The number of properties on the market including houses, units and land fell to 12,975 in early June. At the same time reported sales have been showing a steady increase as the market returns to average turnover levels.
REIWA Deputy President Ian Cornell said while it was a positive sign with confidence returning to the established market, storms clouds are brewing around housing supply in Perth.
“We have seen a dramatic collapse of building approvals for April following the introduction of the new Building Act on 2nd April,” Mr Cornell said.
“In recent weeks the Housing Industry Association has expressed deep concerns with new government red tape which it believes is hampering the building sector and slowing the construction of homes.
“If this persists for a few more months we will see a fall in new dwelling starts for both the June and September quarters.
“This will ultimately lead to a supply imbalance that will, in turn, put pressure on established housing. The knock-on effect will ripple through the existing residential housing market and put price pressure on both buyers and renters for the latter half of 2012.
“In April, building approvals slumped by an extraordinary 46.7 per cent, which means that buyers are now turning to the existing market and stock numbers are falling.
“Ultimately, this means that the increased competition for houses and rental properties on the market will push up the prices for both as we move into spring,” Mr Cornell said.
Mr Cornell’s concerns follow a Real Estate Institute of Australia report out this week which found that housing affordability in Western Australia fell by 1.2 percentage points over the March quarter.
WA and the Northern Territory were the only state or territory where affordability went backwards for the first three months of this year.
According to the REIA Housing Affordability Report the proportion of family income required to meet home loan repayments in WA is now 24.1 per cent.
Mr Cornell said that while this national report didn’t look too good for our State it was still a marginal improvement on the same time last year.
“Of more concern is the affordability pressure on people in the rental system. The proportion of income required to meet the median rent in Perth grew by 0.7 per cent in the March quarter and now stands at almost 21 per cent.
“The good news is that the number of first home buyers increased by 4.1 per in the quarter, up by a whopping 36.4 per cent on March last year,” Mr Cornell said.
The REIA Housing Affordability Report found there were 3,910 first home buyers in WA for the quarter with the average loan to this group increasing by almost 3 per cent to $287,800.
However, Mr Cornell, said it was concerning that the average loan to first home buyers was up by 6.5 per cent on the same time last year and that WA was the only state where average loans to first home buyers increased during the quarter.
“The REIA report also found that the total number of loans, excluding refinancing, fell by 0.6 per cent to 12,018 loans, but which is still 10 per higher than the same time last year,” Mr Cornell said.
The Affordability Report found that the average loan in WA was $305,800, around 2.5 per higher than reported in the December quarter and 2.1 per cent up on the March quarter of 2011.
Mr Cornell said the increased buying activity and decreased construction activity was likely to be troublesome for the rest of the year.
“We need some affordability circuit-breakers from the state government, including adjustments to the rate of stamp duty and an urgent review of the new Building Act to ensure it frees-up the process for creating new homes to meet demand,” Mr Cornell said.