Market Report – Western Australia (April 2008)

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Having slowed to a halt in 2007, the Perth property market is positioned for the next phase of stabilisation in 2008 – and it’s likely to last through to 2009.
 
Property values in Perth dipped 1.8% in the December quarter, according to Residex, with capital growth for 2007 levelling out at just 2.15%. This mild correction is likely to continue in Perth’s outlying areas with less impact felt in and around the Perth CBD thanks to solid demand.
 
“Perth property prices are underpinned by a strong state economy and an unbelievably tight commercial market, which is saving the residential market from a bruising correction,” says Braxton Chase CEO Andrew Donnelly.
 
“Given the period of sustained growth between 2003 and 2006, strong consideration needs to be given to the true market value of Perth property. With rental yields in Perth the lowest in the nation, the market requires a sustained period of stabilisation while yields and values catch up to the big prices paid during the boom.”
 
Donnelly says that waterfront areas can be expected to outperform the general market, as history has shown “that water is always the greatest underwriter of growth” – but overall, Donnelly believes that Perth is one of the least attractive property markets to invest in.
 
“For investors with a short to medium term mindset, 2008 is a good time to bypass WA altogether, which – barring a few exceptions – is not likely to see growth above inflation for at least two years.”
 
However, Real Estate Institute of WA (REIWA) President Rob Druitt is less cautionary, and, while describing the Perth property market as “resilient”, says that supply and demand drivers will help the market recover this year.
 
“Clearly the Perth market is very resilient – and why wouldn't it be, with WA continuing to lead the country in terms of business investment, exports, employment and population growth?" Druitt says.
 
"The slowdown in new housing activity in 2007 and continuing strong population growth will maintain the demand for housing, whether for sale or rent during 2008.”

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