Western Australia is beating its way back as its economy outperforms the rest of Australia.
"I've been watching and waiting for over two years to be able to say this, but the time has arrived: The WA property market is on the way back," proclaims Terry Ryder, director with hotspotting.com.au.
"My gut tells me the time is right for investors to start seriously looking at WA - and the economic events and property statistics support the theory."
The WA market has suffered terribly since late 2007 dragged down by the commodities bust, but the economy have crept up the leader board over the past three months, buoyed by mining-related construction and investment according to CommSec who conducted the ranking.
"Looking ahead, WA appears to have the best prospects of all the states and territories, underpinned by solid investment spending in mining and engineering sectors. It continues to lead the way with economic activity in the September quarter lifting 26% above the state's decade average level of output. The amount of private capital expenditure in the September quarter was 107% above the average levels of the past decade," says Craig James, chief economist with CommSec.
Despite a slowdown in the residential sector, James notes that WA continues to lead all other states and territories when it comes to measuring construction activity with long-term averages. "In WA, the amount of construction done in September quarter was 87% above the decade-average. And importantly, activity is still growing, lifting by 11% over the past year," he says.
Paul Braddick, head of property and financial system research at ANZ also sees bright outlook for the state and adds, "The strong rebound in China combined with the recent major project announcements suggest WA could be on the cusp of yet another resource (LNG and iron ore) led boom."
Turning the corner
House prices are showing particular promise, rising 0.15% in November and 3.89% in the last quarter (the best performer bar Hobart) according to Residex.
According to the Real Estate Institute of Western Australia (REIWA) Perth's median house price is heading back to the peak level it achieved in December 2007.
"It's really quite amazing what can happen in a year and to see how effective the Commonwealth's stimulus strategies have been," said REIWA President, Alan Bourke. "This time last year the median sale price had fallen to $420,000."
Perth units saw the lowest level of discounting and the shortest time on the market out of all capital cities during October, according to RP Data - something many investors are hoping is a sign of things to come.
Rents have some way to go however - especially in the unit market due to large releases of new stock in Perth - but Bourke is confident this will bounce back in the next quarter.
"We've got a vacancy rate of 4.8% but anecdotal evidence from agents is a lot of that is going out this month and [our figures show] rents are starting to grow after nine months of lagging," he says. "There was a temporary over supply and a lot of people who couldn't rent their properties have now sold them, hence, prices have gone up."
Bourke says that while 2009 was a "consolidation year", 2010 will be a growth year. "We will see 8 to 10% [capital] growth," he says. "It will be a better year but not a run away year as many owners are hoping."
Rising interest rates and falling affordability as well as the exit of first homebuyers will test the market in 2010 according to Braddick. However, he adds that a return to boom conditions underpinned by several major resource investment projects will support demand and home buyer confidence.
"Perth is experiencing a growing undersupply of dwelling. New housing approvals fell sharply in 2008 and completions at 19,000 so far in the current fiscal year are expected to fall well short of the underlying housing demand of 30,000. This will drive a renewed tightening of the housing market conditions and provide support for rents and home prices," he says.
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