WA Western Australian property investors are losing hundreds of thousands

Anyone catch the ABC tonight:
Coronavirus combines with end to interest-only home loans in big hit coming for investors, experts warn - ABC News

Max Green's IP has plummeted from $425,000 in 2016 to $300,000 today

Wayne Grimes brought for $670,000. "I'll be lucky if I'm able to sell it for $400,000."
Worst still "Originally when I bought that place I was getting $895 a week in rent and now I get about $415 a week," Mr Grimes said.

 

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Sorry, fixed.

 

Price falls like this have indeed occurred in the Perth market. Most likely for purchases around the 2014 top of market and been dropping pretty much ever since. They are kind of cherry picked terrible cases. Not every $670k dwelling in Perth is now worth $400k. One example is a unit in an outer suburb and a lot of the outer suburbs were hit hard due to over supply, the other example is an inner city apartment - another over supplied market.

The interest only cliff has been happening now for around 2-3 years. Some people have managed to get more IO, some have refinanced to a new 30yr P&I and some have had to roll over because they no longer qualify for a refinance.

Current market outlook is looking a lot more promising though. Over the past 4 years over supply has been used up and is now heading towards under supply

Today's market update for Perth

Residential listings for sale and rent at a six-year low in WA

18 May 2020

There are few signs that the Perth residential property market has been impacted by COVID-19 with the market seeing higher demand than supply and available stock dropping through the period.

REIWA President Damian Collins said despite the COVID-19 pandemic, we are seeing the number of properties for sale and rent continue to reduce each month to currently sit at a six-year low, with 11,690 properties currently for sale and 5,165 properties for rent on reiwa.com. .

“Perth’s property market has been showing signs of recovery since October 2019 and while COVID-19 may delay this, it most likely won’t stop it. The state’s economy is coming back much quicker than many experts thought and as long as it continues to recover, it is unlikely the property market recovery will be reversed,” Mr Collins said.

Sales market
Looking at listings for sale from an annual perspective, the same time in May 2019 there were 16,233 properties for sale on reiwa.com which is 29 per cent higher than current stock levels.

“Another positive is to see that the average discount accepted by sellers has reduced to seven per cent, which is 0.5 per cent lower than May last year. If we were in a struggling market, we would see this number higher as sellers accepted lower than normal prices.

“Due to the lower than normal stock levels we are currently seeing and reduction of sellers discounting, there should not be any major downward price pressure and it is likely that the current median sale price of $477,000 will remain relatively stable over the coming months,” Mr Collins said.

Rental market
From a rental perspective, current stock levels are eight per cent lower than April and 29 per cent lower than the same time last year.

“Since the start of the year the vacancy rate has remained under three per cent, with it currently sitting at 2.4 per cent and despite the lack of stock, rentals are still in high demand which REIWA agents on the ground are seeing by the number of people booking into home opens,” Mr Collins said.

“While things are looking positive so far for the property market, we need to ensure that the market continues the recovery we have been waiting for. Therefore, it is time for tax reform in our state and REIWA will continue to lobby for the removal of stamp duty and work with both sides of parliament to find a better solution.”

 

Yes some markets in Perth have really been hammered, wont help if properties were purchased at peak 2014
Still oversupply of apartments

Agree interest only to I&P has been an issue for last 2-3 years. You can tack on 40% to your bank repayments.... ouch
This topic has been raised on this forum before. For those who think it wont impact, your dreaming. I had two loans revert to P&I, I was able to refinance, but this wont be possible if values have dropped

This combined with drop in value is a disaster, I really feel sorry for these people who are so close to retiring and are now stuck


On the flip side I think inner city Perth period homes are holding up well. There is a demand for this. I see older units also selling well In inner city. Western suburbs also doing well.
Outer burbs still struggling

i have been screaming for years to abolish stamp duty, this is a government rort

 

Personally I think the P&I cliff has been partially averted with the drop in interest rates.

One of mine was coming to the end of IO and a fixed period at 4.19%, at the end of the fixed period I switch it to P&I early so could re-fix the loan. Locked it in at 2.59% for 3 years. The difference in the repayment between 4.19% IO and 2.59% P&I was not huge, definitely not 40% increase.

 

thats good
But its also dependent of number of properties you hold and rents not falling
Interest drop has helped for sure

If you read the article rents have dropped dramatically in Perth
Now we are seeing rents drop everywhere??