Big spending on the resources front boosts confidence that buyers will return to the WA property market
The headlines have been filled with three-letter words throughout the first quarter of 2012 – BHP and Rio. The two companies are responsible for more than $4bn in new spending planned for Western Australia, but the good news goes much deeper, as economic growth in the state appears to be far outpacing the rest of the country.
The latest Commsec State of the States report says WA is way out in front of what author Craig James calls a three-speed economy.
“WA leads the way on economic growth, construction work, unemployment and equipment investment while also possessing strong readings on retail spending and population growth,” James said in the report.
He says that the influx of mining investment is beginning to filter through to the rest of the state’s economy, with economic growth pegged at 5.6%, more than a quarter higher than its long-term average.
Housing to catch up?
But Andrew Wilson, chief economist at Australian Property Monitors, says it has been a bit of a surprise that the state’s housing sector has yet to take a turn for the better, given all the good economic news.
“It is a little counter-intuitive given that it is Australia’s strongest economy,” he says. “Out of the major capitals, Perth has the lowest unemployment rate, the highest incomes, and it also has a very tight rental market which does reflect a shortage of rental accommodation in Perth.
“However, we did see an ongoing lack of enthusiasm by buyers for the Perth market. And I do feel that that is just a prime example of very fragile buyer confidence permeating the housing market,” Wilson continues.
Residex sales data through the end of the year show the Perth market flat at best, and Bernie Kroczek of Perth-area Kroczek Realty says he has been waiting for the good news in the business pages to move over to the real estate section.
“With all things added up, given that we are in this supposed resource boom-state, it hasn’t really been reflected in the real estate market.”
But from his vantage point, Kroczek says, buyers appear to have perked up in the New Year.
“Since Christmas, it is almost as though somebody flicked a switch and all of a sudden there have been a lot of property sales in Perth,” he says. “We’ve been getting a lot more enquiries and inspections… So it seems maybe that sentiment has finally turned.”
According to SQM Research, Perth-area stock on market has been dropping slightly since the middle of the year, and Kroczek says he noticed a number of buyers pulling their properties off the market when they weren’t getting the price they wanted. Now, he says, the market appears a bit more balanced and sellers are getting more attention from buyers, especially in mid-range properties in the inner suburbs.
“They’re not going for the little cheapies at the bottom – they can afford a little more so they are looking into the $300,000–400,000s, because the rest of the market has come back a bit.”
Kroczek says tight rents and big population growth above 2.4% are already a way of life in Perth, and that it should get better as the headline-grabbing projects get going.
“A lot of the stuff in the pipeline hasn’t actually come on stream yet so they are expecting that some more of the benefits of the resource boom will trickle down onto the streets of Perth, but we haven’t seen too much of it just yet, to be quite honest.”
Wilson says that should happen this year, forecasting the return of some reasonable price gains to the Perth market, especially at the bottom and middle of the market.
“We’re looking at an overall price lift of 5% for the year,” he says. “It’s a recovery. It’s a gradual recovery, and it’s getting back to a more sustainable type of market.”