The month in review: Perth
By Herron Todd White
September 2009
Sales activity has increased dramatically this year, with
the overall volume of sales in the first quarter returning
to figures reminiscent of 2006 and 2007.
The lack of confidence in the market in early 2008 saw
sales volumes drop by 20% from the year before, although
the median price maintained its level at $465,000 due
largely to a continuation in activity above $1 million.
As the graph clearly shows, the lower end of the value
range has been driving the market in 2009, with 71%
of all sales in the first quarter falling below $500,000, an
increase of 10% on previous years.
The imminent winding down of the First Home Owners
Boost will have an interesting effect on the market as a
whole. After the boost disappears at the end of the year,
we would expect a decline in activity and a corresponding
decline in values in the lower end of the market.
The FHOB gave the bottom end of the market the kick
it required to get moving, and the increasing threat of
interest rate rises before the end of the year should have
somewhat of a similar effect on the remainder of the
market.
The million dollar question will be whether there is
sufficient optimism in the market to maintain activity in
the middle and upper tiers, and how seriously those in
the trade up markets are affected. One line of thought
is that the middle and upper price tiers have reduced
as much as they are going to, and now is the time to be
upgrading whilst stock levels remain relatively high and
purchaser interest is low.
Another train of thought is that current Australian house
values are skewed from traditional affordability ratios
and further price adjustments are required. Still another
thought is that construction activity isn’t keeping up with
net migration and there will be further pressure placed
on real estate prices well into the future.
What we know is that the Perth real estate market is well
into a recovery stage, with solid activity in the lower price
brackets and increasing activity in the mid value range.
Activity in the over $1 million bracket was down 54%
in the first quarter of 2009 compared to 2007, and in
many areas there appears to be the potential for growth
through 2009/2010.
The recent announcement of the approval of the Gorgon
gas project is a major boost for the WA resource industry.
Unemployment had become a key concern throughout
the industry as commodity prices decreased through
2008, however this recent announcement combined with
recent increases in iron ore spot prices should inject some
much needed optimism into the market.
We remain cautiously optimistic on what the remainder
of the year will bring and envisage that 2010 will herald a
more stable real estate market compared to the volatility
we have experienced since 2006.
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