CoreLogic National housing Update September 2018
September Market Outlook
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Adelaide September 2018
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Perth September 2018
Regional NSW September 2018
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CoreLogic NSW housing Update September 2018
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CoreLogic WA housing Update September 2018
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Perth September 2018
The month in review: Perth
By Herron Todd White
September in Perth is synonymous with cool, sunny days. Gardens start to flourish and consumer sentiment usually improves as people get over their winter blues, though over the past few years the timeline seems to have shifted slightly, bringing a later start to all four seasons. The beginning of the 2017 summer in Perth was uncharacteristically mild which boded well for the property market even though activity was slow.
There is no denying that the time of year can have an effect on the number of listings, average selling days, consumer sentiment and sales volumes. There are a multitude of cycles that markets go through for various reasons, be that due to weather or current national or local economic conditions. This makes pinpointing exact reasons for a change in the market challenging at times, and further, accurately predicting the future can quickly become a risky venture.
Let’s look at some statistics created with the Real Estate Industry of WA’s (REIWA) raw data. The first point to make about the data above is that this is quarterly data. The seasons do not align perfectly with the four quarters as the spring months are September, October and November, but statistical September quarter data includes July, August and September. In the chart above we can clearly see that listings usually decline in June and often pick up in September – with the aberration of 2012 reflecting the peak of activity in the previous market cycle, and 2017 simply reflecting a lack of consumer confidence throughout the year.
2013 brought peak sales volumes for Perth that hadn’t been seen since before the global financial crisis. The resource sector was booming, net interstate migration was at a high putting pressure on supply at the time and there was enough affluence in Perth to fuel demand for all types of dwellings. This demand transferred into a sharp increase in the median house price as we can see from Figure 2. The median price remained stable until the effects of the end of the mining construction phase began to really hit the metropolitan area. Activity since that point has reflected a significant shift in migration as tens of thousands of workers returned to the eastern states or their native homelands.
Presently, Perth has reached unprecedented levels of affordability compared to cities such as Sydney and Melbourne. According to the Housing Industry Association (HIA) over the past 12 months affordability in Perth has improved by 5.6%. This is attributed to the continuing fall in the median house price as well as modest wage growth. REIWA have stated that the Perth median house price will sit around $520,000 for the June quarter after all sales settle. To put that in context, in 2013 Perth had a similar median house price to Sydney. As the next phase of mining construction begins to ramp up in Western Australia, it will be an interesting activity to monitor the current disparity in median house prices.
Looking more closely at quarterly data in Figures 3 and 4 above, REIWA’s statistics over the past seven years show that listings have been highest in the March quarter and progressively decrease throughout the year. Figure 4 shows that the June quarter experiences the lowest volume of sales activity, with an average of just over 6,000 sales.
The clear winner in terms of selling days is the December quarter with an average of 57 selling days. This does show that in the spring months, there are more buyers out actively looking for housing before making a buying decision.
So, what typically happens in each season in Perth? Remember that these seasonal characteristics are only generalisations. If a potential purchaser finds their dream house listed in the middle of winter, they won’t turn down the purchase opportunity just because it’s raining outside.
Summer includes the festive season when most people are busy during the Christmas and New Year period. School holidays always affect sales activity, both with buyers focusing on family time and travel and an associated increase in delays in the bureaucracy involved in any property transaction. However, the increase in activity in outdoor living lends itself to be a good time to sell homes that benefit from a sea breeze, natural light or outdoor living. If you own a coastal home or holiday house, consumers can often want to purchase these at the beginning of summer so that they can move in and enjoy the warm weather in the coming months.
In autumn, the holidays are now over and the kids have settled into school. Owners can start to think about big purchase decisions such as upgrading to a new location or investigating renovations or extensions. Buyers can still be active in the first half of the season, but often wane in the latter.
Winter definitely has the reputation as a buyer’s market and is said to be the least ideal time to sell with less people attending viewings. North facing properties that can get the full benefit of the available sunshine often come to the fore. Fireplaces replace swimming pools as a prime selling feature, as do sheltered or enclosed alfresco areas.
Spring generally does see the most listings as well as the most activity. The season usually starts as a buyer’s market but can often become a seller’s market towards the end of the season. Presentation is the key early on due to the increased competition on the market, and outdoor living can dominate buyers’ wish lists.
Looking at how Perth has been tracking in some of its submarkets, activity has not changed much over the past six to 12 months in Perth’s outer, north-eastern corridor. Things are still slow as the endless supply of stock gives little chance for quick selling periods unless the seller is necessitous. Vendor discounting is still quite high in this area as competition remains fierce, and new lows seem to be common. Given the current supply on market combined with pending supply under construction, suburbs such as Ellenbrook, Aveley and Brabham are likely to continue to be challenged for some time to come. Negative equity is a concern as it is with many outlying Perth suburbs.
Our valuers expect to see a brief spike in purchase activity for the beginning of spring in Perth’s outer, south-eastern corridor as prices continue to be lowered to meet the market. We have been advised that many low offers are occurring and most properties are selling below the asking price. Activity in some suburbs has been extremely subdued.
An example of this is the suburb of Haynes. Homeowners are fearful that a house is worth less than what they paid to build it and are therefore reluctant to put it to market. Byford is also in a similar state. There have been positive signs in Hilbert with prices remaining fairly stable and in line with the land and build cost. We expect the market to remain cautious over the coming months, but there is a lot of value in buying established homes at present. With affordability being so favourable, established dwellings in suburbs such as Armadale and Camillo present opportunities at the moment. Older dwellings on circa 700 square metre allotments are available for less than $200,000, which appears compelling for a capital city, regardless of the challenges experienced in such areas.
Closer to the CBD in suburbs such as Perth, East Perth, South Perth, Victoria Park, Como, Waterford and Burswood there have been early signs of growth for properties over $1 million. Activity for properties under $600,000 remains very slow and values are continuing to decrease in some sectors. It is uncertain what will happen in the near future for these areas as there was a spike earlier in the year before activity declined again. We would expect such micro bursts of activity to continue for the coming 12 months.
Some feedback from local agents in the prestige market indicates that properties representing near land value between $1.5 million and $3 million are experiencing strong demand. Demolish and builds are the in thing, particularly in suburbs such as Floreat, Swanbourne, Cottesloe, Claremont, Mount Claremont, Mosman Park, Dalkeith and Nedlands.
The amount of days properties are on the market does not necessarily decrease in spring as many sellers who have been waiting out the winter months add supply to the market throughout spring and into summer. One opinion from a local real estate agent in the prestige area is that “as less stock compensates for less buyers over the colder months and increased stock compensates for more buyers in the warmer months, the end result is a fairly constant market throughout the year.”
There are so many factors that go into market activity levels that purchase or selling decisions should really be made on a case-by-case basis and depend on your own property’s characteristics as well as the position in the seasonal cycle and the position in Western Australia’s property market cycle. Many segments of the greater Perth region are still struggling at the moment. We have seen great things in terms of affordability, and activity in the prestige sector, but low levels of activity continue to hinder the rest of the market. It seems that if there is a traditional spike in buyer activity over the spring months, it will be very segmented. The more soughtafter localities closer to the CBD are likely to be the ones to benefit from this surge in demand, although established dwellings in many outer lying suburbs still appear to represent good value at present.
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.