The property market’s recovery has come to a sudden halt as prices drop again due to labour market and financing issues
After a positive start to the new year, with many experts noting Perth’s upward trajectory, the WA capital has gone into another slump, and house values fell by 6.7% over the year to March 2019.
According to CoreLogic’s Hedonic Home Value Index for March 2019, the annual rate of decline increased, coinciding with weakened conditions in the job market and lack of credit.
“Perth was coming back up from a negative, but it’s dipped right back again. Around 40% of the market is in decline,” says Brendan Kelly, director of Results Mentoring.
However, he doesn’t see this down period lasting for long.
“I’m anticipating that we’re going to see a swing back into neutral territory – I don’t think Perth is going to dip that much more. We’re going to see a more balanced market.”
Furthermore, this downturn could be drawing interest from offshore property investors in Singapore, Malaysia and the UK, according to REA Group’s chief economist, Nerida Conisbee. In January 2019, Brexit drove search activity related to Perth up 135% in the UK. There is also good rental demand.
“The fundamentals of property demand are looking far more positive – population growth in particular,” Conisbee said in a media release.
Affordable areas selling like hotcakes
The falling values in Perth are inspiring activity from first home buyers, who made up the majority of sales transactions in February 2019.
“Almost half of all transactions occurred below $500,000 in February, which is a trend we’ve observed for the last three months. When we take a closer look, 32% of sales last month were between $350,000 and $500,000, while 17% were below $349,000,” reports Damian Collins, president of the Real Estate Institute of WA.
“Traditionally, when there is a greater proportion of activity occurring below $500,000, this indicates first home buyers are on the move.”
The suburbs that saw increases in sales activity during this period included Hamilton Hill, Tapping, Waikiki, Morley and Rockingham. These markets boasted median prices below the Perth median.
This is not to say that the premium market has come to a standstill – more expensive suburbs like Duncraig, Palmyra, Ocean Reef and Sorrento are among the 10 fastest-selling suburbs in February 2019. Their average selling times were well below the Perth average of 76 days.
SUBURB TO WATCH
MOUNT HAWTHORN: Positivity returns to Perth suburb
The suburb of Mount Hawthorn is slowly but surely aiming to overcome the negativity that has plagued it for several years.
For the first time in five years, Mount Hawthorn has been back in the black, recording an increase of 0.8% in house prices over the 12 months to February 2019, bringing the median to $878,966. Unit values dropped by 8.8%, but both house and unit markets saw rental rates increase by around 2% over the year to December 2018. The rental return for units was also reasonably strong at 4.6%.
Residents enjoy excellent public transport and proximity to the Perth CBD, which is just 5km north of the suburb.
Location: The suburb is very close to the Perth CBD, making it a convenient location for many
Growth: For the first time since 2014, Mount Hawthorn’s house market recorded positive growth