Perth prices drop then rise again

The West Australian property market has shown itself to be unsettled in the March quarter, following three years of unprecedented growth and the end of the boom.

Preliminary figures for the March quarter suggested the overall metropolitan median price fell by a modest 1 per cent. However, REIWA figures show this is climbing once again as further sales data comes to hand later during this month.

REIWA President Rob Druitt said the initial drop represented a reduction of around $4,500 to a median of $452,500 in metropolitan Perth, but that this had already lifted to $455,000 by the second week of May.

"The metropolitan median dipped momentarily this year, however we believe the final median for the March quarter will settle at somewhere between $460,000 and $465,000, illustrating the ongoing resilience and demand in the market ," Mr Druitt said.

Metropolitan units and apartments also dipped in price in the March quarter, sliding by a very modest 0.7 per cent, or around $2,500 to a preliminary median of $352,500. As with houses, these too are expected to bounce back.

Mr Druitt said the modest but temporary decline in the New Year was not surprising and that the market was still catching its breath after the marathon of the last few years.

"It's also the case that many homebuyers have been holding off, waiting to see what stamp duty relief might come from the government. Now that these cuts have been announced the uncertainty is gone and we are seeing renewed confidence in the market which is likely to be maintained through the June quarter," Mr Druitt said.

THE REGIONS

Mr Druitt said the really interesting news from the March quarter was the regional data.

"While metropolitan Perth dipped and bounced a little in the quarter, regional house prices showed some solid gains. Overall they jumped by 5.1 per cent to a new median of $360,000.

"The market is flat in Mandurah/Murray, where we saw just 0.2 per cent growth to a median of $450,000, while Greater Bunbury which had modest growth of 1.2 per cent in December, dropped by -4.2 per cent in the March quarter, down $16,000 to a new median of $374,000.

Mr Druitt said that in contrast to houses, regional units dropped by 5.2 per cent to a median of $280,000 across the state.

LAND

"Regional land is also is strong demand, jumping by 20.6 per cent to a median of $205,000, compared to metropolitan land which grew by 1.9 per cent to a new median of $265,000," Mr Druitt said.

Perth land prices have enjoyed solid growth of more than 50 per cent over the last 12 months, while regional land has grown by almost 30 per cent.

RENTS

Perth's rental vacancy rate has plummeted to a new low of just 0.8 per cent.

"REIWA has never before recorded a vacancy rate this dire, and seems to be caused by a combination of a rapidly growing population and the big drop in first home buyers over the last few months.

"Hopefully, with the generous new stamp duty cuts for first home buyers, more people can now move out of rental accommodation into a home of their own, freeing up rental stock for others and easing the squeeze," Mr Druitt said.

Median metropolitan rents have risen by almost 4 per cent in the quarter to $270 per week.

"Interestingly, the median rent for units alone has stabilised at $250 per week, and did not grow in the March quarter. This is the first time in several years that unit rentals have not increased in price, perhaps suggesting that an affordability cap has been reached for many people at the more accessible end of the rental market," Mr Druitt said.

Mr Druitt said that there had been a 25 per cent reduction in new leases, illustrating that existing tenants were staying put and accepting rent increases, rather than moving out to risk finding alternative rental accommodation.

"We simply don't have the stock, so tenants understand the need to secure a place, hold onto it and to be realistic about Perth rents," Mr Druitt said.

SALES & SELLING DAYS

The number of dwellings sold during the March quarter was up by 6.5 per cent to 11,500 properties, an increase of 21 per cent over the year.

At the same time the number of selling days between listing a property and getting a contract for sale on it has stretched out by 18 days to an average of 55 days.

"The increased sales turnover probably represents a combination of some investors selling up after the boom, along with upgraders who have been waiting for more certainty in the market before listing their house for sale.

"Now that things are settling and with the expectation that first home buyers will return to more usual levels, we have seen stock levels plateau at around 14,000 places. Over the short term we expect to see stock levels return to the historical norm of around 12,000 homes and selling days drop back a little to around 45 days," Mr Druitt said.

SUMMARY

The March quarter results show a statewide market that is unsettled and patchy, yet promising.

The Perth median price seems to have grown by around $8,000 on the revised December quarter median of $457,000.

"The brief, modest price decline in metro Perth was unremarkable and reflected the uncertainty in the market at the beginning of the year.

"We will likely see greater confidence return to the local market over the latter half of this year, particularly as first home buyers now have significant encouragement.

"This in turn will mean that upgraders who have been waiting for a pool of first time buyers to relieve them of their existing property will now have the opportunity to sell, upgrade and move, helping reinvigorate the housing sector across the board," Mr Druitt said.

Mr Druitt said the regions still appeared to be growing strongly on the back of the resources boom and that population pressures in many areas would continue to place accompanying price pressures on land, housing and rents as demand outstripped supply.

"The market is still settling down after record growth, however it seems likely that as things return to normal and buyer confidence is restored we can expect modest growth at least through to the end of the year", Mr Druitt said.

25 May 2007

Source: REIWA web site