The month in review: Perth
By Herron Todd White
April 2010
The Mandurah area has long been the weekend
playground for those in a position to afford the luxury of
a holiday home, and this has flowed through to include a
large population of retirees attracted by the café and canal
lifestyle. A combination of factors including significant
oversupply and tightening credit conditions through the
GFC, caused a lack of demand and values headed rapidly
in a downward direction.
Unfortunately for speculative investors, several apartment
complexes were completed around the same time, which
led to higher than average settlement default rates,
caused by a negative value/contract ratio. There has been
some sales activity below $1 million, however confidence
remains low and there has been virtually no activity above
the million dollar mark with the prospect of further value
corrections this year.
Whilst the general mood of the Mandurah market is
becoming more optimistic, the area has a long way to
go and remains over supplied. The saying is that ‘fortune
favours the brave’, however in Mandurah’s case it might
be more appropriate to say ‘fortune favours the brave and
patient’.
Further north, beachside localities stretching along the
coast from Two Rocks to Jurien Bay have increased in
popularity over the past 10 years with original beach shacks rejuvenated or replaced by units and two storey
dwellings.
Sales activity in Lancelin peaked in 2005 with more than
60 sales recorded and plummeted to fewer than 30 per
annum from 2007, with just 19 sales in 2009. Property
values have followed suit, with recent examples showing
a 10% reduction in values between 2006 and 2009.
Overall, as the GFC hit, luxury boats, sports cars and
holiday homes suddenly became a burden, not a ‘must
have’ and were offloaded quickly, if you could find a
buyer.
Optimism has returned to the Perth market with sales
activity increasing in the traditional premium locales,
however we do not expect to see a mad rush back to the
holiday home lifestyle. Credit has tightened significantly
and lending criteria has changed from a focus on equity
to serviceability. For those with strong cash flow there
should be some bargains to be had in the traditional
holiday hotspots.
Our advice would be that whilst the slow and steady
might not win every race, they are usually still standing
at the end.
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