WA Perth market 2020

It may end up with a lot of shared accommodation. Anyone laid off will probably get the dole straight away. The days of singles living alone in the 1 bed unit might be over for the next 12 months.
Landlords have always copped the short end of the stick though and it looks like they are going to try it on again.

 

Developers/Renovators of Perth, has anyone got any recommendations for garden designers/landscapers in town? Looking for some advice for our PPOR which will likely result in work if we like their ideas. Thanks in advance!

 

Concerned about the Coronavirus' Effect on Perth's Property Market?

It seems the Perth property market just can’t catch a break, doesn’t it?

A year ago, commentators were hoping 2019 was the year of recovery after having paid our penance since the 2012-15 period of over-exuberance and over-supply.

Then the royal banking commission kicked off and spooked the banks to a point of nearly shutting up shop until August 2019.

At the same time, as another kick in the teeth, Bill Shorten decided he would make the 2019 election a war on property ownership (amongst other things). And whilst that didn’t pay off for him in May, it seems we never really came out of our shell as a state in terms of confidence until springtime when buyers came out in their droves and transaction levels went through the roof, upping itself on a weekly basis through Christmas and into February this year. Transactions were 80% higher in February than they were in Winter 2019.

Stock levels, which had been hovering at 17,000 properties on market for the last 4 years, plummeted over spring to WA’s natural balance of 12,500 and are still trending down as homeowners are reluctant to sell when they feel so close to an uptick in 2020 and beyond.

In other words, for every 3 houses being sold, only 2 houses have been coming back on the market. That’s as simple an indicator you can get to demonstrate the buyer/seller dynamic at the moment.

On top of this, the ‘days on market’ median, which had been rising steadily to over 80 days in spring, has started to drop quickly into the 60s. More suburbs are coming into the 40s, which is where we generally see prices start to grow.

On top of that, rental vacancies, which denote how many rentals are available on the market at any one time, have dropped from a high of 7.5% down to 2.2% this year. This is boom levels. We’ve gone from landlords having to offer fruit baskets to get someone in the door to having rentals snapped up on the first viewing and above asking price. Hotter than toilet paper!

cont.........

 

I did read on ABC's blog yesterday BHP were hiring 1500 people. I haven't read much into it and don't know if these jobs were already advertised but that's a positive for anyone potentially out of work. I am also assuming the jobs are in regional WA? Mining jobs are on the nose a bit but still I think a bit of positive news.

 

Try Jack Furzer at Infiniscapes Jack Furzer (@infiniscapes_perth) • Instagram photos and videos he does all my landscaping but is more landscaper than designer. Probably has some good ideas though!

PS He is good mates with your neighbour

 

Newsletter that just went out from local buyers agency.

"We hope you are staying safe in this current extraordinary environment. Australia will get through this and come out the other side well. However, with many people understandably feeling uncertain about the future, we wanted to write to you to give you an outlook on what we expect to see in the Western Australian property market during and following this challenging time.

While Perth’s property market recorded a strong start to 2020 with strengthening rental market conditions and consecutive months of price growth indicating signs of a more sustained recovery, recent events have added new uncertainty as to what will happen within WA’s housing sector and economy.

Although at this stage property activity remains higher than the same time last year (there were 603 sales recorded in the latest weekly REIWA data compared to 469 in the same period of 2019), the potential social and economic repercussions of COVID-19 are understandably leaving existing and aspiring investors with a number of questions.

What’s the impact of the Coronavirus (COVID-19) on residential property?
The coronavirus pandemic will inevitably have short-term impacts for WA – likely in the form of a significant slowdown in the State’s domestic economy (which up to this point had recorded four consecutive quarters of accelerated growth), and a delay to the housing market recovery as buyer/seller activity reduces in the nearer-term.

We expect to see a stagnation of rents for the rest of the year, compared to our earlier optimism of good rental growth in 2020. In the short term, some tenants may find themselves less able or unable to pay rent due to job losses or redundancies which may pose some challenges for landlords. However, the government has confirmed they are working on a rental assistance package to support tenants whose income has been affected, with details anticipated to be released shortly.

Due to current uncertainties, we expect transactions to also slow down, meaning there will be fewer buyers in the market. However, at the same time there will be fewer sellers bringing properties to market, which should help to somewhat offset this.

While the repercussions will be short and sharp, these effects are unlikely to impact the long-term fundamentals that remain in favour for WA’s property market, and we remain confident of the market’s longer-term performance. Given the current shortage of stock for sale and properties for lease in Perth’s market, we anticipate that the current environment will delay activity, but not change the underlying demand for housing.

Property has historically shown long-term resilience

Over the past few decades, Australia’s economy and property markets have been exposed to challenges with events such as the SARS outbreak in 2002 and the Global Financial Crisis of 2008. While this event is clearly larger, it has also been met with a significant government response, with $189 billion in support already being offered to businesses and consumers. While these previous events triggered a drop in activity in the immediate term, the negative effects were short-lived, with property showing long-term resilience, and ultimately continuing its growth in value.

In short, the immediate fluctuations didn’t impact where we are now. In fact, on a national level, analysis has shown that those who bought during the GFC continued to record high levels of growth in the years that followed, supported in turn by government stimulus and falling interest rates.

Indeed, during events such as these, property has consistently shown itself to be one of the more resilient asset classes, with less exposure to real-time data and its relative illiquidity protecting it from the same volatilities as we are currently seeing in the financial markets.

What about WA compared to the rest of Australia?

From a property-specific perspective, we expect WA’s property market to remain more shielded from the effects of coronavirus than the markets in Sydney and Melbourne, where high levels of investor participation and (in the case of Sydney in particular) oversupply could increase susceptibility to price fluctuations.

Our demand from investors was only just starting to return prior to this. And with modest transaction activity currently, we are likely to see a lower drop in activity than other major markets.

While we will very likely see a reduction in sales and leasing transactions as people deal with the current uncertainties, and hence a deferral of projected demand, the long-term fundamentals we are seeing in terms of tightening supply, increased mining investment and lack of oncoming stock remain in place and set the market in strong stead to resume its recovery once certainty is restored.

What’s ahead?
The Australian government has already set out a number of initiatives to soften the economic impact of the coronavirus pandemic, with the announcement of a $189 billion stimulus package set to provide support to Australia’s key industries.

Shortly after news of the outbreak developed, the Reserve Bank of Australia cut official interest rates by 25 basis points, with a further emergency cut taking the official cash rate to a record low of 0.25%.

While these initiatives will help to quell some of the initial impact, they also hold longer-term benefits for property investors by helping to boost access to credit and lowering borrowing costs.

In fact, it’s highly likely in the longer-term that we will see greater levels of interest in property as an investment vehicle, with those who previously participated in more volatile assets such as shares looking to invest capital into more resilient, secure alternatives - something that will help to further bolster the recovery when it comes.

What does it mean for aspiring buyers?

While the coronavirus outbreak is undoubtedly going to trigger a short-term decline in buying activity, for those with high levels of income security, the reduced buyer competition and weaker market conditions are likely to actually improve their buying position.

With the latest interest rate cuts further enhancing accessibility to credit, aspiring buyers have the opportunity to secure more favourable rates on home loans, placing them in a strong financial position when the market recovery resumes.

What does it mean for sellers?

With the coronavirus outbreak inevitably weakening market conditions in the shorter-term, people looking to sell their properties will need to consider any decision in the context of a longer-term outlook.

Given the historic short-term nature of such fluctuations, those with the flexibility to do so should look to defer immediate sales decisions.

What does it mean for existing investors?

With the anticipated decline in leasing transactions and job losses amongst some tenants, rental demand will most likely reduce in the shorter-term. However, given the uncertainties of the current environment, existing tenants will be more inclined to renew and extend leases that are nearing expiry, which (combined with interest rate cuts) will offset some of this initial impact.

Investors with strong financial security may also find themselves in a better position to buy, with easing credit conditions providing opportunities for portfolio expansion.

In addition to rate cuts, several lenders have already begun announcing assistance packages for borrowers affected by the coronavirus outbreak, and are encouraging borrowers to review their credit options with their advisors to prepare for the changing economic environment.

What should I do now?
Evaluate your credit options

As the government announces new measures to stabilise the economy and ensure continuing availability of credit to borrowers, we are actively advising all borrowers to be working with a mortgage broker in reviewing their credit options to ensure they are in a strong financial position for the months ahead and remain informed of the opportunities available to them as they arise. All borrowers should consider:

• Evaluating the opportunities available in the low interest rate environment, especially as easing credit conditions and lender flexibility make potential options more accessible. Our brokers have recently seen rates as low as 2.29% fixed for three (3) years.
  
  
• Negotiating lower rates with existing banks or refinancing to save money on repayments.
  
  
• Reviewing existing lending solutions and assessing availability of offset accounts to store 3-6 months of loan repayments.
  
  
• Evaluating potential to access available equity as emergency cash buffer.
  

If you’d like to speak to our mortgage broking team, please message your existing broker or contact our Finance Team Leader Caylum Merrick at 0423 062 746 or email [email protected]

Keep up-to-date with market opportunities

With competition reducing, there will likely be some strong buying opportunities in the next six months for those who have been considering getting into the market or expanding their portfolio. If you are one of those investors, our advice is to keep up-to-date with market trends in conjunction with your buyer's agent to ensure you are selecting areas and properties with the right demand, supply and growth fundamentals in place to support a strong performance when activity picks up.

If you would like to discuss this further, please contact the Team Leader of our Buyer's Agency division Emma Everett at 0404 015 944 or email [email protected]

Stay in touch with your advisors

As times remain challenging and uncertain, we encourage all investors to continue to seek professional advice from their accountants, brokers, buyer’s agents and other relevant parties so you can continue to maintain, strengthen and protect your investment position.

Above all, we would like to assure you that our team are working tirelessly to protect the interests of our clients during this time, and will be providing regular updates to ensure our investors remain in the best possible position throughout this period of uncertainty.

We hope that you and your family remain safe and healthy during this time.

With warm regards,

Momentum Wealth"

 

Also this is a pretty good initiative by the NT government IMO. Not new but a variation on previous schemes they've implemented. Hopefully the WA gov introduces something similar? Especially considering we are planning some renos on our PPOR!

The NT Government has released its coronavirus stimulus package. Where is the money going?
"The $60 million stimulus package will be divided into two major portions — a $30 million 'Home Improvement Scheme' and a $20 million 'Business Improvement Scheme'.

The Home Improvement Scheme will provide Territorians who own a home a $6,000 grant for renovations if they contribute $2,000 of their own money.

Alternatively, home owners can spend $1,000 to a get a $4,000 renovation grant."

 

Anyone got a tip on the best place to buy good internal doors fully finished and hung?

 

I went to the CBD at 1:30pm today and it resembled a ghost town. I was scared just to walk on carillon arcade as it was so empty that there were as many homeless people roaming the arcade as the shoppers. Can't imagine what it will be when the government introduces the stopping of non essential services as it was introduced in Sydney/Melbourne.

 

Perth Market Snapshot For The Week Ending | 29 March 2020 | REIWA


Perth market snapshot for the week ending 29 March 2020
NEW
30 March 2020

Sales activity decreased 27.2 per cent in Perth this week, with REIWA members reporting 426 transactions.

This decrease can be attributed to a 32.7 per cent fall in house sales and a 27.2 per cent fall in unit sales, despite a 2.7 per cent rise in vacant land sales over the week.

Properties for sale
There were 12,581 properties for sale in Perth at the end of this week, which is 0.9 per cent lower than last week.

A closer look at listing stock levels shows house listings decreased by 0.6 per cent, listings for units decreased by 0.9 per cent and vacant land listings decreased by 1.5 per cent.

This week's total figure for properties listed for sale is 1.4 per cent higher than levels seen four weeks ago, but is 26 per cent lower than levels seen a year ago.

Perth rental market
REIWA members reported there were 5,417 properties for rent in Perth at the end of this week, which is 0.3 per cent less than last week.

This week's rental listings figure is 0.8 per cent higher than levels seen four weeks ago, and is 19 per cent lower than levels seen a year ago.

Leasing activity decreased 3.4 per cent in Perth this week, with REIWA members reporting 1,011 properties leased.

View our Perth Market Snapshot graph for a detailed breakdown of the past week.

 

Another month without a decline for Perth according to CoreLogic index, roughly a gain of 0.5% for March.

Other cities:-

Sydney 1.0%
Melbourne 0.4%
Brisbane 0.6%
Adelaide 0.3%

Interesting times ahead, I think we will need to wait for few months to see any gains again. IMHO Sydney, Melbourne will be affected more than other cities by these crises. Please share your thoughts.

 

Each day it becomes harder to see how the Perth property market will hold values. I think a reasonable fall of between 15-20% is possible, nothing catastrophic (although it will hurt) given the economic hits. The economic situation will take quite some time to resolve, unwind and move forward again.

What will keep prices holding value is that we all still need a house to live in, so with the Government initiatives there is confidence that majority of people will keep their homes.

Its the investment properties that I am more concerned about. Landlords who are not receiving rent may eventually have no option but to bring these properties to market to relieve financial stress, or following years of no growth may be keen to just to get out. These are going to be sold at lower prices to move them.

In addition just confidence again in the market, the world to borrow money and invest into property again, yes many will, but a lot wont.

For a lot of people following the GFC, Covid19, people are becoming a lot more aware of what is important in life and working hard and trying to make money that can get so quickly taken away is going to start being heavily considered against a more simpler life around family, friends and experiences.

This cultural shift was evident following the GFC and I think will be strengthened further, especially given the nature of this crisis, which has put society on edge more then the GFC.

All of these I believe will weigh on the property market for some years to come.

Stay safe and look after each other and we will win!

 

Byford !!
Lot of new families are moving in. Vacancy rate is 1.5%. Property is cheapest and new builds (good tax benefits)

All good signs for a investor. Only negative is its far from the city?

 

Do you want future capital growth? If not, then Byford is great.

There is limitless new supply of land there waiting to be developed that will keep a lid on resale prices for many years.

 

Perth is probably looking better than other capitals - with mortgage rates where they now sit, you could probably service Perth's median house price on a dual income minimum wage. I doubt there will be much forced selling after the pandemic situation passes and repayment deferral periods end, although we'll still see a bit for those who can't pick up their old jobs again.

WA will have more have more going for it than the rest of the country, as demand for iron ore etc presumably ramps up globally when coming out the other side. Hopefully we'll see a pick up in interstate migration.

 

Harsh but it's like watching sheep walk off a cliff ...

Cheap doesn't equal value and Byford is not cheap anyway.

 

Add into the mix that already low levels of new supply are going to collapse even further.


I’d have real concerns for the WA development industry at this stage. They were already starving and now;

1. Private sector demand will have collapsed.
2. The State Government developer welfare fund (Keystart) has hit the skids. Who would have thunk a state backed subprime lender was a risky play? And will be struggling to attract new customers.

So, expect a wave of bankruptcies and, probably, extreme difficulty ramping up the supply side again once the economy restarts.


Watch this space.

 

WA is in the best position of any state to weather this. Having had a net loss interstate migration for a number of years there is actually upside potential within the population growth figures. In a "closed boarders" scenario, combining natural increase and removing interstate loss with zero overseas migration, WA would have had a population growth of 23,500. On dwelling approvals ~15,000, this is almost at stable building levels. I work to the ratio of 2 people per 1 dwelling being a trigger for a growing market, so the development industry would only need to shed 3,000 properties a year to be in "growth conditions".

Conversely NSW and VIC are at development highs which rely on uncharacteristically high population growth. Risk of oversupply is all but guaranteed for these two states:

NSW:

• total population growth 102,000/y, drop to 65,000 with closed boarders
• 50,000 annual dwellings currently approved
• 1.3 people per dwelling closed boarders
• required fall of 17,500 new dwellings for stable market

VIC:

• total population growth 130,000/y, drop to 35,000 with closed boarders
• 60,000 annual dwellings currently approved
• 0.4 people per dwelling closed boarders
• required fall of 42,500 new dwellings

Also bear in mind these falls of dwelling approvals are relatively new - in recent years they've both been consistently over 70,000 each, so real current supply is even higher than these numbers. This looks at the corona events in isolation which is not necessarily appropriate, but it goes to demonstrate the massive reliance on migratory population growth that VIC and NSW currently have, and there is simply no way to solve that.

The other big risk is bankruptcies. This is the risk the federal govt are trying to mitigate and to date we have seen some considerable steps taken by both gvt and banks. Given WA will come out the other end with little market oversupply i think it will be more of a "pause" than a crash. There may be a little dip as desperate sellers do whatever it takes to offload, but it will be short-lived.

So IMO the only way to predict WA is going to drop 20% and enter a sustained crash is to assume (A) Corona-related deaths will exceed 10,000 in the state (dropping the "natural increase" ppn growth number), or (B) total destruction of the Australian economy. Call me a risk taker, but I'm hedging my bets WA will come out of this OK.

 

Thanks for the write up @JL1 love your work!