Perth market remains in a slump
It’s the news that surprised precisely no one: all Australian capitals have now surpassed Perth in terms of annual growth.
But the news gets a little worse, according to Michael Yardney, director of Metropole Property Strategists.
“It is likely that the Perth market has not yet bottomed out,” he says.
“It remains in the slump phase of its property cycle, with high unemployment, an oversupply of properties on the market, high vacancy rates and a poorly performing local economy.”
Specifically, the inner-city area of Perth is suffering from a unit oversupply, although the level of housing development is still healthy.
Nerida Conisbee, REA Group’s chief economist, adds that while the economy of Western Australia as a whole has been slowing down and weakening, this may present an opportunity for some buyers who have a risk profile that can withstand investing in a down market.
“If you’re interested in buying countercyclically, Perth is a market to consider. Prices are still dropping; however, we may be close to the bottom of the cycle,” Conisbee suggests.
“Given the difficulties in predicting the bottom, it’s a good idea to have at least a two-year time frame in mind when buying. While we are starting to see some early signs of price growth in Perth, it will take some time for the whole market to return to growth.”
Nonetheless, RBA rate decisions and the movements of Australian banks could also affect the prospect of price growth.
“It’s looking more likely that Australian banks will continue to increase rates independent of the RBA decision. This will undoubtedly impact price growth in 2017,” Conisbee predicts.
Much focus has been placed on the decline of the resources sector, which has been a major reason for the nosedive in the property market. However, the strong performance of the rising agricultural sector in WA may be coming to the rescue.
The CEO of Professionals Real Estate Group, Shane Kempton, points to a record harvest of grain reported recently, which will beef up the state economy.
“It is expected that this year’s harvest will top 16 million tonnes, which will be higher than the previous record of 15.86 million tonnes during the 2013–2014 season,” says Kempton.
“The agricultural sector is now recording a major upswing and this will be supported over the long term by investment and demand for our food products from Asia.”
Kempton credits the peaking of beef, lamb and grain prices as well as the positive performance of the wool market for boosting the agricultural sector. The low median house price in Perth is now working to the advantage of farmers, who are benefiting from this rise.
“Historically, when farmers have a good year they tend to invest in Perth property, and I expect this trend to continue following this latest bumper harvest,” Kempton says.
Perth is now one of the cheapest capital cities in Australia, which could pique the interest of investors and buyers on a budget. In fact, Charles Tarbey, chairman and owner of Century 21 Australia, sees potential in WA’s current situation.
“Whilst prices are still moving downwards in many areas, this can lend itself to greater potential for investment as the year rolls on. I believe it is an area that investors should be watching as its potential to stabilise is good,” Tarbey suggests.
“Vacancy rates are still very high compared to most of the Australian marketplace; however, the downwards adjustments in pricing may mean there are many good opportunities to secure property at a fair price.”
SUBURB TO WATCH
Ocean Beach: Surfers’ paradise stays afloat
Forming part of Ratcliffe Bay, Ocean Beach is primarily known as a tourist destination near the town of Denmark, between the Wilson Inlet and the Great Southern Ocean. It is highly popular with surfers and is also a favourite swimming spot.
This suburb is home to couples, families and retirees, who benefit from its proximity to Denmark. In addition to tourism, agriculture is also a thriving industry in Ocean Beach, due to the suburb’s location. The Western Australian College of Agriculture – Denmark is located nearby. Ocean Beach is mainly accessible through Denmark, which is situated on the South Coast Highway.
Perth’s downturn, however, has affected Ocean Beach. The house market slipped by 5.5% over the past year; nonetheless, vendors have been able to unload houses at a low average discount of just 3.14%.