Interest rates and other housing news

RBA holds cash rate

Proptracl senior economist Eleanor Creagh this week tipped property prices would continue to rise and that interest rates would likely come down later this year.

In the wake of the Reserve Bank of Australia's May meeting on Tuesday, at which its held the cash rate steady at 4.35 per cent, Ms Creagh said population growth, tight rental markets, resilient labour market conditions and home equity gains supporting upgrade activity were bouying housing demand.

"Further, falling inflation and tax cuts on July 1 will support real incomes and household spending over the second half of this year,'' Ms Creagh said.

"Although higher than expected inflation in the March quarter has pushed back the expected timing of rate cuts, most still expect that the next move for interest rates will be down.

"However, the timing remains uncertain.

"As a result, prices are expected to lift further in the months ahead, though it's likely the pace of growth will continue slowing as the seasonally quieter winter period approaches, particularly in tandem with rate cut expectations being pushed further out."

The Cook Labor government will offer $5000 incentives to 1000 vacant property owners who are willing to provide minimum 12-month leases to new long-term tenants, as part of new incentives announced in this week's State Budget to help address WA's housing crisis.

To qualify, the vacant property must meet conditions, including that it has been vacant for at least six months, is a single self-contained property with its own bathroom, kitchen and toilet and has not been used to receive a payment under the Short-Term Rental Accommodation Incentive Scheme.

Spare rooms and ancillary buildings will not be eligible.

Social and affordable housing will also receive a boost under the latest State Budget, with an additional $843 million inlcuded to increase supply and support across WA.

The 2024-25 State Budget will include an additional $400m in funding to expand the Social and Affordable Housing Investment Fund (SAHIF) to support the delivery and refurbishment of social housing stock, and provide housing to the most vulnerable members of the community.

This latest SAHIF investment brings the total number of new social homes funded in this term of government to almost 5000 - of which more than 2100 have already been delivered.

More than 1500 homes have also been refurbished, extending their useful life.

Detached dwelling approvals hit a 12-year low in January, but growth in national construction costs continued to stabilise in the first quarter of 2024, according to CoreLogic's Cordell Construction Cost Index (CCCI).

The first quarter 2024 national CCCI, which tracks the cost to build a typical new dwelling, recorded an 0.8 per cent rise, which was on a par with the rise experienced during the December quarter last year.

This stabilisation meant the annual change in the CCCI was to ease to 2.8pc - the smallest since the year to March 2007 (2.7pc) and well below the pre-COVID decade average (4pc).

The quarterly change was reasonably aligned across the States - and held steady in WA at 0.7pc.

In WA, construction costs rose 0.7pc during the quarter, in line with the rise seen in quarter four 2023.

Annually, WA's CCCI increased by 2.1pc, which was the lowest annual change in construction costs in almost seven years.

CoreLogic economist Kaytlin Ezzy said while growth in national construction costs had continued to ease from the highs seen through the pandemic, price levels remained elevated.

"Current building costs are still 27.6pc higher than at the start of the pandemic, which is likely putting significant pressure on builder's profit margins," Ms Ezzy said.

She said construction costs were expected to remain within usual margins in the coming year.

"National dwelling approvals have held well below average in 2023 and are continuing to do so into 2024, helping to dampen the growth in construction costs," she said.

"Monthly detached dwelling approvals, reported by the Australian Bureau of Statistics, fell to the lowest monthly count since June 2012 in January at 7701 - and remained down 13.5pc below the decade average in February.

"However, the construction pipeline remains bloated, with ABS building activity data showing about 255,000 dwellings approved but not yet completed."

Residential tenancy reforms are a step closer after new laws were passed in Parliament.

Real Estate Institute of WA (REIWA) chief executive officer Cath Hart last week welcomed the passing of the Residential Tenancies Amendment Act 2024.

"This has been a long process, with a review launched in 2019 and the proposed reforms announced in May 2023," Ms Hart said.

"The Bill was introduced to Parliament last November and we acknowledge the government's efforts to get it passed in a timely manner.

"The passing of the Act gives tenants, investors and industry certainty and allows us to move forward."

Ms Hart said reforms would come in stages, with a ban on rent bidding and provisions for remedy or compensation for retaliatory action to come into effect next month.

"Many details, such as modifications that have to be prescribed by regulations, and REIWA will continue to engage with the government on these matters,'' she said.