Trade-up buy­ers fuel growth hope

The West Australian - - NEWS - Daniel Mercer and Shane Wright

Buy­ers look­ing to trade up are driv­ing one of the few bright spots in Perth’s prop­erty mar­ket, ac­cord­ing to ex­perts who say the city’s real es­tate prices are the most af­ford­able in a gen­er­a­tion.

With the me­dian house price 13 per cent be­low its 2014 peak, in­dus­try ex­perts this week said 2018 was loom­ing as an his­toric low-point in the num­ber of prop­er­ties bought and sold.

But there are glim­mers of hope for 2019, with Perth’s rental mar­ket tight­en­ing and a surge of ac­tiv­ity among trade-up or as­pi­ra­tional buy­ers fu­elling price growth in up­mar­ket ar­eas.

The improve­ment in the prop­erty sec­tor is also com­ing through in home loans.

Fig­ures from the Aus­tralian Bu­reau of Statis­tics re­leased yes­ter­day showed a 4.7 per cent in­crease in WA loans ap­proved in Septem­ber.

It was the best per­for­mance of any State, with loans in WA up more than 7 per cent since June. Over that same pe­riod, loans across the coun­try have fallen by 3 per cent.

Real Es­tate In­sti­tute of WA pres­i­dent Damian Collins said Perth prop­erty was the most af­ford­able of any Aus­tralian cap­i­tal city.

Mr Collins said the me­dian prop­erty price of $450,000 was about five times the av­er­age salary com­pared with a mul­ti­ple of 10 in Syd­ney, where typ­i­cal prices are al­most $1 mil­lion, and more than eight in Mel­bourne.

He said that given WA’s econ­omy was re­cov­er­ing be­cause of a strength­en­ing min­ing sec­tor, a floor was bound to come un­der Perth’s prop­erty mar­ket af­ter four years of de­cline.

One of the first signs of improve­ment would come from the rental mar­ket, where Mr Collins said va­cancy rates had fallen from an his­toric high of 7.3 per cent in June last year to 3.9 per cent in Septem­ber.

Ac­cord­ing to Mr Collins, the tight­en­ing was likely to lead to a bump in rents of up to 10 per cent next year af­ter de­clin­ing 20.5 per cent since 2014.

De­spite th­ese up­sides, prop­erty agent and for­mer REIWA boss Hay­den Groves said Perth’s mort­gage belt was still strug­gling be­cause of an over­sup­ply of stock.

On top of this, Mr Groves said lend­ing re­stric­tions placed on banks by the pru­den­tial reg­u­la­tor to slow Syd­ney’s and Mel­bourne’s pre­vi­ously red-hot mar­kets had fur­ther crimped de­mand by mak­ing it harder for in­vestors to get credit.

He said the bank­ing royal com­mis­sion would only ex­ac­er­bate the trend, pro­long­ing any broader re­cov­ery in Perth.

Val­u­a­tion ex­pert Gavin Heg­ney said the clamp on lend­ing had re­duced most peo­ple’s bor­row­ing ca­pac­ity by 30 per cent com­pared with last year.

‘The clamp on lend­ing had re­duced most peo­ple’s bor­row­ing ca­pac­ity.’

Pic­ture: Nic El­lis

El­lie Houghton with the keys to her South Fre­man­tle house.

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