There’s an air of optimism surrounding the Perth property market as the year starts to draw to a close that its long period of price correction could be coming to an end.
The advice from Capital 360’s buyer’s advocacy team in Perth is that the city should see increased investment activity and a return to growth in early 2012, thanks to improving affordability and the continuation of the mining boom.
The August figures from SQM Research certainly make for interesting reading, showing that property listings in Perth dropped by 7.1% in August – the largest fall of any state capital. Looking further back, REIWA data reveals that listings have dropped by 11% since the end of June – falling from 17,400 to 15,500.
REIWA head of research Stewart Darby, however, notes that this drop in listings isn’t representative of a higher turnover of sales.
“What we are witnessing is a large number of sellers simply taking their properties off the market rather than stock being diminished through sales,” he says.
“Our members are also reporting that there is less discounting going on with sales, which suggests that sellers are finally getting the message and agreeing to price their properties to meet the market and not to hold out for unrealistic expectations.”
Rents on the up
Raine & Horne North Perth principal Larry Gallagher says that falling vacancy rates (Perth’s rate dropped to 1.4% in August according to SQM Research) and a shortfall of new homes should push up rents in the short to medium term.
Looking at the recently released figures from the REIWA, he may have a point: The city’s median weekly rent jumped by 4%, or $15, to hit $395 during July and August, and rose by 2.7% in the 12 months to June.
“If you add the expectation of a significant increase in Perth’s population and the long-term prospects for a quality, well-located Perth investment property are very good,” says Gallagher. “Throw in the prospect of an interest rate cut sooner rather than later and it’s fair to say we are close to the bottom of the residential investment market cycle.”
Certainly, if HIA predictions are anything to go by, Perth is brewing up the ingredients for price growth in simple supply and demand terms. HIA notes that Western Australia’s average annual population growth rate over the past five years of 2.6% is the highest of any state or territory, and that the state will need to increase its average annual home construction rate by a (most likely unachievable) 43% to keep up with demand.
Calculating that 62% of the state’s current housing shortages are in metropolitan Perth, the HIA’s Housing to 2020 report notes:
“It is evident that the shortage is distributed across inner northern (Stirling and Bayswater), inner southern (Melville, Canning and South Perth) metropolitan LGA’s, as well as the outer metropolitan fringes to the north in Joondalup, to the east in Mundaring, and just beyond the metropolitan fringe to the south in Mandurah.”
Between Perth and Mandurah, Rockingham is starting to hit investors’ radars, says Paul Curran, principal of Raine & Horne’s Rockingham & Suburbs and Rockingham Beach branches.
“Prices have stabilised and rents are up 3 to 4%,” says Curran. “Home affordability is the major appeal of Rockingham for investors, while the 50-minute train ride is a big lure for tenants.”
“Four bedroom homes with double garages start from around $335,000, and can command rents around $400 a week.”
Meanwhile, the WA state government launched SharedStart program to encourage its low to moderate income residents to enter the property market.
Under the SharedStart program, state government lender Keystart will offer shared equity loans to singles on incomes of less than $70,000 or couples on incomes of less than $90,000 (up to $110,000 in the North-West). These loans can be used to purchase one of 2,000 new Department of Housing properties.
“This is a key initiative coming from the state government’s affordable housing strategy, and will allow more low to moderate income-earning West Australians achieve their dream of home ownership,” says WA’s minister for transport and housing Troy Buswell, adding that the scheme also aims to stimulate the WA building industry.
The suburbs currently earmarked to benefit from the scheme are Northbridge, Mirrabooka, East Perth, Subiaco and Meadow Springs. Where the scheme heads to next will be determined by the state’s expression of interest process.