WA Excerpt from the 2012 May Market report

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The WA capital appears to have finally bottomed out, but even with all that mining activity, analysts are pointing to a slow and steady recovery for property

Western Australia’s housing market has been reading a bit like the old fable of the tortoise and the hare. The state’s mining towns are racing ahead in a cloud of dust and wild spurts, while the capital hardly appears to be moving at all.

Angie Zigomanis of forecasting firm BIS Shrapnel says his firm expects Perth to start moving ahead, albeit slowly. He says the market should be prodded along by Perth’s stronger fundamentals that are finally showing some of the flow-on effects from huge investment in the Pilbara and other mining centres.

“From an employment perspective, things are pretty good. From an economic growth perspective, things are pretty good, from an affordability perspective, things have improved,” he says. “All those things should point to a stronger residential market and we’re just waiting for that confidence to turn around more than anything else.”

The mining investment has helped crown Western Australia as the nation’s economic top-performer, so market confidence has started to pick up slightly. But over the first few months of 2012, the Perth market has posted mixed results, but that is an improvement considering a year of sustained declines, which saw house prices drop by around 5% across the WA capital.

SQM Research’s Louis Christopher says some of the investment up in the mining centres is finally putting wheels on a Perth recovery.

“Some signs suggest that housing supply or stock on the market is now peaking, and even falling, and that rents are on the rise again,” he says. “So we believe that the Perth housing market is actually close to a bottom or is already experiencing a bottom, finally.”

Landlords have been the first to gain, with median rents in the capital at $425 a week, according to January figures from SQM Research – that’s up a robust 11.8% over the past year alone.

But Zigomanis warns that whatever the extent of the recovery, it will not be evenly distributed around Perth. He says some pockets in the south of Perth will likely continue to lag. “There was probably an element of overbuilding and speculative buying in some pockets there and so those areas tended to have been oversupplied,” he says. “So they are going to take a bit more time to catch up.”

The multi-speed market, however, is most apparent when you look to the mad dash to support the investment in the mining areas of the Pilbara region. Areas like Port Hedland and Karratha have posted double digit median price increases for several years running and show little signs of slowing – yet.

SQM’s Christopher warns against betting too heavy on the boom.

“The mining towns have experienced the run-up regarding these particular projects and Perth itself has not,” he says. “Potentially this year we think that since the Perth market is in the process of bottoming out, we could see a modest recovery this year.”

Christopher appears to be a believer in the old adage: “slow and steady wins the race”.

“The mining towns are looking very toppy at the moment, and if we were to see a hard landing in China that would be the key risk for them.”

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