Perth's lone bright spot has been the lower bracket holding values steady, but that could largely be due to the government incentives.
The reaction of investors to the latest real estate market situation in Western Australia might greatly depend on when they got into the market. Those who bought one year ago might have wished they'd picked a better time, but those who bought much earlier, or are still considering a future investment, have a much more positive take.
No mainland capital city saw more growth in its median house value than Perth in the past 10 years, according to Residex. And for those still considering a Western Australia investment, values have come down dramatically, much further than any other capital in the past 12 months. So sooner or later, the market may begin to bottom out, and the buying opportunities will be prime.
For now, though, it appears the bottom has not been met in house prices. "We're seeing in Perth in general, the median house prices have dropped away at the moment, and continuing in that direction," says Brendon Ptolomey, Herron Todd White Managing Director in Perth.
The reality might be even worse than the numbers are showing, as the first homebuyers grant has no doubt kept demand hot, propping up the sales prices in the lower bracket. In March, some 40% of first homebuyer activity was with first homebuyers, says Ptolomey. "That's well above the average," he says. "So values are actually holding up OK in the bottom sector of $250,000 to $400,000."
While the resource riches of Western Australia and speculation of more have no doubt boosted its property values over the past few years, it's also left the state open to the perils of such swift upward growth. David Airey, Real Estate Association of Australia president, says Western Australia's economy is mostly based on agriculture and natural resources. With global demand down, there confidence in the state has followed.
"As a result, unemployment has risen, and that forces all sorts of problems," says Airey. Still, he remains optimistic things won't get too much worse from here, and there's plenty of resources left to lead to hope things will get much better once global demand returns. "Western Australia is still far off from a significant recovery, but it's not a desperate situation here," he says. "That's not to say it hasn't got problems, but Western Australia still has strong growth prospects ahead."
One of the major issues in of downward movement in the state's property market has been in the upper end, fuelled by overshot speculation and oversupply. Those that have waited until recently to try to sell a luxury home in Perth will no doubt be disappointed with the results, based on the timing. Ptolomey cites a beachside house in Cottesloe, with a selling price of $1.65m in March. Just nine months earlier, the owner had considered offers of more than $2m for the property, but declined them. "That just shows things are still trending downward in the top end of the market," he says.
Although Cottesloe has been one of the suburbs hardest hit, any house priced over $1m is at risk for a major reduction in value lately, says Ptolomey. "Prices are still dropping in the top end, regardless of location," he says. "Best to worst (locations), it doesn't matter."
Those drops have also led to some bargain hunting opportunities, especially along the coast in lifestyle towns and cities. Dunsborough and Margaret River have seen its house prices drop from a range of 10% to as much as 40%, says Airey. "The higher the price, the bigger the drop," he says.
Most buyers have still been focusing on houses in the Perth area, rather than apartments, says Ptolomey. "Certainly Perth has a tradition of people liking to purchase houses," he says. "So right now, there's an excess of units and villas, and those values are tending downwards versus single residence houses."
There may be more incentives for residents to buy, however, as rents continue to rise in Perth. According to the REIA CEO Neil Fisher, Perth was second only to Darwin in rental price increase over the year earlier from March, at 10.9%. Darwin rents increased 13.5%, while the national average was 8.4%.
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