24 November 2015
A slowdown in Western Australia’s population growth may have significant ramifications for the state’s economic growth and performance of the housing market.
In the year to March 2015, Australia’s population growth rate continued to slow from its peak in 2008-09 and is now just below the 20 year average growth rate.
WA also recorded slower growth. In the past two years, net overseas migration to the state has dropped by 71 per cent despite an improvement on a quarterly basis, while net interstate migration has declined to the point where the state has recorded a net interstate loss, a trend not seen over the last 10 years in this state.
The significant loss in interstate migration demonstrates the impact that the mining investment slowdown is having on the resource focused state.
New dwelling constructions
The big challenge confronting the Perth housing market will be the impact that the completion of a record level of new dwelling constructions will have over the next few years.
The impending supply of houses, coupled with the downturn in population is likely to cause a surplus supply of homes in WA, which may trigger downward pressure on house prices that have previously surged on the faith of an acute housing shortage.
This will have flow on effects to both the established housing and rental markets at a time when listings and vacancy rates are on the rise.
Listings for sale crossed the 16,000 mark during the month of October, the highest since April 2011, while rental listings have recently crossed the 8,500 mark. As a result, the vacancy rate recorded a historical high of 5.6 per cent during the three months to September 2015.
While approvals have been outpacing commencements for much of the current cycle, seasonally adjusted building approvals in WA decreased by 8.9 per cent to 2,221 between August and September 2015.
Approvals fell by 3.6 per cent in annual average terms and dropped by 9.5 per cent over the three months to September 2015.
This decline in building approvals will allow the market to work on the sizeable backlog of dwellings that have been approved but have not yet commenced construction.
In the interim, first home buyers are taking advantage of the softening market to secure a good deal. They also enjoyed the final few months of the first home owners grant for established dwellings (officially abolished 3 October).
The impending removal of the $3,000 grant resulted in an upsurge of first home buyers in the market, with activity lifting by six percentage points over the quarter – which equates to 31 per cent of the overall market.
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