The WA economy may be the strongest in the nation, but the state government’s latest budget has not been embraced by those looking to purchase a property. There a few reasons why
The latest state budget is not popular one with prospective home buyers in WA.
For starters, first home buyers have been hit, with the stamp duty levy threshold lowered from $500,000 to $430,000. And this isn’t the first measure in recent times that has set this segment back.
Last September, Colin Barnett’s government slashed the First Home Owners Grant, for people seeking to buy established properties, by more than half to $3,000.
Real Estate Institute of WA (REIWA) president David Airey says these measures have been frustrating for the first home buyers and a worry for the property market’s future.
“The property market in WA is only just stabilising after several volatile years, while current REIWA data indicates a market downturn for the second half of this year,” he says.
“The clear evidence from NSW, which recently scrapped its tax concessions for first home buyers, is that first home buyer activity collapsed and hasn’t recovered. It has been a similar experience in Victoria where other tax concessions for the first home buyers were removed or diminished.”
Laing+Simmons general manager Leanne Piklington argues that first home buyers are already struggling and the country risks an entire generation missing out on a place in the property market.
“A no-brainer in this whole discussion is the removal of stamp duty. Notwithstanding the obvious advantages of its complete abolition, stamp duty exemptions for all first home buyers should be implemented without delay,” says Pilkington.
“Stamp duty has the effect of nullifying a potential deposit. What could be a suitable, conservative deposit for many home buyers too often becomes a permanent barrier to entry once stamp duty is taken into account.”
Land tax hike
The budget also includes a 10% increase in land tax rates this year, which is a 23% increase over the last two years. There is also a 50% increase in the Perth Parking Levy, which is an increase of $365 a year. This equates to about $1 a day and will be phased in over the next two years.
It’s not a budget that makes the tax system fairer or more sustainable, says Joe Lorenzo, executive director of the Property Council of Australia.
“It is a bookkeeper’s budget for the short term that masks the structural faults in the state tax system and the government’s inability to reign in public expenditure,” says Lorenzo.
“The Property Council will launch a public campaign to show government that when you take the shortcut through property tax increases, you hurt the broader WA community.”
Economic leader continues its domination
If the mining boom is over, nobody told the WA economy.
According to the most recent Deloitte Access Economics Investment Monitor report, work is well underway at Australia’s largest iron mine, Gina Rinehart’s $9.5bn Roy Hill project. It employs more than 3,000 workers and recently began mining its first iron ore. Once completed, it is hoped to produce 55 million tonnes of iron ore a year.
Despite this, it seems that population growth and increasing retail spending are the driving forces behind WA finishing first in CommSec's latest State of the States report.
Population growth is not only the highest in the nation but above decade-average levels, providing the economy with momentum in the housing sector.
Denise Carlton, director of demography at the ABS, says WA showed strong population growth in the year ending 30 September 2013.
“Western Australia continues to have the fastest population growth rate, growing by 3.1%, but is slowing from its record high of 3.6% in June 2012,” she says.
However, CommSec chief economist Craig James argues that if the Australian economy increasingly focuses away from mining investment, it could mean that other states climb further up the economic ladder.
“Western Australia continues to lead the rankings of best performing economies but in the latest quarter there was little to separate it from the Northern Territory economy,” James says.
“The mining construction boom is over, replaced by the home construction boom. As a result, winners and losers will change across Australia, not just industries but also state and territory economies.”
Suburb to watch
Inglewood
Looking for a charming little suburb that’s close to the Perth CBD but still affordable? Look no further. There are plenty of renovation opportunities available here, with many 1920s/30s bungalow houses. Apart from character housing, there are also lots of 1960s apartments and modern unit developments. The main commercial centre is located on Beaufort Street and contains retail services, shops and a recreation centre. Two-bedroom units can be bought near here on Eighth Avenue, close to trains, buses and parks, for less than $330,000.
The supply and demand ratio here should work favourably for near- to medium-term growth. Stock on the market is low, at 0.89%, and there is massive interest in the suburb, with an internet search showing 46 potential buyers for every listed property. This explains why properties only take just over a month to sell once listed.
For those seeking capital growth, there looks to be much potential here. Five-year, three-year and 12-month growth are all at just 2%, indicating that there is plenty of room to move up. And for an idea of how cheap it is, the median price of units in neighbouring Mount Lawley is much more expensive at $425,000.
