Investors rush to build new rentals amid crisis, Housing Industry Association says

New homes in WA are largely being built by investors, spurred on by the State’s sustained low rental vacancy rate of less than one per cent, along with house price growth. A new report from the Housing Industry Association said the number of investor loans for new homes in WA increased by an astonishing 66.4 per cent in 2023/24. In the three months to May this year, there was an 80 per cent annual increase in investor loans to build new homes in WA, compared with 17 and 25 per cent increases on the east coast. “In this cycle of rising house and rental prices, the data suggests that investors are increasingly more active in increasing the supply of homes,” the report said. “As prices of homes in the established market continue to rise due to strong housing demand and weak supply, owner-occupiers will gradually re-enter the new home market. Rising houses will make building a new home more attractive irrespective of land, labour, and materials prices and importantly, the higher cost of borrowing.. The report said the trend was most evident in WA. “A sustained low rental vacancy rate of less than one per cent and sharp house price growth of 20 per cent in 2023/24 have provided the signals for investors to build new homes,” the report stated. WA had a strong first quarter this year commencing construction on 3820 homes in the March quarter, up by 38.1 per cent on the previous quarter. HIA expects 3880 commencements in the June quarter of 2024, producing a financial year total of 13,590 in 2023/24, which is a 5.4 per cent increase on the previous year. “The recovery is forecast to continue for Western Australia, reaching 21,510 by 2027/28. This will be only the second year exceeding 20,000 detached house commencements in over a decade,” the report stated. HIA executive director WA Michael McGowan said the rest of the country was yet to see a pick-up in home building, but recovery had been underway in WA for the past year. Challenges to the market include labour constraints and the availability of land. “While less constrained than in the larger States, the re-acceleration of land prices in Perth illustrates the underlying shortage of shovel-ready land and the need for new land to be fast-tracked for residential development,” he said.