Where Will They Live?

Premier Mark McGowan announced during the week that WA’s hard border was to be broken open on 5^th February next year. Presumably, interstate and international visitors and ex-pats will come flooding into our state. According to some estimations, around 50,000 people are expected to arrive after the welcome mat is finally laid out.

Local hospitality, tourism, construction and agricultural businesses, constrained by labour shortages will be understandably relieved by the arrival of potential workers to help their businesses meet service demands.

Many of these people will be fresh arrivals, largely unfamiliar with our unique WA ways. Aside from early embarrassments over the pronunciation of ‘Cockburn’, one of their major challenges will be to find suitable housing.

For some time now, agents have been reporting east-coast buyers and renters – particularly family groups - offering above the asking price for homes throughout our suburbs ‘sight-unseen’ in order to secure accommodation upon arrival.

Property supply is short throughout WA for a variety of reasons. Mostly, it’s due to the lack of substantial investment in residential property in the pre-COVID years of 2012 to 2020. As a percentage of all buyers, investors have typically represented 30 percent of all buying activity. Apart from a brief period in 2015 – the last price peak in WA – investor activity has hovered around 15 percent. It is only now creeping towards 20 percent.

Naturally, people buy real estate in order to contribute to their long-term financial goals. They will attempt to buy when there is a reasonable prospect of some capital gain and a return. When Perth’s property market was at its lowest recent ebb in 2018, property transactions across the state where the lowest in 30 years.

There has not been enough attention paid to address housing supply. A disproportionate effort is applied to addressing supply shortages through the lens of affordability in a social security setting. No doubt, government or subsidised supply of social housing is important in securing homes for those unable to so unassisted. This is evidenced by the state governments’ commitment to build 3300 new tax-payer funded homes by 2026, but for every one government-supplied home, private investors deliver ten.

Perth’s slack market, foreign investor taxes, stamp duty, funding restrictions and tenant-friendly tenancy laws have combined to clear out about 6000 residential rental properties from WA in the past twelve months. Investors are selling faster than they are buying despite a rising market. Fewer investors equals fewer properties equals higher rents equals more pressure on government to build more houses.

The reality is government simply cannot supply the community with enough housing – other than in a Marxist utopia – private investors must do the heavy lifting. Yet, mum and dad investors are not only ignored, they are discouraged from supplying housing.

Let’s hope those arriving in February bring their caravans.