Perth sales activity rebounds, but rental rates slacken

Perth’s housing market experienced a rebound of activity at the end of last year with sales turnover during the December quarter moving back to the long-term average for the metropolitan area.  The strong sales activity through the December quarter had not slowed and that enthusiastic ‘buyer momentum’ had carried into the New Year.

Sales normally calm down over the Christmas holiday period but that didn’t happen last year. The real-time reporting from our members currently indicates that January will also be a bumper month for turnover.

Earlier analysis by the Real Estate Institute of Western Australia showed the median house price lifting by 4% on the previous quarter, suggesting 2013 would end up with growth of at least 7% across the year.

However, real-time sale data from REIWA agents indicate that the quarterly growth was closer to 6% and pushing Perth’s median house price towards $545,000 through 9% annual growth.

This has largely been driven by two key factors. The number of first home buyers has dropped 12% since the June quarter with a  notable fall in sales under $400,000, while at the same time there was an increase in sales over $600,000. Together, this compositional change in sales acted to pull the median price upwards towards the end of the year.

I think the fall in turnover with sales under $400,000 has largely been a reaction to both low levels of housing stock and also affordability pressure on some first home buyers.

The number of houses and vacant lots on the market is below average by about 3,000 properties and this is increasing demand on the available stock.

First home buyers

Strong first home buyer activity had been a significant market driver over the past 18 months, although applications for established homes dropped away by 12% in the December quarter.

Data from the Office of State Revenue show there were approximately 5,330 first home buyers in the December quarter paying a median purchase price across the state of around $433,000.

However, countering the drop in demand for established homes was a 9% lift in applications for new buildings following the state government’s increase in grants for first home buyer construction.

Entry-level activity had prompted an increase in trade-up sales as relinquishing owners sold to first time buyers.

The City of Fremantle dominated house price growth for the quarter with the western part of the City of Stirling also doing well.

Across the whole year price growth was strongest in the City of Belmont, while the cities of Fremantle, Gosnells, the western suburbs and the northern end of Joondalup were close behind with growth exceeding the metropolitan average of 7%.

Units

The sales of multi-residential properties, such as apartments and villas, dropped a little during the quarter but I feel this was probably a reflection of slowing first home buyers and weak investor interest.

Even so, multi-residential dwelling stock enjoyed good growth of almost 5% for the quarter.

Stock and selling days

At the end of the year there were 8,700 properties on the Perth market, virtually unchanged from the September quarter as sales were quickly replaced with new listings.

It was a similar story with blocks of land, with the metropolitan area finishing the year with 1,115 lots on the market, much as it was in the previous quarter.

Days on market have stabilised around 50 days, well down on the 70-plus days at this time last year but it’s the rental market which is really experiencing a slowdown in activity.

Rental system

REIWA data that during the December quarter the metropolitan vacancy rate grew further to around 3.2% as more than 700 additional rentals came onto the market. That’s up 135% since late 2012 with more than 4,800 rental properties currently available for lease through REIWA member agents

In response to the competition the Perth median rent came down by $10 to $460 per week and representing a drop of $15 per week since the middle of last year.

It seems that the downturn of jobs in the mining sector, as well as many former tenants having now become first home owners, has caused the rental system to relax a little.

Regions

In the regions results were patchy depending on local economic conditions.

The Mandurah-Murray area finished up having a good year with sales turnover but price growth was modest. Rents also lifted by $10 to a median of $380 per week.

Turnover in Bunbury was up by almost 20% across the year despite a dip in sales for the December quarter, however, prices didn’t move much from September.

In Kalgoorlie-Boulder sales activity has been trending downwards for two years resulting in volatility in the median price.

Geraldton-Greenough also had a weak year with its median price sliding on stagnant turnover. The mid-west city reporting 500 sales for the year, the same number as 2012.

In the Pilbara, the downturn in the mining sector is very apparent in the housing system.

Karratha sales actually picked up despite annual turnover being at its lowest point in 23 years. With the median house price having dropped across 2013, the improved affordability attracted buyers in the December quarter.

Nearby Port Hedland is also feeling the effects of the downturn with annual turnover being down by a significant 60%, although rents remain very high at around $1,300 per week.

David Airey is president of the Real Estate Institute of Western Australia.

This article was originally published on reiwa.com.