The most affordable capital city houses in the country are enjoying ultra-low interest rates, improved economic conditions, and strong government incentives led a strong recovery of the property market, according to the latest quarterly Risks & Opportunities Report from Property Research.
As projected, the Western Australian housing market has recovered well with substantial increases in housing prices, with capital growth of 3.9 per cent for houses over the past 3 months. There has been a noticeable improvement in buyer confidence resulting in improvements in housing finance, according to .
Pete Wargent, co-founder of property buying services company BuyersBuyers.com.au confirmed that buyer sentiment has turned around very rapidly. “The rental market has gradually shifted over recent years from a huge surplus of rental stock in 2017, when city-wide vacancy rates were at about 5 per cent, to a chronically tight rental market, with numerous examples of spiking rents” Mr Wargent said.
“First homebuyers were already taking advantage of the low mortgage rates and the government deposit scheme, but now it seems that buyers from every cohort are quickly realising that the long-awaited recovery is now about to hit full steam” Mr Wargent said.
Doron Peleg, CEO of Property Research said that the recovery was broadly in line with what had been projected by the research house late last year. “Historically there has been a strong correlation between movements in interest rates, investor activity, and property price growth, and as we forecast last year, the correlation will reassert itself this year leading to strong price growth in Sydney and regional New South Wales, especially for family-suitable properties” Mr Peleg said.
Mr Wargent of BuyersBuyers.com.au said that prospective buyers in 2021 need to be well organised, well-research, and act decisively. “Listings in Perth are now lower than a year ago, and there is now real potential that the coming decade could be a strong one for the resources sector, as global stimulus pumps up demand for commodities” Mr Wargent said.
“A big change this year has been that investors are coming back into the market, so there’s competition for quality property coming from all angles, and rental markets are tightening to the extent that it’s become cheaper to be a buyer from a renter, at least from a cashflow perspective” added Mr Wargent.
“There’s every chance that Perth is heading into another genuine property boom period” Mr Wargent said.
Risks & Opportunities report summary
Strong government support was a key driver in the improved economic conditions, improved consumer sentiment, and, finally, renewed demand for housing.
A sustained weakness in the housing market since the end of the mining boom has led to continued price reductions, that made Perth the most affordable capital city housing market in Australia with a median house price of $475,000.
The combination of the improved economy, government incentives, the recent reductions in interest rates, (with some lenders offering home loans with an interest rate below the 1.80% mark), make WA substantially more attractive market, particularly for owner-occupiers.
For owner-occupiers with interest-only loans, ultra-low interest rates make it typically cheaper to buy than to rent a house from a cashflow perspective in all areas of Perth.
The anticipated price increases of this very affordable market are being now delivered with housing prices are projected to increase over the next 12 months in the range of 6 to 10 per cent, particularly for the mid- and high end of the market.
Popular areas that have shown resilience in the past 12 months, such as Perth-Inner and Perth-North East, are highly likely to enjoy stronger demand in 2021.
However, at the affordable end of the market, price increases might be contained to 4-8 per cent due to the additional first home buyer grant and stamp duty rebate outlined above.
Those generous government grants are likely to increase the supply of new affordable houses, applying some downward pressure on house prices.
In addition, the demand for housing in most regional areas in WA is relatively low. In the absence of strong growth driver and with sufficient supply of housing, the capital growth in those areas is likely to be modest.
Lastly, it should be noted that without structural change to the WA economy that will deliver a large number of high paying jobs and substantially increase population growth, only a moderate price growth is projected over the long term.
Units, particularly rental apartments in high supply areas, carry a higher level of risk.
Rental apartments continue to carry a higher level of risk of deliver poor or negative capital growth, due to the combination of oversupply, lending restrictions and low demand as they are generally not attractive to families or owner-occupiers. The Perth – North East area has the highest rate of unit oversupply in WA with 724 units in the pipeline (a 6.6 per cent uplift to the established stock).
COVID-19 has further increased the risk associated with rental apartments, with investor demand likely to shift towards detached houses.
For the foreseeable future units in WA, particularly new apartments in ‘danger zone’ areas (such as Perth 6000), carry a higher level of risk.
For all media enquiries, contact BuyersBuyers.com.au Media Manager Phil Bathols on 0419 565 193 or email email@example.com