- Owner-occupiers are more comfortable now than they have been in some time, whereas many in the private rental market are struggling to make ends meet
- The divide is likely to widen in the coming months on the back of high demand and limited supply, as well as the lifting of the moratorium
- 100,000 WA renters at risk of major financial impact if rents were to increase by 10 per cent
- There have been significant improvements in affordability perceptions
- Increased housing supply could gradually relieve rental pricing pressures
Housing affordability in Western Australia has improved, but the gains have been unequal, with a divide between those who own a house and those who rent.
The Housing Affordability in WA: A Tale of Two Tenures study, from the Bankwest Curtin Economics Centre, contains findings from the fourth BCEC Housing Affordability Survey, which surveyed 4000 families across Western Australia, New South Wales, and Queensland.
It reveals that homeowners are happier than they have been in a long time, while many people in the private renting market, notably single parents, are struggling to make ends meet.
The divide is likely to widen in the coming months, according to report co-author and Bankwest Curtin Economics Centre Director John Curtin Distinguished Professor Alan Duncan.
“Rents in WA have increased by $60 per week on average since September 2020 because of high rental demand and limited supply of houses available to rent, and are likely to increase further now that the moratorium has lifted,” Professor Duncan said.
“In regional areas such as Port Hedland and Karratha, median rents for units have risen by over $100 per week over the year to March 2021, while median rents for homes in South Perth have risen by $150 per week.
“If rents were to increase by 10 per cent this would have a major impact on the financial wellbeing of more than 100,000 renters in WA, disproportionately affecting those receiving rent assistance.”
The Perth rental market is significantly more affordable than it used to be, according to the Real Estate Institute of WA (REIWA), with its’ analysis showing 235 suburbs had median house rents below their peak prices in May 2021.
“The fact remains that WA is still the most affordable place in the country for tenants,” REIWA president Damian Collins said. “While rent prices have lifted over the last year, most suburbs are cheaper than they used to be — and some significantly so.”
Less people perceive housing as unaffordable
Dr Amity James, co-author of the report and Deputy Director of the Australian Housing and Urban Research Institute’s Curtin University research centre, said there had been significant improvements in affordability perceptions.
“There has also been an increase in the number of low and moderate income households regarding their housing as affordable compared to 2019 and these trends are partly driven by lower mortgage interest rates,” Dr James said.
“Since 2015 there has been a decline in the number of households having difficulty meeting housing costs, with the proportion frequently struggling falling from 24 per cent to 11 per cent in 2021.
“Despite overall improvements in housing affordability, a number of households remain vulnerable or have not seen any improvements in affordability and around 40 per cent of respondents stated that high housing costs were affecting their mental health.
“Single parents are particularly vulnerable to housing cost increases, with one in five families rating their housing as unaffordable and 40 per cent paying over 30 per cent of their income in housing costs.”
Supply needed to relieve tight market
Increased housing supply, according to report co-author Professor Steven Rowley, Director of the Australian Housing and Urban Research Institute’s Curtin University research centre, could gradually relieve rental pricing pressures.
He said based on first home buyers applying for HomeBuilder and the Building Bonus scheme alone, there could be 10,000 households leaving the rental market soon, which will ease the pressure in the next 6-12 months.
“Almost half of those who purchased in the last six months said government incentives allowed them to bring forward their decision to purchase and 43 percent of those purchasing in the last two years stated they would not have been able to buy without the incentives,” Professor Rowley said.
Mr Collins said the biggest issue facing the WA rental market was not affordability, but the shortage of housing.
“To keep rents affordable, property investors must remain an active part of the WA market so there are enough rentals on the market to keep up with tenant demand,” Mr Collins said.
“With the Residential Tenancies Act review currently underway, it’s essential that investors are not disincentivised from buying in WA and that the outcomes of the review are fair for all parties.”