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SPOTLIGHT: WA Where the booms and busts of mining impact the housing sector.

Western Australia’s economy is driven by the mining industry. That includes the housing sector, where the booms and busts of mining feed the market for housing in a way that is … different.

In 2021, at the last Census, Western Australia’s population was around 2.749 million people, living in just over 1.0 million dwellings, 79.7% of which were free-standing houses. By 2036, WA is expected to have a population between 3.417 million and 3.717 million people.

In 2021, 69.2% of households either own their home or were mortgage-holders.

Population estimates and forecasts for WA are focussed on 2036, when the population is expected to have expanded by around 818,000 people or approximately 348,000 households over the fifteen years between 2021 and 2036.

WA’s POPULATION ESTIMATES (mid-Points of Range)

Estimated Population 2021 2025 2030 2036
Total 2,749,400 2,994,700 3,251,100 3,567,000

Source: ABS and IndustryEdge

WA is geographically massive, covering 2.527 million square kilometres. It is Australia’s largest state and the second largest sub-division of any country on earth, surpassed only by an eastern-Russian state.

The map shows where more than 85% of WA’s population lives.

WA HOUSING MARKET: Where boomers become busters

Western Australia’s housing market is prone to booms, followed by busts. That is true of the entire country, but nowhere more than in WA.

For a long time, that created challenges and cruelled opportunities, especially around establishing stability that could develop a more sophisticated housing supply chain. Successive governments used the housing sector as an economic adjustment factor when mining booms occurred.

As the forty-year pipeline chart below shows, when mining went bust and people lost their jobs and headed back south to Perth, they worked in the housing industry, building – in some periods – housing faster than anywhere else in the country. The early to mid-1990s is a great example, where work was commenced and completed so quickly, there were less dwellings being constructed than completed.

Source: ABS and IndustryEdge

The ‘however’ is that as soon as the mining sector kicked back into gear, the housing sector was gutted again, as the workforce headed back north, making it harder to complete dwellings. That can be seen in the mid-2000s and around 2012 to 2014.

By about 2018, WA was already in some trouble – a shortage of housing was met by a severe labour shortage that at the commencement of the pandemic already had commencements at two-decade lows, with the pandemic forcing them lower to record low start levels.

When the pandemic stimulus kicked in, WA’s approvals and starts grew rapidly but to levels that would previously have been manageable. The absence of labour and lack of systems geared to growth resulted in the pipeline of work under construction exploding to record levels.

Right now, as the chart shows, commencements are back in the doldrums at near record lows, completions have improved somewhat, but the amount of work left to do remains enormous.

That does not mean WA is short of demand. Some say demand is around 30,000 dwellings per annum for at least the next three years, on top of the current pipeline. The problem? Labour and equipment are available for maybe 15,000 dwellings per annum and pushing too hard will only add further to what have been steeply higher dwelling prices.

Booms and busts are not for the faint-hearted!

All about houses – but it’s the growth that tells the story

Year-ended April 2024, free-standing house approvals in Western Australia lifted 6.7% compared with the prior year, accounting for a nation-leading 88.7% of all approvals. A far distant second were 1 Storey Townhouses (3.9% of total), with 2+ Storey Townhouses accounting for just 2.1%, beaten into fourth place by 9+ Storey Flats (3.0% of the total).

Overall, WA’s approvals were 0.2% higher over the year-ended April 2024 than for the year prior, totalling 15,659 separate approvals. This is the most telling data in a state where things are just plain different. A relatively small population, sufficient land and a still-manageable urban sprawl appear to be the recipe for a significant emphasis on houses over all other formats.

As the data shows, formats other than houses are of little relevance in WA, which has an impact on the building methods and approaches. This is a reason why double-brick is more prominent in the west than elsewhere in Australia. This situation can only change slowly because builders are mainly ‘tooled up’ for double-brick formats and cannot realise the cost advantage of frames and brick veneer until they invest in design and system changes.

However, the WA Government – like most others – is pursuing multi-residential developments, including townhouses and seems to be preparing to support developments of smaller dwellings.

WA Approvals by Type: Apr ’20 – Apr ‘24

Source: ABS and IndustryEdge

Number YE Apr ’23 YE Apr ’24 % Change
Houses 13,022 13,889 6.7%
Townhouses (1 Storey) 379 610 37.9%
Townhouses (2+ Storeys) 376 328 -14.6%
Flats (1 or 2 Storey) 30 48 37.5%
Flats (3 Storey) 40 12 -233.3%
Flats (4-8 Storey) 845 307 -175.2%
Flats (9+ Storey) 933 465 -100.6%
Total 15,625 15,659 0.2%

 

LGA DATA: Multi-res limited to a few pockets

The data showing dwelling approvals by Local Government Area shows reasonably clearly where to expect Houses to be built and where to anticipate most of the multi-residential development will occur in WA.

Because the Local Government Authorities (LGAs) in WA are relatively small in the main populated areas, mapping them effectively is not very meaningful. We think it is enough to say they hug the coast, around the City of Perth and are bordered by the City of Greater Geraldton to the North and the Shire of Busselton to the South. Further South, Margaret River and the population centre of Albany are also in the top twenty LGAs,

Where Multi-Res formats have any hold (Perth, Cockburn, Stirling, Melville) they hug the city and the coast.

WA Approvals by LGA: Apr ’23 – Mar ‘24

Source: ABS and IndustryEdge

LGA Houses Other Total
Wanneroo 1,795 147 1,942
Swan 1,632 51 1,683
Rockingham 1,327 44 1,371
Cockburn 735 212 947
Stirling 507 417 924
Mandurah 861 46 907
Armadale 830 27 857
Melville 265 237 502
Kwinana 494 494
Gosnells 400 67 467
Serpentine-Jarrahdale 437 1 438
Busselton 395 1 396
Canning 307 34 341
Joondalup 308 22 330
Augusta Margaret River 240 4 244
Murray 232 232
Harvey 203 203
Albany 171 14 185
Bayswater 145 34 179
Kalamunda 138 4 142
Perth 136 136
Belmont 88 39 127
Capel 102 102
Mundaring 97 3 100
Greater Geraldton 72 22 94

 

Much as expected, average new house costs are higher in the inner-city and more densely populated areas. For the most part, that flows through to the multi-residential formats also. The exception is the highly sought after seaside retreats where Busselton for example has by far the highest average multi-residential building costs of the last year.

 

AVERAGE REPORTED VALUE OF NEW BUILDS, BY AREA ($A) SELECTED

Area Houses Multi-Res
Melville 723,891 621,920
Stirling 546,791 450,357
Belmont 499,557 347,744
Joondalup 497,724 266,136
Busselton 474,954 1,150,000
Augusta Margaret River 472,142 490,000
Canning 442,049 362,765
Greater Geraldton 438,833 422,545
Mandurah 411,139 278,174
Albany 405,222 457,500
Bayswater 404,062 248,441
Cockburn 397,185 417,486
Murray 390,582
Mundaring 384,175 321,000
Harvey 378,236
Kalamunda 377,558 232,500
Serpentine-Jarrahdale 371,805 474,000
Capel 360,108
Gosnells 354,138 276,537
Wanneroo 349,000 428,061
Rockingham 342,231 244,318
Swan 342,094 434,137
Armadale 336,022 283,185
Kwinana 325,935
Perth 836,500

 

HOUSING MATERIALS: Input prices consistent with Eastern Australia

PERTH: TIMBER PRICES HOLD STRONGEST OF MAIN MATERIALS

Source: ABS & IndustryEdge

In Perth – similar to the rest of Australia – timber input prices to housing have held for the last year, declining just 2.6% to the year-ended March. Steel input prices were 6.8% lower compared with a year earlier, while concrete prices have lifted 6.6% after deteriorating through much of the pandemic-era.

Builders are reportedly concerned about input prices because their margins have been squeezed. The only advantage the west seems to have over the east is the average build time is coming down faster, meaning builders can get their money faster and recover a little ground that way.

 

PERTH: TIMBER PRICE CONSISTENT WITH EASTERN AUSTRALIA

Source: ABS & IndustryEdge

Compared to a year earlier, timber input costs to housing construction declined 2.6% in Perth over the year-ended March 2024, compared with -1.1% in Sydney and -1.6% in Melbourne.

 

PERTH: STEEL SLIDE CONTINUES

Source: ABS & IndustryEdge

Steel’s sliding input to housing prices appear reflective of the soft markets for new dwellings. Whether timber or steel, once the framing work is completed, the sector faces significantly less work, but this is more the case for steel, with little work after lock-up. Notably, this data reflects steel inputs into housing construction and does not account for price movements in steel used in appliances for instance.

Posted Date: July 7, 2024

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