Weak demand is becoming the norm for Western Australia, but the worst may be over
Perth continues to adjust to its negative status, reporting yet another decline over the most recent quarter. However, “the pace of the declines has slowed”, advises Eliza Owen, market analyst at OnTheHouse.com.au.
Western Australia as a whole has limited the number of building approvals, which is being received as a positive move considering the low levels of demand in the region.
Despite backwards growth, the Perth property market has many things going for it, reports Herron Todd White.
“Many employment sectors remain stable and money is relatively cheap in comparison to similar stages of previous market cycles, hence it’s a good opportunity for the upgrade market if they have job security,” Herron Todd White states in its Month in Review for August 2016.
“Premium areas such as Cottesloe, Nedlands, Dalkeith, Mount Pleasant and Applecross are all experiencing uplifts in sales volumes, particularly in the sub $2.5 million range. This activity is effectively balancing out the median sale price and makes the median sale price appear more stable than it may actually be – and it only takes stimulus or caution in either end of the market to tip the scales.”
Supply and demand imbalance
Apartments appear to be lagging in value more than houses, with a closer look indicating that property demand is minimal, which is causing the prices of inner-city apartments to drop by as much as 25%.
This is partly attributed to a surplus of stock; regardless of the cause, the result is that vacancy rates keep rising. In fact, new units are often being resold at below the contract price.
“Development sites that were the bees knees for mum and dad investors, self-managed super funds and the like only three years ago have tanked, and in many instances there simply is no premium being paid for the underlying development potential,” Herron Todd White says.
“All in all, there is no immediate driver to stimulate demand and given the state of Western Australia’s finances, we would not expect any increase in stimulus any time soon.”
Despite the issues faced by Perth, there continue to be excellent chances to either upgrade or look into areas with development potential. Buyers in good financial condition can stimulate short- to medium-term market activity given that now is the time to hunt down bargain properties.
Southwest WA bucks the state trend
Considering the problems being faced by the metro, the southwest is performing unexpectedly well. This region is experiencing the most rapid growth in the state and is expanding while the rest of WA is contracting.
Herron Todd White attributes this positive performance to the desirability of the suburbs in the southwest, with their proximity to beaches, famous wineries and chill lifestyle. Population growth has certainly helped stabilise the southwest suburbs – for once this area has not followed the general trends of the state.
Tourism is also supporting the local economy. The weakening of the Australian dollar has resulted in an influx of tourists from both out of state and overseas. To encourage further visits and therefore reap long-term benefits, the Busselton Airport is set for expansion.
As a whole, the state government has also drafted a new transport plan that is connected to the initiatives for housing and employment.
“Key features in the new transport plan that are supported by the property sector include the focus on connecting activity centres in suburban Perth; and tunnelling as a cost-effective method to create improved transport connections and promote infill development, while decreasing traffic congestion in urban areas,” says Lino Iacomella, the executive director of Property Council WA.
SUBURB TO WATCH
Halls Head: Seaside suburb highlights southwest living
Halls Head is the most popular of four suburbs situated on an island bordered by estuaries, the Dawesville Channel and the Indian Ocean. It is one of the most affordable suburbs in Western Australia, despite being a desirable coastal area with access to beaches.
Halls Head is an example of a southwest suburb that’s performing steadily. Despite the dip in prices, returns are strong here at over 4.5% yield, which is favourable for investors. This is likely assisted by the availability of amenities in the area, including the shopping hub at Halls Head Central.
Moreover, Halls Head is near Mandurah, WA’s second-largest city. This proximity could contribute to the suburb’s appeal, given that Mandurah is a tourist destination. Halls Head residents can easily take part in water-based activities such as boating, fishing and whale watching. Bus and train services to and from Perth are offered for convenient travel to the capital.
