The Housing Industry Forecasting Group (HIFG) has reviewed and updated its most recent forecasts of dwelling commencements in Western Australia, which demonstrates the impact of COVID-19 and the effects of the building stimulus packages.
HIFG is an independent forum established to provide information and forecasting on the housing market in Western Australia.
The latest forecasting has increased to approximately 18,500 dwelling commencements in 2020-21, which is within the 18-20,000 forecast back in October 2019. Activity in the new build market continues to be underpinned by the stimulus packages, which are expected to flow through into dwelling commencements in 2021-22.
In addition to this, the extension of the construction start-times under the State’s Building Bonus program to 12 months after signing a building contract is further expected to support dwelling commencements over the forecast horizon and lead to a potential downturn in commencements when the stimulus measures end.
Economic outlook for WA is stronger than first expected, with WA being the only state to record positive economic growth in 2019-20. Economy is expected to further grow by 1.25 per cent in 2020-21. The employment and hours worked improved and retail sales growth is stronger than pre-COVID levels, reflecting increased consumer confidence and the impact of government support payments. Population growth is expected to slow significantly to 0.8 per cent in 2020-21, as a result of travel restrictions.
- Sales activity in the established market of the Perth metropolitan region remains strong.
- Lot sales have been boosted by the stimulus measures and historically low mortgage rates.
- Pre-commitment for new stages has been at very high levels not seen for 15 years.
- The multi-residential sector has softened, with commencements of multi-residential dwellings falling below 3,000 in 2019-20. This lull in multi-residential commencements presents a lack of diversity in the residential market and affordable options for future home buyers.
What does this mean for Western Australia?
Whilst the building stimulus measures have given the Western Australian economy a much-needed boost, this is unlikely to mean long-term stable and secure growth for the housing industry and market.
HIFG highlighted the following concern in relation to the rental market.
“Notwithstanding, demand for rentals is strong and outstripping supply. According to REIWA, there were just over 2,900 rental listings in September quarter 2020 – less than half the approximately 6,200 listings at the same time last year. Furthermore, new rental listings are down 20 per cent over the same period. The lifting of the moratorium on residential tenancies scheduled to occur in March 2021 is likely to drive higher turnover and place significant upward pressure on median rents. While some households may be led to consider home ownership, it poses a key risk to rental affordability particularly for very low-income households who may be forced to apply for social housing assistance.”
HIFG states that “However, dwelling starts in WA are expected to remain below the state’s long-term average of 22,000 for the foreseeable future. “The Housing Industry Forecasting Group also noted that housing supply is emerging as a key challenge for WA in early 2021. “WA’s extraordinarily low rental vacancy rate signals strong consumer demand and a lack of supply as people have moved to Western Australia or returned here from interstate and overseas as a result of COVID-19. “However, despite the low rental vacancy rate and record-low interest rates, investors have not yet come back into the market to provide additional stock as might ordinarily be expected.”
Shelter WA is acutely concerned on the impact on renters of the ending of the residential tenancies moratorium.
With over 15,000 people on the wait list for social housing and at current employment forecasts an additional 5,600 rental households expected to be jobless by the end of December 2020 there will be more people in rental stress. This number is expected to grow as saving run out and JobSeeker an JobKeeper ends.
Shelter WA is in discussions across government, industry and the sector on the short, medium and long terms solutions that need to be in place to mitigate against the ending of the moratorium to present a new wave of housing insecurity and homelessness.