Dwelling approvals in Western Australia have shown signs of improvement, but this growth in housing supply is unlikely to have a great effect on property prices, according to Peter Gavalas (pictured above), a buyers agent at Resolve Property Solutions in Perth.
“There’s been a marked increase in dwelling approvals over the past few months, but this was coming off a low base,” Gavalas said. “We still have a significant supply deficit in Perth compared to population growth.”
The latest ABS data showed a 19.6% improvement in total dwelling units approved between April and May 2024. However, Western Australia's population growth continues to be a major driver of demand.
“Population growth remains a key driver,” Gavalas said. “Perth has seen significant population increases over the past few years, largely due to its relatively affordable cost of living and economic opportunities compared to other major Australian cities.”
Western Australia’s population growth is fueled by interstate migration and a flourishing economy. The state recorded the largest population growth in 2023, up 3.3%, according to ABS.
“This influx of people continues to outpace the number of new homes being built, maintaining high demand for housing and will continue to do so,” Gavalas said.
Another barrier for new homes is the cost of construction.
“Construction costs have soared, driven by a combination of material price hikes, interest rates and labor shortages,” Gavalas said.
CoreLogic’s latest residential construction costs analysis shows that, despite a slight improvement in costs, it is still around 30% more expensive to build or renovate now than pre-COVID.
Adding to the situation is the fact that the pool of established homes being listed for sale is also smaller. In June 2024, total listings were down 32.2% across Perth, according to SQM Research.
“Homeowners are holding onto their properties, partly due to the uncertainty in the market and the difficulty in finding a new home once they sell,” Gavalas said. “This reduces the overall availability of housing and further intensifies competition among buyers.”
“With fewer homes available for purchase, and little in the way of new builds, it’s no wonder there has been such upward pressure on property prices over the last year,” Gavalas said.
Prices in Perth grew 23.6% in the 12 months to June, according to CoreLogic.
But despite its housing struggles, Gavalas said Perth is still a desirable location for buyers, thanks largely to its affordability.
“Compared to the eastern capitals, Perth remains relatively affordable. This continues to attract buyers who are after better value for their money,” he said.
This sustained demand from buyers plays off against the slow pace of new supply and the high costs associated with construction.
“Even with more approvals, it would still take time before these properties were built, which means Perth’s supply shortage is unlikely to be solved anytime soon. For this reason, price growth in Perth is unlikely to flatten out in the near future,” he said.
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