Perth Property Insider Ep. 28: Market Update – What’s Ahead?

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The Perth property market continues to hum along with some changes over who is driving the market and what is in demand.

More tenants are looking to get out of renting, and into their own home in the established suburbs around town, home owner buying fever is cooling off, the unit market is picking up and the rental market is remaining tight with more price increases to come. Plus Perth was recently rated as the sixth most liveable city in the world!… What does all this mean for the market ahead?…

Find out by tuning into this episode for the latest insider view on the Perth property market.

 

Episode Highlights:

  1. Kicking off: recent changes in the Perth property market (00:50)
    • Number For Sale (01:04)
    • Number Sold (02:15)
    • A current look on property months of inventory  (03:37)
  2. Perth house sales and median price update (04:44)
    • Perth Unit Sales and Median Price (05:23)
    • Perth Land Sales and Media Price (06:19)
    • Perth Listings & Median Selling Days (06:36)
  3. Catching up on Perth rental market (07:10)
    • Number for Rent (07:12)
    • Rental Vacancy Rate (07:39)
    • Median House Rent (08:20)
  4. Property Clock Timing (09:02)
    • National Property Clock: Units (09:28)
  5. Factors affecting our market (10:39)
    • Availability of Finance (10:44)
    • Homeowner Lending By State (12:36)
    • Investor Lending by State (14:08)
    • FHB Lending by State (15:03)
    • Policy & Changes (15:30)
    • 6th Most Liveable City In the World– Perth! (16:54)
  6. Tips to Survive & Thrive (18:34)
    • Actions to Consider (18:40)
    • My Crystal Ball (20:05)
    • Four Phases Ahead (22:03)
  7. Reach out for further help (23:31)   

 

Transcription and Graphs

G’day and welcome to another episode of Perth Property Insider. I’m your host, Jarrad Mahon. And today, I’m really excited to be bringing you my quarterly Perth property market Update. I’ve got so many things to tell you about, and I’m going to give you my insights as to what’s ahead. And I’ve got a few new areas to touch on today too. So let’s go inside.

Welcome to Perth Property Insider, where you will learn how to grow your wealth and improve your life using Perth property. Our show is brought to you by Investors, Edge Real Estate, the highly rated and award-winning property management specialists servicing the whole of Perth. Now here’s your host, Jarrad Mahon.

Good day and welcome to my Perth property market update where I cover off what’s ahead because so many things have changed, I’ve got a lot to tell you about. So let’s jump straight in, shall we?

Perth Sale Market

Properties For Sale

The Perth sale market has had a lot of changes lately and I’m going to take you through them. So we have had a number for sale tick up a bit in the last few months. So we’ve got quite a few extra properties coming on and it’s jumped us out of our downward trend in the number of properties for sale.

We’re currently sitting at 9,054 and we had a low of 8,300-odd couple of months ago. So we’ve had a gradual increase in the total number for sale as the prices have come back, I predicted this would happen some months ago, I think it was in March or December, I said that as prices start to come back, we’ll see this supply starting to increase. And the reason that it’s increasing, is that the demand has not increased again yet to take off the extra properties that are coming up for sale. So we’ve seen a few coming back and our market lightly soften over the last two months.

Number Sold

Now it’s nothing much yet to be concerned about. Demand is still keeping up and keeping strong. When we look at the number of properties selling every week, we can see that it is still in an upward trend. We’ve had a slight decrease in the last month or two, but it’s there about at 950 to 1,000 sales a week. So that’s very positive to see the sales are still strong and continuing. It’s just that we’ve got some extra supply and extra properties to choose from as the prices get back and many of my sellers are saying, “Yep, it works for me now, let’s go to market.”

And we still have to be mindful of being priced accordingly, things have come up and have improved, but if you overshoot the market, you’re not finding offers in your first and second week and then usually having to adjust to find things. And the moment you find them in the market, then you’d get multiple offers to push the price back up again. So hopefully we’re getting that right each week for my sellers.

And we had a big weekend over the long weekend just then, which was fabulous. I sold three properties above market and above the top end of our range rather and had a good weekend all around. So when we look at the change over the last six months, it’s up 2% on December sales and up 13% on a year ago for the number of sales happening per week.

Inventory

Now, the inventory is a new one that I introduced three months ago. And it basically shows how much stock we’ve got in the cupboard. So at the current rate of properties being bought, how much supply there is out there and you can see that we’ve had a downward overall trend and a slight uptick. So we’re now sitting at 2.38 months of inventory.

We did hit a low of two months of inventory, so not a massive change yet and we’re still way down on the inventory compared to where we were at our peak at 9.4 months. So property prices will continue to increase based on this and it’s just going to happen at a slightly more reduced rate.

A lot of areas have gotten back to where they were for price or close to where they were for price, some suburbs, especially the Western suburbs and coastal suburbs have gone ahead in price. And we’re going to see still some increases ahead that’s for certain.

Median House Price

So Perth house median price, it’s a lagging indicator. So the other indicators I’ll talk through just then are all more front-end leading indicators. The sale price is a lagging one. So you can see, if you’re tuning into the video, that we’ve continued to increase quarter on quarter from our 475,000 median price in June last year to now at 500,000 median price. So around about a 10% increase in the median price over that time, over the last nine months, over the last year rather, sorry. Where did that last three months go?

Median Unit Price

So you’ll also see when we go or certainly describe it to you, when we go to a unit sales median price, we actually hit our low in the September quarter of last year. And that’s when I called that we’d hit the bottom in December. So the only way to know is when we see it come back up and it’s continuing to increase in March. And the most notable thing with the units is that we’ve seen a big uptick in the volume of units over the last two months.

So we’ve got a massive number of units now being sold month on month, compared to nearly double what we were selling in June last year. So that’s really good to see that market coming back and we’ll give some relief to the people that had lost out on values being in that market.

Median Land Price

And then when we look at the land, the sales volume is way down in the number of blocks being sold per week. The median price is slightly upticked, just showing that it’s not all the first time buyers that are driving that market now, but look, land’s going to be very flat for a while.

Average Time on Market

Now, when we look at the average time on market, the median days, selling days on market, we’ve hit new all time low in the average days across Perth at just 16 days. So that’s amazing. When I came to you in the March quarter, we were still at 23 days, now at 16. So it’s super quick to sell properties and that’s the average across the board. So some are still selling first week, some are still selling third or fourth week and super quick to sell.

The Rental Market

Number for Rent

So on the rental market side, the number for rent has had a minor uptick. So we’ve had a 3% increase since December last year. We’re still in an overall downward trend, but the number for rent has more of started to flatten. So we’re bottoming out and not likely to see further decreases in the number for rent.

Vacancy Rate

And when we look at the vacancy rate, that’s also shown up with a marginal increase in the vacancy rate from 0.8% to 0.9%. So it’s still so low compared to the 7.6% we hit with our peak back in October, 2017.

Now, at this sort of vacancy rate, we will see pressure continue to increase rental prices for some time. Anything under 3% generally we would see increases in rental price. So we’ve got some… Likely to have some good increases ahead still for the investors. Unfortunately, not for tenants.

Median Rental Price

Now, with median house rent, our portfolio is now sitting at $392 up $20 over the last three months. But the Perth median has jumped up to $450. Wow. So we hit $350 as our low, and we’re now $100 up on that. And we’re getting very close to our previous peak of $480. So it just $30 away. And I think we will get to there before the year’s out. So 22% increase since same time last year and a 10% increase over the last six months.

The Houses Property Clock

Now, on the property clock, there’s nothing drastically that’s changed across Australia. We’ve just had some of our regional areas move around to a rising market. So Albany and Geraldton have all moved around into a rising market now. Perth remains in a rising market, as does our Southwest WA, as to pretty much all the capitals all in there except for Canberra has hit its peak.

The Units Property Clock

When we look at the property clock for units, we’ve got Perth and Southwest WA around in start of recovery. Still hasn’t really got the pressure around things to start increasing the price, but we did see those sales volumes up earlier. So the next step is once the sales volume is up, the supply starts to decrease. And when it gets to that critical point of more demand than supply, then we’ll start seeing the unit prices increase more rapidly. And we have seen the median price for units start to uptick positively. So more to come on the unit side ahead.

Now, of course, in some areas like Rivervale, West Perth, East Perth and Perth CBD, it’s going to take a fair bit longer to soak up the supply because every day I chat to people in those areas that do want to sell, but the price is still too far away for them and some owners are starting to sell and not waiting to get all their money back, but there’s a lot of people that would sell if they could sell still in those unit apartment areas, that’s going to take some time.

Factors Affecting Our Market

Availability of Finance

Now, factors affecting your market. Let me take you through these. We’ve got the availability of finance. And when we look where head rates now held steady since November. So no surprises there, and you should ideally be paying under 3% loan interest where you can fix for under 2% at the moment.

So again, that comes down to your own situation and whether you’re going to want to revalue your loans or whether you’re looking to sell. So you wouldn’t want to fix, unless you’ve got no real plans for either of those.

Now, the changes for responsible lending that was supposed to be coming through in March have been held up in the Senate with Labor, the Greens and I think one of the representatives in there opposing it. So we’ll have to wait and see whether that gets through. There are some other interesting ideas being thrown around for how lending could be approached differently if you’re a wholesale or sophisticated borrower.

So that was from my financial advisor, Stewart Wemyss did a really good podcast this week on some ideas around how that could be approached. So if you earned over the income thresholds and had a significant asset base then you might be able to qualify for lending easier.

Those ideas, I think have a lot of merit. And it’ll be interesting to see whether it changes to something like that to pass through the Senate or whether it doesn’t get there. So low rates are still forecasted for the next three to five years and that’s really great for anyone buying a property with rent still coming up in Perth. If you can get some buffer aside and plan ahead for some potential increases in the future.

Home Owner Lending by State

Now, this is a new stats that I’ve looked into for this market update and it’s really enlightening. So I’ve got the homeowner lending by state and you can see on the video on YouTube, you’ll be able to see graphs showing how many owner occupiers, what percentage of lending is occurring in WA. Now you can see that the owner occupier lending has taken a dip the April.

So it’s taken a bit of a dip and so the market is cooling a bit for owner-occupiers in WA. Interestingly, because in every other state, the markets are still increasing for lending to owner-occupiers. So watch this space in the coming quarters to see if this continues to dip or whether it more flat lines.

Investor Lending by State

But when we look at the investor lending, we’ve been gradually, tipping increasing up.

But the real notable thing is when we look at the owner occupier lending, we’re well above the lending rates that we’ve basically ever had in any other boom, we’re probably 30% above. So that was not likely to continue anyway, it was pretty unsustainable and we’re still above the peaks, even with a decrease. So if that flat lines or even decreases a bit more, look, that’s probably to be expected.

When we look at the investor lending, boy oh boy, we’re so low in terms of investor lending compared to each of our different other peaks in the market. We’ve got probably two to three times the level of investor lending to still come, if we’re going to be on par with the previous ups cycles. So investors are going to be really late to the party here in WA and you can see that some of the other states have had much bigger increases in their investor lending already.

Queensland has had a huge amount of investor lending as has Victoria, but Sydney hasn’t. Most of the money must be chasing more affordability in Queensland at the moment. And we’ve only seen a moderate uptick in investor lending. So lots more to come I think. More on that later.

First Home Buyer Lending by State

Now, the first time buyer lending by state in virtually every state, the first time buyer lending has decreased and we’ve seen a very sharp decrease in WA of first-time buyers lending, not as much to them anymore. And it’s really just going to be those that are getting out of renting and buying an established property as opposed to all the lending that has been done for the building of new.

Policy Changes

So policy changes and impacts. Well, I was waiting with bated breath for the budget, hoping for some excitement that might impact business more directly or impact individuals more directly or our state even, but it was pretty plain Jane budget as far as I’m concerned. On the surface, there’s no major impacts. There’s a tax cut that might impact individuals by up to a thousand dollars per annum. There’s infrastructure spending, which is pretty much alike in each budget. Might be a bit more than normal.

There’s support for most affected sectors, which is wonderful. And there’s an increase in our spending on aged care disability and mental health funding. So those are really good areas to see some increase in funding too, but it was more of a safe budget that is targeted probably at buying votes from those more elderly sectors and there’s nothing really exciting in any of it.

So look, we’ll continue to see how some of the infrastructure changes might wash through and therein potentially impact some markets and suburbs, but all in all, nothing too exciting there from the budget standpoint.

Perth Livability Ranking

Now, did you see yesterday? We were just named the most livable, well, not the most livable, but number six in the most livable cities in the world. So I think we were at 14 previously and we’ve moved up significantly and that was cited because of our border controls, allowing residents to live relatively normal lives. Also our affordability and a lot of other factors go into that.

So number six, and you can see that Auckland was number one, where my dad’s from. Adelaide, number three. Wellington in New Zealand was number four. Tokyo, Japan, number five, and Perth was at number six. And we had Melbourne at nine and Brisbane at 10. So lots of our capital’s featuring in the top 10 and Sydney is now outside the top 10. So sorry, Sydney.

Now, the reason I mentioned the most livable cities is it’s incredibly important to be listed in here and it’s really going to help our prospects for immigration. And although it’s not really possible yet and it’s still going to be something that’ll come in the future. All of this is building to see a lot of immigrants coming our way.

And it’s probably going to take some time before everything can be set up and we’re much more vaccinated to allow it to progress. But you’d imagine in 12 to 18 months, that this is going to be a significant driver of our market when it starts to happen.

Tips to Survive and Thrive

Now, my actions to consider haven’t changed too much from three months ago, look at upgrading your home or buying an investment property in the best area you can afford. I really can’t see anything stopping this cycle. A lot of people have been asking me, “Is this just a blip?” No, it’s not. This is a two to three year cycle, and yes, it might not be as crazy as it was over the last six months, but we’re going to see investors pick up where homeowners are dropping off and with rents continuing to increase I can’t see how that’s not going to happen.

Where to buy? listen to episode 13 to see just how important capital growth is and to consider booking a strategy session to get my help on selecting a suburb. See the link to that will be later on. Most properties have now increased 10% to 20% from their low point. Consider selling if you wanted to or look at accessing equity for a refinance and ensure that all your rent increases are passed on and remember that we can only increase every six months.

So you definitely need to look at maximizing the return on your properties while you can, because as we all know, the market moves in cycles and at some point we’ll hit our peak and start coming back. So we’ve also been well down on the last two to three years and now is the time to make some of these returns back.

My Crystal Ball

Now, my crystal ball, I’ve made a few changes here, but it’s more just massaging around the edges and firming a few things up. So rents, I think will continue to increase over the next six to 12 months for some easing of the pressure when tenants move into their newly built homes, but that’s still going to be a while away. And there’s certainly more that want to get out of renting that are buying established home. And there’s going to be continued to be a low in land and new home sales.

More sellers are already bringing their properties on market. Now that prices are back and this is exceeding demand for the shorter term causing a little softening. Investors have now started to come back to the market, mainly seeing those from Sydney and Melbourne buying in. Still very few buying compared to the past and I expect there’ll be a lot more demand to come from investors.

Established homes and units in the more affordable areas now are starting to experience growth from increased investor and home buyer demand. I’m expecting 10% growth for 2021. We’ll see prices continue to rise in the well located and coastal areas, the ones with good schools, especially will expect to get 15% to 20% growth for 2021. Immigrants will be drawn back to work in Australia, but I’ve… Now thinking it’s going to take a few years before this demand kicks in.

So that’s why I think we’ve got a lot of runway ahead of two to three years. All our projects were hitting their peak in 2022 and 2023. So that’s still going to drive lots of jobs ahead and then you pile the other infrastructure spends and increase in confidence of starting more projects up. It’s only going to give us more runway. So get in now, there’s lots of ahead.

The Phases Ahead

Phase 1:

So I’ve broken the phases ahead down into four. So the current phase is tenants wanting to get out of rental increases and investors mainly from over east ramping up to buy established properties, not new. Home upgraders and first-time buyers are starting to soften.

Phase 2:

So the next phase I say, is the local investors will have saved enough, have their equity back to add to their portfolio. And it’s probably when all the first time investors will choose to get in, as their friends will be telling them how well they’ve done it at the family barbecues.

Phase 3:

And then I’m thinking the phase three will be the overseas immigration opening up, safest place on earth is Perth. And that’s going to see another phase of demand kick in.

Phase 4:

And then phase four will be a bit of a softening as tenants move into their new built homes. And that’s probably going to be 18 to 24 months before we get into that phase.

And any softening there will likely be picked up, well actually by the immigration side, because immigrants will rent first before buying. So four phases ahead, see how they come to pass and whether they occur in that exact order will depend how long it takes to open up the borders and how long all the new builds take to get constructed.

Get My Help

So for some further help, consider getting a complimentary sale appraisal HERE

Make sure you join my property investor update HERE. You get weekly notifications of podcast, as well as other events and meetups and things in between. And you can also get a six monthly suburb data reports on any of your chosen suburbs. That’s really helpful as well for people to keep an idea of how things are tracking for your properties.

Also one-on-one strategy session with me, initial chat is free and then we’ve got a number of support options, including my buyer pack, which is for homeowners and investors to help with choosing suburbs as well as giving them an offer and acceptance document examples, example clauses and inspection checklist.

And then I’ve got a number of other things such as a property review when you’re looking to seriously make an offer on a property and also introduced a one-on-one mentoring for those that really want to take their investing to the next level.

So check those out, submit for a chat with me HERE 

Thanks for joining me. And I look forward to giving you another market update in three months time. Make sure you check out our next episode of Perth Property Insider coming out next week. Bye.

 

About Our Host:

Jarrad Mahon is the go-to guy in property management and investment in Perth, giving you his insider view on the Perth market and the strategies needed for you to grow your wealth and improve your life. All you need to do is to stay tuned!

 

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