Market Report Western Australia (May 2009)

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There are bargains to be found in Perth, but you'll have to be patient - growth over the next 12 months will be minimal.

The corrective year for the Perth property market was 2008, admits Rob Druitt, president of the Real Estate Institute of WA. "We had four quarters of reducing prices," he says. The early months of 2009, however, saw the housing market slowly but surely sputtering to life.

Residex figures show that house price growth for the three months to May was 2.22%. The median home value in Perth is $482,000. This puts it in third place in terms of price, behind Sydney and Melbourne. Rental yields, however, are still the lowest in the country at 3.90%.

It is clear that Perth has been battling an oversupply problem, but the worst is probably over. "We were wildly overstocked in 2008 with over 18,000 properties on the market, bearing in mind that we have a long-term average of about 12,000 in Perth," says Druitt. "Our latest figures show around 14,000 properties on the market. A lot of that stock was taken up because of the mini-boom with the first homebuyers. Under $500,000 is fairly buoyant, turning over - not going anywhere in price, but good turnover."

There is no such buoyancy for other market sectors, though. "We've still got a fairly sluggish middle and top end of the market," says Druitt, "although those sellers that have been prepared to meet the market - ie come down in price - are finding that the properties are selling, but only to buyers who are looking for real value."

Druitt warns investors not to get too excited about the Perth rebound. There is good buying all over the city, but patience and a long-term view will be required. "Indications are that the bottom of our market price-wise was the December quarter 2008," he says. "It doesn't mean that we're going to be powering into the next cycle yet. We're probably going to have a fairly flat market for 12-18 months."

This will not phase experienced investors, though, as they tend to reject the get-rich-quick attitude that prevailed in Perth in 2006-7. Careful examination of opportunities and strategic investment will certainly bear fruit over the next 5-10 years.

The Perth unit market carries a higher level of risk. "That is an area that you'd want to watch because there is a lot of supply coming through," says Druitt. "One of the difficulties in Perth is that we tend to have most of our apartments $5-600,000 and up. There's not a lot of cheaper, smaller apartments and they're the ones to target because they're the ones that are going to see the growth."

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