The housing market in Perth is slowly showing signs of improvements after it experienced its “worst cycle ever” following the end of the mining boom in Western Australia. Is it time for investors to explore opportunities in the city?
Over the past year, settled transactions in Perth have risen by 1.4 per cent, indicating that the market’s turnaround is beginning.
While property values continue on a downward trend, declining by 0.3 of a percentage point in May and by 0.4 of a percentage point in June, this minimal movements could actually be signs of stability.
In the past three months, the median house price in Perth only went down from $522,000 to $520,500. When compared with house prices in February, the median house price in the city actually went up by 1.1 per cent.
Meanwhile, median unit prices are also holding up well. The median unit price increased by 0.8 of a percentage point to $419,000 last month. Over the past three months, the average increase is up by 2.9 per cent.
Indeed, experts believe that Perth is onto a slow and steady improvement — no rapid price growths but no substantial declines either.
Real Estate Institute of Western Australia’s (REIWA) Hayden Groves said: “We are seeing similar trends in the house and unit medians, which is good news as it suggests one sector of the market is not recovering at the expense of the other.”
“REIWA expects house and unit prices to remain fairly stable for the remainder of the year,” he highlighted.
If the economy of Western Australia continues to recover and consumer sentiment continues to build, the Perth property market can expect genuine improvements by 2019.
Having predicted a bright future for the Perth property market, the current statistics still display a lackluster performance, particularly in terms of demand for dwellings.
The capital city is among the worst performers for houses, with the median time on market reaching 83 days.
Meanwhile, across all capital cities, listings declined by 7.5 per cent while vendor discounting is between 3.6 per cent and 7.6 per cent for houses and between 4.9 per cent and 9.0 per cent for units.
Over the past 12 months, all capital cities saw median house prices rise by 2.2 per cent, except Perth and Darwin.
Following the lack of movement in dwelling prices, median rents for three-bedroom houses in Perth held steady at $330 per week — a 5.7 decline from last year’s median rent.
However, looking at the areas of Perth, the median house rents were a bit more unpredictable. The outer region of the capital city saw a 2.9 per cent increase in rents, the middle region held steady and the inner region saw a decline at 7.1 per cent.
In terms of vacancy rate, Perth follows the declining trend seen in all capital cities except Darwin — an indication of a tightening market. The vacancy rate in the WA capital declined by 0.6 of a percentage point to 5.1 per cent over the quarter.
Compared to this time last year, the number of vacant rental properties in Perth dropped by 23 per cent.
According to Professionals Real Estate Group’s Shane Kempton: “Rents are now stabilizing and with properties in many lower-priced Perth suburbs very competitive, investors can now achieve rental returns in some areas of Perth that are above 5 per cent.”
The combination of rising rental returns and the possibility of future capital growth brought primarily by the recovering resources sector makes it a good time for investors to enter the Perth market, he said.
To make the most out of your rental property, Mr Kempton strongly recommended doing thorough research to avoid the common rental mistakes investors make in Perth — from background checks on potential tenants to review of contracts and lease agreements.
Recent population trends and economic data indicates good potential for property growth in Western Australia, especially as major infrastructure projects are in the works and the resources sector continues to recover.
“In the vast majority of areas in Perth, property prices are still at rock bottom. Buyers should now move quickly to secure a property before the recovery in the market gains further momentum to avoid buyers’ regret,” Mr Kempton advised investors.
The Joondalup Precinct is considered one of the most steady property markets in Perth as it boasts consistent sales activity even when the capital city’s market was going through a general decline.
As the Perth market makes its way to revival, the area offers great opportunities for investors — from affordability to strong capital growth potential brought by an array of education, medical, transport and commercial infrastructure.
Meanwhile, suburbs in Melville, particularly those in the middle of the inner-city and the middle-ring areas of Perth like Bicton, Booragoon, Kardinya and Leeming, will benefit from its good access to the central business district as well as the major east-west transport corridor which links the Perth airport to the Port of Fremantle.
The city of Stirling, as a metropolitan area, also leads the recovery of the Perth property market. Like Joondalup, it remained steady throughout the economic downturn in the capital city.
Investors are also advised to check out Yanchep and Two Rocks where nearly $150 million in new residential housing was recently approved, according to the latest ABS building approvals figures.
In the first four months of 2018, over 640 new homes to be built along the coastal strip between Yanchep and Two Rocks were given building approvals.
During April 2018 alone, the area accounted for 15 per cent of new homes approved in the entire city of Wanneroo. That is 193 homes with a combined value of $44 million, “outstripping” other coastal areas like the Mindarie/Quinns Rock/ coastal area.
This upcoming influx of dwelling supplies is expected to increase consumer confidence in the area.
Capricorn Beach Estate and Atlantis Beach Estate’s Jarrod Rendell said: “Affordable coastal building land combined with improving social infrastructure is driving this investment in new housing both in Yanchep and Two Rocks.”
At the moment, coastal lots can be bought for just $139,500 in Two Rocks and from $175,000 in Yanchep, according to him.
Aside from its affordability, the area also boasts good lifestyle, strong local communities and growing infrastructure, including Two Rocks marina, Atlantis Beach Baptist College, Yanchep Secondary School worth $57 million, Yanchep Surf Life Saving Club, Yanchep sporting complex worth $8.3 million, improved medical and child care facilities and the new Yanchep rail station set to operate in 2022.
While not as affordable as the areas previously mentioned, suburbs in exclusive locations are also contributing to Perth’s recover as it shows big growth percentages over the past months.
Over the past year, Applecross recorded a median house price increase of 32.4 per cent, pushing the price to $1.6 million. Meanwhile, Dalkeith saw an 8.3 per cent growth in median house price, pushing it to $2.6 million.
Aside from Applecross and Dalkeith, these top suburbs also include Bicton, North Freemantle, Cottesloe, Kallaroo, Nedlands, Mosman Park, Ardross, and City Beach, which all experienced growth ranging from 22.7 per cent to 8.6 per cent.
According to Mr Kempton: “Traditionally, it is the top end of the real estate market that leads the recovery in the Perth property market and these figures confirm that Perth is now entering this recovery stage.”
Among the growth drivers in these areas are the recovery of the resources sector that improves consumer confidence and the decline in stocks that drives prices up further.
The trend in Perth’s premium suburbs are expected to be experienced by the rest of the property market over a one- to two-year period.