HOUSE PRICES
The Perth housing market is moving into "uncharted territory," according to the Real Estate Institute of Western Australia, which has reported that the housing and unit markets have experienced their third consecutive quarterly fall in median price.
REIWA President Rob Druitt said Perth had not experienced a period like this since 1982, when the median house price fell 10.5 per cent.
"The overall median house price fell by just over 2 per cent in the September quarter to $435,000, down from $445,000 in June," Mr Druitt said.
"While this was down by a modest 8 per cent on the peak price in December 2007, there were still a number of regional sub-markets that experienced growth during the September quarter.
"These pockets of growth covered all market sectors, from first home buyers in Armadale-Serpentine, Swan and the north-eastern part of the City of Wanneroo, to the trade-up markets in South Perth-Victoria Park, Fremantle and the northern parts of the City of Joondalup," Mr Druitt said.
A surprise return to positive price growth was seen in Perth’s affluent western suburbs, which had been recording sharp falls in recent months.
FIRST HOME BUYERS
Mr Druitt said that while the median price had retreated for a number of areas this retraction was only minimal in those favoured by first home buyers.
"The level of activity by first home buyers is the saviour of the current flat market.
"First home buyers now represent 32 per cent of the overall market, making it uncertain as to how many additional buyers might be drawn into the market by the Rudd Government’s First Home Owners Boost.
"The high number of sales at the lower end of the market is having the effect of pulling the overall median price down", Mr Druitt said.
Mr Druitt said this outcome was confirmed by REIWA’s research which found the true extent of owners actually selling below their original purchase price is limited to just 1 per cent of sales. The average drop in price for these transactions was around 5 per cent.
"The other feature of the September quarter is the continuation of the low turnover in both house and unit markets. Sales volumes have fallen to the historically low levels experienced in the 1990-91 recession years, however current population growth is more than twice what it was back then," Mr Druitt said.
Mr Druitt said low turnover was now expected to delay the return of the market to equilibrium conditions until around the end of 2009, as the stock of property listed for sale has remained at just over 17,000 for the past six months.
"Since the end of September, the stock of listings has grown by a further 1,000 properties, or 6 per cent. Coupled with the growth in listings is a further increase in the time taken to sell a property with the average number selling days increasing by five in the September quarter to 79 days," Mr Druitt said.
UNIT PRICES
The REIWA data show the unit market is mirroring the house market, having experienced falls in both median price and turnover.
The current preliminary median price for units of $352,000 is down 8.3 per cent from a peak of $384,000 in December 2007.
RENTS
Despite the low level of sales activity and a swelling stock of listings, the rental market is meeting Perth’s housing needs as the vacancy rate remains below the 3 per cent threshold. The figure of 2.6 per cent in September represents only a small tightening on the June figure.
Mr Druitt said the steady flow of available property into the rental market was keeping a lid on rent rises with the overall median rent of $350 remaining unchanged in the September quarter.
The median rent for houses has remained unchanged at $350 for the past two quarters, whilst the median unit rent has increased to $340. Although house rents have stabilised, yields for both houses (4.2%) and units (5.0%) are steadily improving as the median price falls.
"With the current state of equity markets, property may again start looking attractive to investors," Mr Druitt said.
REGIONAL MARKETS
The Goldfields and Pilbara were the only real positive lights in an otherwise depressed regional housing market, with most coastal and sea-change cities and towns recording their second quarter of falls in the September quarter.
Median prices for Mandurah-Murray and Greater Bunbury have now retreated to the levels experienced in the March quarter of 2006, as both markets grapple with excessive stock.
"While the economic slowdown may put a number of resource-related projects on hold as commodity prices tumble and global demand softens, the new State Government’s ’Royalties for Regions’ program may provide some stimuli across the state which will support the demand for housing," Mr Druitt said.
SUMMARY
Mr Druitt said continuing uncertainty around the financial and economic contagion engulfing the world, talk of a possible recession and growing unemployment are fear factors eating into consumer confidence.
"This is being felt deeply in housing markets, however it is to be hoped that the good news of savage cuts to interest rates by the Reserve Bank in October and November and an additional $7,000 grant to first home buyers will help to kick the market out of its current doldrums," Mr Druitt said.
Mr Druitt noted that the Australian All Ordinaries Index has passed its first anniversary of free fall which commenced in November 2007 and has now fallen 50 per cent by mid November.
"By comparison, the plunge in share prices makes the current decline in median house and unit prices across WA look insignificant," Mr Druitt said.
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