PERTH PROPERTY UPDATE – AUGUST 2014
When it comes to the state of the property market in Perth right now there is a mixed bag of statistics and market commentary that may paint a confusing picture. Statistics can make for interesting news headlines, however it is useful when analysing market statistics to consider monthly and quarterly results in the context of annual trends in order to establish a clear picture of the property market. While the monthly and quarterly stats can certainly indicate future trends, they can also represent short term peaks and troughs that must be considered in a broader context. Therefore, I have analysed some of the latest data on the Perth property market in relation to annual trends and long term outlooks in order to find out where the market is heading.
There is no denying that the Perth market has certainly softened this year. However this is not likely to represent a long term trend as a range of factors impact on the property market and general market confidence. While some of the latest monthly and quarterly statistics paint a relatively bleak picture, we can look past these shorter term figures to a much brighter outlook for Perth.
To start with, let us look at the median house price. REIWA figures show that during the month of July prices dipped by 0.2% to $540,000. In the last three months prices have decreased by 1.8% . The ABS has reinforced this short term decrease, with their figures representing a 0.2% decrease for the June quarter Residential Property Price Index (RPPI). The good news is that the annual figure is not as bleak, with a 3.6% lift in Perth’s RPPI for the year ending 30 June 2014. REIWA figures also represent increases in the median price over the past 12 months.
Following on from existing house prices, the level of dwelling approvals is also down this month across the country. Perth is no exception with a 0.7% decrease in dwelling approvals, a continuation of a four month downward trend. Once again, annual figures are less bleak, with a 27.6% increase in dwelling approvals for the year . This is a good indicator of future housing construction activity and provides a really positive outlook for investment in the Perth housing market. The Chamber of Minerals and Energy (CME) in particular has earmarked this financial year as a time for strong growth in the private housing investment sector . They say that while there will be slow growth in the mining industry as the sector moves from expansion and construction to export activity, they predict an increase in the level of private housing investment in WA. The CME believe that an increasing amount of labour made available due to the mining slow down (previously many trades were in short supply due to the lure of the mines) will see a pick-up in the housing sector in WA in the mid-term as the construction industry will have more capacity.
In terms of the rental market we have certainly seen signs of a decline this year after a sustained period of low vacancy rates and rapidly rising weekly rental values. According to REIWA the number of listings was up 4% in July 2014 with an average weekly rent of $450. The annual figures don’t provide a much better picture given the vacancy rate has been on the increase since September 2012. While the rental statistics may seem on the bleak side, the positive is that some level of affordability is creeping back into the rental market. Perth has been labelled one of the most unaffordable cities to live due to the mining boom and strong demand from exploding population growth. At the moment renters have a bit of breathing space while demand for rental properties still remains relatively strong.
Looking at the broader factors that will impact the WA property market moving forward, we can certainly see positive signs. The RBA has announced for a record consecutive 12 month period that the cash rate will remain unchanged at 2.5%. This is good news for those looking to secure a low interest rate with their financial institution. All signs from the RBA point to rates remaining as they are until at least mid-2015 with the Governor Glenn Stevens stating on 5 August that “the most prudent course is likely to be a period of stability in interest rates”.
Housing finance commitments are also on the way up with a 0.4% increase during the month of June. This positive trend has been continuing since October 2013. Primarily these commitments have been for established homes, with 30% of housing commitments in June coming from first homebuyers. First homebuyer activity in the market has slowed over the last 12 months with finance commitments in the 6 months to June 2014 down compared to the last 6 months in 2013.
The average number of days that properties spend on the market has crept up slightly over winter (which is not unusual). However, when looking at the June quarter statistics for previous years, this quarter has seen the lowest number of selling days (average of 57 days on the market) since June 2006. This shows there is still strong buyer appetite in the Perth market which is only likely to increase as we head into the spring buying season.
Other positive factors include Perth’s strong population growth, which continues to rank as the highest in the country at 2.9% . We also have the lowest unemployment rate (5.2%) compared with 6.4% nationally.
In the long term I think we can rest assured that property in Perth will continue to be a wise investment. In that regard, it is worth looking more specifically at different areas around Perth to analyse market value growth. In an upcoming blog post, I will be providing snapshots of Perth hot spots to look out for with regard to growth potential in order to provide our clients with the most up to date market value information.