Brace for impact as slowdown gathers pace
Perth’s property market has recorded a distinct slowdown, with the rental market showing most cause for concern
It’s hardly surprising that Western Australia’s economy is coming off the back of a spectacular resources boom. As the resources sector transitions from the construction phase to the production phase, much around it has started to moderate.
In particular, lower worker demand means there has been a downturn in the jobs market and population growth has decreased. In turn, the Perth’s property market started to see a moderation in demand. Some reports show that there is now a distinct slowdown.
Not only do the latest RP Data Rismark home value results show a 0.1% decline in Perth’s dwelling values over the three months to July 2014, but new research from REWIA shows falling sales, prices and rents over the June quarter.
According to the REIWA data:
- Perth’s median house price has fallen by about 1% to $545,000
- The unit market remains stagnant at $449,500 median price
- property sales in Perth continued trending down and are now about 5% below the 15 year average
- the amount of stock on the market increased by about 8% to 10,872 properties - an increase of almost 25% on the same time last year
REIWA president David Airey says the biggest challenge in the Perth market has not been with sales and price, but with the rental market. The data indicates that times are getting tougher for Perth landlords with:
- Vacancy rate rising to 4.2
- Median rent dropped by $10 to $450 per week
- Rising number of rental listings to a total of 5,824
Airey says the increase in listings is significant – it is now up 43% on the same time last year.
“Also, more current REIWA data shows this has since grown further to more than 6,000 properties by the middle of July,” he adds.
Significant apartment construction in central Perth is continuing, with many of these apartments scheduled to come on stream over the next year. This could add to the challenges Perth landlords already face as they might contribute to a glut of rental stock on the market.
Commentators are saying that, while there is increasing demand for apartment living in Perth, investors should tread carefully when considering such properties. This is because the amount of such properties coming on to the market means there will be little upward pressure on prices for some time.
Property industry sentiment declines
Another sign of the changing conditions in the Perth market is a decline in property industry sentiment. The Property Council/ANZ Property Industry Confidence Survey index for WA has dropped from 128 to 123 in the September quarter 2014.
WA Property Council executive director Joe Lenzo says this is mainly due to the continued downsizing within the resource sector, coupled with the negative signals for the property industry in the state budget.
“The spike in the land tax rate and the drop in infrastructure spending in the budget are seen by the industry as an indication its concerns and interests are not being recognised by government. More action needs to be taken by government to develop a vision to ensure WA keeps growing after the mining boom.”
Not all bad news
While the boom time glory days might be over, WA is not facing a crash. In fact, the state’s economy remains strong and healthy – and should continue to be so in the foreseeable future.
According to the latest Deloitte Access Economics Business Outlook, WA has largely seen a smooth baton pass from construction to operations, despite a recent drop in the iron ore price. This means the hit to growth is likely to be temporary as WA has growth options available in several sectors.
Further, the report points to forecasts of a huge lift in export volumes of almost 50% in the five years to 2018-19. Thanks to a smooth winding back of the construction spend, this means that exports are soaring while construction is merely contracting.
WA also has a solid portfolio of growth options (eg: gas, agribusiness) to tap deeper into as Asia’s boom evolves. And the state’s housing construction sector continues to be strong.
However, the report does note that – despite this outlook - there will be some testing times, and some short term bumps along the road, for WA in the years ahead.
Suburb to watch
Maylands: Future developments to fuel growth
Sitting on the northern banks of the Swan River, Maylands is 4.5km from the Perth CBD. Once famous as home to the airport where Charles Kingsford-Smith landed to complete the first non-stop flight across Australia, it is now known as a diverse, vibrant and evolving suburb.
Ashton Crooks, from LJ Hooker City Residential, says that Maylands major draw cards are its accessibility to the city, proximity to the river and the constant improvement of its amenities.
“With its own café and restaurant strip, boutique retail outlets, small bar and brand new Rise sports centre, it is quickly becoming the next Mt Lawley.”
The suburb is increasingly made up of townhouses, villas and apartments as older properties slowly make way for multiple dwelling sites. Crooks says that the peninsula, which is the newest part of Maylands, features luxury double storey family homes on smaller size blocks.
“However, sections which overlook the river and have city views still tend to be large character homes or new double storey dwellings on larger blocks… The best streets are considered to be ones which have views of either the river, the city or the golf course.”
Maylands has a range of schools, as well as its own train station, yacht club, golf course, and a new cycle/foot path along the Swan River shoreline into Perth.
Crooks says there are plans regarding further development on the peninsula, and a new $72 million development is currently being built on Railway Parade. This means the future looks bright for Maylands, and price growth should follow accordingly.
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