The withdrawal of the federal government’s first homeowner boost has had an immediate effect on the Perth property market. During the three months to January 2010, median house values slipped by almost 1% to $487,000 according to the latest Residex data. Unit values drifted lower as well with median values falling by 0.16% to $394,500.
Affordability concerns have also weighed on sentiment after the HIA reported affordability levels dropping dramatically during the December quarter, following the recent string of interest rate rises and bounce in house prices.
“Prices have returned to record levels and affordability compared to the December 2008 quarter was down by 24.8% in Perth and 16.9% in regional WA,” says the HIA report.
With the cash rate expected to increase to 4.5% by the end of 2010, combined with the strong property price growth already underway, housing affordability is set to deteriorate further.
This will cap the robust growth in values predicted by many experts according to Brendan Aylmore, branch director with WBP Group WA.
“Despite predictions suggesting that 2010 will see a steady rise in values across the country, rising interest rates will keep this growth to a moderate level. With this in mind, Perth is likely to perform steadily during 2010 showing marginal improvement,” Aylmore says.
Despite concerns of worsening affordability, market players remain upbeat as evidenced by the spate of high-profile sales in Perth.
The recent sale of a property in Perth’s Mosman Park, which sold for a record $57.5m, is proof of a buoyant market according to Aylmore. Located on the Swan River, the property was purchased as vacant land in 1992 for only $400,000 and now comprises three self-contained dwellings, pool, tennis court, cinema, gym, private boat house and jetty.
The Herron Todd White (HTW) report called the sale of Angela Bennett’s mansion an “injection of adrenalin to the WA property market [which] created a sense of confidence in the battered premium sector”.
Another example according to HTW is the sale of 18a Fraser Road in the riverside suburb of Applecross, which was snapped up for more than $7m within the first weeks of marketing the property.
While sales activity has increased in most of the traditional blue chip suburbs such as Cottesloe, City Beach, South Perth and Applecross, stock levels remain reasonable through Dalkeith and Claremont, according to HTW.
“It seems that many opportunities remain for the astute buyer, whether it be targeting properties that have been advertised for extended periods and are now overexposed, or accepting that auctions are a way of life and being bold enough to bid,” the report says. Aylmore also noted that there has been a notable increase in the popularity of renovations and extensions, with property owners showing strong preference towards improving their existing dwellings rather than upgrading.
“Rising interest rates, the cost of selling and strengthening values are the key factors underlying this trend. However, renovators need to be cautious of overcapitalising, especially in the hardest hit suburbs where recovery after the GFC is some way off,” says Aylmore.
Infrastructure development is another factor contributing to improved property values in and around Perth, according to Aylmore.
“The recently completed Perth to Bunbury Highway has been a blessing for many motorists and cuts travel time to the Mandurah and Bunbury localities. As a result of the improved infrastructure, more isolated southern suburbs such as Yunderup, Ravenswood and Pinjarra may become a feasible option for commuters, offering greater affordability and positive implications for capital growth. Leederville and Scarborough are also poised to benefit from proposed redevelopment, undergoing zoning changes to accommodate a shopping centre and foreshore development respectively,” Aylmore explains.