Here's why Perth property prices will be lower again by year end: Simon Pressley
GUEST OBSERVER
After price growth in both 2013 and 2014, I said on live television in January 2015 that Propertyology’s research suggested Perth property values would be lower by the end of 2015 and we proved to be right. Our outlook for Perth in 2016 is for this trend to continue – they’ll be lower again by the end of 2016.
While I can understand why local real estate agents are trying to sell ‘hope’ by claiming that the market has stabilised, it is false hope. Propertyology does not share the view that it is a good time to buy in Perth and are therefore recommending alternative locations to our investors. Propertyology expects both property prices and rents in Perth to fall further during 2016.
Perth is a beautiful city with great infrastructure however, its economy is significantly more reliant on one industry than what would be expected from a city with 2 million population. The economy lacks diversity.
Demand and supply fundamentals are completely out of whack in Perth.
From 2013 onwards, construction of several large mining projects reached completion however, sharply falling commodity prices meant that haven’t been any replacement contracts for the tens of thousands of affected workers. The state’s unemployment rate has increased by 1.0% more than the national average over the last two years.
State government coffers are such that spending is being curtailed. Our research also suggests that significant further job cuts in iron ore and gas are imminent, many of these workers will currently be residing in Perth.
For the year ending June 2013, Western Australia’s population grew by 77,000 people whereas in the year ending June 2015 population growth had reduced significantly to 33,000 people.
The most concerning part of the population trend is that it has now been five consecutive quarters where interstate migration has declined. Before this current trend commenced in June 2014, it had been eleven years since a negative interstate migration figure had been produced in WA.
On the housing supply side of the equation, the city normally builds around 18,000 dwellings per year. Over the last two years, 53,000 dwellings have been approved in Perth. The over-supply pipeline will hang around for at least of couple of years yet.
In July 2013, there were 7,800 properties for sale; today there are 15,200. It’s a similar story with sales volumes – in July 2013, approximately 900 properties were being sold per week and now it’s back to 500 per week.
SIMON PRESSLEY IS MANAGING DIRECTOR OF PROPERTYOLOGY, AN REIA HALL OF FAME INDUCTEE, PROPERTY MARKET ANALYST, ACCREDITED PROPERTY INVESTMENT ADVISER, AND BUYER’S AGENT. PROPERTYOLOGY WORKS EXCLUSIVELY WITH PROPERTY INVESTORS TO PURCHASE PROPERTIES IN STRATEGICALLY CHOSEN LOCATIONS ALL OVER AUSTRALIA.