Border pressure on rental market

WESTERN Australia’s borders are open after almost two years, paving the way for interstate and overseas workers to plug the skills gaps exacerbated during COVID-19.

But historically low rental vacancy rates mean there are few places for these workers to live.

Industry experts describe the issue as a double-edged sword, as an undersupply of labour has led to residential construction delays.

Recent Real Estate Institute of WA figures reveal the rental vacancy rate in Perth has moved to 0.9 per cent, from an all-time low of 0.7 per cent in December, well below a balanced market rate of about 2.5 per cent.

REIWA president Damian Collins said delays in constructing homes contributed to the low rental vacancy, as well as reduced investor activity in residential property.

“We’ve got some real challenges in terms of housing, because of the inability to keep up the supply,” Mr Collins told Business News.

“We think there are 8,000 people sitting in rental properties now, waiting for homes to be built.

“Had they been built in a normal cycle it would have freed up more rental stock.”

Before the pandemic, Mr Collins said, it took between nine and 12 months to build a home in WA, but that had blown out to 24 months for a house and 36 months for apartments.

Recent Australian Bureau of Statistics data shows investors borrowed $600 million for dwellings in WA in January, up from $385 million 12 months prior but well below 2014 levels of more than $1 billion.

“Investor finance is definitely improving, but it is not where it normally would be in this sort of vacancy rate and rising rents,” Mr Collins said.

“For every investor coming in, there are more than one leaving [1.1]; all those people who got scared over the last six years are selling now.

“The reality is they’ve just had enough … no-one foresaw a six-year downturn.”

Also, he said, investors had been deterred by the state’s moratoriums on rent increases and on evicting tenants introduced during COVID-19.

Urban Development Institute of WA chief executive Tanya Steinbeck welcomed the state government’s recent investment in social housing, but said it was only addressing one piece of the puzzle.

“I think the greatest pressure we are going to see, and what we’re already seeing, is in the affordable private rental market,” Ms Steinbeck said.

“There’s nowhere for people to rent at the moment, and the number of established properties on the market is very limited.”

Builder experience Building giant BGC felt the impact of Perth’s housing shortage when it carried out an interstate recruitment campaign last year, targeting skilled workers from the eastern states.

BGC Housing Group executive general manager Michael Bartier said sourcing accommodation for these workers was the main hurdle for the company.

“It was really difficult for them to try and find something anywhere near where they were hoping to work,” he said.

“In the end, really the only successful employees we sought from other states were people who either already had a dwelling here and were returning to WA, or had family and friends here they could leverage and bunk with them.

“It was a very expensive and very challenging exercise.”

Alternative

Founder and managing director of Perth’s The HMO Property Co, Neil Gibb, facilitates the use of entire houses by working with property investors or homeowners to rent out individual rooms.

He said his ‘house-in-multiple-occupation’ model could help fill gaps in accommodation for people moving to the state.

“The borders opening will impact our businesses in a good way,” Mr Gibb said.

“More people will need accommodation, which will place even more pressure on the housing market, which in turn will push rents and prices up.

“This should bring more investors back into Perth.” Since December 2017, The HMO Property Co has converted and built more than 90 homes and currently has 420 rooms under management.

It aims to provide 10,000 rooms by 2031. Mr Collins acknowledged, however, that while solutions like this helped, they were not an ideal fit for many.