House prices need to lift

Western Australian house prices must rise significantly to offset input costs, a panel of experts has found.

Speaking at today’s Housing Industry Association of WA economic outlook event, Urbis director David Cresp said the system was broken.

“The house prices need to go up. We’ve seen the highest median house price we’ve ever seen in Perth recently, and it’s slightly higher than what we were 10 years ago,” he said.

Mr Cresp said a building sector that had experienced next to zero inflation over much of the decade had recently experienced a lot of cost rises at once, which was not matched by house prices.

“It is a break in the system that prices are where they are at the moment,” he said.

“Apartment buildings don’t work at the moment, unless you can see ocean or river.”

Perth’s median house price is at about $632,000, according to CoreLogic.

While the state is showing one of the fastest growth rates in the nation, it is still the cheapest jurisdiction aside from Darwin at about $498,000 and well below the national median of $747,424.

Mr Cresp said WA typically was on par with Brisbane, which currently had a $770,575 median value.

HIA chief economist Tim Reardon, who spoke on the nation’s economic outlook last week, said confidence in WA’s housing market was low.

“It’s a confidence story,” he said.

“WA has forgotten that house prices go up, everywhere else knows that.

“You’ve had a very unique cycle.”

Mr Reardon said WA had suffered the consequences of Australia Prudential Regulation Authority and Australian Securities and Investment Commission policies to slow house price growth on the eastern states, which occurred from 2016 to 2019.

He said regulators would not affect house price growth in WA in the medium term.

Mr Reardon added that apartments were a key part of new supply, and would help offset excessive dwelling price growth.

Strategic Property Group managing director Trent Fleskens pointed to the economic indicators dominating WA, which would inevitably lead to dwelling price growth.

“Five years ago we had 17,000 properties available for sale in the market, we’ve got less than 5,000 now, and this time last year we had 8,000,” he said.

“We now have less than a third of the properties we had five years ago. A balanced market is around 12,500.

“The rental vacancy rate is 0.7 per cent. Five years ago it was 10.3 per cent.

“We had population growth over the past twelve months of 80,000 people … we need about 40,000 houses for those people.”

WA is currently building about 13,500 homes per annum, which is well under what it requires.

Mr Reardon said any year the state builds less than 27,000 homes, it was underbuilding.