Perth’s mining boom caused its property prices to surge between 2007 and 2013, eventually reaching a median of $550,0000, about five times the median of the early 1990s, based on stats from the Real Estate Institute of Western Australia (REIWA).
The quick gains eased, however, as most mining projects moved into production phase. An economic slowdown followed and now Western Australia ranks among the country's worst performing state-based economies, according CommSec's State By State report of last year.
Despite the impact of lower numbers, Perth continues to be a strong buyer’s market with plenty of options amid reduced competition, says managing director of Investors Edge Real Estate, Jarrad Mahon.
Mahon says that home buyers have been taking advantage of opportunities in blue chip suburbs like Fremantle and Alfred Cove particularly, which have seen prices actually increase of late.
For instance, three-bedroom houses in both suburbs are typically priced above $700,000, as per figures from Domain Group. Four bedroom houses are often closer to $1m, so there are apparently buyers for these premium waterfront locations.
Eyeing the opportunities
Mahon says buyers should now focus on middle priced suburbs, between $500-800,000, because he expects demand will ripple down from blue chip areas.
“Investors are already starting to return to the market and we have had a lot more enquiries from the eastern states over the last two months,” says Mahon. “Relatively speaking we [Perth] are looking like great value with reasonable rental return."
Similarly, marketing manager at Momentum Wealth, Melvin Tang says current market conditions suit the astute investor, especially because purchases made at the bottom of the property cycle can see the greatest gains down the track.
“This makes it an excellent time to invest in the Perth market, particularly with relatively lesser competition,” says Tang. “The first home buyers grant has also made purchasing new dwellings and land even more attractive for first home buyers, along with the relative affordability already in the market, while owner occupiers have the opportunity to upgrade houses.”
So where are the numbers right now?
Compared to larger markets like Sydney and Melbourne, there’s certainly far greater affordability in Perth right now. While this should appeal to first time buyers it will also make investors wary.
For example, median property prices dropped 4.3% year on year to January, says CoreLogic RP Data, easily the worst performing capital city based on annual figures. As of January, median house prices are down to about $520,000 and units to $430,000, according to the REIWA’s figures for the Perth metro area.
And price falls haven’t been helped by lower volumes of stock either, which typically improve buyer demand and fuel competition. For example, in the March quarter of 2013 the volume of sales in Perth surpassed 9,000, as per the REIWA. However, in more recent quarters, sales volumes have dropped to around 6,000.
As might be expected in a slower market, properties are taking longer to sell too, with the average property selling in just under 50 days at the end of 2013, then up to 65 days and even longer toward the end of last year. Average selling times tend to differ, however, depending on the location or property type.
Other suburbs to watch
Momentum Wealth has earmarked Bibra Lake and Ashfield for good future capital growth due to their locations and because of residential rezoning in those areas.
Tang also notes that properties near the beach or river, with good amenities and close to the city have continued to perform well. For example, suburbs such as Kallaroo, Swanbourne, Trigg, Applecross and Attadale were all top 10 performers in 2016, according to the REIWA. These suburbs are especially interesting because of their potential water views.
More recently, Morely, Dianella, Nollamara and Ballajura have done well, based on sales in the week to January 17, as per the REIWA.
By JP Pelosi.
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