A short-term lull in property prices is at odds with the city’s year-on-year growth and has shaken Perth from its record-breaking December quarter
The Perth residential property market has continued to sag in February 2010, following on from a drop in capital growth at the beginning of the year.
Although the market showed growth compared to 12 months ago – particularly in the unit sector, with an increase of 7.27% – Residex recorded negative growth for both the quarter and month of February.
Houses slumped by 2.3% and units fell by 0.32% over the last three months, with Residex finding negative growth of 1.19% and 0.91%, respectively, over the month of February.
This all comes after a strong December quarter, which saw Perth, Geraldton-Greenough, Kalgoorlie-Boulder, Karratha and Port Hedland breaking median house price records.
However, it’s not all bad news for Perth. Managing director of RE/MAX Western Australia Geoff Baldwin predicts that 2010 will be a year of increasing growth for the state.
“All indicators are pointing to the WA property market continuing to recover strongly and for prices to rise steadily during the next 12 months and beyond,” he says.
“I expect our prices to average around 12–15% growth in 2010 and for this to pick up pace into 2011 and 2012, culminating in another boom market within four to five years.”
As the state’s population continues to grow, demand just keeps intensifying, explains Baldwin. “One of the biggest drivers in our market today is the WA population growth, which is on a par with Queensland as the highest in Australia at 3.1% pa. We currently have over 5,500 new entrants coming into our state weekly – and they all need a place to rent or buy.”
This additional demand is adding pressure to the housing shortage. Baldwin says the number of properties for sale has reduced from around 20,000 in mid-2008 to 11,500 this year.
“If you consider that of these 11,500 properties, about 30% aren’t ‘saleable’ because the asking price is unrealistic, and also consider that a healthy number of available properties today is considered to be around the 15,000 mark, we have a supply and demand issue.”
An emerging trend is the significant lack of first homebuyers in the market. The Office of State Revenue recorded a dramatic fall in first homebuyer activity since December 2009, with applicant numbers on a par with the historic lows of June 2004 and February 2007.
REIWA president Alan Bourke says this trend could have a negative effect on the property market if it continues.
“A lack of first homebuyers makes it harder for investors and trade-up buyers to sell their existing stock and move on,” he explains. “This situation can create a domino effect and we may see some slow-down in the regular market later in the year if first homebuyers are still thin on the ground.”
As first homebuyers drop off, investors are elbowing their way into the Perth property market. “We’ve seen a significant resurgence of investors over the past six months,” explains Baldwin. “We’re predominantly selling [investors] off-the-plan house and land packages and apartments whereby the property is finished to a ready-to-rent standard.
“With the lack of choice in the established market and the fact that new properties provide much higher tax benefits and attract optimum rents, this is a natural progression for investors and one that will grow in popularity.”
Buyers are looking up
Bourke says that properties around the $550,000–750,000 band are experiencing the most buyer activity. “In more recent times, it’s been the upper-middle range where turnover has been strongest.
“The main reason for this seems to be simply because first homebuyers have fallen dramatically in number, accompanied by the fact that the market has strengthened and is growing,” Bourke explains.
“This positive momentum has given renewed confidence to homebuyers in the more expensive, upper end of the market, who tend to be upgrading. We can see that Perth has now recovered all of its 2008 losses.”
Baldwin agrees: “There’s no doubt that properties priced at around $600,000 is where the market is the strongest. However, the more expensive properties are really starting to again attract enquiry, and it’s expected that this area of the market will also continue to strengthen.”
Ones to watch
Baldwin has pointed to a number of regions with potential for short to medium-term growth.
He says properties in Mandurah are expected to bounce back with a vengeance in 2010. “People should look for new or near-new properties priced up to $400,000, or luxury apartments along the waterfront where there is currently a massive oversupply.”
Baldwin describes South Yunderup as “a hidden diamond that is set to take off ”, pointing to Satterley’s Austin Cove development as one with strong buyer interest. Located on the Murray River, South Yunderup is just 40 minutes from Perth, thanks to the recently opened Forrest Highway. Bunbury is another area benefiting from the new highway, which has reduced its travel time to Perth by 25%.
WBP Property Group (WA) branch director Brendan Aylmore agrees that the southern suburbs of Yunderup, Ravenswood and Pinjarra show potential for capital growth, thanks to this improved infrastructure.
Armadale also made Baldwin’s watch-list for its abundance of new and near-new, positively-geared properties and undervalued dwellings.
He points to Northbridge for “amazing” value located on the city’s doorstep, Balcatta for its close proximity to the Perth CBD, and Ocean Reef for its growth potential.
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