Date: 28 November 2018
Hope is on the horizon for Perth’s property market heading into 2019 and beyond, with prices predicted to grow faster than most markets across Australia.
Domain’s new Property Price Forecasts report has predicted while Perth house prices will fall about 5 per cent in 2018, resulting in a median house price of $535,000, they will record modest growth of 5 per cent in 2019 and 3 per cent in 2020.
Furthermore, the report says Perth house prices will bottom out in late 2018 to early 2019, after a decline of 13 per cent from a peak of $616,000 in 2014.
Domain economist Trent Wiltshire said the positive outlook was due to better economic conditions, which was likely to result in Perth becoming one of the best performing capitals in the nation.
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“Fundamentals like the mining sector are looking a little bit better, new mines are being built, there is more mining investment going on and job prospects are looking better in WA,” Mr Wiltshire said.
“The state Treasury is forecasting economic growth to be a lot higher than it has been in the past few years and then a big driver for house prices is population growth, and that has turned a corner and is picking up in WA. There are more people from overseas (arriving) and less people leaving to different states. And that is forecast to continue as well.”
Perth unit prices were likely to fall by about 6 per cent in 2018 and were set to record growth of 2 per cent in 2019 as well as in 2020, the report predicted.
While the price growth signs were positive, the report also revealed home loan approvals would continue to trend downwards, with market sentiment remaining weak and tighter lending conditions would affect prices.
Bankwest chief economist Alan Langford was very confident the housing market had bottomed in 2018, although it was unlikely to be on the verge of a strong rebound. He said an oversupply of dwellings in Perth was slowly being unwound, but it was significant at the start of 2018 and still had some way to go.
“Affordability in Perth compared to Sydney and Melbourne is a big plus, particularly for first-home buyers, but very soft population growth (especially compared to when resource construction was booming a few years ago) means that all of the adjustment to the excess of supply over demand is occurring on the supply side,” Mr Langford said.
“Dwelling approvals do not yet point to an imminent uptick in actual construction. Even if they jumped back up strongly soon, it would take at least a few months for actual activity to recover. And before it does, there’s some scope for a modest uptick in established prices.
“But anything more than 2-3 per cent growth in 2019, perhaps up to 5 per cent in some pockets of the market, would be a pleasant surprise to landlords, and not enough to cut seriously into affordability.”
Furthermore, Mr Langford believed, as the production phase of the mining boom continued to gather momentum, housing affordability compared to NSW and Victoria and the attraction of well-paid jobs should underpin a steady acceleration in population growth, but to rates well short of those seen at the height of the construction phase of the resources boom.
The outlook is more upbeat for Perth house prices into 2020. Photo: Erin Jonasson
Property analyst and valuer Gavin Hegney believed Perth house prices would record a fall of between 3 and 4 per cent this year.
“By this time next year, I think we be will seeing significant rental pressure on the basis that we will get a change of federal government and negative gearing to new properties, which will hit Western Australia at exactly the wrong time. My guess is in 2019 … we will probably finish the year stronger than where we started,” he said.
“The market is wanting to recover; prices are really cheap. They have been down for over four years.”
* Annual change to December quarter
Notes: Darwin excluded from forecast due to small volumes and market volatility. Stratified median house price forecasts.
* Annual change to December quarter
Notes: Darwin excluded from forecast due to small volumes and market volatility. Stratified median unit price forecasts.
Andrew Friebe, LJ Hooker WA managing director, said the Perth market had been patchy with even neighbouring suburbs performing at different speeds.
“But that inconsistency is often the first indicator of wider growth coming through,” he said. “We think there’ll be moderate, low-digit improvement overall, with some suburbs performing strongly and others still trying to gain momentum.”