Leading estate agent Geoff Baldwin, managing director of RE/MAX, believes that the Perth market is full of “dead stock” that has languished because of owners’ wishful thinking.
In an article in Property Observer Baldwin says that greedy vendors and scare tactics from the Reserve Bank have flushed scores of investors out of the WA residential market.
“Investors usually represent about 25% of buyers in Perth and this has fallen to a low of 10%. They are not likely to return to the market until vendor expectation meets market conditions and the Reserve Bank stops scaring people with threats of rate rises,” Baldwin says.
Figures released by the Real Estate Institute of WA reveal that listings have tumbled by 11% since the end of June.
REIWA head of research Stewart Darby says the fall in listings is due to people withdrawing their properties from sale. The REIWA research shows that 15,500 residential properties are currently for sale.
Baldwin believes this figure is closer to 18,000 and says a large proportion of these properties were bought at the peak of the boom.
“People are being squeezed out by a tough economy, interest rates and unemployment. Many buyers committed 50% of their income to their mortgage, and deposits were just 5%. It does not take much to push many overextended home owners over the financial edge,” Baldwin says.
“This two-speed economy in WA can be hard on people that are not working within the resources sector. People just are not prepared to take a hit on their home when they first list is for sale and by the time they accept their situation it has become far worse, more money has been put on the mortgage and the value of their property has dropped further.”
He says he refuses to list houses he deems “unsalable”.
The agent recently sold a house in suburban Perth where the vendor had to borrow money from his family in order to settle the sale.
“We reduced our commission and the bank helped in its own way. While this is extreme, we should expect to see more sales where there is negative equity. As people come to terms with values, investors should slowly return to more stable market,” he says.
RP Data-Rismark’s Hedonic Home Value Index has Perth’s median house price at $455,000, which is down 6.3% on last year’s July quarter figure of $475,000.
Source: Property Observer
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