Recovering market sees ‘interesting’ buying patterns as prices settle

Damian Collins, president of the REIWA, said that this meant good news for the WA property market, and property investors.

“We’ve had an oversupply of properties for a number of years and ... continuing to build more houses is not going to help the oversupply situation,” Mr Collins said.

“So, the fact that first home buyers are taking up established properties means that this’ll help reduce the excess supply, particularly on the outskirts and fringes of the city where there is a lot of oversupply, so overall it will be positive for the market in taking up supply that's on market.”

With the reduction of the current oversupply, the last 18 months have also seen the vacancy rate decline, which in turn has increased rents.

However, capital growth is not expected to rise until at least 2020 due to oversupply, which is currently being absorbed by first-home buyers.

This then in turn creates an opportunity for investors to enter a market with high rents and, when the supply is properly absorbed, solid longer-term growth prospects.

“Not all areas are oversupplied, but anything that helps pick up the excess stock in the market is good for long-term and the fact that a lot of first-home buyers are choosing to buy established stock means that established stock for sale reduces versus when they build, it adds more stock into the market, so overall it’s positive for capital growth in the long term,” Mr Collins said.

“This year is about buying a good quality investment property where you will see the rent growth, but 2020 is when you’ll start to see if you bought well, you’ll start to see some reasonable capital growth in 2020 onward as the mining sector brings in a lot of extra workforce to cope with all the extra mining construction projects.”

Why are first home buyers turning away from new?

According to Mr Collins, the shift away from new properties was due to underlying issues with the current first-home owner grant.

“As it currently stands, the WA First Home Owner Grant unfairly penalises buyers wanting to purchase established properties by only providing assistance to those who choose to build,” Mr Collins said.

“Initially, this had the effect of skewing first-home buyer preferences towards new builds, but it appears more first-home buyers are choosing to forgo the grant in favour of purchasing an existing property in an established suburb.

“It’s not fair that so many first-home buyers are missing out on the grant, simply because they don’t want to build a new home. Or even worse, it means some first-home buyers who want an established property are unable to enter the market.”

As a result, the REIWA and Mr Collins believe the first-home owners grant should be amended to include established properties as well.

“Increasing the demand for established housing will have a knock-on effect to other areas of the market. This would allow more WA households to [move] into accommodation that suits their changing needs, resulting in more transfer duty revenue for the state,” Mr Collins said.

“First-home buyers have consistently shown they prefer to buy established homes. The WA government should respect the preferences of first-home buyers by not discriminating between established and new build properties, enabling more West Australians to make the dream of home ownership a reality.”