The Smartline Report – October Edition

The month in review: Perth

By Herron Todd White
October 2016

The residential market in Perth appears to be very segmented at present, with several mortgage belt areas appearing to be in a downward spiral, several upgrade pockets holding their own and some prestige areas doing reasonably well.

Weekly sales activity is currently exactly the same as 12 months ago and listings are slightly lower.

The median sale price for houses is steady at $530,000, while the median sale price for units fell off a cliff last quarter from $435,000 to $405,000, coming off a high of $452,000 in 2014.

There are bargain hunters out there, but there are also many people who have simply been paying off debt or building up savings for many years and are now in a position to upgrade to those areas they have been desiring. There is more competition for sought after products than there was six months ago. Many neighbouring suburbs are performing at vastly different levels.

However, statistics only ever tell one side of the story. Our role is to look through the statistics and determine what is actually happening on the ground – treat every valuation independently and treat every property on its own merits.

As mentioned above, the market is extremely segmented. Investors have largely retreated from the market over the past 18 months however speculation about the timing of the bottom of the cycle is rife.

Small scale development sites in particular have been on the nose, but with prices in many areas approaching single residential value reducing the risk profile of these sites, they appear to be rebounding. An example of this can be found in Gabriel Street, Cloverdale, where many sites have a zoning of R20/50/100 and offer a variety of development opportunities. The property at 127 Gabriel Street transacted in May 2016 for $535,000, whilst an almost identical property situated at 131 Gabriel Street transacted in July 2015 for $610,000. More recent activity indicates a higher level of interest in similar properties above $550,000.

In the more traditional market, the trend appears to be that the market is avoiding the best house in the worst suburb and normalised to the worst house in the best suburb. Market activity through premium suburbs such as Cottesloe, Mount Pleasant and Leederville has improved, with a significant level of activity at entry level prices. This is being driven by buyers who have long desired to reside in such suburbs and due to personal circumstances including debt profile, job security and current interest rates, they can now take the plunge.

Less desirable areas such as Camillo, Koondoola and Girrawheen are struggling for traction, largely due to older style, generic housing options not inspiring the market, when perceived better value offerings are available in better located or more desirable suburbs such as Parkwood, Warwick and Greenwood. Buyers include first home buyers plus upgrade activity from current owners within those less desirable suburbs.

There remains activity in traditional first home buyer suburbs on the urban fringe, albeit at base entry prices. Suburbs such as Golden Bay, Secret Harbour, Wandi and Wellard in the south along with Banksia Grove in the north are attracting the majority of interest, with the driver appearing to be affordability and reasonable proximity to public amenities.

Many new and developing estates previously targeted by upgrade activity are now struggling for traction, with re-pricing of land common, as are rebates and performance incentives. Areas such as Eglinton, Butler and Alkimos in the north and Piara Waters in the south are competing with near new, fully established products which are often purchased at a discount to the buy and build process. As such, sales activity and fall over rates in such areas are reportedly significantly higher than 12 months ago.

Land prices in these areas remain the key to their performance through the remainder of 2016. Many developers are reluctant to meet current market price expectations and more innovative estates are likely to come to the fore. Estates where developers have significant relationships with large scale builders that can secure a significant volume of lots will remain attractive, as the cost efficiencies of mass construction narrow the gap between the traditional buy and build and the established housing market. However caution still needs to be applied in such scenarios, including the land and building cost splits, quality and variety of product offering and most importantly, the amenity offerings within the estate or immediately nearby.

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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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.