Perth's break-up with other capitals offers property investment potential

To corrupt a new age phrase resuscitated by celebrity Gwyneth Paltrow as she tried to shed some positivity on her marital breakdown, the Perth property market has seemingly unconsciously uncoupled from the rest of the county.

Perth was the only capital city to record a loss last month, with median dwelling values falling 0.4% in October. 

Prices have been steadily declining since the peak of the mining boom in 2015.

The premise behind the conscious uncoupling espoused by the Hollywood set is that breaking away should be seen as a positive and represent opportunity. According to property experts, it is not too much of a stretch to suggest Perth’s divergent price trajectory from the rest of the country represents an investment opportunity.

There are signs the market is beginning to turn around. The vacancy rate has halved since reaching a high of 5.4%, as mining workers exited the city, to a relatively balanced 2.7% and looks likely to continue trending lower. This represents a strong indication that demand is returning to the housing market. 

James Nihill, Managing Director of Patrick Leo, described it as buyers’ market.

“Perth is arguably one of the best investment opportunities right now, as it struggles in its recovery and prices remain suppressed,” he said.

“Prices have fallen by 22 per cent since 2014 and in October dropped again, according to the CoreLogic Home Value Index. 

“It is the only capital in Australia that reported values continuing to drop in October and remains absolutely affordable, with one of the lowest median house prices in the country at just $435,119 —almost half of Sydney’s median dwelling price,” Mr. Nihill said. 

While prices are declining, the rate of decline has slowed.

“It is a good opportunity for investors as we near the bottom of the cycle in Perth, with last month’s decline the lowest since mid-2018 and a clear indicator the tide could finally be changing for Perth,” Mr. Nihill said.

REIWA Deputy President Lisa Joyce recently pointed out the improvements in sales activity, up 2% in sales transactions and 16% in leasing transactions.

The median rent price continued to stabilise at $350 per week and rent listings reached the lowest levels since 2014. There were still 29 suburbs that recorded an increase to their median rent price, with Butler, Baldivis, Cooloongup, Jindalee and Warnbro showing the biggest improvement.

“Although overall prices had remained the same as the previous month, reiwa.com data shows 26 per cent of suburbs saw improvements in median sale price,” Ms. Joyce said.

REIWA data also revealed the top performers for the month in regard to median sale price increases were Scarborough, Ballajura, Winthrop, Stirling and Wembley Downs.

“Perth remains very favourable for buyers and investors at the moment, however, I would advise those who are thinking about purchasing their first home, trading up or investing, to act soon and take advantage of current conditions before the market starts to recover and prices inevitably rise,” Ms. Joyce said. 

Western Australia's economic recovery is picking up momentum and is poised to improve significantly starting next year in line with a recovery in the mining industry.

The recent spike in Sydney and Melbourne property prices, as they retrace their steps towards record levels, could also drive value hunters to invest in Perth.

Some parts of Perth have already enjoyed keen interest from buyers. For instance, suburbs in Inner South recorded a 2.2% increase in unit sales over the past year.

“Property works best as a long-term investment and the success in any strategy is knowing when to buy and when to sell – watching markets closely and being able to predict both peaks and troughs,” said James Nihill, Managing Director of Patrick Leo. 

The State Government has also shown its intent to support the market, recently announcing a two-year stamp duty reform, allowing for a rebate of up to 75% on off-the-plan sales.