More Positive Signs For Perth Property Prices
The Perth property market continues to show some signs of a possible turn around with the state economy and the jobs market getting ready for another growth stage.
With multiple mining and construction projects getting ready to ramp up in the state's North-West, it has been estimated that there will soon be another 10,000 more workers needed in a sector that already employs approximately 112,000 workers.
According to REIWA President Damian Collins, Perth is starting to show signs that the market is in the early stages of a recovery, and as the major mining companies continue into the next stages of their projects these new jobs will help boost Perth property prices.
“Given Western Australia’s location and distance from the other states, when people move here it tends to be job-related. The mining companies are talking about the 10,000 jobs they've got to fill and the impending skills shortage. There are also a lot of other sectors that relate to mining so we just need to see them employ those people as construction ramps up this year”, said Damian Collins.
After riding high on the back of the mining boom, property prices peaked around 2015, before cooling off over the last few years. During the peak of the boom, Perth was seeing strong rates of population growth. While Perth’s number might still be off their highs, the trend is once again on the rise.
“We're still growing. Even though we had a downturn, the population never stopped growing. The long term average is 1.8%, during the mining boom we hit 3.5% before falling over the last couple of years where we've been at 0.8%. But that's been WA overall and quite interestingly Perth's been sitting at 1.1%. So we're still seeing population growth but not at the elevated levels during the boom.”
“So I expect that in 2020 and 2021 we'll get back to that long term population growth of 1.8% per annum.”
One of the key metrics that has been improving thanks to the mining industry turnaround has been the rental vacancy rate. Traditionally, a falling vacancy rate is a bullish leading indicator for property prices and it is one that Mr. Collins is watching very closely.
“Our vacancy rate was over 7% and that fell to about 2.5% over the last 18 months or two years. So that's been a positive sign and definitely back to where we are in a balanced market with rents starting to increase a little bit across the board. So that's been a really positive sign that the excess rental stock is being taken up. So I certainly expect we will see some rental growth in the next couple months as the mining sector returns.”
This improving vacancy rate, coupled with some of the lowest levels of building rates in over a decade, will likely mean that in the near-term housing supply will exceed demand and this will ultimately drive up property prices.
Along with Mr. Collins, the RBA also has high hopes for the state of the WA economy. In a recent discussion, Mr. Collins had with the RBA, the RBA suggested that they are now far more bullish on the state of both the mining sector and what that might mean for jobs.
“The RBA were certainly feeling fairly comfortable that WA is returning to some decent economic growth. The mining sector is in great shape with the iron ore prices being very high as is gold.”
“So the mining sector and also mining services are going well, it just hasn't seen a big uptake in employment yet. It's just getting back to decent capacity So that really hasn't flowed through to the wider economy so when the major minors start to ramp with new investment that's when we'll see some more job creation. So overall the Reserve Bank is pretty positive in the medium term about the WA economy.”
On top of the positive outlook, 23% of Perth’s suburbs are already showing up to 5% median price growth in the past 12 months, including Mt Pleasant at 21% and Burswood with an impressive 28% growth rate.
There are clearly some green shoots appearing all around Perth and throughout WA at the moment. This could very well open the door to another growth phase for property as we head into late 2019 and 2020.