Buyer interest increases in Perth
While new properties continue to hit the market, night is falling on the City of Light as residents migrate out of the state.
“Population growth has slowed and weakened as people who moved here from other states move back home again,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics.
“In the meantime, there’s a big pipeline of dwelling construction working its way through the system, as you can’t just build a dwelling instantaneously. And it’s working through at a time when the population flows are reversing.”
As a result, Perth is expected to see more of a downturn, even though some have predicted that the market has bottomed out.
“On our estimate, there’s probably still at least another 12 months to go if not more on the decline in mining sector investment. So, from an economic perspective, it’s going to be fairly challenging [during that time]. That points to weaker conditions in the housing market,” Zigomanis says.
Perth could benefit from upping its tourism appeal as visitors come in from overseas. However, despite interest from investors already rising, the market’s recovery is expected to be quite slow.
“Perth 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,” explains Michael Yardney, CEO of Metropole Property Strategists.
This view is supported by the fact that Perth’s economy remains highly reliant on the movement of the resources sector and commodity prices.
Perth’s economy evolving?
The average vacancy rate in Perth is currently nearly 5%, which suggests that properties are difficult to lease out and rents are very low. With the constant drop in prices, however, the city is looking quite appealing to investors, especially with word that the economy could be on the verge of starting a gradual upswing.
“There’s been a bit of an upturn in mining exports recently, which will give a boost to incomes and property prices in mining-focused areas like Perth,” says Steve Jovcevski, property investment and lending expert at Mozo.com.au.
“A Perth investment has all the fundamentals of a good property buy. It’s a major city, with plenty of infrastructure and potential for growth in jobs and population. That means that even if there’s a slump at the moment, chances are the market will revive.”
Nonetheless, Jovcevski agrees that investors must be prepared to handle the financial risks of investing in a market that’s in the midst of a slump.
“Ultimately, a Perth property is a good idea for a seasoned investor who’s financially comfortable and willing to play the waiting game in the property market,” he says.
Unemployment rates in WA also went down to 6% in February 2017, which matched the national rate. This rate could be set for a further decline if the state government pushes through with plans such as the construction of the Perth Academic College in the City Link development.
“Educational facilities are a key attraction for families, and this development should therefore have a positive impact on surrounding property values,” says Irene Limnios, managing director of Limnios Property Group.
The Property Council of Australia is also supporting government plans to improve public transport.
“The government’s Metronet rail plan to create more cross-city rail connections is a great opportunity to achieve the sorts of higher-density housing around suburban hubs that are proving difficult to achieve,” reports Lino Iacomella, the Property Council’s executive director for WA. Iacomella also believes that it’s time to conduct a review of property-related state taxes, such as stamp duty and land tax, which have impeded the property market’s role in helping to uplift WA’s economy.
SUBURB TO WATCH
Rossmoyne: Prices fall in premium suburb
Rossmoyne is one of Perth’s premium suburbs, with a median house price coming in at over $1m. Located just 14km south of Perth, the suburb’s short distance from the city could be a reason for its value.
Rossmoyne’s price tag remains high, even though prices fell by 5.2% over the past 12 months. This could also account for the low rental yield.
Nonetheless, Rossmoyne’s residents are served by various amenities, including a shopping centre that contains a supermarket, cafe and restaurants.
The local sports facilities include tennis courts and a bowling club. The suburb is also home to three schools for students of various ages: a kindergarten, primary school and a senior high school. Buses run to and from Perth as well.