After getting beaten by the negative outcomes of the end of the mining boom, the Perth property market has started to show signs of improvement, with current market conditions deemed favourable for buyers and investors.
The Western Australia capital saw affordability improve for both houses and units over the quarter, according to the Real Estate Institute of Western Australia (REIWA).
According to REIWA president Damian Collins, investors are presented with an ‘excellent opportunity’ to take advantage of the current market conditions in .
“While the worst of the market downturn appears to be behind us, the results of the September 2018 quarter reveal conditions that are favourable for buyers and investors.”
Following price declines for three previous calendar years, experts believe that the property market in Perth is finally stabilising, setting up for a significant recovery soon.
In the last week of October, Perth saw a 0.3 per cent decline in dwelling values, higher than Melbourne at 0.2 per cent and Sydney and Adelaide at 0.1 per cent. Only Brisbane bucked the downward trend, climbing by climbing by 0.1 of a percentage point.
The median house price in Perth currently sits at $544,609, while the median unit price is at $347,089.
Despite the seemingly lackluster performance of the WA capital, the Domain House Price Report for the September quarter found that all capital cities are now underperforming relative to last year, except for Perth and Darwin.
This development in the more affordable capital city markets has allowed first-home buyers to get their foot up the property ladder.
Domain senior research analyst Dr Nicola Powell said: “Property prices across almost all capitals continue to fall. In many markets throughout Australia, gaining entry has become a greater possibility. The downturn has been aided by the tightening of credit by the banks following regulatory intervention and a bruising royal commission.”
“Rising mortgage rates, tighter credit conditions and reduced borrowing power have impacted all capital cities to a varied degree.”
Despite the decline in most parts of the Perth property market, there are more than 50 suburbs that bucked the trend, including Swan View, East Cannington, , Hillarys and Cottesloe for houses, and , Midland, Tuart Hill, Fremantle and for units.
There are more than 13,800 properties for sale in Perth at the end of the September 2018 quarter. During the same quarter, stock levels across the metro area have also declined by 3.7 per cent.
According to Mr Collins, this general decline in dwelling stocks is a ‘positive step forward in the market’s recovery.’
“This is the third consecutive quarter we’ve seen listings for sale decline and it’s pleasing that, although there were fewer sales this quarter, listing stock continues to be absorbed.”
Houses now comprise 74 per cent of all sales in Perth, which is a significant rise from last year’s 65 per cent.
Among the top-selling Perth suburbs for house sales during the September 2018 quarter are Baldivis, Canning Vale, Morley, Dianella and Gosnells, while the suburbs of Cooloongup, The Vines, Alexander Heights, Mirrabooka and recorded the biggest improvement in house sales activity.
“It’s a good time to buy, which is reflected in the fact a higher proportion of houses are now being sold,” Mr Collins said.
“This shift in the composition of sales (houses, units and land) indicates buyers are more inclined to purchase a house than they might have otherwise been. This can be attributed to housing affordability improving across the metro area, which has made buying a house a more attainable property purchase.
“We’ve also seen an increase in activity between the $350,000 and $500,000 price range during the September quarter, which is pleasing as it indicates first home buyers remain an active component of the Perth market.”
Clearance rates, meanwhile, are currently sitting at 30.8 per cent for houses and 13 per cent for units—significantly lower than the capital city average of 49.4 for houses and 53.9 for units.
Nationally, the clearance rates are deemed the lowest level for spring since 2012, according to the latest Property Pulse report from CoreLogic.
These low figures have tipped the balance of power to the buyers, auctioneer James Pratt said.
“It’s not necessarily a strong market, but it’s certainly not as bad as the media has been portraying it to be. It’s just a little bit harder.”
Nowadays, the center of Perth and East Perth, in particular, are offering good buying opportunities for investors and homebuyers alike.
According to Mr Pratt: “Those kinds of suburbs have a lot of personality, a little bit closer to the city’s always is started to become a little bit more on-trend in that marketplace and the demand for those properties is still pretty cool.”
REIWA also found that every aspect of the rental market of Perth has provided a range of benefits to property investors over the quarter as rental supply declined and demand continues to go up.
Mr Collins said that leasing activity was up, median rents remained stable, stock levels were reduced, average leasing times were quicker and the vacancy rate had ‘plummeted’ to its lowest level in more than four years—all of which are providing confidence to both landlords and investors in the capital city.
With more than 13,200 properties leased over the quarter, leasing activity in Perth had increased by 5.2 per cent, while listings are down by 11.9 per cent to over 7,200 properties for rent across the capital city.
On average, it took landlords only 46 days to find a tenant during the quarter—one day faster than the June 2018 quarter and eight days faster than the September 2017 quarter.
“Provided landlords are listening to the advice of their property manager and pricing their rental in line with market expectations, they have a very good chance of securing a tenant,” Mr Collins said.
"With less new properties coming onto the market, rental stock is being absorbed at a quicker pace, which has put downward pressure on listing volumes. A combination of increased tenant activity and lower listing levels has had a positive impact on average leasing times for landlords, with tenants needing to act quickly to secure a rental.”
For the sixth consecutive quarter, Perth’s overall median rent price held at $350 per week, which allowed the capital city to retain its title as the most affordable capital city rental market. This has proved to be beneficial for tenants, who enjoy the affordable rates, as well as for landlords, who have been provided with some much-needed consistency.
Furthermore, vacancy rates have declined to 3.9 per cent during the quarter, which is the lowest level Perth has seen since the March 2014 quarter, while gross rental yield for units and houses sit at 4.26 per cent and 4.58 per cent, respectively.
Overall, the rental sector has been leading the way towards the recovery of the Perth property market, he said.
According to Mr Collins: “Slowly but surely we are moving towards parity in the Perth rental market, with improved conditions across the board meaning there is a good opportunity for tenants and landlords to benefit simultaneously.”
Overall, while the Western Australia capital may not yet be in tip-top shape as a property market, but experts agree that the capital city is well on its way to restabilisation.
Property Investment Professionals of Australia (PIPA) chairman Peter Koulizos said that the simple secret to finding the best location for property investment, even in softening markets, is going back to the fundamentals of a good property.
The property lecturer said: "Look for undervalued areas around prime hubs. It's not just based on median price because before it might just be really cheap because the soil is contaminated."
"Go and have a look, drive down the streets. Are the houses similar in the prime suburb as they are in the undervalued suburb? Are the streets similar? We're looking for wide, tree-lined streets—they're the key there. Then, make sure that you compare apples with apples. If you can tick those boxes, it should be alright."
“They can't go wrong if they're close to the city or they're close to the river. Australians love the water, they love looking at beautiful views.”
Track the major market movements in Perth and get to know more about the capital city’s growth drivers and hotspots through Smart Property Investment’s April 2018, May 2018, June 2018, July 2018, August 2018 and September 2018 market updates. Visit Smart Property Investment's Property Market News page to get updates on other major capital cities.