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Western Australian Statistical Indicators (cat. no. 1367.5)

THE IMPACT OF RISING HOUSE PRICES ON THE WESTERN AUSTRALIAN ECONOMY

The December 2004 issue of Western Australian Statistical Indicators (ABS cat. no. 1367.5) charges apply, released on 12 January 2005, will include a feature article on the impact of rising house prices on the Western Australian economy.

The article shows that recent increases in house prices have largely been the result of: increased demand, driven by low interest rates and the attractiveness of housing as an investment; and constraints on the responsiveness of supply. However, comparisons with other states show that both the rise in residential property prices, and the associated economic impacts, have been more moderate in Western Australia than in the larger eastern states markets.

Highlights from the article include:

• Between 1999-2000 and 2003-04, the established house price index for Perth rose by an annual average of 10.5%, compared to 13.4% nationally. Over the same period, the CPI increased by an average of 3.1%;
• In the space of five years, the average home loan in Western Australia increased by $32,000 to $151,500 in 2003-04. During this period, household debt increased and savings declined, as consumers borrowed to purchase homes or drew on the increased value of their homes to finance household consumption;
• In the five years to 2003-04, borrowing for investment properties increased from 21.9% of total housing finance to 30.1%. However, this was well below the level of growth in New South Wales and Victoria; and
• Investment in housing and associated infrastructure has resulted in increased incomes and employment in the property and construction industries. Recent activity in the construction industry has not yet reached the levels experienced in 1999-2000 in the lead up to the GST.