Happy New Year! Check out my wrap up of the 2015 Perth Property market- including the latest insights into the Perth sale market, rental market and how to plan for a successful year in property. See the video below and if you prefer to read, below that is the transcription and graphs I talk about.
Transcription & Graphs
G’Day! Jarrad Mahon here from Investors Edge Real Estate. It’s great to be back with you for the first time in 2016 with my Perth Property Market Update. I hope you had a fabulous Christmas and enjoyed your break and caught up with all your family. I certainly had way too many calories over the break but never mind what happens in Christmas, stays in Christmas right?
So, I’m going to take you through the Sale Market, the Rental Market, plus I’ve got a lot of extra info to insert into things and this will take you up to speed to the end of last year. And then, I’ll continue to keep you updated every 2nd month moving forward.
Perth Sale Market
So in the Perth market the number of properties For Sale has really decreased coming in to the end of December. We went from the high in on November of 16,300. Now that is the highest number for sale that we have had in recent years to decrease to 15,600 properties.
It’s typical for properties to not be listed for sale in December. All the owners that didn’t come on in October, November are generally now waiting to come on the market in the next couple of weeks in January.
So, what actually happened with the number of sales each week is that the sales continued, pretty strong right through December at previous levels that we were seeing in October and November. So we are averaging 600 sales for each of the weeks. And what that did is that with few new listings, it brought the number of properties listed for sale down. And it was good to see things tighten up a bit there. The telling tale will be what happens in January, we’ll see a heap of extra properties come to the market now and we’ll have to see how many buyers come back with them.
Now in December, we actually had a lot more genuine buyers out buying than I thought and we had good interest all the way through. We managed to get 5-6 properties sold over the break, so that was great.
Average Selling Time
And when we take a look at what else has been happening, things did tighten up because we went from an average selling time of just of 71 days across Perth to drop down to 65-66 days. So it’s nice to see things tighten up a bit and that’s the first sign of any tightening up that we’ve had in recent times.\
The other really interesting thing about the average selling times is that the hot part of the market is at the moment is the $500-600k price range. Now, it’s a great time if you are in a property in that end of the market because selling days is on average of 47 days, so, significantly less than the 65 days that it’s taking for the average time in Perth. And at the $500-600k, you can upgrade into a higher price point that’s lagging and sitting softer at the moment and really do well in that change up.
Unfortunately for the first homebuyers end of the market, that’s pretty soft since the first homeowners grant was decreased last year and for the higher end of the market that’s pretty soft as well still.
Houses Median Price
So when we look at the median house prices, there’s a new graph that I’ve thrown into things for you here, you can actually see that the median house held pretty stable at $550k. And in the last quarter that we’re reporting on, the September quarter, things drop to 530k. Really the median house price has always been a trailing indicator to the other indicators.
So, I expect this will come down a bit more but we should hopefully start seeing things tighten up in the other stats and that will indicate that we’re stabilizing and recovering. So, I will keep an eye on this one but do expect the median price to drop a little bit more before it starts coming up.
Units Median Price
Next we’ve got the unit median price and I found this really interesting because when we compare the two graph’s, you can see the unit median prices had regular decreases over this last year whereas the house price had held very stable. So, really that’s because we’ve had a whole bunch extra higher density infill going on, we’ve had all the apartments zoning changes flushing extra supply of apartments on the market. And I expect the units are going to decrease in stats for quite some time longer because a project for units takes 12 to 24 months, usually, and sometimes even longer. So, really any project that started a year ago probably still hasn’t finished and we’re going to be seeing more supply come on before it’s taken off.
So expect this to continue decreasing longer than the actual houses though, you can see them now at 427k which does represent great affordability compared to some other capitals around Australia, Sydney and Melbourne but looking very affordable at the price.
The Property Clock
On the property clock, nothing’s changed since I came to you in November, we’re still in a declining market and as I’ve mentioned previously, the only way to really know that we’re on the start of the recovery is when we see prices coming back. And when you’re an investor, if you are building a property, you have to think ahead, it can take up to a year to build, so you really don’t want to wait until you see the market coming by. Looking back, I’ve done that a few times and I really kick myself that I haven’t done more. So, really, don’t presume you’ve got too much time, it can move very quick through to starting to recover. And if you are able to look at a purchase, now would be a great time to do it.
Perth Rental Market
In the Perth rental market, you can see from the map, we do manage in 128 suburbs so we have a great perspective on everything that’s happening across the rental market.
And what we saw with our leasing managers is, after the first week of December properties really stopped leasing, we did get a few away in the second week leading up to Christmas but majority of tenant inquiry just really dropped off. So sorry if we were not able to find you a tenant, we do everything possible not to have leases expire in December for this reason.
And you can see that properties kept coming on the market and we ended on a super high of supply that we’ve had on all my records that I’ve been keeping for the last two years of 9,600 properties for rent. So, a little bit worrying that peak up, it does happen each December but this was much higher.
Not to worry if your property is vacant because most property managers in Perth, the good ones anyway, write our leases to expire in November and January. So we will have whole flurry of tenants coming back to the market, looking for a rental property and we should be able to get a lot of properties away over the next 1 to 2 weeks. We’re already finding that inquiry right lifted up a lot and my leasing managers are going to be very busy in January getting properties rented.
Rental Vacancy Rate
So, the rental vacancy rate, now, this is a positive sign. Things have actually stabilized over the last 3 months at 5.6% and why that’s important to me is that in the 6 to 9 months previously we really did see a gradual increase month per month. And so this is the first real sign that we’ve started to stabilized again and that’s also being reflected in the median rent stabilizing at $410.
So, hopefully for investors, we’re at the bottom of the market and we’re not going to see any other drops. So, month by month lately we haven’t seen drops in rental prices in most areas but obviously if you’re coming up to renew your lease or if you’re placing a tenant at the end of a longer period of having one, you are going to drop to meet the market and that’s around 10% drop but once you’re there, hopefully it’s going to stabilized any further drops. And we’ve come down from the $450 mark about a year ago to $410 so about 10%, that’s what you can expect.
Your Property Plan for 2016
And finally, I just want to make some points about how you can go about setting a plan for this year, I love this time of the year! You can really set yourself up and have a great plan for the whole year.
Check property and rental price
It just gives me a good feeling to know that I’m on top of things, so I’d encourage you to take a look at what the current rental price is and your property price. Now, we can help you with those if we manage your property or even if we don’t do let me know, we can take an independent look at where the rental sits and where the property price sits. Request a free property appraisal for anywhere in Perth here.
Check finance rate and structure
Have a check with your finance broker about your loan structures and interest rates and you’ll be surprised how much you can save just by getting a 0.5% discount. We do have a good finance broker to take a look at that at no cost for you if you wish. Request a free finance and equity check here.
Check and free up equity
Once you’ve established your property price, you can then look at how much available equity you’ve got and that’s a discussion to have with your finance broker. And even if you don’t have a direct plan to make use of it, my general philosophy is, get money from the bank when you don’t need it. Set up that line of credits when you don’t need them and then when you do, you’ve got it and you can have it quickly.
Set Your Budget
Now’s another great time to look at how your budget went. Set a budget for categories for this year, just keep your spending under control, keep your savings going towards your holidays and your next investment property in separate bank accounts is a great idea. See my separate article here for more tips on Millionaire Money Management habits.
Maintenance & Improvements
And finally, with your maintenance and improvements, take a look back at your recent routine inspections and around your home. See if there are any projects that you’re going to need a budget in for this year to keep your property price value protected. And we might be able to find out from your tenants if there’s any particular things they would want in the property and if they would be willing to pay any extra for it, getting a dishwasher or something that’s really wanted by a tenant could also help keep your tenant and happy tenant’s last longer in property. So, now is the great time to look at any of those improvements.
And then finally, once you’ve done that whole review and it doesn’t have to be hard, we can help you, we can also help you with planning your next steps.
Property Growth Plan
Now we got a property growth plan, which is a great format to help you plan towards your retirement, where can, when to buy your properties and buy some average growth rates. We help you be conservative and plan towards things so that you’re not just getting to your retirement and hoping and praying that you’ve got enough money. Request a chat with us here.
Does Your Home Suit Your Needs?
And does your home suit your needs? As I mentioned earlier, now is a great time to look at upgrading especially if you’re in that middle price point and we can certainly help you with selling. And also looking your buying options.
So, I really hope you have a ripper of the start of the year. I simply can’t wait to get stuck in the things round here and if I can help you with your property plans in any way do get in touch. Speak to you soon.