Oversupply amid a falling population have pushed home prices in Perth down.
Despite the declining population in Perth, property developers there have created an oversupply of homes, thereby negatively affecting house prices, revealed the Reserve Bank of Australia’s (RBA) Assistant Governor Christopher Kent.
Since the peak of mining investment in 2012, the population in Western Australia has significantly declined. Building approvals, however, continued to increase before peaking in 2014. “This meant that the housing supply was still ramping up at the same time that population growth was declining,” said Kent.
As such, more houses were being completed than actually needed by the falling population, based on a ratio of new houses and average people per household, he said. “That is consistent with the sharp rise in vacancy rates in Perth and the adjustment to rents and housing prices.”
“It also suggests that dwelling construction and construction employment are likely to remain subdued for some time. That is having a knock-on effect to other industries linked to the property market. These linkages are one way, in which the decline in the resource sector has been extended and amplified through to other parts of the economy,” he added.
Cheryl Marie Tay, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories, email cheryl@propertyguru.com.sg
