The month in review: Perth
By Herron Todd White
December 2009
It’s safe to say that regardless of the dire predictions of
how severe the GFC was going to be, Perth weathered
the storm reasonably well through 2009.
As valuers, we try to be realists, not pessimists, and
certainly not optimists. Entering 2009, the sky wasn’t
quite falling in, but it was teetering on the brink. Mass
redundancies were occurring through the resource sector
and the world was entering a recession that was touted
as leading to a depression! Scary stuff!
In February’s edition we predicted that the second tier
would start to move in a positive direction. Values had
retracted through the latter part of 2008, and interest
rates were low, leading to a perfect scenario for cashed up
buyers. We also expected the first home buyer market to
heat up as supply competition increased and incentives
were back in the market. Lastly, we anticipated a further
weakening of values in the premium sector as confidence
remained low. So how did we go?
Let’s start from the bottom up. First home buyer activity
increased steadily throughout the first three quarters of
2009. Although, it appears to have peaked in the middle
of the year. Early on in the year, first home buyers had their
choice of property and were controlling the market to a
certain extent. Their optimism was refreshing, although
bordered on amusing considering the negativity in the
press. With the assistance of the First Home Owners Grant
and stamp duty concessions, first home buyers hardly
had to reach into their own pockets to buy a home, and
with interest rates at all time lows, why would you pay
rent? It was the perfect opportunity and a great kickstart
to a quiet market.
The supply in the first home buyer market evened out, as
some areas were oversupplied in the first half of the year
and there was consistent supply in other areas.
As we hoped would occur all along, the activity in the
lower value brackets enabled those ready to upgrade to
sell quickly, and at reasonable value levels. The demand
in the second tier had built up through 2008 and was
unleashed on the market early in the middle of 2009.
We thought there would be an increase in activity in the
second tier markets, but have been amazed by the level
of that activity and the strong demand is exerting upward
pressure on prices. Discussions with selling agents no longer involved anguished groans as open home
attendances increased, multiple offers became the norm
and the market appeared to be off and running again.
The premium market hasn’t performed as positively.
Demand is still restrained, albeit considerably better than
early in the year. Up until recently, values in the premium
sector have continued their dramatic downward
spiral, although recent enquiry levels have increased
dramatically, and the pent up demand experienced in the
second tier appears to have reached the $1 – 2 million
market.
Sales of vacant land have been strong throughout the
year, with the focus moving from cheaper cottage style
lots for first home buyers to premium larger allotments
in superior locations. The price disparity between the two
narrowed towards the middle of the year, although now
appears to be returning to more usual margins.
The winners of the year are those who put on a brave face
and bought into the second tier early in the year. They
are being richly rewarded in many areas by strong value
gains.
The unfortunate losers are those poor souls who either
over committed or became a victim of the GFC, as forced/
distressed sales increased dramatically through the year,
and as interest rates are undoubtedly moving upwards,
there appears to be more pain ahead.
All in all, the resource sector was once again our saviour.
The market has proven that consumer confidence in WA is
tied into commodity prices with the flow on effect seen in
the value of real estate. The WA resource sector appears to
be off and running again, and the recent announcement
of the massive Gorgon development on Barrow Island
will place further pressure on an active housing market.
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