Perth has seen its ‘worst cycle ever’ as the mining boom in Western Australia came to an end, but opportunities remain for investors to take advantage of the city’s property market as it goes into ‘recovery mode’.
Median house prices across Australia have declined over the quarter, with the national median house price falling by 1.2 per cent to $809,201, according to the Domain March Quarter 2018 House Price Report.
, in particular, saw a 2.0 per cent decline in house prices.
Unit prices in capital cities have also declined over the quarter by 0.9 per cent to a median of $555,574.
“Drivers such as employment growth, new housing supply, affordability hurdles, tightening credit policies and out-of-cycle rate hikes have made their impact; however, the effect on property prices varies from city to city,” Domain’s Dr Nicola Powell said.
Houses in Cooloongup are currently selling at $200,000 and below, and Gosnell and also offer dwellings for prices below replacement costs.
Experts believe that the decline in prices may pave the way for the influx of investors looking to buy affordable houses in established areas, hoping to get higher rental returns and the opportunity to add value to the property by taking advantage of large block sizes.
In contrast to the decline of house prices, rental rates have shown an impressive growth across Australian property markets.
The nationwide median rental rate has risen by 1.1 per cent in the last quarter, bringing the price up to $427 per week, according to CoreLogic’s Quarterly Rental Review.
This rise in Perth’s rents is the first for almost five years, Professionals Real Estate Group’s Shane Kempton said, and it may very well make way for the city’s property market’s recovery.
According to him: “Rising rents are generally an early indicator that the property market has bottomed and housing supply is beginning to tighten. These rental rises come at a time when house prices in the more affordable suburbs of Perth are now at rock bottom.”
Meanwhile, rental yield has also seen been strong across markets in Australia.
Yields in Perth are at 3.92 per cent, preceded by Darwin, Hobart, Canberra, Brisbane and Adelaide, and followed by Sydney and Melbourne.
According to CoreLogic, investors may expect yields to remain strong in the following quarters.
While the Perth property market is definitely recovering, it will probably take time before it’s back on top, which is why experts strongly recommend a long-term approach when investing in the city.
According to OpenCorp’s Michael Beresford, with strong fundamentals in the area, including population growth, new infrastructure, affordability, price growth and jobs growth, it could easily take off easily in the next 12 to 18 months.
“It makes far more sense to be in markets that are yet to see growth, and then capitalise on the full scale of that growth cycle over time,” he told Smart Property Investment.
In the next 20 years, property values across different markets in Perth can double as its population rises to 3.2 million to 4 million by 2038—nearly the size of Melbourne.
Other Perth suburbs expected to see growth in the next months are: