Perth prices drop further
Tough times for landlords as property prices and rents continue to slide
Dwelling prices in Perth weakened further in the September quarter, losing 0.7%. During the year, values fell by 0.9%, according to the CoreLogic RP Data stats.
The decline has been much greater across the unit market, where values have fallen by 4% over the year compared with house values, which were 0.7% lower.
Perth’s rental market is also weakening, with median rents for houses falling by 5.6% and unit rents falling by 6.8%, according to Cameron Kusher, senior research analyst at CoreLogic RP Data.
“The large fall in weekly rents is also pushing local yields down, with the typical Perth house now showing a 3.9% gross yield while units are returning a gross yield of 4.4%,” he says.
Andrew Wilson, senior economist at Domain, agrees that the Perth market is weakening and he thinks this will continue over the medium term.
“Perth is a market that continues to go backwards,” he says. “Prices will be lower this year than last year. It’s a product of a sharp decline in the local economy. The unemployment rate went from mid-4% to mid-6%. Interstate migration is falling as well. The confidence is very low at the moment.”
With prices as low as they are now, the question of whether the market has reached the bottom persists, with some analysts forecasting further drops in property values.
“It is definitely a buyer’s market, with the number of listings going up and activity falling,” says Linda Phillips, head of research at Propell. “The continuing recession in the state has seen the population drop significantly. With fewer people moving into Perth, demand has fallen. It’s likely that house prices will fall by another $25,000 over the next year. If this is bad news for vendors, it is good news for buyers as they can take advantage of their strong bargaining position, aiming to pay next year’s prices today.”
Rich Harvey, CEO of PropertyBuyer.com.au, is advising his clients to stay away completely from the Perth market. “I’d stay away from Perth and Darwin
,” he says. “They’re undergoing corrections and I expect further falls to happen because their resources sector is depressed.”
Market sweet spot
Phillips warns interstate buyers to be very selective of where they buy in Perth.
“Perth is a large geographical market, extending 40km in each direction. On the edges of the metropolitan area, there is plenty of land available for development and an oversupply of the typical four-bedroom, two-bathroom, first home buyer properties. But there is a preference to live close to the Perth CBD and it is important for investors to identify valued suburbs as close to the CBD as possible,” she says. “You can still get good deals within the 11–12km radius.”
Phillips has analysed this market sweet spot and found that while these areas are still fairly close to the city, they’re offering a below-average median price. Suburbs on the eastern side of the city, such as Eden Hill and Beechboro, offer the lowest median prices at $518,000 and $460,000 respectively.
“The lower price points generally reflect the older properties in these suburbs. But there is a high level of sales activity here. Prices have hardly moved in the past year. Eden Hill is in reasonably close proximity to the Midland
s train line, while Beechboro is well served by highways. In the longer term, mooted extensions to the train system are likely to benefit these suburbs, as any train link will have to pass near these on its way to Ellenbrook
,” says Phillips.
To the south, Phillips recommends looking at Ferndale, Lynwood and Parkwood.
“These are all well served by the road system, with High Street, Leach Highway and Albany Highway providing easy access to the city and the airport,” she says. “They are one or two suburbs away from the river, and the regional shopping centre of Carousel is an easy distance away. While they were seen as downmarket in past years, they are starting to experience development and gentrification, which should enhance the long-term outlook. Sales activity has been heavy. While Ferndale prices have not increased, those in Beechboro were up 5% in the past year, and Lynwood 4.7%, which means that they are experiencing growth and demand, despite slower metropolitan activity in general.”
The suburb of Willagee is to the south, and closer to Fremantle
“It has the higher median price at $619,000, but demand is also high, with prices up 5.8% in the past year. The story here is one of redevelopment to higher densities, which is adding value.
“The prospect for these suburbs looks better than average, but once a suburb has been selected, it is important for an investor to be familiar with the product on the market and be savage in their negotiations on price,” says Phillips.
SUBURB TO WATCH
Eden Hill: Hidden gem
Located 11km from the Perth CBD, Eden Hill is an underrated suburb with good potential. The suburb is a magnet for professionals and families thanks to its desirable amenities and proximity to the Perth CBD.
There are four parks in the 3sqm suburb, which has about 3,509 residents. Eden Hill is well established and enjoys wide, leafy and quiet streets.
It’s currently undergoing gentrification as more young families are attracted to the affordable homes on large blocks of land. It has largely defied the overall slowdown in the Perth market. Prices have been growing strongly since 2012 when median house values surged by a total of $68,500, or 15.73%.
There are a wide range of properties in the suburb and a good mix of old cottages, 1950s brick-and-tile houses and newer builds.
The suburb is also in high demand among renters, and so the vacancy rate is quite low at 1.04%. Unlike some areas of Perth, Eden Hill is experiencing very low levels of housing supply. During the past 12 months, properties listed for sale plunged by 58.7%, according to RealEstateInvestar.com.au.
The cheapest streets for buying a home are around Padbury Way, Wendlebury Way, Lord Street and May Road, according to OnTheHouse.com.au.
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