Posted on Wednesday, March 13th, 2013 in by Matt Garmony
Following the Reserve Bank leaving interest rates on hold in March 2013 and a slow start to building approvals, the increase in buyer activity at the lower end of the market is seeing a steady growth in the medium house price for the Perth Metropolitan area. Increased activity from the investors looking to capitalise on increasing residential rents and low interest rates, coupled with strong population growth and increase in consumer confidence, has increased the demand for residential homes in the $400,000 – $800,000 price bracket.
A report put out by the Real Estate Institute of Western Australia (REIWA) stated “agents are reporting an increasing shortage of properties in popular price ranges, especially around the median of $500,000.” REIWA data suggests that listing stock is trending downwards on the back of strong sales turnover and these properties are not being replaced with enough new listings to meet demand. REIWA data suggests there are only 8429 properties on the market for sale, down from 14,092 properties at the same time last year, with equilibrium being approximately 12,000 properties.
RBA Governor Glenn Stevens stated in a recent press release “down side risks to the global economy had lessened over recent months, with the United States experiencing moderate expansion and reduced financial strain in Europe.” Mr Stevens went on further to say “in Australia, most indicators suggest that economic growth in Australia was close to trend, helped mainly by an increase in investment in the resources sector.” It is for this reason Mr Steven’s said “the boards (RBA) view is that with inflation likely to be consistent with the target and with growth likely to be a little below trend over the coming year, a combinative stance on monetary policy is appropriate.”
This steady growth however has not been reflected in the building industry, with a poor start to 2013 for building approvals. Figures released by the Australian Bureau of Statistics indicate that residential building approvals fell by 2.4% in January with only 1700 dwellings approved in January, down 64 dwellings from December 2012.
Further statistics released by RP Data on 7 March 2013 shows, Perth households are holding on to their homes for an average of 8.2 years which is nearly 2 and a half years longer than it used to be 10 years ago up from an average of 6.8 years, which could be adding to the lack of properties listed on the market for sale. In our opinion high transfer costs, including Stamp Duty and Agents fees, along with slow growth in the past 5 years, has created no incentive for home owners to move more frequently.
In a rising property market, it is prudent to obtain an independent property valuation by a licensed valuer for pre-purchase purposes, to make sure you are not paying above market levels. The licensed valuers at Garmony Property Consultants can assist you with your real estate investments by providing expert valuation and property consultancy advice.