South West WA February 2017

The Smartline Report – February Edition

The month in review: South West WA

By Herron Todd White
February 2017

South West WA
Overall the residential property market in the South West of WA has weakened with reduced demand and values, however the market is quite mixed with some particularly sought after properties holding their values. The volume of sales generally remains reasonable with adequate stock movement in most localities.

The top end of the market continues to be soft with an overall weak demand. The exception is that there does seem to be reasonable demand for well-located properties that present to a high standard. The rural residential market is also continuing to slow with the majority of sales being below $1 million. This market is experiencing extended selling periods.

Rents have fallen but are starting to stabilise while building activity has weakened.

The slow down in the state resource sector, continued weakness in the Perth property market and general uncertainty of the WA economy has promoted a downturn throughout the South West WA real estate market. The extent of the downturn ranges from mild to moderate depending on the location and property type.

As always is it difficult to predict future market conditions however we expect the year ahead could be more of the same or that the market may bottom out and stabilise.

There are no significant drivers to suggest values will increase and there is limited demand from international buyers to spur the market as has been seen in some other parts of Australia.

The WA State Government has increased the first home owner’s grant from $10,000 to $15,000 for 2017. This is viewed as maybe having a stabilising effect but unfortunately the increase is unlikely to be high enough to overcome the negative factors influencing property values, for example the State’s high unemployment.

We would recommend caution as some market segments are in decline and it remains unclear if the market has bottomed out.

Before looking at the crystal ball for the year ahead, a quick recap on the year just passed may assist in providing some indications for the months to come.

After a reasonably subdued start to 2016, market activity did improve towards the middle of the year and then tapered off for a very quiet close. Sales over a variety of value ranges were noted, particularly above $1 million which saw sales for the first time in a couple of years. Values over all price ranges and property types in the broader Esperance townsite have remained reasonably consistent however selling periods have lengthened compared to previous years.

Vacant land sales remained stable with supply slowly diminishing. Values have remained consistent with the preceding year and shown some minor improvement in the localities now seeing a shortage in supply.

So, to the year ahead. At the risk of sounding like a broken record, much of the same is the prediction for 2017. A number of properties over all price ranges and property types are available for sale however demand is also relatively stable within all markets and sales are occurring, albeit at a slower pace with a reasonable consistency in values. As with all areas, accurately priced property is attracting sound demand and typical selling periods are still less than six months.

The market prediction for the smaller centres in the broader Esperance region are more difficult to gauge. Hopetoun, 200 kilometres west of Esperance, has seen a substantial decline in values over the past five years with a combination of excessive oversupply of land, very low sales volumes and uncertainty of employment in the region all contributing factors. The land is slowly beginning to be absorbed and improved residential values at present appear to have stabilised within a typical range of between $220,000 and $320,000. Sales volumes are still very low and there is a large amount of property available on the market. It is likely if sales volumes do not improve there may still be some downward correction to come as vendors who have had property listed for an extended period become more anxious to quit this market.

The small mining town of Norseman, 200 kilometres north of Esperance, has had an interesting 2016 and will likely have an interesting 2017. Norseman Gold mine, the main employer in the town, went into a care and maintenance program in June 2014 with most staff laid off and the town largely emptied. This is on the back of massively declining values since 2012 due largely to uncertainty over the future of the mine.

Since July 2014 however, the volume of sales in Norseman has been particularly strong, especially noting the overall size of the market. Values are very low with a 4-bedroom home in a generally good condition likely to sell for less than $50,000 and typical sales for older homes in varying conditions ranging between $20,000 and $40,000. It has been suggested Norseman provided the most affordable housing in the country and this could well be correct and be a reason that sales volumes are improving. As to whether any capital growth may occur, it is unlikely until the local economy can stabilise with either the current mine re-opening or new publicised mining ventures in the region gaining some momentum.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

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