Kevin: The Real Estate Institute of Western Australia’s latest figures have Perth’s median house prices lifting 1% over the September quarter lifting up to 548,000.
However, we REIWA’s president, David Airey, warns of a downturn and is predicting that it could happen as soon as 2015. He joins us.
David: Hello, Kevin. Good to be with you.
Kevin: It’s a bit of a sobering view. The possibility of a downturn in WA. How likely is that, David?
The fact is we’re in our eighth quarter in the Perth metropolitan market, slowing sales transactions.
David: Well, Kevin, we’ve agonized over this message and I think it’s better to bring the news out sooner rather than later.
Strangely, the median prices remain pretty tight in the band between about $530 and $550-odd.
It’s certainly in that $540 mark, which is mainly stabilized at that level, because there’s plenty of activity under $600,000 and around that median price level, but as you get up in prior sales, transaction numbers have wanted.
We’ve been particularly hurt since first-time buyers started to fall away as a result of changes by the state government and the first homebuyers grant in West Australia, which came into effect in June.
Kevin: A couple of the key performance indicators (or KPIs) that could be leaning that way: number of listings growing and the number of vendors having to drop their asking price has actually increased as well, David.
David: Vendor discounting is significantly higher, Kevin, yes.
Typically in Perth, most sales 90% or 95% are made by private treaty.
That is, offer and acceptance negotiation.
We’ve seen asking prices and the discounting figure on that is being dropped in order to get a deal.
The other factor you just mentioned is to do with the number of listings.
As we speak, they have moved over the 12,000 mark to 12,105 listings currently on the market on REIWA.com at the moment.
That’s back to, most would say, traditional levels, but it’s up about 2,000 listings in three months.
When you’ve got a 20% listing stock for sale, you’re inevitably going to have a market tilting in favor of the buyer.
Kevin: Do you see any downturn coming, as you say, in 2015 being long term, David?
David: I think West Australia is going through a reorganization of its finances as a result of the resources downturn.
And whilst the state economy is very strong, there’s less confidence in the marketplace.
We’ve got less investors, less first home buyers.
I also think that people’s housing needs have been satisfied.
They’ve bought their investments; they’ve bought their home and they’re staying in houses a lot longer.
People used to move every two, three, four or five years.
That average is definitely moving. People are preferring to stay in a home for longer, and I think our members’ real estate agents have got to prepare for less sales.
Maybe that’s going to result in some consolidation in the real estate market.
I guess from a buyer’s point of view, there will be more choice. And from a seller’s point of view, you’ll want to be very realistic about your asking price.
Kevin: Well, it’s certainly time to trim the sails. David, thank you for giving us those facts.
I’ve been talking to REIWA’s president, David Airey. David, thanks for your time.
David: A pleasure, Kevin. Thanks.
Kevin: To get another view on the market, I’m going to talk this time to Damian Collins from Momentum Wealth.
They’re buyers’ agents in Western Australia. Damian, thank you for your time.
What are your sentiments about the WA market right now?
Damian: Kevin, we’ve certainly seen an increase in stock available. We’re up around the 12,000 market, which is a balanced market.
We’ve also seen that the number of properties selling has certainly started to slow down a bit.
After a couple of years of reasonable growth, the last twelve months has slowed down a bit. Our forecast is that coming into 2015, we’d see a relatively flat sort of market, anywhere from 1-4% growth.
We certainly don’t see any of the signs of a significant downturn that some have been predicting.
Kevin: There are reports of that downturn, which of course is quite alarming.
It’s a pretty big call I would’ve thought to say a downturn. Do you think it’s creating good opportunities for investors to look at the WA market? If so, where should they be looking, Damian?
Damian: With the general market, I have no doubt it’s looking relatively flat certainly for 2015. Our advice to investors is you’ve got to be looking at a property that has got some way you can value add yourself or the market is going to rerate.
The properties that we’ve been buying have been in areas that we are aware are likely to be rezoned or proposed rezoning areas, and also properties that you can renovate or add value to yourself.
That’s the way you’re going to get market outperformance.
We bought in some suburbs last year that the properties have done 12-15% even though the market as a whole only did 3 or 4. There are always still good opportunities in a downturn.
You just have to be a lot more selective.
Kevin: How are the banks looking at the WA market right now?
Damian: No change at all. They’re still very positive. The mining towns have been quite selective for a period of time, and I’d expect that to stay. But generally the Perth metropolitan area is just the same as any other metro city around Australia. There are no problems getting funding.
Kevin: Okay. We’ll continue to keep an eye on the WA market, and our expert on the ground there, Damian Collins, from Momentum Wealth buyers’ agents has helped us with that. Damian, thank you very much for you time.
Damian: Thanks, Kevin.
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