Perth apartments are a high risk property investment: RiskWise

The Perth apartment market carried "a high level of risk," according to RiskWise Property Research, given the significant number of new Perth housing developments completed recently, along with lending restrictions and declining population growth

"The impact of this is projected to last throughout the short to medium-term," RiskWise Property Research CEO Doron Peleg suggests.

“Perth is attracting a new wave of attention because many investors believe this property market has hit rock bottom and that strong capital growth will follow,” Mr Peleg said.

“However, while its economy has shown some slight improvement recently, Perth is projected to deliver low economic growth, a soft job market and low population growth. 

“This means both houses and units in Perth still carry high risk," he said, noting eastern state interest had risen due to an increased number of property professionals and marketeers promoting the Perth market.

Peleg said the WA economy had been in decline “at an alarming rate” since the end of the mining boom.

He said over the past year, the state delivered negative GSP growth of -2.7 per cent and this had a detrimental on the local property market. 

Moreover, he said the 5.7 per cent (seasonally adjusted) unemployment rate (and 8.95 per cent effective unemployment rate) were reflective of the city’s depleted labour market which was the second highest in Australia after Tasmania.

"While the Sydney and Melbourne market go flat, all eyes are turned towards Perth which many are tipping as the ‘next big thing’ in the investment property market," Pelog said, adding that all the promises of potential property profits are not to be believed.

WA is also experiencing one of the lowest population growth rates across Australia, he said.

“This has resulted in negative price growth for both houses and units across Perth in recent years. 

“But it is the risk associated with units in Perth that is of the greatest concern as this is very high due not only to current oversupply, but also the number of units in the development pipeline.

“The Perth unit market is facing severe ongoing oversupply. For example, in central Perth there are 1151 new units in the pipeline representing a 13.7 per cent increase to the existing supply, putting this area in our list of danger zones. 

“Unfortunately, while it is likely WA will experience slow improvement to its economy as it continues to adjust to the post-mining era, this improvement is unlikely to result, in the foreseeable future, in solid capital growth,” he said. 

“The Perth property market has continually delivered negative or poor growth of -7 per cent in the past three years for houses and -14 per cent for units.

"These negative growth rates for both houses and units fall well below the Australian benchmark and clearly show the dire state of the Perth property market.”

He also noted, due to APRA’s lending restrictions, units in some suburbs of Perth were subject to voluntary lending restrictions by the major lenders, such as lower loan-to-value ratio  requiring higher deposits.