Master Builders Western Australia — May-June 2017

Housing affordability – a complex beast

Master Builders’ housing director

Jason Robertson

There has been so much recent debate over housing affordability it is
easy to forget the ‘issue’ has been raging for many years, and perhaps a
legitimate question is, why is it suddenly such a focus?

Discussion and viewpoints of stakeholders are as divergent as that of
the current economic climate in Australia. Herein lies part of the problem,
in trying to get consensus on solutions to an issue at the very heart of
many Australians and certainly that of our industry.

Looking firstly to economic forecasts for residential building activity,
at a national level, projections overwhelmingly state a record year for
residential building construction in 2016/17 with Sydney having a 46-
year record high for housing completions by way of example.

By comparison, however, forecasts by industry groups for 2016/17 for
WA centred on 19,000 starts, compared to 2015/16 (actual) figures of
25,563. Most in industry have forecast a moderate recovery with 21,000
new builds for 2017/2018.

Some economists say it is likely WA will have an extra 14,600 dwellings
relative to underlying demand by the middle of the year, and an extra
17,500 dwellings by June 2018.

Others are predicting the State’s housing market will reach the bottom
of its current cycle in the second half of 2018. Their viewpoint is that
WA has gone from an undersupplied market three or four years ago
to a massive drop-off in population growth, from about 3.5 per cent
to around 1.3 per cent, and in that environment demand for housing
has declined.

So, in terms of housing affordability where does that leave WA?

A 2016 Housing Affordability report for WA showed some alarming
statistics. Seventy per cent of residential sales in the Perth central
sub-region were not affordable for those households on low (less than
$69,000 per annum) incomes, or very low (less than $43,000 per
annum). Less than one per cent of private sales for dwellings and units
were available to very low income households.

There is no single magic silver bullet to address every aspect of the

housing affordability issue. What is vital, however, is for strategies

to improve WA housing affordability to be different from those in the

Eastern States.

The Perth housing market is operating at a very different phase of the

economic cycle compared to Sydney and Melbourne. This is highlighted

by the fact that in the last 12 months, the highest ever number of new

homes were built in Australia with NSW and Victoria accounting for more

than 60 per cent; whereas WA is building at below its 10-year average.

At the national level, the Federal Government needs to tailor its

strategies based on a two-speed economy. As such, any strategies to

slow down investment in an over-heated eastern seaboard property

market will not be appropriate and certainly won’t be well received in WA

for some time to come.

One measure is that Master Builders continues to support retention of

negative gearing and opposes discriminatory additional taxes on foreign

investors. It is fair to say, with the WA housing industry about to enter

a recovery phase, the last thing the industry needs is the wrong policy

mix. While Master Builders understands that the Federal Government,

the Reserve Bank and APRA have an important role to play in promoting

stable market conditions, any moves to further tighten lending

conditions or dampen investor demand must be aligned to local market

conditions first and foremost.

Master Builders believes the primary focus in improving housing

affordability in WA should be strengthening our economy which will

provide more jobs, additional job security and greater capacity and

confidence to own a home.

In addition, other key focus areas at the forefront of our advocacy in this

area include regulatory reform in the planning and building approvals

process, and dealing with the infrastructure challenges facing the State.

The issues surrounding housing affordability are vast and complex. It

remains, however, the single highest priority for Master Builders in the

residential sector, with constant advocacy and engagement both at a

State and national level.

32 UPDATES housing

MAY–JUNE 2017