Will Perth property take the stairs or the elevator?

There is an age-old proverb that the share market takes the stairs up and the elevator down.

But for the Perth property market, the opposite has largely been the case over the past couple of decades. 

Riding the 2000s elevator to median prices that surpassed Melbourne and neared Sydney levels, Perth prices were soaring annually in double-digit percentages. The past half dozen years, however, have seen prices unwind, as they’ve meandered down the stairs at around three to five per cent per year.

While prices doubled and even tripled through the 2000s, the stroll down the stairs has now sliced 20 per cent from the value of Perth properties since June 2014.

The WA capital remains the weakest performing capital city in Australia, marking a fall from grace since the heady days of the mining boom. The latest Core Logic figures show the city posted a decline in housing and unit values of 1.8% in the three months to August, and a further 2% last month, reinforcing a sense of market wariness.

According to the Real Estate Institute of WA (Reiwa), the median house price dropped from $490,000 last month to $486,000 and the number of properties listed for sale was at its lowest level since late 2014. Rents and yields remained stable.

To borrow from another cautionary stock market adage about trying to catch a falling knife, Perth market watchers are wondering whether they should risk being cut timing the bottom of the market.

There are signs of hope.

Nationally, housing construction dropped to its lowest level in 19 years but WA was the only state to have posted a lift in construction projects.

Licia Santoriello, director of Property Selection Realty, said it was the lower and mid-tiers of the housing market that were faring best.

“First home buyers and investors are taking advantage of the low housing prices to secure their first home or investment property.

“With properties selling, it stimulates the property market and boosts confidence,” she said.

This sentiment was supported by the industry number crunchers, with first home buyers in WA increasing to 3,473 in the June quarter, an increase of 4.8 per cent over the quarter

The gradual construction pick-up reflected the low base prices that were seeing buyers filter back into the market.

“As land has never been more affordable, builders are snapping up land to subdivide and sell as vacant land or build strata villas.

“Either way, it allows buyers who previously could not afford to buy to enter the property market and this activity stimulates the economy, providing much-needed work for those in this industry,"" said Santoriello.

Over the past few decades, Perth suburbs and city precincts have been transformed as apartments increase population densities across the metropolitan area. The rapid growth in the apartment market has in recent years eclipsed demand, but this may be about to change.

“In the short term, houses are outperforming apartments, however, taking a longer-term view, apartments will become more popular as they have become more affordable”

The offer of benefits such as swimming pools, convenient locations and easy care living will only add to their allure.

REIWA president Damian Collins said on Perth radio that the city’s population needed to grow before prices would take any significant upturn.

“The first homeowners grant moved to new properties, which encouraged people to build a new home, right at the time WA was losing population,” he said.

The subsequent increase in housing stocks has kept a lid on prices.

According to Ms. Santoriello, it is a good time for first home buyers and those looking to upgrade to a family-sized suburban home to make their move.

“Buyers are looking to spend under a million dollars - anything above that is struggling to sell.”

Perth in Numbers - August 2019