The month in review: Perth
By Herron Todd White
The major events affecting the Perth residential market since our February edition were the Federal election, continued cautionary consumer sentiment, continued downturn in the mining and construction sectors, continued negative migration and population growth, job security concerns and winter, which was a very long and cold one – in fact the coldest winter since 1998. For the most part, purchasers went into hibernation.
REIWA September quarterly statistics confirmed a further reduction in the median house price to $512,500, down from the June figure of $532,000. Housing sales volumes were also down from 5,925 in the June quarter to 4,968. Surprisingly, the median unit price increased to $429,000, up $19,000 from the June figure of $410,000. The volume of unit sales however fell from 1,215 in June to 1,064 for the September quarter. The September statistics for vacant land are surprising, showing an increase of $30,000 from the June quarter of $255,000, however this is linked to far lower transaction numbers, with the volume of sales reducing from the June quarter figure of 1,770 to 875 in September.
June quarter rental statistics confirm a further correction in rents from the March quarter with the median house rental falling $10 to $390 per week and units falling $30 to $350 per week. During this period the vacancy rate also increased from 5.6% to 6%.
As at 8 November, the combined number of sales for the week was 672, up from the previous month of 519 and significantly better than this time last year of 481. Property listings were 15,140, comprising 9,433 for dwellings, 3,205 for units and 2,502 for land. This has risen slightly in line with spring listing activity, but does not give any cause for concern.
June quarter construction data from CoreLogic confirmed the number of houses under construction in WA continued to decline and that the number of houses under construction is at its lowest level since September 2012.
The most recent CoreLogic-TEG consumer housing market sentiment survey results reveal that 80% of the Perth respondents thought it was a good time to buy and not surprisingly only 20% thought it was a good time to sell. 73% of those surveyed still thought the Perth housing market was vulnerable to a significant correction in value. Only 20% of those surveyed believed values would increase over the next 12 months, with 53% believing they would remain stable and 27% believing they would fall.
Whilst the September quarter shows an increase in the median land value and not the downward correction we would have expected, our day to day experiences paint another picture with many land estates – particularly those 15 kilometres or more from the Perth CBD – having reduced their asking prices or now offering incentives including cash rebates.
Similarly, the improvement in the September quarter unit median value is at odds with what we are experiencing in the field with recent contracts of newly completed units and apartments confirming a retraction in values from the peak in mid 2014. There remains a very significant supply of units and apartments with further value corrections required to improve the demand versus supply equation.
Now back to the weather. As our city begins to thaw out it appears the residential property market is starting to experience the traditional spring uplift albeit with values confirming a correctional trend since February. Our valuers are reporting an improvement in activity within the first home buyer’s market and strong activity in the upgrade market in the $800,000 to $2 million price category. This is particularly evident for suburbs with good amenity, close proximity to the CBD or beach and good schooling options.
Unfortunately the prestige market remains subdued although we note that modern contemporary properties appear to be faring slightly better than older and now perceived dated property in this market segment.
Our February edition can be summarised as a tale of caution and uncertainty with positive opportunities to upgrade if market corrections continued to occur. We were cautious about land values in areas greater than 15 kilometres from the Perth CBD and also cautious of the apartment/unit sector, particularly the potential for significant oversupply. Despite the September statistics showing a more positive outcome, our valuers have been reporting evidence to the contrary and as such we think our predictions in these two sectors in February have come to fruition.
While the past four to six weeks has seen strong improvement in the upgrade market (which was also predicted in February), we were in hindsight too optimistic with regard to the prestige market which remains subdued. Overall, the majority of our predictions and concerns have come to pass and as such we would give ourselves a rating of 7.5 out of 10.
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