Perth’s property prices continue to slump

That’s exactly what I am doing.

Comparing property sales from 2015 and 2016 with similar properties in the last year.

It’s not perfect because you have to see a place obviously but when you control for property condition (standard of the finish, quality and age of kitchens and bathrooms) you are looking at serious falls.

And this is in inner ring suburbs. It’s remarkable. That said, the bottom cant be far away for properties in this class.

 

Id be super happy if I wanted to buy a PPOR in Perth right now. Always a silver lining.

 

But just because prices are cheaper today than what they were 15 years ago does not mean its a great investment today and you need to jump in. This adds some sort of urgency to get in before they go back to what they were at peak in say 2007. But its a nonsense, for properties to rise you need good economy, jobs, buyers....

Problem is we don't have the buyers and it just got worse over the last 2 years because of the credit squeeze. Investors in the main cant source finance, and FHB can not soak up the volume. On top of this the yields are woeful.

If you must invest stick it in the bank, fixed interest, at least you preserve your capital.

 

Agree, good time for this, but upgrading would mean primary residence that you are selling would need to be in one of the desirable locations to sell

 

If they could line up selling in a good area and buying in a cheaper area...could work out well..

 

good point.

 

Agreed, markets don't go up just because they've been down. Ok maybe the stock market does. But I was more pointing out that now is demonstrably a better time to buy in Perth than say five years ago, because everything is at a lower price point. Doesn't mean it's the ideal time to buy though.

Although rents have fallen significantly, prices have fallen almost as much, so yields are lower but still good compared to other Australian capitals. Varies from suburb to suburb of course.

You're right, money in the bank is likely to perform better than any investment in Aussie property over the next couple of years. But if buying for the long term hold, I think Perth is good buying in 2019/2020, better than most other capitals. And really good PPoR buying.

The problem is that house prices have now fallen so far that most people who bought in the last 15 years have not seen any increase in value or gone backwards. Yes markets within markets, but a significant proportion of Perth households have less equity in their home today than when they started, and equity for an upgrade purchase has to be sourced from savings. This is a handbrake on the upgrade market.

 

Hi Rex,


I know a couple selling up from Syd and moving to Perth. They tell me they are totally spoilt looking for their home . I guess their wealth transfer from Syd to Perth worked out really well for them.

 

Of course, what's the median of Syd vs Perth.... half, wow lots of choice

 

Stephen kouk tweeted that Perth is down 18% from peak in 2014, 5 years. Sydney is down 13% in only 1.5 years. Perth hasn’t tanked that much in comparison?

 

Stats are a broad picture, it will be very much dependent on area and product on how big the falls are.

Many outer burbs been hammered in Perth, same as apartments

Blue chip in Perth high end also
Have had significant falls

 

It’s in a deflationary spiral that has last almost five years. That’s bad.

Now it has to contend with the headwinds caused by the eastern states collapse.

What’s to say it doesn’t deflate for another 5 years?

The only compelling reason it won’t is that there will be a plain vanilla supply squeeze which inflates rents and makes investment more attractive again.

Its ALL about the rents.

 

Totally, it's about the state economy. This is key to a house price recovery.

Good point regarding rents and the assumption of strong rent increases automatically following a tight vacancy rate. This last year I've been banging on about shrinking household sizes being a response to the massive fall in Perth rents (sharehouses getting smaller, kids moving out of home sooner, etc because it's now cheaper to rent a house) and that it explains some of the rapid decline in vacancy rate. This elasticity can of course work in reverse, taking the wind out of a recovery, but would take some time to unwind.

I do however think that a minor economic improvement is enough to get the Perth rental market moving. Rents are set by supply and demand (and there isn't much supply coming), but with an upper limit set by household income. Median household income for WA is still at or just above the national median, and rents are currently lower than all other capitals. Starting from this base, I think Perth has reasonable headroom for rent increases IF vacancy rates do fall a little further. I think a 10-20% increase in rents over the next couple of years is likely if vacancies remain tight enough. A modest recovery in population growth would help sustain this low vacancy rate.

 

The building boom in syd/melb would’ve sucked some people out of Perth? They’d be set to return home as the construction sector tanks in these states.

 

Rents are somewhat constrained by wages but not really. Barring moving back in with your parents or leaving the city all together, if you want a roof over your head you will pay.


Interestingly, I haven’t heard any of the real estate spruikers beat the drum that loudly though.


The campaign they should be running now is that this year’s record low housing completion rates is going to translate into 2021’s housing shortage and rent boom.


Get in now before the squeeze etc.

 

The exodus is the only reason unemployment is 7% and not 10%- or higher.


I don’t know what they would be coming back to though.


There is no building boom here and there won’t be until prices start rising and that won’t happen until rents start rising.


The eastern states was the migration safety valve for WA; not sure we will be returning the favour.

 

Yeh i think in general people are hitting the mark and that mark seems to be fairly negative for Perth in the near future.

What we know:

- Vacancy Rates declining
- Unemployment Increasing
- Median Prices falling
- Incomes stabilising/Cost of Living Increasing

Ive said it recently but i feel this winter could be a very poor season for this state

Its not a bad time to buy a PPOR if you have the deposit. Its not that much cheaper to rent than to buy if you have a 15-20% deposit.

I guess vacancy rates are falling because you can either pay 100/wk with mum and dad or move out with 2 friends and pay 130/wk. That extra $20-30 seems worth it right now.

Im in a position to buy but i almost feel comfortable holding for a bit longer. We know labor isnt exactly going to help the cause in improving house prices. We know the Royal Comm isnt helping with getting loans ect

I find it hard to see improvement.

If its an okay time to buy PPOR it seem like the clock is at 4 with still some downside to come. Its a time to lowball a little for me and see if someone bites with tightening on Interest only loans ect turning to principle. Im looking at places bought 5 years ago ect

The only light right now for WA and positive is the reduction in vacancy rates. If that stagnates soon then thats a real concern it needs a little further and then a couple of years after that we will should see some improvement and minor catchup/rectification

Hope some of that makes sense

 

It is not an apples to apples comparison. Look at the ramp up in Sydney prices in the two years before it tanked, sort of puts the "tanking" in some perspective. The other issue worth considering is that these are nominal declines. When taking CPI inflation into account the five year spread of Perth property price falls is close to 18% real.