Successive rate cuts in the official cash rate during the last 18 months has precipitated undesirably high rates of inflation in the price of residential property in Western Australia, further worsening our housing affordability problem.

According to ABS data released today (http://www NULL.abs NULL.gov NULL.au/ausstats/abs null@null NULL.nsf/mf/6416 NULL.0) which measures house price movements in Australia, WA established house prices are up 6% since March 2012.Conversely, house price growth in all the other major capitals barring Darwin has been much more modest. (See graphic below fold)

The Reserve Bank of Australia’s decision to cut the official cash rate to a record low of 2.75% adds further fuel to the inflationary fire. In fact, with rates this low and with the prospect of further cuts to come, the prospect of a housing bubble (http://www NULL.investopedia NULL.com/terms/h/housing_bubble NULL.asp) developing in the Western Australian market is becoming a real threat.

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Perth does not provide quality affordable housing and the WA State Government has failed in making housing more affordable, according to a recent survey (https://www NULL.propertyoz NULL.com NULL.au/library/B%20-%20FULL%20REPORT NULL.pdf) of residents released by the Property Council of Australia.

The survey shows that of the total number of respondents residing in Perth (603 persons), only 26 per cent agreed that there was a good range of quality affordable housing, while 47 per cent of respondents did not agree, and 27 per cent of respondents neither agreed nor disagreed (see Figure 1). This left Perth ranked the third worst city on housing affordability of those surveyed, equal with Sydney (26 per cent), and only marginally better than Canberra (25 per cent).Perceptions of housing affordability in Perth have also declined: from 34 per cent in 2011 and 32 per cent in 2010 (see Figure 1). Overall then, Perth rates relatively poorly in terms of having a good range of quality affordable housing, and housing is seen as becoming more unaffordable.

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Analysis of 2011 Census data by the Community Housing Coalition of WA reveals that more than 20 per cent of homes in regional WA were vacant at the time of the census. Even locations experiencing acute housing shortages such as the Pilbara have vacancy rates of 19.2 per cent.

 “Given the chronic housing affordability issues that much of the State is experiencing, the level of vacant properties in WA is staggering. A significant number of homes could be made available for people to live in and Government could encourage owners to make the properties available to the market through reform of the tax system,” Barry Doyle, CHCWA’s Executive Officer, said.

 “According to the 2011 Census, 43,100 homes in regional WA are vacant equal to 20.5 per cent of the total housing stock. The number of vacancies is equivalent to more than one-third, or almost 35 per cent, of the total households renting in regional WA. This follows analysis by CHCWA that showed 66,231 vacant homes in the Perth metropolitan area accounting for 9.6 per cent of the total housing stock, including significantly high vacancy rates in many areas close to the Perth CBD.”

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A significant number of unoccupied homes in well-established areas close to the Perth CBD could be made available for people to live in and ease the rental market failure, according to analysis by the Community Housing Coalition of WA (CHCWA).

According to the 2011 Census, 66,231 homes in the Perth metropolitan area remain vacant, equal to 9.6 per cent of the total housing stock. The number of vacancies is equivalent to two-fifths, or almost 40 per cent, of the total households renting in Perth. The number of vacancies is an increase on 2006 Census figures which showed 48,600 empty homes, accounting for 8 per cent of the total housing stock.

“Perth has witnessed a dramatic increase in the median weekly rent in recent years while house prices remain high. Housing under supply is often cited as a key reason for price hikes,” said Barry Doyle, CHCWA Executive Officer.

CHCWA analysis of 2011 Census data shows there are thousands of unoccupied homes in Perth. The largest number of vacancies is in the Peel region, coastal towns such as Rockingham and Yanchep, and in newly developed suburbs such as North Coogee, Harrisdale, and Piara Waters. At the same time, many established areas in Perth have significant vacancy rates that are well above the state average – i.e. Perth City, Fremantle, Claremont, South Perth, and Cottesloe, among others.

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The Housing Industry Forecasting Group’s (HIFG) October report shows housing affordability remains an issue for low-to-medium income earners in WA, although housing activity and consumer confidence appear to be on the way to recovery.

The HIFG is independent of the Government and was established four years ago to provide the WA State Government and housing sector with assessments and forecasts of land and housing activity in the state.

According to the report a 20 per cent increase is expected in new house construction in 2012-13, suggesting consumers are regaining confidence in the property market after several years of hanging back.

But the report notes housing affordability remains an issue for WA households on low to moderate incomes despite falling interest rates. This was true for both prospective homeowners and renters.

According to the report, in the June quarter of 2012 a Perth household on the estimated median income of $80,800 with a 10 per cent deposit would only be able to afford a property valued at $322,000. This would mean they had access to only 14 per cent of houses and units sold during the quarter.

It was also noted in order to be able to pay the median rent of $450 per week a household in Perth needs a weekly income of $1,500, or an annual income of $78,000.

A single person who earned just above the limit for public housing ($430 per week) would have been able to access less than one per cent of all new rentals for the June quarter of 2012.

Click here to see the HIFG report. (http://www NULL.planning NULL.wa NULL.gov NULL.au/716 NULL.asp)

On Friday, 29 June, the COAG Reform Council released its third report assessing progress under the National Affordable Housing Agreement. The report showed mortgage and rental stress increased across Australia while the number of homes affordable to low income households decreased. WA performed particularly poorly in a number of areas. Here is a summary of some of the reports significant findings:

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NEW analysis by the COAG Reform Council shows that Perth’s low income earners are in severe rental stress paying substantially more than 30 per cent of their income on rent.

This comes hot on the heels of the 2011 Census figures which show that WA has the largest increase in weekly rent and mortgage repayments of any jurisdiction in Australia.

WA’s median rent increased by 76.5 per cent from $170 in 2006 to $300 in 2011 and in the Perth area, the increase was higher rising by 77.7 per cent from $180 in 2006 to $320 in 2011.

In addition, mortgage stress levels among low income groups in WA has soared with WA now having the second highest level of mortgage stress in the country and Perth and Darwin experiencing the highest year on year increases in the country.

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The National Housing Supply Council has released Housing Supply and Affordability Key Indicators 2012 (http://www NULL.nhsc NULL.org NULL.au/content/publications/housing_supply_affordability/downloads/housing_supply_affordability_report NULL.pdf). The publication updates the National Housing Supply Council’s analysis of underlying housing demand, supply, the balance between the two and housing affordability using data not available for inclusion in the 2011 State of Supply Report (http://www NULL.nhsc NULL.org NULL.au/content/supply NULL.html) released in December, 2011.

Key findings are:

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