A softening of Perth
’s property market has continued into August, with minimal growth for houses and falls seen for units.
After the strong capital growth experienced in late 2009 and earlier this year, Perth property prices began to slow in the June quarter and have continued with minimal growth in August. Houses in the capital rose by only 0.77% in the month, as units fell by the same amount.
Travis Coleman, residential valuations manager with Propell National Valuers in Perth, explains that the state property market was adversely affected by rising interest rates and the mining tax debate in June, and this slowdown has continued into August.
“The sentiment among buyers is relatively weak and market conditions are very similar to the June 2010 quarter, which saw a 2.5% fall in the median house price to $490,000,” Coleman says. “Over the last two months, the federal election and uncertainty has continued to undermine confidence in the real estate market.”
According to Residex, the median house price rose 4.24% to $494,000 in the past 12 months while the median unit price grew by 6.47% to $410,000 – well below the annual average over the past decade of 11.72% and 11.2% respectively. Senior research analyst with RP Data, Cameron Kusher, says the Perth market has under-performed since the end of 2008, when Perth home values have risen by a total of 10.4%. “Only Brisbane has been lower,” he says. “During the 12 months to July 2010, home values in Perth have increased by just 5.7%. The last quarter has seen a noticeable softening in the market, with values falling by 2.5% and during the month of July values fell by 1%.”
CB Richard Ellis manager, global research and consulting, Sam Reilly, says a number of factors have led to a dampening in investor activity across most WA residential markets in recent months. These include commodity prices, interest rate rises and global economic conditions. “Furthermore, a significant rise in listings on the back of easing demand has been reflected in a downward correction in values,” Reilly adds. “However, this could cause pent-up demand going forward, which may potentially lead to solid growth and sales rate increases in late 2010 and into 2011.”
Auction clearance rates are also very low in the WA capital. The final weekend of winter saw a very poor auction performance, with a 25% auction clearance rate for Perth the week ending 29 August, with RP Data recording only eight properties sold out of a total of 32 auctions. This is compared to the week before ending 22 August, which saw just 15 auctions – eight of which sold properties.
Coleman says a drop in first homebuyer activity in lower-priced areas, such as Rockingham
and Armadale, has led to an increase in listings by more than 20%.
“There is currently a relatively high number of properties listed for sale – over 14,000 in Perth – and sellers are having to discount from their original selling price in order to achieve a sale both in lower and higher-priced properties,” he adds. “However, with the formation of the new federal government, we anticipate a pick-up in confidence and an overall improvement in property sales in WA due to the major new investment being made in the state economy such as Gorgon.”
While the property markets appear to be suffering from weakened buyer confidence, the WA economy remains in good shape. ANZ noted in its report that the economy has rebounded sharply over the course of 2009/10 with employment rising by 3.8% and economic growth estimated to be 3%. “Despite positive economic conditions, house prices have not been supported to the same degree as other states,” ANZ says.
National markets research manager with Propell National Valuers in Perth, Philip Ragan, adds that the current economic growth levels in the state are above the national average. “Driving the economy, apart from the mining boom, will be increased business investment and rising household spending, expanded by strong population growth, as a result of the very low unemployment rate in WA,” Ragan explains.”
ANZ points out that over the medium term, the fundamentals of Perth’s property market will remain tight. “Economic growth will be supported by an upsurge in business investment with key major resource projects ramping up over the coming years, while strong growth in the Asian region will boost demand for Australian commodities supporting income growth and domestic economic activity. Combined with strong population growth, these conditions should provide support to growth in the WA house prices and housing market activity in the years ahead.”
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