With experts predicting a slow and steady market for the remainder of the year, WA’s mining town investors may just enjoy a boost thanks to recent resources tax changes.
It was a divided market for Perth
in June, with capital growth for houses and units travelling on very different paths. While house prices slumped in both the quarter and the month of June, units showed positive growth in values.
The median house price in the Western Australian capital fell by 0.2% in the three months to June, with a disappointing 2.16% year-on-year growth. The $489,000 figure recorded by Residex in May dropped 0.68% – or $3,000 – to a median value of $486,000 in June.
Russell Poliwka, managing director of First Western Realty in Joondalup, says that the WA market generally is soft at the moment, with few buyers having ample choice of properties – creating a distinct buyer’s market in the state.
Units, on the other hand, have fared well in the western state. The median unit value increased by 10.6% in the year and 1.98% in the month to reach $411,000 in June, according to Residex.
According to RP Data, average discount levels for houses have decreased in the past 12 months, dropping from 6.6% to 5.1%. Levels for units, however, have increased, rising from 6% a year ago to 8.6%.
RP Data also found significant cuts in the average time on market. Houses are taking an average of 30 days, compared to 46 days a year ago, while units are taking 17 days, compared to 36 days just 12 months ago.
Real Estate Institute of WA (REIWA) president Alan Bourke says it’s a buyer’s market in Perth, with potential purchasers doing the rounds of open home inspections to make sure they get the best bang for their buck. “Sellers need to understand that the market will be flat for at least a year, so it’s important to listen to your agent about setting the right price for a quick sale,” he advises.
Bourke adds that the rental market is “quite soft” at the moment, as a result of steady rental amounts and vacancy rates sitting around the 4.5% level for almost two years.
Herron Todd White says it’s a balanced market for rental vacancies in Perth, with demand for new properties fair. Rental yields are performing reasonably well, offering investors 3.97% for houses and 4.57% for units in June, according to Residex.
Perth’s rental prices are in an interesting situation, with only $10 difference between the average weekly rental amounts of houses and units. They are achieving rents of $370 and $360 respectively – both up $10 a week on last year.
While BIS Shrapnel has predicted that Perth house prices will rise by around 7% pa for the next three years, Bourke says this is far too optimistic. “REIWA data is showing that the number of properties on the market in Perth has jumped by 32% since January, with more than 14,000 listings currently up for sale in a sluggish market,” he explains.
“The reality is that the uncertain economic conditions overseas … and a lowering of the expected migration intake over the next year are making the local market very flat, with many buyers waiting until after winter and the looming federal election to see how things pan out. “I expect that the local property market will be very steady for at least the next year, then after that we may start to see some modest growth, but nothing like 22% over three years – that just isn’t realistic under current conditions,” Bourke explains.
WA economy powers ahead
While the overall health of the property market is uninspiring to say the least, the WA economy is surging ahead. According to the latest rankings by CommSec, Western Australia is the best performing economy in Australia, bumping off the ACT from the top of the leader board. In the March quarter, Western Australia’s economic output was almost 29% above the state’s decade average.
Craig James, chief economist with CommSec, says that the ACT had held the mantle over the past two quarterly surveys, “but it is clear that Western Australia has now fully shrugged off the effects of the global financial crisis, underpinned by a strong job market and rising demand for resources. Western Australia had felt the cool winds of the global financial crisis during 2009. But with that episode now behind it, the Western Australian economy has bounced back solidly, underpinned by low unemployment, firm retail spending and rising construction.”
Looking ahead, James says Western Australia is well placed to maintain its ranking as best performing state. “Western Australia’s current unemployment rate of 4.1% is 15% below the long-term average of 8.8%. Population growth is also fastest in Western Australia, at 2.7%,” James explains.
“The state is well positioned for growth as a consequence of strong Chinese and Indian demand for resources.”
However, James warns, it is exposed to the same macroeconomic forces as other state and territory economies, especially interest rates. “And Western Australia – alongside the ACT and Northern Territory – faces the challenges posed by tight labour markets such as securing workers and keeping labour costs down.”
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