The month in review: Perth
By Herron Todd White
The recent fall in interest rates has had little immediate effect on market activity. The market is predicting further rate cuts this year. The need to drop interest rates further is a sign that our economy is heading downward. As a result, with softening prices for commodities, there will be falls in profits of major corporations which will lead to a loss of jobs and ultimately a decrease in demand for housing and fall in property prices.
Discussions with agents, valuers and business people suggest there is a softening trend caused by and large as a result of economic factors associated with the resource sector (oil and gas and minerals). An increase in the unemployment rate in Western Australian from 5.2% in the third quarter of 2014 to 6% in December 2014 signals that headcounts are being reduced across these sectors which are traditionally the main employers of labour.
The flow on effect is a fall in net migration to the state as some people return to interstate or overseas.
Land sales agents are reporting a decrease in sales and an introduction of incentives to lure buyers to the market. This is usually the first signal of a price correction. This last occurred immediately post GFC.
Agents are still reporting reasonable levels of interest for property in the sub $1 million price range, however longer selling periods apply, suggesting the balance of power has shifted away from the seller and towards to the buyer. There is also a noticeable increase in the number of listings. As a result, the final contract price is tracking more towards the asking price.
Sales above $1.5 million have slowed significantly. Buyers are become more discerning. There appears to be discounting in this price segment and the number of listings has increased. Some valuers have noticed that a number of properties in this price range have remained on the market for extended periods, becoming stale and resulting in a significantly reduced contract price.
The inner city apartment market is soft and trending downwards. Valuers in this market have suggested prices may have declined and that it’s not uncommon to see apartments resold below the off-the-plan purchase price.
Agents are reporting generally flat conditions. Property which is reasonably priced appears to be selling quickly, however vendors are a bit reluctant to adjust to the softening trend.
Some of the signals which point to a shift in the market in the Perth metropolitan region include an increase in the number of listings, increase in the days a property remains on the market, the lower number of offers received for the marketed property, volume of sales, level of discounting of a property from the original asking price or expectation of the seller and whether the contract price exceeds or falls below the asking price.