Posted on Friday, January 12th, 2018 in by Matt Garmony
The Perth property market continues to experience subdued market conditions across most market sectors however the industry reports there appears to be more activity in the market place however no change in values. The latest Perth median house price report from the Real Estate Institute of Western Australia (REIWA) as at the 8 January 2018 indicates “Perth’s median house price was resilient in December, remaining unchanged at $525,000.” The Australian Newspaper reported on the 10 January 2018 “housing price growth is likely to reach a trough in the June quarter of this year and then pick up again, according to research from the ANZ” which would be referring to the whole Australian housing market.
REIWA’s market snapshot for the Perth Metropolitan Area market as at 10 January 2018 indicated to 465 property sales of the week ending the 9th of January 2018 which was down 40 sales from 4 weeks ago (which may be due to the Christmas holiday period) however is still up from the 386 for the same week last year. Properties listed on the market for sale have declined from 14,502 from the same week last year to 13,134 for the first week of January 2018. REIWA’s graph of the Perth house sales and median house medium price shows a continued decline in sales volume and median house price between March 2013 to September 2017 which is evidence of a decline in the property market cycle with average listing days and remaining relatively steady for the past two years with average selling days increasing from 40 days in December 2013 to 70 days in September 2017 supports the decline in the market.
The average selling days over the past 3 quarters of 2017 shows a levelling off and the average number of listings has also declined. Mr Hayden Groves, president of REIWA stated on the 8 January 2018 “over the past 6 months we have consistently observed steady house prices in Perth, which is an encouraging indicator the bottom of the market has occurred. “
These residential statistics provide an indication that the Perth residential property market may be at the bottom of the cycle and are supported by the Reserve Bank of Australia’s market commentary statement in December 2017 where it was quoted “conditions in the global economy have improved over 2017.” The Reserve Bank Board left the interest rate unchanged at 1. 5% on a basis of continued growth in the Chinese economy, wage growth and inflation remaining low along with long term bond yields and CPI. The RBA quoted “recent data suggest that the Australian economy grew at around its trend rate for the year to the September quarter. The central forecast is for GDP growth to average around 3% over the next few years”. It further commented “employment growth has remained strong over 2017 and the unemployment rate has declined.”
We are of the opinion that if the residential property market has reached the bottom of the market that it may stay at the bottom of the cycle for a longer than expected period due to the continued uncertainty for household consumption with only household income growing slowly and debt levels are high. The RBA reported “growth in household debt has been outpacing the slow growth in household income for some time” and APRA (Australian Prudential Regulation Authority) has introduced a number of supervisory measures and credit standards have been tightened to reduce household indebtedness and risk profiles of borrowers. The Australian Newspaper reported on 11 January 2018, “the rules will focus on the loan-to-income and debt-to-income ratios, looking at borrowers gross incomes excluding compulsory superannuation contributions to reduce the risk of the residential mortgage market.”
As for the above reasons that we are of the opinion that the residential property market, if it is at the bottom of the property cycle, most likely will remain at this level and have an extended trough period before the next market movement.
The Licensed Valuers at Garmony Property Consultants are continually analysing the residential and commercial property markets within Perth and the metropolitan area. Our Licensed Valuers can provide up to date valuation reports and property consultancy advice to enable you to make important property related decisions. Please contact one of our Licensed Valuers to discuss your valuation needs further, by clicking here on this link or calling our office on (08) 9474 2220.