Residents exit Western Australia as the market tries to anticipate the bottom of the cycle
Property values continue to drop in Perth, and many Western Australians are no longer sticking around to wait things out.
According to CoreLogic’s Quarterly Housing and Economic Review for April 2017, the state experienced its highest rate of negative migration in the year leading up to September 2016, which could throw a wrench in investors’ plans to profit off the very affordable property prices.
“Investors should remain wary of negative migration from the state and what this means for their ability to find and maintain tenants,” says Charles Tarbey, chairman and owner of Century 21 Australasia.
Nonetheless, Tarbey also believes that Perth is beginning to find its footing. “Of late, conditions are showing signs of balance. CoreLogic data showed that dwelling values in Perth were down 0.4% over the quarter to the end of May. This may represent a good opportunity for investors, and as such, some areas appear to be experiencing increasing investor interest.”
Investors Choice Mortgages director Jane Slack-Smith also notes that national buyers’ agents began shifting their focus to Perth in mid-2016.
“With property prices dropping, it seemed they could not continue to drop. After all, as long-term investors, a few years of less than ideal performance can be caught up. There is some optimism around commodity prices, [although] there is still a way to go for this state to bounce back.”
Rental activity rises
Hayden Groves, president of the Real Estate Institute of WA (REIWA), concedes that landlords in Perth’s private rental sector could run into problems; however, rental activity in the metro has been high. In particular, leasing activity certainly improved through May 2017; almost 5,000 properties were rented out that month, according to REIWA.
“At a suburb level, East Perth, Perth and Scarborough in the Central sub-region had the highest volume of properties leased in May,” comments Hayden Groves, president of REIWA.
“The South West and Central sub-regions also had particularly strong months, recording increases in leasing activity of 33.7% and 33%, respectively.”
However, the top performer in the rental market was the North East subregion, with a 35.5% rise in activity.
Additionally, Perth is addressing the issue of stock and looking to sustain demand by tempering the volume of properties for rent.
“When compared to May 2016, the volume of properties for rent had only increased marginally by one per cent, which hints to signs that listing levels have finally begun to stabilize,” Groves reports.
SUBURB TO WATCH
LEEDERVILLE: Weak unit market in Perth neighbour
The apartment market continues to decline in the suburb of Leederville, with buyers clearly preferring houses.
Unit prices have been plummeting for the past five years and continue to do so, recording a 10.7% drop in the past 12 months. The median value is slightly over $500,000, but if the trend keeps up it could fall below this threshold soon.
Houses, on the contrary, are experiencing positive growth, even if it has slowed. This market reported a 1.2% increase in prices over the past year.
Leederville has an ideal location just 4km from Perth that factors into its appeal. It is also home to several schools, including the Schools of Isolated and Distance Education.
