As first homebuyers return to the Perth market, hopes are high that capital growth will pick up in 2012.
The Perth market has been showing renewed signs of life during the spring selling season, with first homebuyers leading the charge.
Sales activity has been slow in the wake of the GFC, says REIWA president David Airey, but this upswing in first homebuyer activity is a much needed shot in the arm for the Perth property market.
“Sales transactions are probably down by 30% going back to 2008, but in the last couple of months first homebuyers have been driving the market,” he says.
“Interest rates are stable, there’s a lot of stock on the market, affordability has improved and wages in Western Australia have gone up.”
Strong rental market
For the time being, this increase in first homebuyers hasn’t had a dramatic enough effect on sales activity to hit the city’s solid rental market.
“The rental market is probably stronger than it’s ever been, and that’s down to the lack of sales activity,” says Airey. “It’s quite an unusual dynamic: the sales are slow, but rentals are strong.”
The increasing popularity of public transport is also well worth keeping an eye on, says Airey. According to Department for Transport figures, public transport use in Perth has increased by 67% over the past 10 years – three times the rate of population growth over the same period.
He notes that investors have been targeting those parts of the city that have good transport and infrastructure, but are also undergoing some form of urban renewal that will aid long-term capital growth.
“Anybody looking for short-term gain is kidding themselves,” he says. “This is not a short-term market; it’s a longer term recovery.”
Away from the city’s inner suburbs, Airey suggests that investors should focus on the city’s northern and southern coastal areas. He singles out Rockingham, around a 50km train ride south of the CBD, as one to watch.
Around 10km north-east of Rockingham, Kwinana is also worth further investigation, says Airey, thanks to its affordable median house price ($300,000 according to REIWA figures).
One factor that’s been keeping the Perth market in check, says BIS Shrapnel senior manager, residential property, Angie Zigomanis, is a general concern about how planned new tax regimes will affect the state’s mining industry.
“One of the reasons why prices are still weak is because they’ve got a Liberal state government versus a federal Labor government. So there’s probably a lot of negativity that gets bandied around because of the mining tax and carbon tax, and people are a bit petrified that their mining boom will be cut short,” he says.
He adds, however, that confidence – and capital growth – should pick up towards the end of 2012 as the state’s major mining projects take off.
“People have a lot of concerns that probably aren’t as well founded as they think they are,” he says.
Winners and losers
Regionally there have been some winners and losers in the Western Australian market in recent times. Airey notes that the state’s south-west, in particular, has struggled.
He picks out Mandurah, around 70km south of Perth, as one of the south-western towns that grew too fast too soon.
“Mandurah took off in the last 10–15 years because the government extended the electric train line from the city to Mandurah, which really opened it up,” he says. “A lot of people got burnt, and they’ve lost 40–50% in equity – mostly in off-the-plan purchases.”
The Pilbara region, however, continues to be Western Australia’s shining light. Housing shortages and inflated mining salaries have seen prices continue to rise in the key resource industry hubs of Port Hedland, South Hedland and Karratha, with Port Hedland’s median house price now tipping the scales at $1.3m, according to RP Data’s August figures.
Airey, however, points out that for those who can afford the high buy-in prices, it’s sky high rental returns that are now drawing investors into the Pilbara.
“It’s more about the rents up there, and they are extreme,” he says.