The month in review: South Western WA
By Herron Todd White
December, 2009
I recently re-read the February edition of the ‘Month in
Review’ and it would not come as a great surprise that
the general sentiment being expressed at the start of the
year was uncertainty and a desire to wait and see what
the year would bring. As the year comes to a conclusion
it is possible to look back and see that the effects of
government incentives and lower interest rates did result
in some confidence returning to the market.
The first home buyers have underpinned the market for
the majority of the year but we also saw the second and
third tier buyers start to return in greater numbers in the
latter half of the year.
It will be interesting to watch what happens as the first
home buyer stimulus unwinds. The decision to buy,
for many people in this sector, was moved earlier in
the year than would otherwise have been the case and
consequently the number of first home buyers/ builders
is likely to be low for the foreseeable future. Whether
this slack will be taken up by the return of investors and
sales in higher price brackets, which were put on hold
previously, is the interesting question. At the time of
writing, sales volumes are steady with agents reporting
increased activity across most sectors of the market and
so, for now, we would have to say yes. While not trying to
be too pessimistic, I hope that those buyers who rushed
into purchasing on the strength of incentives don’t find
themselves in trouble with the interest rate rises that are
currently filtering through the system.
One point of interest coming to the fore as the year winds
down, is that the supply of land available in Bunbury and
Busselton appears to be somewhat limited. We have gone
from a situation where excess blocks were being sold at
reduced prices, to where most developers are reporting
that their existing stocks are virtually exhausted with new
stages still some way away from having title. Most of the
sellers who had to sell are also now out of the market.
There were many examples of these investors being left
well and truly in the red on their speculative purchases
of land.
Builders are still reporting good sales with (as expected)
the first home buyer numbers dropping, but increased
demand coming from clients upgrading their houses.
Many of these clients are now looking to build dwellings
of approximately 220 sqm with a build price around the
$200,000 mark indicating that there are still distinct price
points that clients are working to and the search for a
good deal is keeping the builders competitive. Over the
medium term, this shortage of land and demand to build
may however result in some upward pressure on prices.
Particular factors that have had an impact on the
local economy have included, the announcement of
substantial projects in the mining and associated industry
sectors, as well as other infrastructure projects including
the southern desalination plant. Stimulus in the form of
school building projects has also served to underpin the
building industry. To a large extent, this has served to
insulate the South West from some of the more extreme
doom and gloom on offer in other parts of the country.
These initiatives have also helped to alleviate many of
the fears around unemployment which resulted from the
job cuts by the miners and reduction in hours by many
businesses.
In summary, it would appear that most of the fundamentals
indicate that the property market will continue to rise
(if hopefully not at the same pace as previously) as
migration to the area remains strong and employment
seems set to be fairly settled for some period to come.
Interest rates may be on the increase, but with the
continued world economic uncertainty it seems unlikely
that a full strength boom will occur anytime soon. And,
as a consequence therefore, rates should stay in line with
long term averages leading to continued confidence in
the market.
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