PERTH HOUSING – Only Way Is Up…???

GENERAL MARKET CONDITIONS

Driven by strong demand and low mortgage rates, the Real Estate Institute of WA (REIWA) recent forecasting shows the Perth residential property market stands to see house prices rise by 15% in 2021, with some suburbs on track to exceed these predictions, with current pricing rising 10% in as little as 4 months.

Understandably, Perth has seen the highest growth rates in housing over the past 12 months and this remains a strong prediction over all major Australian capital city markets, based on the latest ANZ economic insight report, supported by Perth's rental vacancy rate being at its lowest level in 40 years and increased investment activity into Perth’s residential property market.

The Australian 2021-22 Federal Budget's emphasis on infrastructure spending, maintaining property development and a continued momentum in the new housing markets also supporting continued growth in the Perth housing market.

GOOD NEWS STORY

Real Estate agencies, residential developers and advocacy groups are singing from the rooftops, encouraging those not invested in property to do so, prior to the sector reaching its peak pricing point. Our rental shortages correlating back to increased lease rates, trending upwards of 15% annual increases for tenants, adding to the fear of missing out (FOMO) and moving prospective first home buyers, long term renters and down-sizers into the ‘buyers’ market.    

PERTH PEGGED TO RESOURCES

Despite the hype, it’s worth mentioning slowed migration, retainment of a two-speed economy and the fact of all Australian cities, Perth’s residential property market initiated its rise from a low base point. Perth’s housing having declined from its ‘median price point’ peak of December 2014 of $551,500 and recent recoveries although promising of the last 2 years, remain currently at the latest REIWA median pricing of circa $500,000 - proving there are winners and losers in the Perth housing market.

 “Before you look to splurge on a new property, do your research, due diligence and pay attention to the area in which you’re purchasing. Realestate.com.au and Domain.com.au are great website reference points on suburb data for new or interstate investors”

Never discount the swings and roundabouts of the iron ore industry that effect the Australian economy and positive growth rate in the Perth housing market. Likewise, owner occupiers need to review their choices and try not to be too emotional on their purchasing choices or be driven up in pricing or bidding wars, that benefit the seller and agent, where it is important to set your limits prior to making an offer on that dream home.

DON’T ALWAYS ENTRUST A SALES AGENT

Aside from all the hype, expected from Real Estate Sales agencies who's very existence is reliant on retaining a positive property market, the reality is there will always be choices in the property market. The choices, however, may not be as varied, at the same pricing point or as incentivised as they are at today. Noting, if those within the Real Estate Sales agency or new homes sales market were to tell it any differently, it would show a grey sky and who wants that?

"We all need ‘hope’ and despite the fact the current median housing price is sliding back from the peak property prices of late last year 2020, the now elevated housing market and deterioration of affordability for the average West Australian has spooked some buyers, slowing the runaway price growth."

CHALLENGES IN THE WA HOUSING MARKET

Buyers are being challenged by affordability, challenging the extremely competitive conditions of late last year, where prices are starting to pull back and buyers are taking a more cautious approach, both in purchasing existing housing and new homes, which I recommend also to our first home buyers and site acquisition clientele, is a wise choice.

We’re starting to see settling of impulse and snap buying, that is a good thing in a hot market, where prospective buyers should be taking more time to assess their choices, to ensure they make the right decision to suit their longer term needs and not overpaying for their selected property.

GROWTH TO CONTINUE

Despite some speculation concerns and some normality in current housing prices on market not being as steep as later last year, current REIWA and national data does suggest pricing will continue to grow for the course of 2021-22, but not as fast paced as we’ve experienced of late, with some suburbs more bullish than others.

Our shortage of inner city suburb vacant land and surging land prices in our growth corridors is also forcing people looking for new housing alternatives away from detached housing and into apartments, triggering an anticipated new apartment construction boom over the next 5-8 years. That will, in my mind only remain positive as our border restrictions relax to migration and upon a more active return of interstate and international investors, spurring on growth to both medium density developments and investment into our regional communities. Yet, this will only progress if our WA government starts to open our borders and promote trade and investment into the State.

WILL THE GREEN SHOOTS CONTINUE TO BLOSSOM?

Unlike many analysts and economists in the property sector predicting easing of border restrictions will return our Perth economy to pre-pandemic positive growth conditions for housing, for which I’m hopeful, I do believe our West Australian workforce will remain heavily resources focused and without stronger diversity and migration to the future.

"The opening of our borders could therefore reduce population growth in Perth, with housing sales growth and construction being stagnated within our residential sector, as the rest of the World and other cities also become safe to travel, live and work."

RENOVATIONS SURGE

An argument outside of this, to the positive is I do see refurbishments and home renovations starting to increase as pandemic lead working from home (WFH) continues to gain traction, adding to our increasing city office vacancy rates and a dent in commercial office demand, but an increase in creating an office space at home - our working culture changing, with a blend of WFH and the office and businesses requiring less office space.

WA HOUSING - A BRIGHT FUTURE AHEAD

For the short-medium term, the residential housing market in Perth remains bright for many and dull for some. I only urge any prospective purchaser of residential property in Perth to choose wisely, seek professional advisory outside the sales agency representing your chosen property, know your focus and what you’d like to achieve out of your property for the longer term and all I’m sure your new home and lives will all fall into place – good luck!