Low Perth prices increase sales
Despite a slight recovery in the month of October 2016, dwelling prices across Perth dropped as a whole over the last quarter, resulting in an overall decrease of 3.7% over the past 12 months. It is the only one of two capital cities in Australia to record falling values, Darwin being the other.
CoreLogic’s head of research, Cameron Kusher, says the increased availability of new stock for sale may have contributed to this weak performance. In the process, properties are taking longer to sell, with time on market increasing to 79 days compared to 2015’s 67 days.
Nonetheless, auction activity is strong in Perth, as this capital was the only one to record a boost in clearance rates over the third week of November 2016. The number of scheduled auctions dipped during the following week, likely to address the concern of stock outweighing demand.
“While [listing stock] remains above the long-term average, it’s pleasing that the usual surge of spring listings has failed to materialise, keeping listing levels more or less commensurate with demand,” says Hayden Groves, president of the Real Estate Institute of WA.
Land of opportunity
Groves says the decreased property prices resulted in significant sales in the second half of 2016, mainly at the lower end of Perth’s house market.
“First home buyers recognise that now is a great time to buy in Perth and are taking advantage of more affordable prices and lower interest rates to secure their first property,” says Groves.
“With more activity occurring in the lower end of the market, this has contributed to the softening of the median house price. Once all sales have settled, we expect the revised quarterly figure to lift.”
Unlike in the house market, however, unit values went up with the increased sales activity, particularly in the price range of above $450,000.
“Perth’s rental market has certainly presented its challenges in recent times; however, it’s pleasing to see that leasing activity is healthy across the metro area,” Groves states.
“Tenants clearly recognise that there is a good opportunity in the current market to secure themselves a new lease at a more affordable price. It’s important to remember that, although rents have fallen, so too have interest rates, with many investors able to ride out the downturn as a result.”
Perth investors are “well advised to heed the advice of their property managers, to help ensure their rental appeals to tenants in what is a competitive market,” he adds.
Mining bust continues
Although the state has been holding on admirably, it continues to face economic problems with the continued downturn of the mining industry.
Richard Robinson, senior economist at BIS Shrapnel, reports that population growth has plummeted over recent years, lowering the demand for property.
The employment rate has also fallen, alongside the slowing mining industry.
“It feels like a recession,” Robinson says, highlighting the weakened retail spending, low dwelling prices and oversupply.
Nonetheless, gross state product growth is expected to remain positive, along with that of the iron ore and gold export sector.
The worst is still to come for Perth, but Robinson also does not expect it to last. The decline of the state is anticipated to ease in 2019 or 2020, therefore those who weather the storm could be looking at long-term gains when WA begins its recovery period.
SUBURB TO WATCH
Waikiki: Beach suburb makes waves
Those looking for a seaside lifestyle need not go far to find Waikiki, which is just minutes away from Perth’s beaches and offers low-priced dwellings that are still close to the metro.
This suburb has stumbled as WA continues to recover from the mining bust, with prices dropping by almost 10%. In return, however, investors can recover yields of over 5%. Moreover, this affordability could boost sales in the suburbs, particularly among first home buyers seeking easy entry into the property market.
Waikiki’s location within the City of Rockingham ensures that it is not lacking in amenities, especially stores, cafes, pubs, schools and medical institutions, since the city has become self-sufficient.
The focus on tourism should also keep Waikiki from recording a significant decline, and more developments coming up are expected to improve the local economy.
Those travelling to Perth from the suburb can do so conveniently by train or car via the Kwinana Freeway.