The much-hyped second resources boom should bring WA’s property market out of the doldrums, but an oversupply of stock could delay growth in the state capital.
It’s no secret that many areas of Western Australia saw phenomenal growth in the lead-up to the GFC on the back of the commodity boom. And with many pundits predicting a post-GFC resources renaissance, property investors will be keenly eyeing up this commodity-rich state’s prospects.
“Western Australia is about to experience probably the biggest resources boom in its history, and that’s saying something,” says APM senior economist Andrew Wilson.
Despite bullish predictions for prosperity in WA’s mining and export sector this year, the property market won’t see any benefit until it shakes off its massive oversupply of stock, says Real Estate Institute of Western Australia (REIWA) President Alan Bourke.
“We’re still 40% oversupplied in the marketplace, so that will be the very dominant thing over the next 12 to 18 months as we slowly get rid of the excess stock that’s in the market before we start to see significant price growth,” he explains.
Raine & Horne CEO Angus Raine echoes Bourke’s belief that WA’s oversupply issue will keep the market cool this year, but also points to uncertainty over the federal mining tax as another factor that has caused investors to hesitate.
“Interest rate rises, coupled with the mooted mining tax, really took the wind out of WA’s confidence,” says Raine.
Wilson however is more confident that capital growth will soon be on the up, predicting that demand will outstrip supply by the middle of the year. He forecasts that, after a flat start to the year, capital growth in Perth will hit around 2% for the June quarter and will pick up apace from there.
In the meantime, slow growth and an abundance of property for sale has seen a buyer’s market emerge in much of WA. Citing REIWA September figures for example, Bourke points to the statistic that on average 65% of buyers managed to negotiated a sale price of 6% below the vendor’s initial asking price.
REIWA director of communications Brian Greig suggests that investors shouldn’t get bogged down with short-term issues. “Investors are hard to find because yields are weak, but there is plenty of good buying to be had for those investors who have a long-term outlook.”
RP Data research director Tim Lawless believes first homebuyers and upgraders in particular can benefit from the current price correction.
“We expect that because the market has been so subdued since 2006 it has given prices a chance to consolidate somewhat and for value to return to the marketplace, which is definitely a good thing for certain segments of the market – especially first homebuyers and people who are upgrading.”
In terms of where the buying activity is in the state capital, WBP’s WA director Brendan Aylmore writes in his Perth Property Update that “active buyers are particularly interested in Perth’s ‘blue chip’ investment suburbs, which are largely inner-city localities”.
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