Housing market stability years away

Western Australia won’t reach the volume of housing starts it needs to support population growth until the end of this decade, Housing Industry Association chief economist Tim Reardon says.

Speaking on the latest HIA economic outlook, released today, Mr Reardon told Business News while WA had reached its lowest point of home starts, it was still building well below what was required.

He said the state hollowed out its trade base about a decade ago, when home builds plummeted to their lowest levels in three decades.

“The loss of skilled trades in that cycle means WA is building about 15,000 homes now, when it needs around 25,000,” Mr Reardon said.

“It is going to take to the end of the decade to build up the workforce to build the homes WA is going to need.”

He said WA was undergoing a completely different economic cycle to other states, in that it was so exposed to the mining sector.

“It is still [experiencing] the bull whip effect from the mining cycle a decade ago, when Perth underbuilt,” Mr Reardon said.

He added that the state had a degree of immunity from interest rate rises given its higher wages and relative affordability compared with other jurisdictions.

Detached house commencements in WA dropped by 5 per cent in the June quarter 2023, to just 2,960.

This brought the 2022-23 financial year to 13,000 commencements, down by 28.3 per cent on the previous year, and 35.7 per cent down from the 2020-21 peak.

This made the recent financial year one of the weakest this century, but still not quite plumbing the depths of 2019.

The 2022-23 figures are expected to mark the trough of this cycle, with detached house commencements expected to increase by 3.5 per cent to 13,460 this financial year.

HIA predicts housing starts will reach about 17,850 by 2027-28.

For WA to meet the federal government’s target of 1.2 million more homes over the next five years, it must build about 25,000 homes each year. 

But as Mr Reardon explained, if the state’s population kept growing at the rate it was, that figure needed to be closer to 30,000.

Apartments would play a significant role in meeting that target, he added.

“Apartments are going to have to play a central role in every capital city to increase the volume of housing stock, we need growth in both detached [housing] and apartments,” Mr Reardon said.

Multi-unit commencements in WA jumped by 66.2 per cent in the June quarter to 580.

This still only produced a 2022-23 total of 1,970 in 2022-23, the weakest year for the state since the Australian Bureau of Statistics started keeping records in 1985.

This year was down by 36.7 per cent on the previous year, and just a quarter of the 2014-15 mining boom peak.

Apartment commencements are expected to bounce back to 3,340 in 2023-24, and to 5,190 2024-25 and towards 7,000 by 2027-28, the report stated.