Posted on Friday, February 6th, 2015 in by Matt Garmony
With recent falls in the commodity, oil and gas prices, the Western Australian economy appears to be contracting as the viability of some mining projects appears to be compromised with sharp falls in these markets. We are of the opinion that this has reduced both business and consumer confidence and has caused subdued property market conditions.
The Reserve Bank of Australia (RBA) board decided to lower the cash rate by 25 basis points to 2.25% at its 3 February 2015 meeting, which is the lowest cash rate in Australia’s history. Reasons for the Board’s cash rate reduction included; the continued decline in commodity prices in particular the sharp fall in oil, rising unemployment over the past year and “below-trend pace” of Australian economic growth, “the Australian Dollar has declined noticeably against the rising US Dollar over recent months, though less so against a basket of currencies.” The RBA policy statement by Governor Glenn Stevens stated “a lower exchange rate is likely to be needed to achieve balanced growth in the economy.”
It is evident that the Perth residential property market has levelled off, and in some areas has shown signs of a slight decline, particularly with slow enquiry and sales rate in the upper price property market. Over the next 12 months, Perth may experiencing an oversupply of properties listed for sale and our enquires to REIWA indicate that the current number of properties listed for sale is already above equilibrium. This increase in supply will be compounded by many homes and home units currently under construction and due for completion within the next 12 to 18 months. With a downturn in net migration, the demand for housing in Perth and in some regional centres has declined. On a positive note, for renters, the Perth Rental Market has also declined, with an increase in supply for properties available for rent thus providing some affordability relief to tenants however less return for investors.
On the commercial, front the office market is experiencing low demand and increase supply with land lords having to reduce their asking rents and provide attractive incentives in order to secure suitable tenants.
If you are about to enter into a sales or leasing transaction or are approaching a market review, it would be prudent to obtain independent expert property advice from one of the licensed valuers and property advisors at Garmony Property Consultants.