As a suburb, Perth’s median has risen a healthy 7%, linking with a $840,000 median price tag and rising population of 11,425. Latest Corelogic analysis reveals that Perth property prices increased 18% over the past 12 months to September making it stellar year for local sellers. The turnaround in the WA market has been remarkably fast considering the downturn only hit its lowest point the middle of last year.
Data from REIWA in early September showed that despite the rain and cold weather, value growth was experienced across 233 Perth suburbs, continuing the upswing in property values.
In August, home buyers had about 8511 total listings to choose from reflecting a 21.95% decline from the same period last year and a whopping 41% fall in listings compared to August 2019.
Property in a 4km arc north of the CBD are experiencing very strong demand across most property types but with particular interest in 3x1 character homes between $800k and $1.3M, and families upgrading to larger 3x2 homes upwards of $1.3M. Strong confidence, low stock levels, low interest rates and strong buyer competition resulting in multiple offers are rewarding sellers with excellent prices.
Two types of prices are evident in the market:
Logical prices such as sales history, and Emotional prices where buyers are forced by the market to push harder for fear of losing their dream home.
Inner city townhouse/villa accommodation between $500k and $800k is also sought after with well presented and located stock experiencing multiple offers and strong results. An example of strong demand unique inner city homes was the sale of a 2x2 townhouse in The Boot Factory where 30 buyer groups attended its first home open on a Sunday resulting in a sale price $100,000 more than the previous similar sale in the complex exactly 12 months ago!
Apartment sellers too, have experienced growth in values but not as strong housing stock. Units have seen an uptick in first home buyer activity but this product type is still sensitive to high strata levies, over pricing, and ample choice on the market. Nevertheless, 2nd hand units represent much better value and avoid the quality issues (and other pitfalls) that come with off-the-plan or brand new purchases. My advice is stay away from new and strongly consider established apartments.
What factors are causing the price rises?
Building costs are rising and there are lengthy wait times. As a result, buyers are baulking at building and are resorting to purchase established homes. Although there has been a huge spike in building approvals, new home deliveries have slowed significantly as material and labour shortages are caused by international building booms, covid influenced delays in transportation and the mining boom.
Out-of-state buyers fueling the demand for property. With a strong inflow of people to WA, this has added to the demand for housing. Worker shortages will balloon the number of people coming to Perth once border controls are lifted and employers look to ship in labour to meet their requirements. As the borders open up there will be more interstate and international in-bound migration from skilled tradespeople and professional workers to fill roles. This will naturally increase demand for housing and push prices upwards.
Cheap interest rates.
The above factors combined with historically low interest rates and general confidence in the local economy is contributing in the strong interest for Perth real estate.
As a suburb, Perth’s median has risen a healthy 7%, linking with a $840,000 median price tag and rising population of 11,425.
Surrounding inner suburbs tell a similar story, with Mount Lawley enjoying a 12.3% rise in annual median house price and West Perth leaping forward 23.7%. The shining light for inner Perth suburbs is Highgate boasting a mammoth 41.7% in annual growth, recording an $899,500 median and a rising population of 2202.
How long will this boom continue?
Let’s have a look at 6 property trends across Australia that are likely to occur in 2021.
1. Property demand from home buyers is going to continue to be strong
Currently, home prices are surging around Australia, auction clearance rates remain high, and the media keeps reminding us we’re in a property boom. The result is emotions are running high at the moment, FOMO (fear ofissing out) being a common theme around Australia’s property markets.
One of the leading indicators I watch carefully is finance housing approvals, and these are suggesting that more Aussies are looking at getting into property and we will have strong ongoing demand from owner-occupiers and investors over the next 6 months.
Now, with borrowing costs lower than they ever have been, the reassurance that interest rates won’t rise for a number of years, it is likely that buyer demand will remain strong throughout the year.
In fact, this is a self-fulfilling prophecy…as property values increase and the media reports more positively about our property markets, FOMO will mean more buyers will be keen to get in the market before it prices them out.
2. Investors will squeeze out first home buyers
While there were many first-time buyers (FHB’s) in the market in the first half of the year, buoyed by the many incentives being offered to them, now demand from FHB’s is fading and property investors re-enter the market and property values rise.
Of course over the last few years, investor lending has been low, but with historically low-interest rates and easing lending restrictions, investors are back with a vengeance.
3. Property Prices will continue to rise
While many factors affect property values, the main drivers of property price growth are consumer confidence, low-interest rates, economic growth and a favourable supply and demand ratio.
As always, there are multiple real estate markets around Australia, but in general property values should increase strongly throughout 2021.
However certain segments of the market will still continue to suffer, in particular in the city apartment towers.
It is unlikely these segments of the market will rise to the same level of houses. The value of these apartments is likely to continue to rise modestly then plateau quicker than housing stock.
But overall, Australia’s low mortgage rates continue to underpin very strong growth in property prices throughout the country.
House prices will rise further
Ongoing strength in housing finance, elevated auction clearance rates, and continued low stock levels suggest housing prices will continue to rise solidly through 2021.
4. People will pay a premium to be in the right neighbourhood
If Coronavirus taught us anything, it was the importance of living in the right type of property in the right neighbourhood.
In our new “Covid Normal” world, people will pay a premium for the ability to work, live and play within a 20-minute drive, bike ride or walk from home. They will look for things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs all within 20 minutes reach.
Residents of these neighbourhoods have now come to appreciate the ability to be out and about on the street socialising, supporting local businesses, being involved with local schools, enjoying local parks. This is why inner city suburbs such as North Perth, Mount Hawthorn, West Perth, Leederville and surrounds are experiencing low stock levels and days on market of around 6 days.
5. More expensive properties will outperform
The current property cycle was initially characterised by all segments of the market rising – other than inner-city high-rise apartments. But now the high end of the market is leading the growth in property values
According to Corelogic, the high tier is the top 25% of property values in any given region.
As of February, this refers to dwelling values at around $960,000 or higher for the combined capitals, with a typical value in the high tier around $1.2 million.
Over February, the top 25% of values in the combined capital cities jumped 2.7% in value. This was up from an increase of 0.5% in January.
The middle 50% of dwelling values (the mid-tier) increased 1.5%, and the ‘low’ end of property values (the low tier) increased 1.2%.
6. This is a cycle dominated by upgraders
The current property and economic environment, plus the scars left on many of us after a year of Covid related lockdowns have meant that Aussies are looking to upgrade their lifestyle.
Many tenants are no longer happy to live in small dingy apartments and with an improvement in supply of rental units becoming available in many areas, they are taking the opportunity to upgrade their accommodation.
Other tenants who have managed to save a deposit are taking advantage of many of the many incentives available and are becoming first home buyers.
With record low-interest rates and surging property markets, many existing homeowners or upgrading their accommodation to larger homes in better neighbourhoods. In fact, a recent survey suggested that one in three homeowners are looking to sell their home in the next five years.
While small group homeowners are upgrading their lifestyle and moving out of the big smoke to regional Australia, more Aussies are looking to upgrade their lifestyle by moving to a better neighbourhood. As mentioned above, they love the thought that most of the things needed for a good life are just around the corner.
Many Baby Boomers are looking to upgrade their accommodation by moving out of their old, tired family home into large family-friendly apartments or townhouses. But they’re not looking for a sea change or tree change, they’re keen to live in “20-minute” neighbourhoods close to their family and friends.
CURIOUS TO UNDERSTAND THE VALUE OF YOUR HOME OR INVESTMENT PROPERTY?
As 2021 comes to a close and 2022 brings an air of positivity, this may be a good time to review your property values.
If you're thinking of selling, not sure whether to hold or sell your investment property, thinking about undertaking a major extension on your home or are simply curious about where your home value sits, please call or email me NOW for immediate advice.
Claude Iaconi | Edison Property 0412 427 877 or email@example.com