15th May 2009
There's been some activity in the lower end of the market by first homebuyers, but investors have mostly stayed away from Western Australia for now.
As with the rest of the country, first home buyers are giving a boost to Western Australia by increasing buying activity. But it has yet to sway the investors, as there's still a cloud of uncertainty hanging over the state.
Even if some experts say prices have bottomed out earlier this year, many investors are still waiting for better employment and economic news before coming back to the once booming state.
Rob Druitt, president of the Real Estate Institute of Western Australia, says 2008 was a corrective year for much of the state. But he senses such major falls in prices as something of the recent past.
"It appears the market bottomed out in November, December 2008, in both activity levels and prices," he says. "Into 2009, we've seen a minor recovery, although it is still very segmented."
That segment is mostly based under $500,000, says Druitt, and not surprisingly, led by first homebuyers.
Some 42% of sales in 2009 were by first homebuyers, compared to the usual average of 20%, says Druitt.
While some prices have been dropping, Druitt says the greater lower end activity has meant prices in the $300,000 and $400,000 have been slightly increasing.
"There's a lot of activity in that $350,000 to $400,000 area, but not much at all above $450,000," says Angus Murray, director of PRDnationwide Western Australia. "There's a significantly lower sales volume than normal market conditions, except for that first homebuyers band."
The market conditions have also meant that developers have dropped their prices, leading to lower prices on new houses and apartments, Murray says.
"That reflects the current construction climate," he says.
When it doesn't sell, rent it
While 2008 saw a flood of property owners trying to sell their homes, that figure has fallen substantially in 2009.
Druitt says there were about 18,500 properties on the market in 2008, when the average for Western Australia is usually 13,000.
By the end of the first quarter of 2009, it's back down to 16,000 properties. But the reason behind the drop is not perhaps a positive one for current property owners in the state.
"That (drop) is not just because there have been more sales," explains Druitt. "It's also because sellers have not had their price met, and have withdrawn their properties and put them on the rental market."
As more properties come on to the rental market, so to have rents begun to slow as well. In April 2008, a unit in Western Australia rented for a median of $280. By February this year, it was back down to a median of $240.
But investors should understand the rental market has been mostly hit on the upper end, which has been oversupplied. The lower half of the price bracket has performed better, says Druitt.
Even as prices fall, investors have pushed Western Australia aside and looked to more seemingly stable other areas of the country.
"There's a different dynamic in Western Australia in that we still have a strong supply of property," says Druitt.
Murray says investors are likely wondering what will happen when the boost to the first home owner grant runs out.
"There are just not a lot of investors in the marketplace right now," he says. "It's mainly owner-occupiers."
For his part, Murray doesn't see a good result for Western Australia when the boost expires. At the time of this publication, it was set for a 30 June expiration.
"Whenever (the government) removes the incentives, whether it's the end of June or a later time, we're going to see the market go very flat," he says. "It is going to mean we are going to have less new buyers in the marketplace down the track."
Murray says he sees the property market recovering only when consumer confidence picks up.
"Until confident levels pick up, we're probably not going to see the market recover in any substantial way," he says.
Some of the negative reports for the regional mining areas of the state have been a bit overblown thus far, however, he says.
"There's not as much contraction in the mining and resource centres as might be apparent from reading the newspapers," says Murray.
Druitt agrees, noting unemployment was still lower than much of the rest of the country.
"If employment worsens, then our market is going to follow, but at the moment it is holding up well," he says.
Murray says where there is more concern is the lifestyle areas, where there's an oversupply.
Dunsborough, Busselton and Bunbury are amongst those towns dependent on lifestyles and retirees, and oversupplied, he says.
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