Perth’s housing market continues its downward slide as interstate migration rates drop, fuelled by unemployment woes, which is translating to a slowdown in population growth.
It’s not surprising therefore that house and unit values across the state are feeling the financial impact, particularly those located in regional areas that have traditionally been reliant on the resources sector.
“Regional Western Australia has been hardest hit over August 2016, with median house values 22.6% lower than they were at their peak,” says Eliza Owen, market analyst for OnTheHouse.com.au.
“Perth has also recorded a substantial fall from its peak.”
CoreLogic’s head of research, Cameron Kusher, says rental rates are lower and still declining, especially in Perth. Annual dwelling approval rates also fell for both houses and units, along with the number of listings.
Regional market slump
As a result of the mining sector’s downfall, unemployment has hit the prestige market of Southwest WA hard. Nonetheless, the region has a reputation as a top holiday destination for its beautiful beaches and internationally famous wineries, and local agents report that this is underpinning demand for prestige properties worth over $1m.
At the lower-priced end of the market, however, sales have continued to be weak, according to Herron Todd White’s Month in Review for October 2016.
This part of the market typically attracts investors and first home buyers, especially in a low interest rate environment. The former aim to take advantage of the increased rental returns, while the latter are inspired by the availability of government rebates, and the more affordable prices.
However, few homeowners intend to trade up, leaving the middle segment of the market (properties in the $500,000–$1m range) bare. At present there is reasonable demand for well located dwellings, primarily from second and third home buyers, as well as investors looking for holiday homes.
Overall, Herron Todd White predicts that, over the coming months, “it is likely the property market in the South West … will be slow”. Those keen to sell may need to meet the market to secure a sale, but those ready to buy are in an excellent position to negotiate for the best-value price.
Divided market
Some mortgage-belt areas in Perth are reflecting the poor performance of the state as a whole. However, regions with upgrade potential are holding on and prestige pockets are performing well.
“Investors have largely retreated from the market over the past 18 months, however, speculation about the timing of the bottom of the cycle is rife,” HTW reports.
“Small scale development sites in particular have been on the nose, but with prices in many areas approaching single residential value, reducing the risk profile of these sites, they appear to be rebounding.”
Premium suburbs, including Leederville and Mount Pleasant, are benefiting from this as a result of the enhanced market activity from buyers who have wanted to live in these areas for a while and are finally financially capable of doing so, thanks in part to the low interest rates.
For first home buyers, the city fringe appears to be the property hotspot of choice, based on the affordable entry prices. Banksia Grove in the north is one of the suburbs drawing buyer attention, along with suburbs at the southern end, like Golden Bay, Secret Harbour, Wandi and Wellard. The charm of these areas is enhanced by their proximity to amenities.
“The swings of the Perth market during the last several years have been missed in the regions but we would recommend caution,” HTW recommends.
“The slowdown in the state resource sector, continued weakness in Perth and general economic uncertainty could promote more of a widespread downturn throughout the market.”
SUBURB TO WATCH
Highgate: Inner-city suburb holds on in a shaky market
The well-located suburb of Highgate may have seen prices slip due to the volatility of the Perth property market, but it is still holding up.
Units here can provide investors with almost 5% returns, while the median house price remains well above the Perth average, suggesting that the suburb has, for the most part, maintained its status as a prestige dwelling space. This is likely because Highgate is a mere 2km from the CBD – very convenient for residents working in the city.
The bustling cafe and wine bar scene of Mount Lawley is also just within walking distance north of the suburb.
Despite being the smallest residential suburb in Perth, Highgate has made room for several schools within the area.
