What could derail the long-awaited property market recovery?
by Natalie HordovPROPERTY experts are hopeful 2020 will be the year the Perth market returns to growth.
There was similar optimism and talk of green shoots at the start of 2019, but any potential recovery was derailed by the Federal election and the stricter lending conditions following on from the banking Royal Commission.
The end of the year saw a small rise in prices in November and greater sales and rental activity in the December quarter, so the signs are good for an improvement, but the market is fickle and Residential asked Reiwa president Damian Collins and Master Builders WA housing director Jason Robertson what could help or hinder a long-awaited upswing.
Both mentioned the importance of population growth.
“WA’s population growth rate remains slower than it has historically at 1.1 per cent, which is around half of the long-term average of 2.1 per cent since 1990 and less than a third of the 3.5 per cent peak seen in 2008,” Mr Collins said.
“Population flows are an important driver for the housing market and arguably the single biggest demand factor, quite simply because the more people there are, the more demand there is for housing and competition increases, forcing prices to go up.
“In 2020, we expect that population growth will likely remain soft unless the economy can create jobs to attract people.”
Mr Robertson said population growth was crucial to a sustained recovery.
“To help this process, it was pleasing to see Perth be reclassified as a region for international students with changes to visa and migration settings,” he said.
“But if population growth doesn’t kick in and boost demand, we won’t see an upsurge in the number of new homes being built.”
Government policies and actions would also play role.
Mr Collins said at a state level stamp duty was an ongoing barrier for people looking to buy property or trade up and there would still be uncertainty over negative gearing and capital gain tax until Labor ruled out any changes ahead of the next election.
“Moving into 2020 with somewhat high hopes, the government needs to be careful of meddling with such tax policies,” he said.
“Negative gearing is a healthy incentive for investment, and if removed could have serious consequences to our property market recovery.
“Stamp duty remains a big reason why people aren’t active in the property market, and if the government continues to overlook any reform to stamp duty hopes of a market recovery could be prolonged.”
While supporting last year’s changes to Keystart, Mr Robertson said Master Builders was lobbying for a rise in the Keystart property price cap to $550,000 and rolling the income limits for couples into the $155,000 family category to give more people the chance to own a home.
He also called for a review into the foreign buyer surcharge to encourage international investment and for social infrastructure and major capital works to be fast-tracked to kick-start growth, unlock housing, create jobs and get the economy moving.
“Some of the State Government’s recent announcements are encouraging as infrastructure work gives a great bang for its buck,” he said.
“It provides visible, confidence-boosting work, expands capacity and flexibility in the building industry and the money circulates within the WA economy to promote recovery.
“The upcoming budget in May is a great opportunity for the State Government to review the current market conditions and look to consider further policies and stimulus to assist the building and construction industry recover and create more jobs for WA.”
Mr Robertson hoped to see the long-predicted recovery take hold towards the end of the year, but said employment and public confidence would also impact any upswing.
“Even as the WA economy improves, builders will be the last to see the benefits,” he said.
“West Australians have had years of unemployment worries and stagnating wages so until they feel like their incomes are secure, they won’t splurge on a new home or investment property.
“The media can make a difference to public confidence, bad news seems to get a better run than good, but a balanced viewpoint is important and it would be great to see a few more positive stories.”
Interestingly the results of the downturn itself could hamper growth.
“The industry has lost around 15,000 workers during the downturn and apprentice numbers have also fallen.” Mr Robertson said.
“When building activity starts to crank up, this may affect our capacity to build the new homes, roads, hospitals and other infrastructure needed.”