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State of Markets - WA August 2014

State of Markets - WA August 2014

Western Australia’s surge in prices is coming to an end as the market returns to more moderate growth.

In the 12 months to April, the median price in the Western Australian capital has increased by 7.7 per cent, according to RP Data.

However, this surge slowed in the first three months of the year. Data from Australian Property Monitors shows growth for houses was flat over the March quarter, while the unit price eased by 1.4 per cent.

Andrew Wilson from APM said price growth in Perth may have passed its peak, although the outlook for the city remains positive. He predicted growth over the next 12 months would be around five per cent. In his view, the best investments are to be found in the $400,000 to $500,000 price bracket, close to the CBD.

On the other hand, Herron Todd White warned investors about medium-density developments in the outer suburbs of Perth. A report by the valuation firm states that “overactivity by investors and developers” is threatening the stability of the market.

According to HTW, developers are increasingly building townhouses on villas with small lot sizes which are primarily marketed to investors. However, first home buyers have little interest in this type of product and values may be undercut once investors move on.

Development activity could also become problematic in the Perth CBD, according to Terry Ryder from Hotspotting.com.au. Availability in the city has gone through the roof over the past two years while new construction continues to increase the supply of apartments. While the situation is not as bad as in Melbourne or Brisbane, Mr Ryder cautions investors to be wary.

He also raises concern over the market in Port Hedland. This mining town has seen vacancy rates rise while rents and values plummet. Properties that were valued at $1.2 million in late 2012 are now on the market for $990,000, Mr Ryder says. Moreover, time on market has blown out to over five months.

In more positive news, a regional area with good prospects may be West Busselton, in the state’s south. Onthehouse identified this town as one of the top performers over the past quarter. The median price increased by 6.77 per cent over the three months, pushing it to $362,500.

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