First home builders’ dreams fade as prospective buyers turn to established homes in the face of rising costs

The dream of building and owning a first home in the Mid West appears to be flat-lining, with property novices choosing established homes due to rising construction costs. That’s according to local builder Warren Taylor, who says his business hasn’t seen any first home buyers come through the doors in the past 18 months. The State Government introduced a $117m Building Bonus scheme in 2020, including a $20,000 grant to encourage first home buyers to build. Mr Taylor said it was fantastic for first home buyers at the time because it got a lot of them into the system. “We probably built about six or seven houses for first home buyers,” he said. However, that number has flatlined since the scheme finished in December 2020. “We haven’t seen a first home buyer in our office since the stimulus started, everyone was signed up in 2020 and since that time we haven’t had anyone,” Mr Taylor said. In the past 12 months, the Mid West building industry has been faced with rising construction costs and growing labour shortages. “The cost of homes has gone up that much, the sad part is that it will probably force a lot of first-time buyers out of the market,” he said. Mr Taylor said the price of building a house has increased by 25 per cent in the past two years. “So, unless the first home buyer has got unreal savings, great jobs, then it lessens their desire to build a house instead of buying,” he said. “I know a lot of people who want to build their first home and they just can’t now, what they could afford now has gone up 25 per cent.” As the price of new builds has soared, many prospective first home buyers have turned to established properties to get their foot into the market. “That’s the only other option for them now, but then it may not be in the area they wanted to live in,” Mr Taylor said. Mr Taylor said the established market had also gone up but not to the extent of new builds. “So, they might be eligible to borrow X amount of dollars, but they have to see what suburb they can buy into now, whereas two years ago, they could probably buy anywhere,” he said. “It’s made it hard for first home buyers and I feel sorry for them because it’s the start of their whole life.” Mr Taylor said the only way to attract first home buyers back was for building costs to decrease but he was not optimistic. “Some materials have gone up over 100 per cent, timber, steel and insulation, while others have increased by between 40 and 80 per cent,” he said. “I really can’t see the prices being reduced that much. They might drop them back a bit, but they won’t drop 100 per cent.” Activewest’s Phil Sorgiovanni said they had seen land sales decrease as people were“just looking for the completed product.” “For obvious reasons, if you can’t get builders, trades and services,” he said. He highlighted a lack of grants and the time to build as two factors causing first home-buyers to increasingly look at established homes. “At the time when COVID finished they put a heap of grants in for new builds which is obviously not available to them and as such you lose the incentive to wait longer to get your house built,” he said. “Land is still relatively cheap and that’s because there is just no volume of sale of land.” Mr Sorgiovanni said they saw a sharp drop in first home buyers on vacant land following the end of the Government incentives. “Those that did remain in the market, which was heavily reduced, leant towards established homes as their preferred option. It remains a small portion of the current regional market in my opinion,” he said. “There are currently somewhere around 1500 to 2000 vacant lots of land paying rates, this would mean they could be built on should the owner wish to do so.” Ray White Geraldton’s Henry Van Tiel said first home buyers were choosing established builds over new builds. “In the last 12 months, there were about four houses sold for every block. Going back to 2019-20, it was two houses for every block sold. Block sales were also down about 20 per cent in value over that comparable period,” he said. “Although the idea of building is very appealing, the idea of waiting is not and as rents continue to increase because of the exceptionally high demand, buying an established home now is a sensible option for many.”