Housing supply in Western Australia is facing critical shortages with no relief in sight, CEDA Chief Economist Cassandra Winzar told a CEDA event last week.
While house prices have grown steadily over the past few years, a lack of housing supply is driving the state’s housing issues, with skills shortages in the building industry exacerbating the problem.
“The real concern about housing is around supply and the incredibly slow growth that we're seeing in supply,” Ms Winzar said.
“This is probably going to keep pushing housing prices up and unfortunately, particularly for lower-income households, this poses a very poor outlook for rentals.”
Ms Winzar said that despite federal and state stimulus for construction over the past few years, supply is only just getting back to long-term averages.
The previous housing construction boom in WA saw annual growth of housing supply reach more than 30,000 dwellings a year, but the last two years have seen new dwelling commencements of just over 20,000 per year.
“The constraints around the supply of both materials and labour has made it feel like we had a lot more building going on than we actually did,” she said.
“We lost a lot of builders from the industry and they haven't come back, so the capacity in our building industry has actually reduced quite significantly.”
This is putting further pressure on social housing, as a result of the industry’s diminished capacity to construct apartment buildings.
“We've actually seen the total stock of social housing decline, despite quite a good chunk of money going into social housing,” Ms Winzar said.
“There’s a lot going on at a federal level around housing policy and trying to get a bit more spending there, but it's not just around the money, it's also around the capacity of the sector to respond.”
Demand in the broader labour market is also holding strong, with WA’s unemployment rate sitting at 3.6 per cent, while the national rate is at 3.5 per cent.
Ms Winzar said WA’s high participation rate has helped act as a buffer to higher unemployment, but warned the RBA has signalled that we should expect the unemployment rate to rise.
While the state has started to see a drop in job vacancies over the past year, the vacancy rate is still higher than it was in the previous resources boom.
“If you're finding it hard to employ people, this is why,” Ms Winzar said.
“We've reopened migration, we have seen population growth in WA and we're still finding this really challenging.”