Perth is predicted to remain down in the dumps in the near future, experiencing negative growth for at least another 12 months
Vacancy rates continue to soar as Perth struggles under the weight of oversupply and limited demand.
“It is still very much a bargain-buying market and doesn’t have any good growth indicators associated with it for at least 18–24 months,” says Paul Glossop, director of Pure Property Investment.
“As a whole, the [vacancy rate] is still on the increase. And the supply has not decreased yet since the undertop of its cycle back in 2014.” Migration is a significant part of the problem as residents of WA leave for states offering greater opportunity.
“It points to further weakness in this market,” explains Cameron Kusher, research analyst at CoreLogic.
“We see more houses and units reselling at a loss. The market is really being plagued by not having a lot of demand for housing at the moment.”
Outer-ring suburbs are not faring well either; their rental markets are struggling as landlords face difficulty in finding tenants. New dwellings are selling at below cost prices as well. According to CoreLogic’s most recent Pain and Gain report, the proportion of dwellings reselling at a loss across Perth continued to trend higher over the December 2016 quarter. Over the quarter, 18.9% of houses and 33.8% of units resold for less than the previous purchase price, with loss-making resales in Perth a whopping 47.8%.
Location drives performance
Nonetheless, sectors of the Perth property market are seeing some success.
“Prestige areas continue to experience a heightened level of demand up to the $2m mark in comparison to 12 months ago,” states Herron Todd White in its May 2017 Month in Review report.
“Sought after [homes] include improved properties reflecting land value, but with some rental income potential in the short term, and very well presented properties in traditional upgrade locations.”
The southwestern region of the state is also reporting stable sales volumes.
“The South West is a desirable place to live and as such naturally attracts continuous growth, mostly fuelled by young families, retirees and fly in, fly out workers,” HTW reports.
“On a local level, the region would benefit from the expansion of the Busselton airport. The airport is looking at attracting more interstate and some international flights. This would fuel the tourism industry and have a positive effect on job creation.”
Nerida Conisbee, chief economist at REA Group, also emphasises that even in a poor market “we do see the best suburbs continuing to do well, like the premium suburbs in the west”.
SUBURB TO WATCH
FLOREAT: Premium suburb bucks the trend
In spite of Perth’s negative trend, the premium suburb of Floreat defies the norm by continuing to record growth over the 12 months to April 2017.
House prices increased by 3% during this period, with the median value clocking in at just over $1,250,000. This continues a fairly steady positive trend observed over the recent five-year period and shows there is growth potential here, even though the average rental yield is low at just 2.9%.
Floreat’s proximity to the Perth CBD likely contributes to the interest in the suburb, as it’s just 8km from the capital. Moreover, it’s loaded with amenities, including a shopping centre, restaurants, sports venues and several schools.
