It’s Supply, Stupid

Bumping into a local developer this week at a local café led to an interesting chat about the current state of the local property market and the difficulties he faces in getting projects out of the ground. In summary, unless a developer can sell an average two-bedroom apartment at completion for around $15,000 per sqm, the numbers don’t work. The gap between what the market will pay (about $1,275,000 for an 85 sqm flat) and the cost of construction with a
risk-assessed margin is still too wide. This means ‘end’ prices must continue to rise or the cost of construction has to fall before meaningful housing supply is added. The former is likely, the latter, less so.

Despite this, developers, domestic home builders and the government are adding supply, albeit at a pace that will fail to meet the national 1.2 million homes target by 2029. There is a deepening housing affordability crisis. A recent report from the Bankwest Curtin Economics Centre (BCEC) reveals that over 210,000 households now find their housing unaffordable—a staggering 91 % increase in just two years.

Despite the predicament, WA has seen encouraging improvements. 20,639 new homes were completed in 2024 – the highest annual figure in over seven years and an 18.2 % increase from the previous year. Housing commencements have also gained pace with approximately 16,400 starts over the past year, 40 % up from 11,700 the year before.

However, to meet its fair share of the National Housing Accord target (around 130,000 homes by mid-2029), WA must sustain an average of 6,500 homes per quarter or 26,000 annually. We’ve still well short of these levels.

So, how do we get more houses into the system more quickly? Firstly, we can streamline planning and cut red tape. WA’s controversial planning reforms that passed last year have created a more streamlined, transparent planning system, including a reformed DAP (Development Assessment Panel) process and improved application tracking. Additional reforms allow single-house approvals and community housing projects to bypass lengthy approvals, helping projects proceed faster.

We can also look to innovation and federal funding. The state budget has allocated an extra $1.4 billion to housing supply with housing minister Carey busily spending it on new social home developments. There’s also 1000 Keystart shared equity loans, stamp duty reductions for first-home buyers and off-plan buyers, a Housing Enabling Infrastructure Fund to unlock about 33,000 new residential lots and funding for modular and prefabricated housing to speed up build times.

Meanwhile, the local market remains tight on supply with a quick search of houses for sale on www.reiwa.com in Fremantle, East Fremantle and South Fremantle at the time of writing throwing up only three houses (apartments not included) that were not marked ‘under offer’. I dare say they’ll be gone by the time the sunsets this evening.