4 REASONS WHY BUILDING IN WA NOW COULD BE THE OPPORTUNITY OF A LIFETIME
The impact of Covid-19 is gradually beginning to flatten off around the world and we are now starting to gauge the extent and depth of the pandemic. How has Australia, and in particular Western Australia, fared compared to the rest of the world? And what opportunities are present in an uncertain market?
In this article we will take a detailed look at four key areas and the opportunities that they present.
We are now starting to see the Covid-19 crisis easing around the world. With Australia being an isolated island nation, and WA (Wait Awhile) being one the most isolated cities in the world, it seems Australians and more so West Australians will fare comparatively well compared to the rest of the world.
WA specifically has performed particularly well with Covid-19 due to:
Other countries have been affected by the current crisis far greater than Australia and other Australian states have been more affected than WA.
You can see how the isolation of Perth has contributed to slowing the spread of Covid-19 from the East Coast to the West from the below Department of Health statistics.
Perth’s isolation has positioned WA to be the second best performing state/territory in terms of the lowest number of Covid-19 cases (per capita) behind the Northern Territory. This means less lockdown restrictions and greater job/economy preservation locally for WA.
2. ECONOMICS: HOUSING, SUPPLY & DEMAND, JOBS & POPULATION
All of these topics are related and intertwined. We will break them down for analysis into the following three areas:
- Housing Supply (or stock)
- Population & Jobs
For years now WA has been underperforming in housing supply (new homes). This is due to the oversupply correction from 2014 where building approvals in WA were almost 32,000 and then slid for the following 5 years to approx 15,000 (less than half) in 2019.
This has been reflected with housing and rental prices in WA also falling over these years. However, there are recent signs that the bottom may be close if not already behind us.
Population & Jobs:
Our Population Growth contributes to the Supply and Demand factors we’ve outlined. People need houses to live in — whether via ownership or rentals. It’s also important to state that while population grows, housing “stock” only grows with building approvals representing the construction of new homes/units. So the above graph is indicative of a reducing housing growth over years, and the below graph outlines WA’s population growth over years.
You can clearly see that WA’s population growth bottomed out in 2015 & 2016, meanwhile at this same time building approvals were continuing their slide. Building approvals are basically the green light for construction to commence whereas completions have a delayed effect from building approvals (generally 6 months for single stories, up to a year or more for double story homes or years when we’re looking at larger unit/apartment developments).
In 2019 WA’s population grew significantly by almost 2%, which was close to double the growth rate for the year prior in 2018. This growth has come largely from jobs, particularly in mining which has been ramping up for the past 12–18 months.
The Department of Planning, Lands & Heritage have forecasted growth rates for WA for 2021 to be between 2% & 2.7% depending on which model is used.
The reality now is that mining kicked off some time ago and projects of that size and scale simply don’t disappear overnight.
A lot of us here in WA know someone, a friend or family member, in mining. If you do just ask them how busy it is and if they’ve had any shortages in labour or have any jobs advertised or coming up. The answer is almost always yes. But mining isn’t everything that WA has to offer. Other industries have also been showing signs of growth.
The following numbers are from SEEK’s monthly reports which show month on month job growth volumes in ads placed on SEEK for WA:
This is where the rental market comes in. Rental prices and vacancy rates are generally lead indicators for the housing markets performance. Over the past 6 months we’ve seen decreases in vacancys and rent increases for the first time in years. Keeping in mind that, after being in a long multi year property market slide, landlords, agents and even tenants are all well conditioned to price reductions not price increases. The first increase is always going to be the hardest as it’s indicative of the change in direction which is great news for property owners and investors already in the market. Not so much for renters.
Throughout March we saw articles of people queuing up for rental inspections with 70+ people lining up for a single property: https://bit.ly/2VVtG5L
Again, although pre-pandemic-panic, situations like these were actually quite common and in 2019 we saw rental averages for WA move upwards for the first time in a long time. According to the latest data from Corelogic, 2020 has shown continued increases for monthly and quarterly reports:
In summary, in the (not so) brief economic section we’ve covered:
- WA Housing Supply (building approvals, new homes or “stock”);
- WA Population Growth;
- WA Jobs Growth; and,
- WA Rentals.
These indicators are all starting to show long term, sustained positive signs for WA, our local economy and the property market. It’s also important to note that whether it be a shortage of supply (in housing) or jobs and population growth, these factors have been sustained over a period of time now that cannot simply disappear overnight.
When it comes to buying your first home there’s currently an unprecedented abundance of financial incentives exclusive to West Australians which include:
- Amazingly low land prices (with some land developers offering cash rebates);
- Low House prices (with incredible inclusions & value offerings);
- $10,000 First Home Owners Grant (only for new homes in WA);
- $15,000 savings on LMI (National scheme while placements last);
- Lowest interest rates in history; and,
- Bottoming signs for the WA economy and property market.
With historical low interest rates, low land prices and rebate offerings, amazing house values with builders as well as the $10,000 state initiative with the First Home Owners Grant (for building only) AND with the National initiative with the 5% First Home Loan Deposit Scheme — there’s never been greater incentives or affordability for First Home Buyers in WA.
4. LONG TERM CHANGES TO HOW WE LIVE
As Covid-19 restrictions begin to lift — how has it changed us and the way we live? And are these changes temporary or likely to stay?
I believe that Covid-19 has been an eye opener for many of us. In particular we have especially learned a lot about hygiene and spreading disease.
“Social Distancing” is likely to be a scar upon many of us. Thinking about how we live, how we interact with each other and many other considerations that we’ve never had to think of before. Some of which are here to stay.
Social distancing created many challenges, particularly when it came to house sharing, sharing cars or ride services, public places, public transport and especially for apartment living (social distancing in an elevator means one person at a time…).
Consequently, people are now more aware than ever about how dependent we are on each other for our emotional wellbeing and support. Also, thanks to technology, we’re now aware of how independent we can be when the need arises while maintaining work and interactions remotely.
Exactly how Covid-19 has changed society is not yet completely clear. However when it comes to choosing where and how you live, I think there are now some new considerations that a lot of people will be adding to their PROS and CONS list. For example:
- House Share or Own?
- Open Space or Density?
- House or Apartment?
- Inner City or Suburbs?
- Small lot or Large lot/Acreage?
- Do we build here or go back home (interstate or overseas)
- Which capital city is safest?
- Which country is safest?
- Where is the best job security?
During the Covid-19 pandemic we experienced shortages in all sorts of products which was a real eye opener as to how fragile and dependent we all are on society continuing in an orderly fashion. With this, we saw a new era of prepping, home gardening and a general push of people becoming less dependant and more independant. While a lot of us love to be close to the city, we also saw the devastation of Covid-19’s spread in New York, with its inner city high density lifestyle and apartment living.
WISHLIST FOR HOME BUYERS — A NEW ERA FOR INDEPENDENT SUSTAINABLE LIVING
I have always been passionate about sustainability in housing. There are some basics that don’t cost the Earth that people can implement to become less resource dependent and more resource independent by harvesting solar and rain, making homes more energy efficient.
A lot of progress has been made over the years in this area, however adapting has been a slow process largely due to cost. Now I can see a resurgence in interest as the following is likely to move up home buyers list of priorities, especially post Covid-19:
- Independent Power (solar PV’s & Tesla batteries)
- Independent Water (rainwater tanks, grey water recycling)
- Solar Hot Water (reduction of gas required)
- Energy Efficiency (beyond minimum requirements()
- Open Space and Backyards
- Independent Food Supply or Home Gardening
Each of us is motivated differently. Some things are higher priorities for us than for others. When it comes to Covid-19, there’s still a lot of uncertainty. However the media is already quoting Australia to be the best positioned for a recovery, largely thanks to the early actions of the Government. WA has already been leading that recovery by lifting restrictions as our total number of active cases dropped below 40.
We’re already seeing spikes of activity in land sales and building activity will soon follow. However I expect our housing shortage in WA to become more evident over the coming months as rents continue to increase, possibly after a short Covid-19 pause.
Everybody loves a bargain and the current climate is certainly bargain territory for anyone looking to build, more so for First Home Buyers who have up to $25,000 in Government incentives. Additionally the RBA stimulus, with record low interest rates, are added incentives for anyone looking to buy or build right now.
If you’re confident with your work, confident with your job and confident with WA’s/Australia’s progress with Covid-19, and if you’ve contemplated home ownership in the past but the conditions, incentives or timing just wasn’t right, then now would be the time to seriously consider your position.
The current prices and Government incentives simply won’t last as the supply and demand factors kick in and demand continues to extend its lead on our supply, causing further increases in rents and house prices.
Our mission at First Home Buyers Direct is to help aspiring homeowners achieve their goal of home ownership. Our team is fully versed in Finance, Design and Housing Sustainability. We also have our exclusive Simsai Assist Package that offers up to $10,000 in Finance Assistance & Debt Consolidation.
If you would like to start your journey to home ownership, or even if you simply have questions to ask, please contact our team today.