Perth recovery back on track: Hotspotting's Terry Ryder
EXPERT OBSERVER
The Perth recovery is back on track, having paused in the lead-up to the Federal Election. Sales activity is solid to strong in many locations and some areas have had price growth.
The Price Predictor Index published by Hotspotting reported increasingly strong signs of recovery in Perth markets in 2018 and early 2019. The number of suburbs with growing sales activity in five consecutive quarters was 39, 45, 49, 51 and 53 - undeniable evidence of growing demand in the Perth metro area.
Then the revival hit a wall. Like many locations across capital city Australia, Perth paused amid the uncertainty created by the Election and the prospect of a Labor victory and major changes to negative gearing and capital gains tax.
Tighter finance and a highly negative media also contributed to putting the brakes on the Perth recovery. For those reasons, the number of growth markets across the Perth metropolitan area was lower in our Winter survey.
Now our Spring survey shows that the decline has likely bottomed out, with a steady number of growth markets and improving number of consistency markets. There are now very few declining markets across the Perth metro area.
This comes as vacancy rates continue to tighten and rents rise. New data from SQM Research shows that the Perth vacancy rate is continuing to fall. In 2017 the rate was close to 6% and in mid-2018 it was still at 4% - but now 2.9% and trending in the right direction.
SQM Research also reports solid growth in Perth rentals, with the Rents Index up in annual terms for both houses and apartments. This source has also recorded short-term improvement recently in the city’s Prices Index.
Our analysis of median price trends shows that close to 30% of Perth suburbs have recorded growth in their median prices in the past 12 months. The list of suburbs with rising prices is dominated by top-end markets and upper-middle markets - locations with median prices above $700,000.
Mount Pleasant, which has stood out in a number of our recent surveys, continues to be a market leader with its median house price rising 14% to $1.25 million in the past year. This suburb is part of the Melville LGA which has been - and remains - one of the most solid precincts in the Perth market.
An emerging feature is the number of suburbs with median prices lower than a year ago, but with growth in the latest quarter - providing further evidence of a recent market turnaround. Most of the locations exhibiting that trend are at the affordable end of the market - examples include Two Rocks in the Wanneroo LGA (median price $370,000 - down 3% in annual terms, but up 2% in the latest quarter) and Huntingdale in the Gosnells LGA (median price $375,000 - down 1% in annual terms but up 1% in the latest quarter).
Perth, in general terms, is a capital city leader on housing affordability (thanks to several years of price decreases) and, according to one recent report, has its highest affordability reading since 2004. Against that background, a notable feature of our Spring survey is the emergence of growth markets at the affordable end of the Perth market.
The LGAs of Armadale, Wanneroo, Canning, Gosnells, Kalamanda and Rockingham all now have suburbs with growth momentum.
Another precinct attracting attention is the Kwinana LGA in the south of the Perth metro area. It has been identified in a recent affordability report as the only part of the Perth market where it’s cheaper to buy than to rent. Many suburbs have median house prices in the low to mid $200,000s, making it the cheapest precinct in capital city Australia, except for parts of northern Adelaide.
Rental yields are typically above 6%, in an area that attracts residents because it’s close to one of Perth’s biggest jobs nodes and has good transport links to the CBD, as well as good local amenities.
Terry Ryder is the founder of hotspotting.com.au
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