Perth stares at big shortfall in housing

PERTH faces a much bigger housing shortage as rapid population growth continues to outstrip the construction of new homes, according to a new report on Australia’s cities.

Population growth in Perth is running well above the national average, making it the second-fastest growing city behind the Gold Coast-Tweed area.

The federal government report describes the housing supply gap in Australia’s cities as “the largest and most sustained in a century”.

The State of Australian Cities 2012 report, released this week by the Department Infrastructure and Transport, said Perth’s population grew from 1.45 million in 2001 to 1.83 million in 2011, at an average growth rate of 2.6 per cent.

This is well above the national average of 1.5 per cent.

But this growth was not matched by new home building. Between 2006 and 2011, 98,565 new dwellings were built in the wider Perth region while the population rose by 283,791 people, the report said.

Urban Development Institute of Australia WA CEO Debra Goostrey said she was particularly perturbed by the state of WA’s housing supply.

“The reality is that housing stocks are falling behind our population growth at a rate of nearly 30 dwellings every day,” Ms Goostrey said.

“While first-homebuyers activity is at its highest level in three years, supply is simply not keeping up with demand, pushing the median rent in Perth up 13.9 per cent over the past year and vacancy rates down to a crushing 1.9 per cent.

“With over 1,000 people entering the state from overseas or interstate each week, construction levels have to improve significantly otherwise the tight supply will cause rental costs to become prohibitive for many families.”

ANZ head of property research Paul Braddick said WA was looking at a population increase of between 80,000 and 85,000 this year, more than double the state’s average annual growth.

Mr Braddick told an Urban Development Institute of Australia Market Predictions conference last week new dwelling starts for 2012 needed to be around 40,000 to meet demand.

The state is on track for the completion of 18,000 to 18,500 new dwellings for this year.

But affordability had improved.

“House-purchase affordability went from 16 per cent of disposable income in 2002 to doubling to 35 per cent of disposable income (between 2006 and 2008),” Mr Braddick said.

Since then, house-purchase affordability has improved significantly, something Mr Braddick said would be a “catalyst for the market to move forward again”.

Real Estate Institute of WA executive manager of research and policy Stewart Darby told WA Business News last month the National Housing Supply Council had forecast demand of 38,000 dwellings in 2012 for WA.

But Mr Darby said the council was basing its calculations purely on population size and has failed to take into account the changing nature of WA households.

“The world has changed in a generation. You may see that (the number of) persons per household will have increased by the next census,” he said.

One of the lead causes of this is Gen Y staying home longer as they put off buying a home.

Mr Braddick said the recovery this year in dwelling approvals had been entirely driven by non-house developments. Detached houses still remained near cyclical lows.

He said the period between 2006 and 2011 was the first time since 1986 that the five-year housing cycle of sharp peaks and troughs had been broken.

Mr Braddick attributed this change to a cautious market that had learnt from its mistakes and was wary of the state’s slowing mining boom.

ANZ research expected the market recovery to be subdued and Mr Braddick was highly doubtful the state would see a housing boom like it had in previous years.

Ms Goostrey said the Reserve Bank of Australia’s interest rate cut of 25 basis points this week would encourage investors to return to the residential property sector but it was unlikely to be in time to avoid a looming housing crisis.