The property market across WA is stuck.
Glued to the spot by low confidence, decade-long stagnation of prices, slow economic activity, exorbitant taxes and low population growth.
Remarkably, in 2018 there were a mere 32,529 property transactions recorded across metropolitan Perth with our current population in WA at 2.72 million souls.
You have to go back 28 years to 1990 to find a lower level of sales activity when 30,784 sales transpired.
Back then, our population was 1.613 million people.
This change in population and the necessary increase in home construction to house them throughout the last thirty years makes the current sales numbers even more extraordinary.
Over the past 30 years, 2005 was the peak of our home buying activity with 69,820 sales recorded across Perth.
In only five years, Perth’s sales activity has plunged 47 per cent (from 61,067 transactions to 32,529) whilst the median house price has gone from $505,000 to $480,000 during the same period.
Whilst it is abundantly clear from the numbers that more home owners are staying put, it’s worthwhile considering the reasons why.
The first problem is negative equity.
Folk who built a home in some of our outer suburbs five years ago have seen their $450,000 home be now worth less than $300,000.
If they’ve got a job and are meeting their re-payments (made easier now thanks to lower interest rates) why would they up-stumps and sell now?
The second problem is transfer (stamp) duty.
Unless you are a first home buyer, you pay a penalty of $16,815 for the privilege of buying a home at the median price of $480,000.
And if you’re looking at the market growth over the past decade you’ve got little confidence that the $16,815 you’ve paid will be taken care of by the capital gain of the property because there’s been none.
Incentivising first home buyers by government grants to buy land and build new is making the problem worse still; established homes are ignored by first-time buyers as a result of the current grant settings lessening demand and lowering property values even further.
Meanwhile, a stupid 7 per cent additional tax on foreign buyers (even those who reside here) on top of the normal transfer duty has further curbed investment.
Government revenues from transfer duties have less than halved over the past five years but have been off-set by record levels of cash flowing from mining royalties and the recovery of our share of the GST.
The latest interest rate cuts did nothing to our property market; Melbourne and Sydney rebounded 4 per cent.
People who own homes feel wealthier when their property values are rising and they spend more money in the community when that happens.
A healthy property sector is instrumental to the overall health of our economy for the benefit of all West Australians.
It is time the state government looked seriously at housing taxation policy settings to help kick-start a recovery before things get any worse.