By Herron Todd White
The residential market in Perth has tracked closely in line with our February predictions for the year (so far). Our assumptions were that the rental market would continue to be a strong point for Western Australia and that sales volumes and house price growth would remain subdued until 2020. There has been a lot of speculation about when the Perth market will finally turn and it doesn’t seem like we are much closer to knowing, mostly due to our split property cycles and diminishing sales volumes.
Thankfully, the wider Perth area has seen some stability in its median price. The median house price settled at $500,000 for the March quarter, 0.6% higher than the previous quarter. The unit median price also remained steady, holding at $380,000. REIWA data shows that there were 6,636 properties sold in the March quarter, proving Perth’s state of subdued activity. REIWA reports that “although overall sales are down, 10% of suburbs experienced stable or increased volumes”. This is a positive sign as there are improvements in some submarkets, and it shows the differences between Perth’s inner and outer suburbs.
Figure 1 shows the distribution of wider Perth area house sales by price bracket. In the December 2018 quarter, 64% of homes sold below $600,000. This figure jumped to 70% in the recent March quarter, indicating that affordability is continually improving, but it is also a symptom of a decline in prestige activity. President of REIWA Damian Collins states that this affordability “presents excellent opportunities for first home buyers, trade-up buyers, downsizers and investors to secure a good deal”.
Listings have increased 6% since the December 2018 quarter to 16,957 which isn’t helping selling periods. It took an average of 78 days for vendors to sell their properties last quarter. This is a significant jump from the 68 days to sell in the December 2018 quarter. It can be attributed to new land releases as well as a softening in demand across the board. Mr Collins recently said, “it’s also worth noting that a significant portion (43%) of Perth sellers are achieving sales prices at or above their original asking price, which suggests that many vendors are heeding the advice of their real estate agent and pricing their properties in line with market expectations”. This is key to avoid the extended selling periods that we have been seeing far too often. Our valuers are seeing frequent evidence of properties becoming stale in the market place due to the initial asking price being out of kilter with the market and the eventual sale price of these properties is often below what market evidence suggests they should achieve.
The rental sphere was once again increasingly active in the March 2019 quarter, favouring investors and shortening the Perth vacancy rate to 2.5%. The median rental price remained stable at $350 per week for a ninth consecutive quarter. REIWA data shows that 29% of suburbs in Perth had an increase in rents during the quarter, and 36% of suburbs increased over the past year. If the rental market continues in this direction we should inevitably see an increase in Perth’s median rent over the coming seasons.
In terms of activity, 14,003 properties were leased during the March 2019 quarter, almost 9% more than the December 2018 quarter. There were 6,738 properties listed for rent at the end of the March quarter 2019, which was 2% lower than the December quarter figure and 25% lower than the same time last year, showing that competition amongst tenants is ramping up. It took two days less to find a tenant during the March quarter, decreasing to 42 days. This figure has crept downwards since the peak of 57 days in June 2017 and shows that tenants need to be decisive and act fast to secure their preferred property.
The suburbs that recorded the best and worst median price growth over the March 2019 quarter are in Figure 2. Note that both Burswood and South Guildford are benefiting from the sale of properties in new developments. The Peninsula development by Mirvac would be significantly affecting Burswood’s median as some of the properties are selling for over $1.7 million. A few lifestyle living areas have been active over the past six months including Mundaring, Glen Forrest, and Serpentine. Suburban North Lake has tracked well, jumping 8.5% quarter-on-quarter. This was surprising to see as North Lake’s surroundings have been disrupted lately by the development of the Murdoch Drive Connection – adding extensions from the Kwinana Freeway and Roe Highway to the Murdoch Activity Centre and Health Precinct.
Peppermint Grove has surged over the past quarter taking its median house price from $3.45 million up to $4.025 million. There has been a fair amount of activity in this region which is nice to see, as the prestige market (previously helping to stabilise the Perth median) faltered over the March 2019 quarter, showing signs of volatility.
Cottesloe, Swanbourne, Mosman Park, North Fremantle, Attadale, Bicton and Dalkeith all experienced decreases in their annual median house prices. This is understandable, however, as the March quarter usually experiences an increase in listings. On top of this, consumer confidence has been low; the fallout from the Banking Royal Commission has created a challenging financial market, and with the distraction of a federal election, homeowners and investors would be hesitant to make any big moves. There has been a lot of media coverage around the declining Australian property market (mainly surrounding Sydney and Melbourne) and this isn’t helping confidence in the Western Australian market even though our property market is in a different stage of the cycle to the eastern states. All of this has forced sales volumes to drop, selling periods to extend and top-end prices have fallen as a result.
In the upgrader market, our valuers are still seeing a fair amount of activity, however, home buyers are generally seeking to purchase at a discounted rate. This is pushing out selling periods and it seems that prices may continue to soften as a result, further improving affordability.
Perth’s fringe is still being suffocated by chronic oversupply. Baldivis is continuing its decline due to consistent land releases putting downward pressure on established dwelling sale prices. As an example, a property on Avoca Chase had a summated cost of $285,000 in April 2018, being one of the cheapest we had seen at the time. It was sold in March 2019 on completion for $225,000, declining 21% throughout its construction period. This sales figure is actually considered to be fairly cheap, however, it’s part of the unfortunate truth in the current market.
Properties in oversupplied regions need to be priced very keenly in order to achieve a quick selling period and avoid them going stale on the market, so listen to the advice of agents about what is realistic and appropriate. Developing suburbs in the south-east are in a similar situation. Whitby and Byford have softened over the past six months and it is expected that these areas will stay flat for the remainder of 2019.
Our predictions for the rest of the year are fairly simple for Perth’s outer regions. We expect to see no rebound in 2019 and assume that medians in these areas will continue their slow descent to wherever the median price floor holds, but we expect the overall median house price to remain relatively steady for the wider Perth area as upgraders take advantage of the buying opportunities that are available in many sought after areas.
Speak with a Perth Mortgage Broker today.
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