Perth looks set to continue along a path of attractive growth, but a few whispered warnings are echoing in the background
Perth property market’s phenomenal rise over 2012–2013 was long overdue after spending a few years in stagnation following its 2006 boom. Terry Ryder, director of Hotspotting.com.au, says 2013 was a solid year for the Perth property market.
“In fact, it was the state’s first decent growth year for some time, and it’s not over yet. It is the beginning of something for Perth. I think there is a further good year to come.”
Ryder adds that Perth now has in place all of the factors that are necessary for a good property market: a strong economy, low unemployment, good population growth, and rising sales. WA’s resources economy remains strong, with many of the successful mining outfits planning development and even expansion, Ryder adds.
“Despite what some media commentators say, the boom is not over yet. Massive investment ontinues and more is to come in the future.”
Ryder’s view of the Perth market is backed up by recent Real Estate Institute of WA (REIWA) data. It shows that sales turnover in the city lifted towards the end of 2013, pushing the median house price to a record high of $535,000.
According to REIWA president David Airey, this increase is due to the fact that Perth had come out of a slump in sales over the September quarter and has more recently returned to more normal conditions.
First home buyer activity is still very evident, Airey continues.
“But there was a solid increase in sales within a 10km radius of the CBD and a softening of activity in outer areas, particularly along the coastal subregions north and south of the city.”
A shift in sales composition towards more expensive properties on the market also helped to pull the median upwards, Airey says.
However, the REIWA data also shows there was a weakening of sales activity in some of WA’s coastal subregions, including parts of Wanneroo and Joondalup, and in Rockingham
Airey says that while the sales retraction was modest at around 2–3% on the previous month, it was accompanied by a drop in listings, which meant that oversupply was not the issue.
“It is more likely that first home activity away from the coastal strip has been the focus of buyers,” he says.
It is worth noting that WA first home buyers appear to be dancing to a different tune to those around the rest of Australia. Recent ABS data shows that, while first home buyer activity is at a 20-year low nationally; in WA it remains strong at 23.1% of the state’s finance commitments.
Meanwhile, the latest Herron Todd White report utters some words of caution about Perth’s market.
It notes that the activity and rising market are serving to make Perth increasingly unaffordable. It also says that interest rates are likely to start going up again over 2014 and this could lead to a rise in delinquent mortgage activity.
Some commentators have also warned investors to tread warily in Perth’s rental market – due to declining rents and increasing vacancies.
Airey says the median rent in Perth has dropped by just over 2%, in recent months, to $460 across the board.
“REIWA data shows that rental vacancies remain above average at around 3.2%.” he adds
Perth is actually continuing to exhibit ongoing increases in vacancies, SQM Research’s Louis Christopher says. “We attribute this largely to the decline in mining activity in the region.”
Mixed mortgage delinquency scorecard
The latest Fitch Ratings mortgage delinquencies report shows that
WA has recorded a substantial improvement in its mortgage performance since end-March 2011. At that time, the state’s delinquency rate was 1.99%.
On the other hand, the report shows that delinquencies in non-metropolitan WA have increased significantly to 1.76% as of September 2013.
This is attributed to an increase in unemployment and declining house prices in this area (unlike Perth and Southwest WA) over the six months to September 2013.
Suburb to watch
Named after noted WA settler Walter Padbury, the well-located, near-coastal suburb of Padbury has been overlooked and undervalued for many years.
It sits just a suburb back from the beach, is close to all necessary amenities and services, and the central hub of Hilary’s Marina is nearby. It is also only 20 minutes from the Perth CBD.
Padbury is an excellent place for families with schools, good local shopping, excellent public transport links and organised sporting events like football and hockey, Bryn Harvey from Ray White Bursmac & Associates says.
The typical properties in the suburb are brick and tile, 3- or 4-bedroom homes on large blocks of land. The majority of properties date from the 1970s, but Hepburn Heights has a lot of newer stock.
Harvey says there a lot of homes being renovated and/or added to in order to make the most of the great block sizes that can be found in the area.
There are pockets of Padbury which the City of Joondalup has proposed for rezoning – and this will make the area very attractive to buyers, Harvey adds.
Prices have always been steady, but the proposed rezoning should lead to modernisation and rebuilding which should result in prices going up, Harley Burke, from Harber Real Estate, agrees.
Further, Padbury is situation in the middle of suburbs like Sorrento and Duncraig, which command much higher prices, Burke says. “This should also make it attractive to investors.”