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Warning – 6 reasons the Perth market is heading for a downturn

REIWA president David Airey has warned the Perth property market is headed for a downturn next year.

While Perth has been a strong performer up till a couple of years ago it looks a tough time ahead with a downturn in 2015 likely.David Airey

While the latest REIWA data shows the median price has lifted slightly, sales turnover is at its lowest level in two years, sale listings are trending upwards and rents are falling.

In fact, the number of listings are likely to smash through the 12,000 barrier shortly, Airey said:

“Perth’s equilibrium for listings in a balanced market is around 12,000… Indications are that we will clearly surpass this in 2015, which will add to selling days and put downwards pressure on price,”

6 reasons for a tough 2015

Airey offered the following figures as further evidence for his warning of a downturn:

  1. Sales turnover is 12% below average.
  2. Average days on market have gone up to 59.
  3. The number of vendors dropping their asking prices have gone from 48% to 51%.
  4. There is 50% more rental properties available for lease than there was at this same time last year.
  5. The vacancy rate is 4% and owners are taking an average of 33 days to find a tenant.
  6. Rents have softened to 4% below the median price from the same time last year.

Perth’s rental market is struggling because it currently has 2,000 properties more than is needed to balance supply and demand.

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Airey said the increase in stock was mostly due to weakening demand for rentals as migrations slowed:

“The extent to which the low level of sales, increase in listings, soft rental market and low consumer sentiment might influence the housing system in the longer term may become apparent in the December quarter,” 

Hundreds of vacant apartments are languishing on the market in Perth’s city precinct, as owners struggle to find buyers and tenants in the over-supplied market.

SQM Research reports the overall home vacancy rate in the Perth city postcode of 6000 at 5.9 per cent, which is almost double the rate for some east coast state capitals.

To make things worse, the Perth inner-city vacancy rate is expected to increase in 2015 as the completion of a record number of developments – commissioned during stronger economic times – come to the market next year at a time when population growth will be slowing in Western Australia.

The bottom line:

While this may be good news for first home buyers who are struggling to get into the market, there will be better investment opportunities on the east coast in 2015 for property investors.



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Warning – 6 reasons the Perth market is heading for a downturn' have 1 comment

  1. Avatar for Property Update

    November 14, 2014 @ 3:34 am em

    Sounds like there’s good buying ahead then!

    Reply


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