Perth April 2017

The month in review: Perth

By Herron Todd White
April 2017

The Perth residential property market is commonly perceived to be under performing or stagnant; however, in amongst the negativity are pockets of activity indicating pent-up demand for some products and locations.

Currently, the most active clear market segment is buyers in established suburbs seeking well-presented homes in good locations. One example is South Fremantle, where well-renovated character dwellings are in high demand and are relatively tightly held. Properties within the low to mid-$1 million range are attracting very good attendances at home opens and experiencing lower than average selling periods. These properties have often been through a thorough renovation and are often transacting below previous vendor expectations – a sign that the market has corrected to a level that is appealing to purchasers.

Similar activity is being experienced throughout Cottesloe, Applecross and Mount Pleasant, with selling agents reporting higher instances of multiple offers on properties and decreasing selling periods for well-priced properties. The market remains very price sensitive, but properties in sought-after locations priced at levels expected in the market place don’t seem to have any problems securing multiple offers.

Other motivating factors are suburbs within highly desired school catchment areas such as Willetton and Bull Creek. As private school fees continue to rise against the flow of consumer sentiment, we are seeing multiple examples of purchase activity targeting high-achieving public school areas. Whilst price reductions in these areas may not have been as significant as less desired areas, the discount is proving to be sufficient to increase activity.

The majority of this activity appears to be upgrade activity, with buyers able to enter suburbs previously out of their price range and concerns that these areas may again be out of their reach if the market improves or interest rises considerably.

In more modern localities, properties over five years old and presented in a less-than-optimal manner have been heavily punished by the market, but this is also increasing demand as properties are often transacting for well below replacement cost, with depreciation rates of up to 25% being applied to the improvements. Examples include Tapping, Ashby and Carramar. The coastal suburbs of Mindarie and Jindalee are also experiencing similar increases in demand created by the market being repriced to more realistic levels. Older-style two-storey dwellings in Mindarie stand out as experiencing heavy discounts, which is starting to translate into a higher level of demand.

Following the state government’s tweaks to the First Home Buyers Grant, we have seen an increase in construction applications beginning to flow through; however, we caution that there is a significant imbalance in pricing between various builders and in many instances, the premium paid by the market for new builds has dissipated or is simply non-existent. Brand new products in the sub-$500,000 range in areas such as Jindalee are transacting for less than the land-plus-build costs in many instances that we have seen. However, several building companies appear to have repriced or are offering discounts that negate this loss and reinstate the premium for new products. We strongly encourage all parties contemplating signing a building contract to rigorously test the proposal against the competition.

Overall, the $1 million to $1.5 million price bracket in premium locations appears to be dominating buyer activity across the Perth metro area. It is likely that activity in this price range is supporting the current median house price across Perth, which we had expected to be lower than currently being reported. We expect this trend to continue, as prospective purchasers who thought they had time up their sleeves prior to making a buying decision realise that the good-quality stock is not hanging around for long.

 

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