The month in review: Perth
By Herron Todd White
In February this year we discussed how the word caution would describe market activity throughout 2015, with early signs at the time that sales activity had likely peaked and supply would continue to outstrip demand. Unfortunately, we were correct, but the year has not ended in doom and gloom across the board.
According to the Real Estate Institute of WA, Perth started 2015 with a median house price of $550,000 and looks set to finish the year with a median house price below $525,000. Stock levels are some 30% higher than at the start of the year and the average property is taking ten days extra to sell.
Similarly, sales rates for multi residential units have reduced by some 23% over the course of 2015, which we predicted in February. Peak demand in this segment was in early 2013 at the height of the mining boom, with reductions in resource project construction phase employment numbers occurring on a consistent basis since. The reduction in sales rates corresponded with an increase in supply, an increase in the rental vacancy rate and a decrease in market sentiment.
Sales rates for vacant land appear to have peaked in the June 2013 quarter (4,200 sales), and have declined significantly throughout 2015 to 946 in the September quarter. Interestingly, the median sale price for vacant allotments has continued to rise from $263,000 at the start of 2015 to $288,500 at the end of the September quarter. We note however, that we have seen an increase in rebates and incentives on offer across the metropolitan area, which reflects the struggling state of the residential land market.
2015 presented as a buyer’s market in comparison to 2014 and those in the financial position and having the confidence were in a strong buying position. Multiple high end sales occurred which reflected sporadic confidence in individual positions. Notable sales for the year included 3/19 South Perth Esplanade, South Perth (apartment) for $10 million, 16 Reginald Street, Cottesloe (contemporary residence) for $23 million and 2 Majestic Close, Applecross (vacant land) for $10.5 million.
Discussions with selling agents reveal that there are still several pockets of strong activity. Many of the drivers for these markets are education based – school catchment zones or proximity to sought after educational facilities. A good example of this is the southern suburb of Willetton. It hosts a well renowned public high school and is partially in the catchment zone of another highly sought after school. While sales rates decreased in the suburb in 2015, it maintained a median price increase of 6.4% and more importantly, has remained in positive territory over the last quarter.
All in all it was a cautious year, with the market levelling off in most areas, and some uncertainty remaining as to where the actual market is at. The summer period should provide a good insight as to which areas have been re-priced and are attractive in comparison to the wider market.