West Australian Property Under Supply Threatens Recovery

West Australian Property Under supply Threatens Recovery.

Unlike almost anywhere else in the developed world Western Australia seems to have a claim that its housing stock is seriously holding back its recovery.  Lets look at why property prices are set to skyrocket in WA in 2010.

Western Australia is the largest state in the world’s largest island nation – and its also one of the world’s largest mines. WA is all about mining – from the Iron Ore of the Pilbara to the gold of Kalgoorlie this is a boom and bust mining state. The bust came about a year ago when investment dried up for smaller miners and exploration firms on the back of the chaos in Wall Street. But the fundamentals didn’t change.  The gold price has gone from strength to strength as the US$ dives gold looks set to hit $1500 – that’s all good for the gold miners of the state. And while the iron ore industry hiccups and laid off about 20,000 workers earlier on in the year, the state’s unemployment figures are yet to hit 6%. Why? Well China is still buying, and now the massive off-shore Gorgon gas field is set to kick start a whole new infrastructure boom in the Kimberley and Pilbara.

The Busy Pilbara, from the man highway, in the height of the tourist season

Western Australia has one of the lowest population densities in the world. In a state of 2,529,875 km² (976,790 sq mi) there area a total of 2.24 million which works out to be an average density of just 0.84 people/km² (2.2 /sq mi). Its actually a lot lower than that as over 1 million live in Perth and 85% of the population live in the SouthWest. In short the state has an awful lot of space – which makes the following exchange as reported in The Australian even more extraordinary:

“There’s no question there is going to be a major housing crisis in Western Australia; the only question is when,” NAB state business banking chief Andrew Whitechurch told The Weekend Australian. “It is a big issue and it’s about to get bigger.”

With a string of major resources projects promising thousands of new jobs from next year, Mr Whitechurch said the lack of land release and a “ridiculous” approvals process were creating roadblocks for developers.

[Western Australian] Treasurer Troy Buswell revealed on Tuesday that fewer than 19,000 homes were built in WA in 2008-09, when 24,000 were needed just to cater for population growth of more than 67,000, without touching existing problems.

Mr Whitechurch said: “The number of people coming in is not stopping, so the problem gets worse every day, and even if you get through the approvals process you can’t provide additional supply for 12 to 18 months.”

So where there is so much land that most visitors come away simply amazed at the size of the state the government is the main cause of the housing crises. Now I can think of a number of issues as to why its hard to house people in isolated areas (access to water, protection from storms, communications) – but this is not the issue here – the issue is the planning department!

So in a state which can’t even organise Sunday shopping or daylight savings I feel confident in saying that property prices in the Pilbara and elsewhere will be staying sky-high for the foreseeable future!