The month in review: Perth
By Herron Todd White
The Perth residential real estate market has remained subdued over the past quarter, although there are signs of life in more affordable or traditional first home buyer areas, particularly in the sub $450,000 price bracket where first home buyers and investors remain active. Modern units and villas in established areas appear to be attracting the highest level of interest, albeit at price levels that appear attractive in comparison to previous transaction history.
Overall, sales transactions are down some 18% on the same time last year while stock on market is some 40% higher, with control having well and truly shifted to buyers, as opposed to sellers.
Land sales activity has slowed dramatically, although we do note reasonable activity in the outlying developments where the asking price for vacant allotments remains affordable in comparison to more traditional first home buyer locales. Examples of this include Byford in the south-east corridor, Lakelands in the Peel region, Ellenbrook and Aveley in the north east corridor and Alkimos and Eglinton in the northern coastal sector.
We wouldn’t say that any sector is running hot at this point in time, however we note that new or near new properties which are well presented and accurately priced are transacting in shorter time periods than traditional renovator properties. The heat has also well and truly dissipated from the development market, which appears to have peaked early this year, with some suburbs indicating a 10% price adjustment from peak levels, including in Balga, Rivervale and East Cannington.
The market is very price sensitive at the moment. Discussions with selling agents indicate that they are struggling to accurately price properties given the subdued trading conditions and price adjustments are often required reasonably early in the marketing campaign. We note that this is particularly prevalent in well established locales such as Kardinya, where recent sales activity indicates price adjustments of over 10% in some cases.
The market is largely being driven by first home buyers and investors – hence affordability is the key. While modest compared to 2014 levels, sales of modern 3-bedroom, 2-bathroom dwellings on lot sizes ranging from 300 to 450 square metres in establishing suburbs are dominating the market. Examples include Piara Waters ($450,000 to $525,000), Lakelands ($320,000 to $370,000) and Aveley ($400,000 to $450,000).
The apartment market has experienced a significant increase in supply above traditional levels, led by the strong population increase experienced through 2010 to 2014. Investor demand for the premium rental returns on offer during the peak of the construction phase of mining projects in the state drove demand for new developments. Subsequent to peak levels of development activity throughout 2014, numerous unit or apartment developments are under construction and competition in this sector is very strong. While most developers are understandably hesitant to amend current pricing schedules, there is evidence that properties approaching settlement date are under valuation pressure, largely created by resales of new products in similar developments which were slightly more advanced in the construction time line. This is likely to become a larger issue over the six months.
A recent sale of a 2-bedroom, 2-bathroom apartment in West Perth provides a good indication of how the apartment market is currently performing. The apartment sold for $605,000 in August 2013 and recently re-sold for $570,000.
As we come into spring, we expect the market to remain on track, with no significant deviation from its current trajectory. We would anticipate the more traditionally affordable areas to continue to appeal to the market, while the apartment market value levels will become more defined as further re-sales occur post release of titles in new developments.