The month in review: South West WA
By Herron Todd White
We have turned the corner at the half way point of 2016 and are now on the run home into Christmas and it is a time to reflect on how each market segment is performing throughout the South West.
Throughout the lower end of the property market there is a reduced level of sales and a weakening of values.
First home buyers and investors generally make up the buyer profile for the lower end of the market. In this case the market is driven relatively equally by both. First home buyers have been stimulated by government rebates, low interest rates and property values in general being the lowest they have been for numerous years. These positive indicators have resulted in first home buyers returning to the market.
Competition for the lower market segment is brought by investors who are looking to capitalise on historically stronger rental market that has seen an increase in yields. Higher yields and low interest rates create a good market for investors and this has strengthened property values.
Entry points into the lower end of the market range from $250,000 to $400,000 and for this amount you can purchase either a basic established residence or build a project home in one of the outlying new developments. These established homes are in general located within closer proximity to the beach than the new developments and as such the established homes generally offer better capital growth potential while the new housing market offers better yields.
The middle segment of the market is also weakening as there are fewer vendors from the lower market looking to trade up. There is still good demand for well presented and well located properties within this $500,000 to $1 million price range. As the market is currently soft in the South West it presents opportunity to upgrade the residence as value for money is very good. The buyer profile usually consists of second and third time home owners or investors from Perth looking for a holiday home.
Unfortunately, the upper end of the market is considerably slower than the lower and middle market segments. Properties in and above $1 million are selling if they are priced correctly, however extended selling periods of six to 12 months are still common. This is a reflection of the limited number of prospective purchasers in this price bracket.
Sale numbers in the prestige market over recent months have reduced, especially with job losses in the mining sector. This undoubtedly puts pressure on the prestige property market as high income earners are taking considerable reductions in wages as they relocate.
That being said, the South West is considered to be a premium holiday destination given its pristine beaches, surf and world renowned wine region. Therefore there is still demand from the wealthy to invest and holiday in the region. Prestigious properties scattered throughout the South West, such as Naturaliste, Eagle Bay, Metricup and Yallingup are still recording sale prices regularly in excess of $1 million.
Overall it is likely the property market in the South West for the remainder of 2016 will be slow. The swings of the Perth market during the last several years have been missed in the regions but we would recommend caution as the slow down in the state resource sector, continued weakness in Perth and general economic uncertainty could promote more of a widespread downturn throughout the market.