20th March 2009
Median house values fell by 4.59% over the three months to December, taking the median price lower to $481,500 according to Residex. Units fared better, with median values dropping by 2.53% to $377,500.
Mark Armstrong, director, Property Planning Australia and joint-director of The Property School says he expects the decline in growth for the state will continue at least until the end of 2009.
"The regions driven by mining will go into decline in 2009, after the volatile global economy continues to force companies like Rio Tinto and BHP to lay off thousands of workers," says Armstrong.
"With less people employed in Western Australia, we're going to see a softening of demand for housing."
Angus Murray, director of PRDnationwide Western Australia says the Perth market may well lose another 5% in growth over the 2009 period, amid uncertainty in the employment sector.
"The record low unemployment rate of 2.7% in WA has remained stable despite the job losses occurring in the beginning of 2009. A lot of employers are still looking for staff at the moment, but we're not sure how the future of unemployment will pan out just yet. Unemployment in WA could very well drop to around 4% during these tough times," says Murray.
Buyers shun expensive homes
Brendon Ptolomey, the managing director for Herron Todd White in Perth says the recent job losses in the mining industries have prompted buyers to abandon properties above the $500,000 price range, which partly to blame for the drop of median house values.
"The oversupply of unit and house stock in the Perth market coupled with a lack of buyers continues to draw property price growth down," says Ptolomey.
Armstrong says it will be at least another 12 to 24 months before buying activity in the Perth market begins to pick up again.
"The businesses of Perth and the mining sector of WA will take at least another 12 months to get back on their feet, but may take another three years to get back to the high levels of employment they held pre-recession," Armstrong says.
"The flow on effect to property prices will take at least another 24 months from now."
Murray says he thinks further rate reductions will encourage investors, first home buyers and bargain hunters back into the property market.
"Interest rates for investors are still about 6.5% with most of the major banks, and if this gets to 4.5% then we'll see some substantial buyer activity return to the market," Murray says.
"At the moment a lot of investors are waiting to see what the bottom of the interest rate cycle looks like. If they can fix their rates in at around 5% pa for as long as possible, this will be the key sign for them to begin buying again."
Rentals remain healthy
Murray says the rental market is holding up in the face of negative factors influencing the Perth market, and says there hasn't been any noticeable reduction in rents.
"The rapid increase of rents we saw in early 2008 has passed but the vacancy rate is still extremely low and rents are holding up exceptionally well," says Murray.
"In conjunction with lowering interest rates, this strong rental market means that a lot of people who would have been otherwise forced to sell their properties have been able to hold onto them. This means that the problems once foreseen for the Perth property market may be reduced substantially."
The rental yield for houses ending December last year came in at 3.90% The unit rental market is performing even stronger with yields sitting at 4.84%.
"The rental yields in Perth have consolidated and rents are now hovering at around the $350 a week for houses," says Brendon Ptolomey, the managing director for Herron Todd White in Perth.
"We expect that rental yields will stay solid for most of the rest of 2009, and although they may tail off a bit, they're still at a peak compared to the lows of $150 a week that we were experiencing a few years ago, and even compared to the $240 we were achieving in 2006 and $290 in 2007, according to figures release by the Real Estate Institute of Western Australia (REIWA)," says Ptolomey.
Areas to watch
Murray says the best bargains in Perth at the moment can be found in the upper price range areas being hurt the most by huge losses in capital growth. He says this is mainly occurring throughout the western suburbs.
"If there is going to be property selling for substantially below previous values, those isolated opportunities are likely to occur in the western suburbs," Murray says.
"If you're looking long term, the metropolitan areas of Perth look set to grow over the next three to five years, in anticipation for the recovery of the resources industry."
Can you afford to buy in this suburb? Find out how much you can borrow