FHB grants obsolete amid construction crunch

While this scheme is designed to help revitalise Western Australia’s stream of new housing supply, buyer’s agent Peter Gavalas warned that Perth’s severe shortage of builders risks rendering the FHOG irrelevant.

“The construction industry in Perth is in a tight spot,” said Gavalas. “We’re seeing extended delays and financial strain due to the backlog of projects.”

“Unfortunately, this means first home buyers have fewer new homes to choose from, limiting their options in an already competitive market,” he stated.

The current backlog of projects dates back to the COVID-19 pandemic, and has been exacerbated by escalating construction costs.

Gavalas shared that many Western Australian builders are “haemorrhaging financially as they try to complete outdated contracts, a situation reflected in the fact so many gone broke”.

He pointed to the concerning fact that in the 2022–23 financial year, a total of 132 construction firms in the state faced administration.

“The state government needs to address the reality of today’s market. The existing FHOG framework is out of touch with the current needs of first home buyers and the construction industry’s capacity,” warned Gavalas.

Despite the intense strain the construction industry is facing, Western Australia still urgently needs an increase in housing supply.

The rental market is especially dire, with the capital city of Perth seeing a rental vacancy rate of just 0.4 per cent – the lowest in Australia. Over the 12 months to March 2024, rental rates jumped a massive 17.3 per cent.

For buyers, the market is equally tough. According to Domain, it now takes the average Perth resident almost four years to save a 20 per cent deposit on a house.

“The current conditions in Perth are creating a perfect storm for first home buyers, with limited rental options and extended saving periods for deposits,” Gavalas stated.

“It’s clear that something needs to change to provide relief to these buyers.”

Gavalas’ personal recommendation is for the state government to open up the FHOG scheme to existing homes, as well as new builds, to take pressure off the construction sector.

A number of other suggestions to solve this dilemma have been offered by public and private stakeholders, including incentivising build-to-rent, encouraging private investment, and creating a public property developer.