It’s the news Perth property investors and homeowners have waited five years to hear – the real estate bust is over.
A recent article in Perth Now reported leading property analysts saying strong population growth, a tight rental market and low interest rates have created the perfect mix for a steady market recovery.
The latest RPData figures show in what is usually a seasonally-weak month, Perth dwelling values rose 2.0% in June.
At the same time Real Estate Institute of WA figures show a sharp decrease in housing stock, falling from 18,000 to 11,973 over the past 12 months and bringing Perth back to optimum supply and demand levels.
It was the first time the supply level dropped below 12,000 properties in five years.
A jump in sales also signaled a comeback, with the State Government recording a 4.1 per cent increase in property activity in the first six months of the year compared with the same period last year.
It’s been a hard few years
The bounce back comes after a five-year lull in the property market, made worse by the global financial crisis.
Perth’s median house price is now $469,000. Two years ago it was $505,000.
More conflicting results
And just to confuse property investors more according to the latest figures from Residex suggest Perth house prices fell 4.26% in the June quarter to a median of $467,000 – the lowest median price since March 2009, .
The WA capital was the worst-performing detached housing market over the past three months, just ahead of Hobart, where prices fell 4.15% to a median of $357,000 according to Residex.
Now there’s nothing new about different data houses coming up with different results. Over the years I’ve found RPData’s figures to be more accurate.
Some thoughts on the Perth market
Premier Colin Barnett said the shift was a reflection of the confidence that all Australians had in the state’s future.
“This is amply demonstrated by the Westpac-Melbourne Institute survey of consumer confidence in WA which rebounded sharply in June 2012, in contrast to a small rise at the national level,” he said.
“The strong jobs markets in WA has also strengthened further and at 3.8 per cent is the lowest rate since January 2009, and compares to 5.3 per cent for the rest of Australia.
“And this strong demand for labour means wages are higher in WA. So this, combined with the recent interest rate cuts, means that we have forecast a recovery in housing market activity over coming years.”
REIWA president David Airey said Perth was “definitely out of the trough and on the upside”, but it would not return to the boom prices of 2006.
“It probably also signals the closing stages of the buyers’ market,” Mr Airey said, adding that WA’s strong economy was underpinning the real estate bounce back.
“We hit 18,500 listings in April 2010 and it’s slowly wound its way down from that, which indicates properties have been sold or withdrawn.
“We’ve got rid of all the over-priced, long-listed properties and we’re into the start of what could be a new and more buoyant market.”
He said the $300k-$700k section of the market was making the greatest improvement, but the top end was lagging.
Perth had a number of years of exceptional and unsustainable growth leading up to 2008 and the market got ahead of itself.
It ended in a typical speculative boom, that had to be followed by a number of years of falling prices, but nowthe cycle is moving on.
First home buyers are coming back to the market, in part forced by high rentals and savvy property investors are getting a foothold ready for the next stage of the cycle.
This doesn’t mean the next boom is upon us.
Typically the next stage of the property cycle is the stabilisation phase. Buyers are back and slowly more sellers, including some who couldn’t move their properties over the last few years, are going to put their properties, back on the market and we’ll have a period of unspectacular growth.
Over the next year strategic property investors are going to set themselves up for the next WA property boom by buying the right type of property at he right price. They will have learned from the last few years and rather than speculating will by a property with an element of scarcity that will be in continual strong demand by owner occupiers (because these are the ones who push up property values) and tenants.
I’ll be sharing my thoughts on the WA property markets at my upcoming National Property Market and Economic Updates around Australia. Click here or on the link below for more details.
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