South West WA

The Smartline Report – October Edition

The month in review: South West WA

By Herron Todd White
October 2015

We have turned the corner at the half way point of 2015 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.

The lower end of the property market stabilised after modest growth in 2014. With decreasing levels of supply coupled with strengthening purchaser demand the property market in this market segment is in a healthy state.

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 many years. These positive indicators have resulted in first home buyers returning to the market.

Competition for the lower market segment is brought by investors looking to capitalise on a strong rental market that has seen a considerable increase in yields. Higher yields and low interest rates create a very good market for investors and this has strengthened property values.

The entry point at the lower end of the market ranges 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 in 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 stable condition of the lower market segment consequently has a flow on effect into the middle market as vendors of the lower market segment look to trade up. This market segment is considered to be stable, however we note that it is not performing as well as the lower market segment. This is understandable given the higher price range resulting in fewer prospective purchasers. While there seems to be a healthy balance between supply and demand the selling periods are in general longer than the lower market segment.

Unfortunately, the upper end of the market is considerably slower than the lower and middle segments. Properties above $1 million are selling if they are priced correctly, however extended selling periods of six to twelve 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, due largely to 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. There is still demand from the wealthy to invest and holiday in the region and prestigious properties scattered throughout areas of the south west such as Naturaliste, Eagle Bay, Metricup and Yallingup are still recording sale prices regularly in excess of $1 million.

The prediction is that the top end of the market will continue to be slightly problematic, with continuing weakening demand characterised by an over supply of properties for sale coupled with a lack of prospective purchasers in that value range due to a slowing Western Australian economy.

Overall the word on the street is that the property market in the south west will likely start to slow. This is on the back of the Perth metropolitan market, which historically has had a flow on effect to the south west, slowing significantly throughout the last two quarters of 2014 and the first two quarters of 2015. Nevertheless, the south west market to date has remained relatively steady, however is expected at some point to weaken.

www.smartline.com.au

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 – 2015. Australian Credit Licence Number 385325

 

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