In 2001 it cost on average $125,000 to build a median value new home in Perth, about what you will pay today for one of the cheapest houses in the smallest Wheatbelt towns of say Wyalkatchem or Wickepin.
By 2010 house construction costs had more than doubled to $270,000 average, which is what you can expect to pay today for a 1960’s built small brick house in one of the Super Towns of Merredin or Moora.
Come 2023 and the average built price in Perth has hit the $400,000 mark, which is what you would have paid for a house built by a retired farmer back in the 1980’s in say Wagin or Wongan Hills, something that would cost close to $800,000 to build today.
If you want a cheap house to buy then all roads lead to the bush, rather than to a half million dollar mortgage on a house and land package on the outskirts of Perth.
In each case the block value of building in the bush is next to nothing compared to the land value of a block in a new estate in Perth.
In the bush anything between $10,000 to $50,000 ($10 to $50m2), depending on which side of the tracks you are building on, while in Perth that average block starts at about $750m2 which is why the old aspirational 1000m2 (quarter acre) block still available in country towns is a long lost dream in the big city with most blocks now about 300m2 but costing $250,000.
Despite the cheap price of land in the Wheatbelt, and the abundance of jobs, country towns are not being bowled over by first home buyers, so what’s going on?
The first and most obvious answer is the Hotel California explanation.
Once you arrive in your newly built house you can never leave as locking into the country town market quickly locks you out of the city market as Perth prices escalate up, leaving you behind.
There has been next to zero capital gain for the past 40 years, in comparison those who built in far flung suburbs like Karrinyup or Booragoon in the ’70s and ’80s have reaped the reward of solid capital gains at about 8% a year making many accidental property millionaires.
Not so those who bought in the bush.
The average house and land package back in the early 1980s of about $100,000 is now worth more than six times the amount at $623,011 versus a new house built on a block in the same year in say Pingelly is today worth probably closer to half that amount.
This in part explains the desperate shortage of quality new housing in country towns across the inland Wheatbelt and Great Southern.
It simply does not pay to build new homes in farming country towns, which has left these communities with a stock of housing that is rapidly running down as old houses fall into disrepair or become so out of date no skilled worker and their family is prepared to live in one.
Which raises the question what does this mean for the future of our country towns?
Any visit to the South West and North West corners of the State will show lots of new houses being built so obviously not all towns are going backwards.
The problem is, one is the go to corner for a sea change lifestyle, based around the Margaret River lifestyle which is seeing a steady influx of new people who are comfortable investing there, as the property market has a long track record of capital gains.
While the other is driven by the big dollars of the mining industry, with a massive demand for houses and serious land shortage due to local factors keeping prices high.
The one big difference is there are less and less family investors prepared to punt the million dollars it costs to build a full 4 x 2, 300m2 cyclone rated house or the $500,000 or so for a 150m2 transportable, plus the $250,000 for the land in the Pilbara.
The shortage of labour and the additional costs make it incredibly expensive to build in these towns, not to mention the zero to hero nature of the mining boom which means investors are wary of investing the money needed to build a new house. Even the sky-high rental returns of new houses at $1000 to $1500 a week is not enough to offset the risks as memories are strong of the collapse in house values of about 30% at the end of the last boom.
As a result we are now seeing the big miners and contractors having to step into the market and underwrite long term leases to off set the risks.
Unfortunately the Wheatbelt is not attractive to the sea and tree changers and has no great mining wealth underwriting the building of new houses, so the towns are starting to struggle when compared to the urban renewal that is happening in Perth, as old properties get flattened and replaced with new homes.
Who is bulldozing the old State houses in country towns to spend $500,000 on a new house that may likely be worth less than it cost twelve months after the keys have been handed over?
We are following the route that the rust belt States across America have experienced for the past 50 years as cities like Detroit has collapsed from 1.7m people in the 1950s to 700,000 today.
The end result is cities and towns are full of abandoned, boarded up houses while the coast and the southern States like Texas are booming.
The same thing is happening to us here and our communities and government need to think about the consequences.
Despite claims by politicians and many farmers that country towns offer great lifestyles for families they are often the first to invest in a house in Perth or the coast with plans to stay there on their retirement.
The reality is few farmers are electing to build their dream retirement houses in their local communities, if for no other reason than it makes no economic sense.
Those who do stay often elect to spend half a million dollars and buy one of the nicer existing houses on snob’s hill and do a renovation rather than fork out the $800,000 plus to build something on the empty new estate which would then only be worth $700,000 once completed.
Assuming they can find a buyer.
While most community leaders and many farmers like to think their country towns have a future the brutal reality is the American experience tells us they don’t unless we can find a way to address urban renewal.
Somehow we need a way to fund the replacement of those no longer fit for purpose old small houses with modern houses that look like they belong on a new estate in Perth.
If we don’t we are going to be seen as the rust belt of the bush and we will struggle even harder to get the skilled people we need to service the farms and communities, to leave the city and move to the bush.
Part of our problem is that as a State we keep getting richer.
Years of economic growth has seen expectations lift from the days of young couples accepting a 1970’s transportable or an asbestos dog box on stilts as an acceptable first home to buy or rent.
Now the expectations have risen to wanting the latest display home on offer, complete with theatre room and walk-in wardrobes.
For decades we have been seeing first home buyers bypass cheaper houses in suburbs like Balga, Armadale or Midland to head for the sand dunes north or south of Perth to build a new home.
Few people want to live in post-war State housing commission 10 square asbestos homes, in fact most of these in Perth have been bulldozed and turned into duplexes because the land value justifies their replacement.
But go to any country town and there are swags of these houses all struggling to look like homes anyone would want to live in.
These then become battlers central, with streets of no grass and old cars parked out the front, not an appealing option when a town is attempting to attract mechanics or nurses to relocate to a country town, even if they have a beautiful big recreation centre and an immediate start in the A grade of the football and hockey teams on offer.
And why would they, when every night they are bombarded with images on TV of happy couples taking the keys to their flash newly built house in Ellenbrook and the State government building a billion dollar railway line to the billion dollar football stadium.
Who is going to be attracted to a country town when the State government keeps pouring all the resources into the outer suburbs or the marginal seats along the coast.
When almost anyone can get a job in a mining village doing housekeeping on $100,000 a year, working one-week-on, one-week-off, allowing them to afford a brand new 4x2x2 home on 385m2 for $584,400, in the northern suburbs, why should we expect skilled people to accept living in a 1960’s asbestos house that is half the size of modern homes and all of 200km from the nearest beach.
If inland country towns are going to compete with Perth or the big money mining towns or even the likes of Geraldton, Albany and Esperance as coastal farming service centres, we need to radically rethink our housing shortage and the quality of our housing stock across the Wheatbelt communities.
I know that some bigger farmers have been quietly buying some of the better housing stock in towns to accommodate their workers, which then allows those workers to invest in a negative-geared property in Perth or down south to fast track them up the housing ladder.
This is a win-win program, as it locks workers into country towns at least while their children are in primary school, while turning them into property barons by allowing them to buy a couple of investment houses.
But farmers buying the better houses is also a negative as it is locking up the limited stock of good houses that could have been rented or sold to service providers like the local farm dealership to house their mechanics.
Who is going to pay $1000 a week rent on a $500,000 house in a country town to generate the needed 10% return?
Looking through the Seek pages for jobs on offer I see one machinery dealership is offering between $89,000 and $119,000 for diesel mechanics, while another is offering $43-$63 an hour, plus housing assistance for jobs in Merredin.
So the dealers have worked out they have to pay more to attract workers, but few workers or their families want to stay in sub-standed houses no matter how cheap the rent.
Even apprentices can’t be expected to stay in the old fibro houses across the tracks when their mates are in nice houses or impressive transportables up north.
We need to get with the program, expectations of the millennials have changed, with record low unemployment it’s a buyers market and they are not buying into living in old crappy houses.
Housing is a problem so we need solutions if we don’t want to end up with drive-in, drive-out mechanics or the need to buy new machinery as no one is left to fix the old gear.
Unfortunately the WA State government is not very interested as these inland farming shires sit across safe National Party seats.
Which raises the question what did the National Party do about saving our country towns other than build big Taj Mahal recreational centres they could hang plaques with their names on.
The lack of thinking and policy development about issues such as housing and the future of country towns is a constant bug bear of mine.
Few politicians have any ideas, or worse they get caught up in virtual signalling ideas, like supporting the Voice rather than pushing for real solutions to real problems.
When there was money to spend through Royalties for Regions (RfR) we ended up with lots of big recreational centres in towns struggling to attract young people when it was obvious that we had a looming housing problem.
Let’s face it, what’s the point of Pingelly’s 3700m2, $9m award winning recreation centre if the town is dying and people and businesses are moving to Narrogin or worse Perth.
Maybe a 1000m2 $3m building and 10 houses would have been a better bet.
No doubt the government had restrictions on what grant money could be spent on, which reinforces my view that governments should get out of the way and let communities decide what’s best for them.
I’ve always thought country towns should have been given their RfR grant with no strings attached and let the community decide where the dollars are best invested.
Some would have built Taj Mahals, others bought the pub, built aged care or worker’s houses, others invested in community farms.
But no point looking backwards, let’s focus on the future.
So for the benefit of the National Party, Liberals and Labor if listening, here is a policy idea which you could run with at the next election.
The WA State government is allocating $750 million out of its $160 billion budget over the next four years on building 3300 social housing properties at $500,000 each, which gives you an idea of where it stands with its housing program for the battlers.
There is hidden deep in the budget, $70m unallocated for the Provision of Future Royalties for Regions Projects over the next three years (it’s the remnants of a once large fund).
Let’s assume that about $25m is available each year going forward for a new RfR regional development project.
I would allocate that to inland country shires on a dollar for dollar basis for towns to build new houses for service personnel. Divided up, the $70m across the 42 Wheatbelt Great Southern Shires should be enough to build about 140 houses over three years.
If the original money was matched via borrowing and a long term rental deal with a local farm machinery dealership or engineering business it would raise another $70m, enough to build 280 houses.
That’s enough to flood the farming towns with 280 additional mechanics, electricians, metal workers, technicians, apprentices, plus kick some money into the pockets of local builders.
That would see at least one new modern house a year going up in mid-sized towns like Narembeen or Corrigin every year, more in the bigger centres like Narrogin and Merredin.
Part B of the plan would be to find an additional $10m a year to buy and pull down or upgrade the worst of the older houses, properties that are clearly at the end of their life and are worth less than a caravan.
An empty block is better than an empty derelict house, or a community project to buy and refurbish a house a year including the empty main street shops which should be converted to houses at least it would keep the town looking smart.
Every town should have an urban renewal plan and every country politician should have some ideas on what it will look like and how it will be funded.
It’s the game changer needed to reboot our towns and attract the skilled workers. The alternative is our towns will follow the small siding towns of old and simply die.
