Property market update: Perth, December 2019

Property Club Western Australia’s branch manager Troy Gunasekera said that the biggest drag on the Western Australian capital over the past five years has been a massive oversupply in housing stock due to the building boom from 2011 to 2014. However, there is growing evidence this oversupply issue is coming to an end.

In the past month, 3,392 newly listed properties were added to the Perth market – 23 per cent down from last year’s figures and 23.1 per cent below the decade average. Further, this is the lowest figure since CoreLogic listing records commenced in 2007.

Moving forward, massive injections in public and private expenditure tipped to fire up the Western Australian capital.

“Billions of dollars in new road and rail infrastructure will be spent in Perth over the coming four years starting from the beginning of 2020. As of September 2019, Western Australia had resource projects in the pipeline valued at an estimated $108 billion,” Mr Gunasekera said.

“For example, there will be six METRONET rail projects under construction in Perth in 2020, creating thousands of local jobs and opportunities for local businesses and transforming Perth’s public transport network.”

Moreover, an upswing in the resource sector as it sees billions of new private investment in the state is tipped to help the unemployment rate and ultimately assist the recovery of the property market.

Significant mineral resource investment amounting to $20 billion will also influence the property market as it impacts the state population.

“We are expecting renewed interest in the Perth property market by investors throughout Australia driven by higher rental yields and rising prices, but as in all markets, investors need to be selective to achieve the best possible outcomes,” he said.

Property values

As of the end of 2019, Perth remains one of the most affordable capital cities despite being home to over 2 million people.

According to CoreLogic’s national home value index, dwelling values rose by 1.1 per cent over the month of December and by 4.0 per cent over the quarter, marking the fastest rate of national dwelling value growth over any three-month period since November 2009.

Australian dwelling values tracked 2.3 per cent higher over 2019, with five of the eight capital cities and five of the seven “rest-of-state” regions seeing the year out in positive growth territory.

Amongst the capitals, Sydney and Melbourne recorded the highest annual capital gain, with both cities posting a 5.3 per cent rise in dwelling values over the year. Regional Tasmania, where values were 6.1 per cent higher over the year, led the regional markets.

Values were down in Darwin by 9.7 per cent, 6.8 per cent lower in Perth and 0.2 per cent lower in Adelaide over the year, while values also fell across regional Western Australia (-11.8 per cent) and regional NSW (-1.1 per cent).

CoreLogic’s head of research Tim Lawless said: “The positive year-end results mask what has been a year of two distinct halves – we saw capital city dwelling values fall by 3.8 per cent over the first six months of 2019 and then rebound by 7.0 per cent over the second half of the year.”

Lower mortgage rates, the relaxation in borrower serviceability assessment, improved housing affordability and renewed property taxation policies following the federal election ultimately spurred the housing value rebound, according to him.

“Lower advertised stock levels persisted providing additional upwards pressure on prices amidst rising buyer activity,” Mr Lawless highlighted.

Supply and demand

The combined capital city clearance rate has dropped for the final week of auction reporting, based on figures from CoreLogic’s Market Activity Update.

For the week ending 15 December 2019, the combined capital city clearance rate dropped below 70 per cent “as volumes see their usual seasonal taper”, the report stated.

Further, there were 2,750 homes taken to auction across the combined capital cities over the week. Volumes were down by -5.6 per cent on last week’s 2,912 auctions, which was marked the second busiest week of 2019.

Preliminary results show a clearance rate of 69.2 per cent, after last week’s final clearance rate of 71.1 per cent – a significant departure from last year’s 2,406 auctions with only a 40 per cent clearance rate.

Melbourne and Sydney led the pack with clearance rates of 73.2 per cent and 73.6 per cent, respectively.

Meanwhile, the smaller capital cities returned varied results, with Adelaide coming in with the highest preliminary clearance rate of 60.6 per cent and Perth recording the lowest at 34.4 per cent of Perth.

Auction activity is not expected to pick up in earnest until early February next year as the market emerges from the seasonal festive period slowdown, according to the report.

Hotspots

CoreLogic has identified 10 subregions that recorded the most growth when it comes to annual change in dwelling values, led by Melbourne-inner east with dwelling values increasing 12.1 per cent.

This was followed by Sydney-inner west and Sydney-Baulkham Hills and Hawkesbury, both at 8.8 per cent, Melbourne inner at 8.0 per cent, Sydney-city and inner south at 7.7 per cent and Melbourne-inner south at 7.6 per cent.

Meanwhile, Sydney-Ryde rose by at 6.5 per cent and Sydney-Sutherland, Sydney-Eastern Suburbs and Sydney-Northern Beaches all rose by 6.3 per cent.

On the other hand, Mandurah and Darwin emerged as the subregions with the biggest decrease in dwelling values over the past year at -9.7 per cent.

This was followed by Perth-South West at -7.1 per cent, Perth-South East at -7.0 per cent, Perth-Inner at -6.9 per cent, Perth-North West at -6.3 per cent, Perth-North East at -6.0 per cent, Central Coast at -3.4 per cent and Mornington Peninsula and Adelaide-West, both at -2.2 per cent.

In CoreLogic’s Best of the Best report, the inner city of Melbourne’s St Kilda was identified as Australia’s fastest-growing suburb, rising by 19.6 per cent for the financial year, followed by Sydney’s Carlingford, Parramatta, with 15.4 per cent, Hobart’s Risdon Vale with 10.6 per cent and Brisbane’s Hawthorne with 6.0 per cent.

According to Mr Lawless: “For 2020, we’re likely to see markets in recovery mode as housing prices catch up and then overtake their previous record highs; however, we expect the rapid rate of capital gains seen over the second half of 2019 to lose steam as stock levels rise and affordability deteriorates.”

While the countries east is showing strong signs of growth, the west is lagging behind, with Perth’s Osborne Park having the lowest median value within 10 kilometres of the capital city for units.

Perth’s best-performing suburb Hazelmere Guildford North West grew by only 1.5 per cent for the year.