HOUSING — STATE
DEMAND
837. Mr D.C. NALDER to the Treasurer:
I
refer to the budget forecast in the 2022–23 budget showing a massive
decline in housing construction of 17 per cent following the end of the
state and federal housing stimulus. Can the Treasurer confirm that pulling
forward the demand has created a substantial escalation in prices now and will
create a housing cliff into the future?
Mr B.S.
WYATT replied:
I
thank the member for the question. This is an issue I had some conversation
about during the budget estimates with both
the member for Bateman and the member for Riverton—that is, the
bring-forward of work and the success of the building bonus grants. The building bonus was designed by the state
government to bring forward work so that there would be activity in the construction space. By way of background—I
have told Parliament this before so members may recall—the housing
sector came to government in the middle of the COVID restrictions concerned
that the pipeline of work for residential construction was coming to an
end, depending on whether it was the Housing Industry Association or the Master
Builders Association, between May and September. For whatever reason, Western Australia had a shorter pipeline of residential
construction work than other states such as Victoria. That was clearly an
issue. At the time, we thought that we would have six months of restrictions.
The Premier has outlined before that some governments wanted the Premier to put
the same restrictions on construction activity and the mining sector. We did
not do that.
We introduced the building bonus,
combined with the commonwealth's HomeBuilder program—our
program is more generous and more expensive—to create and bring forward
work. That has been extraordinarily successful. I note that for the month of September, building approvals increased by
42.6 per cent, which is the strongest rise of the states. That is 74 per
cent higher than in September 2019. Similarly, housing finance commitments for
owner–occupiers increased by 26 per cent in September. Again, that is
the strongest of all the states. We are seeing a very large pipeline of work
for new builds spilling over into the established market. We are seeing
activity in the established market that we have not seen for nearly a decade.
That will hopefully start to resolve the issue that the member for Bateman
bangs on about incessantly—that is, the issue of negative equity. We
are seeing CoreLogic data that highlights that prices are increasing, which is
something the member will no doubt welcome. That is a good outcome of our
policy announcement.
The ability to make sure that work
starts in a timely way is an issue that has worried us. The government has made
a couple of decisions over the course of this
policy. Originally, the program was designed so that the payment was made
once the slab went down. There were issues around the supply of concrete, so we
changed that so that substantive work on the site would trigger that.
Originally, construction had to start by 30 June 2021. We have changed that to
31 December 2021. That has extended the activity. That happened after the
budget was released. The member for Bateman may recall this conversation. I think
he referred to the cliff as a 17 per cent fall. I suspect that it will not be
that great in 2022–23, which is the year the member asked me about,
because we have extended the construction timetable. I now fully expect that
that activity, which has been far greater than we expected, will continue well
into calendar year 2022. We will update the figures in the midyear review on
the profiles of building activity the member quoted. Regardless of what I think
is the now out-of-date figure of 17 per cent, this is clearly a bring-forward
of work. Without a return to normalised population growth, there will clearly
be what the member referred to as a cliff emerge some point in the future. Our
job is to try to push that out as far as we can so that we can return to a more
normalised level of population growth.
Before
I sit down, I will make one final point. We now have a very low vacancy levels.
The vacancy rate is very low. That is starting to show up in investor loans and
investor construction. Unsurprisingly, the market is starting to work. We
expected the vacancy rate to be quite low for some time—the Real Estate
Institute of Western Australia has made this point—and I am comfortable
that the cliff will be pushed back further as more investment comes in, particularly
now that we have an interest rate of 0.1 per cent. It is likely to be
0.1 per cent for the next two or three years. There will be a cliff at some
point, but I suspect that we have pushed that out and it will not be as
dramatic as is currently shown in 2020–23.