Perth property market outlook: experts’ market predictions for 2019
IGNORE the negative news from the east and focus on local data is the request from property experts when it comes to looking ahead to 2019.
They say the signs are good and feel a positive change is on the horizon.
From the established home market to new builds, land, apartments and finance, shared their thoughts on the market outlook for the next 12 months.
Improved economic activity, including in the mining sector, population growth and a tightening of the rental market are likely to have a positive effect on all areas of the market.
Slight price growth is forecast for residential real estate, an apartment shortage may be on the cards in the longer term, buyers will continue to find good value in land and the range of product when building, and interest rates should remain fairly stable.
Factors that may negatively affect the market include a change in the federal government and tightened lending conditions.
Read the experts predictions below.
RESIDENTIAL REAL ESTATE
Damian Collins
REIWA president
The WA property market should remain stable this year with some notable improvements expected in the rental market.
In 2018 we saw weekly sales in Perth hover at around 500 per week throughout the year, while listings for sale were largely unchanged from 2017 levels, fluctuating between 13,000 and 16,000.
Listings should continue to trend at current levels throughout 2019.
While sales activity in 2019 is expected to largely reflect what we saw in 2018, there is a possibility that rising consumer confidence levels, coupled with improved housing affordability, could translate to increased sales volumes.
If weekly sales remain at 2018 levels or better, Perth’s median house price could improve during the next 12 months.
However if lending standards tighten further, this could restrict the number of people that are able to purchase a property, which could negatively impact sales and prices.
Additionally, if the banks choose to increase interest rates any further, this also has the potential to adversely affect buying and lending conditions in WA
The Perth rental market led the way in 2018, with stable median rents, healthy leasing activity levels, declining listings and a plummeting vacancy rate.
The upward trajectory should continue through 2019, with stable population growth and slowing new-building construction levels the key drivers for this improvement – this should see competition among tenants increase, putting further downward pressure on the vacancy rate which dropped below 4 per cent (for the first time in four years) at the end of 2018.
While Perth’s overall median rent price has held at $350 per week since April 2017, if listings continue to decline and leasing volumes remain healthy, we should see the overall median rent price increase in 2019 for the first time since September 2014.
While the outlook is positive, changes to negative gearing could pose a risk for both the rental sector and wider property market.
Paul Blakeley
Harcourts WA chief executive
Indications are that we will see an improvement in the residential property market in 2019, property prices have started to plateau with an increase in sales activity in some areas of Perth.
The first signs of a recovery can be seen in the rental market.
The average weekly rent has remained stable at $350 per week for some time now, with the average days to lease a property reducing.
The vacancy rate also dropped below 4 per cent.
This should start to make Perth a more attractive option for investors.
We saw a slight rise in population growth throughout 2018, which is expected to continue into this year as we receive more positive news around the improvement in the job market in this state.
Two major factors that will contribute to the rate of recovery will be job security and low interest rates, both will help with consumer confidence.
A couple of things that may hinder growth will be the abolishment of negative gearing, which is looking likely if Labor wins the next federal election and, with an already increased scrutiny by the banks on lending practices, any interest rate hikes will further dampen recovery.
Overall we anticipate that the first six months of the year will remain similar to the conditions we experienced in 2018, with an improvement in property prices of between 1 – 3 per cent after that.
John Percudani
Realmark managing director
The improving economic news in WA suggests a reason to be more optimistic about this year however this will be tempered by the combination of finance availability, population growth and employment security.
There is a lot of negative noise about the Australian property market, but we need to largely separate WA from this as it is following a property cycle at a different rate to that of the eastern states and the market drivers in WA are very different.
The WA market data is different from that of the east coast and we should focus on the reality revealed by this information and not the headlines.
Generally speaking, the WA market is in an increasingly healthy state.
Overall we expect to see the WA market consolidate, especially in the metro market, through 2019 and improve into 2020.
Results will vary across suburbs and property sectors depending on supply, buyer motivation and access to amenities and school catchments.
However, the affordability of property is presently attractive and the sentiment is increasingly positive.
The rental market has improved dramatically in the second half of 2018 and this is an increasingly forward indicator to conditions in the sales market this year.
We expect the potential restrictions in finance availability to be the primary influencing factor in 2019, together with the supply of properties for sale versus demand.
As consequence prices may stay subdued in the first half of this year, but leading into 2020 this could be different depending on economic and financial conditions at that time.
Key indicators to watch in 2019 are loan approvals, property sales clearance rates and the average days on market reports, to get a sense of the market direction.
Combine these market indicators with reports on population growth to indicate basic demand, plus employment rate to indicate security and sentiment, and this will help buyers and sellers make an informed decision to make their best move in 2019.
Peter Peard
Peard chief executive
This year is shaping up to be one of the most positive for the Perth real estate market in recent times.
Perth prices will grow faster than most markets across Australia due to improving economic conditions and consumer confidence.
House prices have now bottomed out after a decline of 13 per cent from a peak of $616,000 in 2014.
I expect Perth to see modest growth in the first part of 2019 but feel it is unlikely to be a significant rebound.
Despite the market slowly absorbing the oversupply of homes that remain, there is still a way to go.
Rental vacancies, which are a lead indicator for the direction of the property market, have been falling since 2017 with Perth now having 7000 vacant properties (at the time of writing), compared to nearly 11,000 during 2016.
With the Perth vacancy rate down to just 3.9 per cent compared to almost 7 per cent earlier in 2018, it is safe to say we have hit a steady state of recovery.
Suburbs that should most benefit from the continued recovery in the property market during 2019 will be those areas in high demand where there is currently limited supply.
For example, established inner-city suburbs such as Mount Hawthorn, less than 10kms from the city and offering large family blocks.
I think 2019 will be a positive year for coastal suburb of Scarborough, WA’s new hotspot.
We have not seen as much activity as we would expect considering the large-scale developments taking place, however, the recent $24 million site purchase by Woolworths is underpinning confidence in the area.
Andrew Friebe
LJ Hooker managing director WA
The Perth market has been patchy with even neighbouring suburbs performing at different speeds, but that inconsistency is often the first indicator of wider growth coming through.
I think there will be moderate, low digit improvement this year, with some suburbs performing strongly and others still trying to gain momentum.
In the foothills, we saw interest around Lesmurdie last year and I think that will carry through the first half of this year.
In the inner-suburbs, it is time for Kensington’s value to come to the fore amongst upgraders.
South of the river, Mt Pleasant is well positioned for growth.
The rental market is often a portent of recovery and 2018 saw the vacancy rate tighten up due to encouraging population growth.
The activation of resources projects will continue to attract workers over the coming year.
And history has proven over several property cycles that when the heat starts to come out of the east coast markets, that is when the west warms up, and vice versa.
We are seeing the first indicators of positive population growth for several years, with the return of people looking for resources contracts.
The latest ABS quarterly population growth (March) showed WA had a 7 per cent increase in interstate arrivals year-on-year.
With the resources sector in employment mode and the rental vacancy rate tightening, we are anticipating the interstate population exodus is over. It is still very much based on the fundamentals of the property and the suburb it is located in.
There is no urgency from buyers to simply get into the market, they still have time to research and look around for what best suits them
If you are upgrading in the same marketplace, there is a window of opportunity now to step up into a home that better suits your lifestyle, which would have most likely been out of your budget five to six years ago.
If you are thinking of purchasing within a 15km commute of the CBD, you will end up buying well in 2019.
PEEL REGION
Craig Abbott
Raine & Horne WA general manager
The city of Mandurah went through a transition in 2018, which along with the lithium plant near Bunbury will support some capital growth and real estate activity in 2019.
The plant will be built in Kemerton, which is on the Mandurah side of Bunbury, and we see that Mandurah will be a launching pad for many of the plant’s workers as they will only be 50 minutes from work and an hour from their relatives in Perth.
The City of Mandurah has also spent $17 million on a makeover of the Mandurah foreshore, while $51.8 million was spent on replacing the old timber bridge with a dual carriageway bridge linking Mandurah to Halls Head.
We have also had a $350 million refurbishment of the Mandurah Forum by owner Vicinity plus a couple of our other shopping centres have seen $10 – $30 million upgrades.
Improvements to government and private sector facilities is a clear signal commercial and bureaucratic interests believe retirees and sea changers have identified Mandurah as a viable and more affordable alternative to city life in Perth.
The median house price in Mandurah is $280,000 compared to $450,000 in Perth.
Retirees are seeing the value in Mandurah waterfront and near-water properties and that the town is no longer a sleepy hollow thanks to the council and commercial makeovers.
Given the combination of council and commercial sector investment and the job opportunities that will flow from the lithium processing plant, 2019 looks like being a very robust year for real estate activity and values in Mandurah.
Andrew Friebe
LJ Hooker Managing director WA
Lifestyle destinations always follow the fortunes of the nearby cities.
Perth is not in growth mode yet, its recovery is inconsistent from suburb to suburb, so while the city market is still finding its feet, sellers in the Peel region will need to meet the market to find a sale.
The advantage that the Mandurah-Rockingham corridor area has over other regional markets however, is its popularity amongst the FIFO workforce.
With great shopping hubs, schools and the boating lifestyle on its doorstep, the area could receive a boost in buyer activity if the resources industry continues to tick along.
Being lifestyle markets in proximity to the Perth airport positions it favourably as a regional market.
There is definitely good value in the market with some owner-occupants recognising the opportunities on offer.
In the Mandurah area, houses in Dawesville rose 8.7 per cent over the last 12 months ($432,500 median), Erskine is up 10.7 per cent ($415,000) and Dudley Park improved 6.7 per cent ($407,500).
Mandurah itself and sought-after Halls Head remained flat – 0.3 per cent and 0.2 per cent growth, respectively – but the slight improvements were a welcome sign that the market may be changing.
Owners need to meet the market for a sale in 2019, but if they are buying and selling within the Mandurah market, any value they may forsake in their sale, they will pick up in their purchase.
I think the Rockingham market is ready to stabilise this year after some significant corrections and will be boosted by the first-home buyer market.
The area could be on the radar for a lot of young FIFO workers wanting to get into the market which will help stabilise prices.
The Rockingham area is also benefitting from a purple patch in infrastructure with a new marina, revamp of the waterfront and the future lithium plant that is coming, all of these are combining to underpin a wave of employment opportunities.
FINANCE
Don Crellin
Resolve Finance managing director
Economists’ interest rate forecasts are a mixed bag, with predictions the next RBA move will be upwards anywhere from mid this year, through to no move until 2020.
This variance highlights the uncertainty of how other market-related factors play out.
The RBA will be watching these factors closely, including:
– Tightening credit conditions and the resulting contraction of credit by lenders
– Property market movements
– Lenders out-of-cycle interest rate movements
I predict no movement by the RBA for 2019, however I would not be surprised if we actually saw a downward movement during the year.
During 2018 the focus on credit policy and subsequent tightening by lenders saw a raft of changes.
Many were made as a result of the activity surrounding the Financial Services Royal Commission.
Most of the focus surrounded the investigation of a consumer’s ‘discretionary’ expenditure activity.
Where once a consumer was able to disclose what they would be spending on items such as food, clothing and entertainment following the purchase of a new home, lenders are now forensically looking at bank statements before the purchase to better test the consumers declaration.
Any material differences between what you are currently spending and your disclosure will need to be thoroughly explained.
There will be a number of recommendations made by the Financial Services Royal Commission in February 2019 which may trigger some further policy shifts, however following that, I expect some level of stability.
With the property market at current levels, coupled with historically low interest rates, it is an ideal time to take the plunge.
If you are thinking of buying in 2019, my advice is to start planning early with the many changes that we have seen in lenders, credit policy.
Have a good look at your expenditure levels and patterns well before applying for finance – what are you spending, where and how often.
These questions will be asked so it is good to have an understanding beforehand.
If nothing else, it is good practices to understand where your money id going and it is a great discipline to have as you head into your home ownership journey.
Also, not all lenders apply the same criteria, so engage a mortgage broker to match you with the most appropriate lender and loan product.
LAND AND NEW HOMES
Tanya Steinbeck
UDIA WA chief executive
While property market conditions have remained sluggish in 2018, there is growing anticipation of a market recovery during the later part of 2019.
Positive signs include that the unemployment rate has fallen slightly to 5.4 per cent, while there has been a corresponding 2% lift in the number of employed persons.
Further to those promising figures, the Premier Mark McGowan recently stated that the state budget will be in surplus in 2019/20. That is a year ahead of schedule due to a range of factors including increased revenue from iron ore royalties and the changes to the GST distribution system.
There are also signs the rental market is tightening with Perth’s median rent up 2.9 per cent for the year and vacancy rates down 3.9 per cent.
UDIA WA expects positive economic activity, along with tighter rental conditions, will have a flow on effect to the land and housing market as demand increases.
We recently tracked the historical impact of mining exploration expenditure on dwelling commencement figures in WA over the last thirty years in order to get an even clearer picture on how that sector impacts the property market.
We found there is a distinct two-year lag between an upturn in mineral exploration expenditure and a corresponding uplift in dwelling commencement figures.
Therefore, based on current mineral exploration expenditure figures, we can confidently predict that the next property market upswing will likely occur within the next 12 – 18 months.
Areas to watch
City of Swan
Experienced the biggest lift in new land prices over the last year, up 3.1 per cent to $235,535. The recent rezoning of a large swathe of land in Henley Brook will open up more opportunity in the North East growth corridor in the coming years.
Subiaco
The Subiaco East Redevelopment Area that includes the old football oval and the former Princess Margaret Hospital site provides a massive opportunity to provide a diverse range of residential, retail and commercial product to the market in proximity to plenty of amenities and services, not to mention the CBD and public transport. The old Pavilion Market site is also set for redevelopment meaning lots is happening in Subi.
Scarborough
The redevelopment of the Scarborough foreshore is changing the face of the area and providing fantastic development opportunities and more options for buyers will continue to emerge as the project progresses.
Alkimos
Already a massive growth area in a prime coastal location, the extension of the rail line to Yanchep and the proposed Metronet station at Alkimos makes this an area that will continue to grow and evolve.
Joondalup
The State Government’s ‘Connect Joondalup’ project will provide significant housing options in partnership with private developers adjacent to the existing town centre presenting lots of opportunities for savvy buyers.
Serpentine Jarrahdale
Remains the most affordable local government in the Perth Metro area, offering good-sized lots at an average price well under $200,000.
Jason Robertson
Master Builders housing director
Master Builders expects 2019 to be a year of consolidation and progressive, sustained growth.
Demand for new housing will pick up slowly.
The nature of the sector is cyclical and a subdued recovery and growth period is likely as the economy strengthens.
Low interest rates and the possibility the RBA may cut them further this year, plus rental vacancies going down, mean this is a great time to build.
Other positive factors include economic indicators showing our population growth is starting to rise, the resource sector is ramping up and employment data shows signs of improvement.
One big trend in 2019 will be a continued shift towards multi-generational living.
More homes are being planned for changing uses such as double-storey homes with two master bedrooms, one upstairs and one downstairs.
Universal living is increasingly important, with wet areas and doorways set up for disabled access.
Multi-functional areas with big sliding doors to close off zones are also on the up.
We will see lots of full-height glazing on rooms with northern aspects.
Smaller lots and light-weight building methods are becoming popular, especially around city centres and near transport nodes.
Technology continues to be a leading trend, especially smart wiring, solar connectivity, batteries and provision for electric vehicles.
Discerning consumers know what they want and how they want it to be done.
For anyone considering building, a clear understanding of brief, lifestyle and budget is important.
Brendan Gore
Peet Limited managing director
The Perth property market continues to show signs of stabilisation with current conditions expected to continue through 2019.
It largely remains a buyers’ market, with interest rates remaining at record lows and levels of affordability we have not seen in years, although tighter credit availability is having an effect on buying and lending conditions across the country.
We welcomed the State Government’s extension of the Keystart loan scheme late last year, which will enable an additional 1100 or so first-home buyers to get into the property market.
Buyers generally are continuing to benefit from the range of government and market incentives for new builds as well as a much greater choice in housing options.
The challenging and sustained property market conditions experienced in WA over recent years has driven industry innovation and led to a new generation of housing products – with highly appealing medium and high-density housing products that have been carefully designed to maximise space and meet the needs of changing lifestyles.
It means buyers have more choice than ever before – both in where they want to live, and in the type of property they want to purchase – whether they are looking for land, an established home, a brand new completed home, or a terrace or apartment.
Areas to watch
Current hotspots where there is great value to be found in both land and newly-completed homes include the rapidly growing outer metropolitan corridors in Perth’s north-east, east and south, particularly for first-home buyers.
Suburbs such as Yanchep, Alkimos, Brabham, Ellenbrook, Morley, Forrestfield, Byford and Karnup – as well as the Perth Airport – will be connected to rail transport through Metronet for the first time, having a profound impact on the desirability and demand for homes in these areas.
Established areas like Midland, Bayswater and Thornlie will also benefit from significant station upgrades and increased rail services and linkages.
Prime coastal locations are also increasingly popular with extremely well-priced land, house-and-land packages, terraces and apartments available in Perth’s new coastal communities from Yanchep to Mandurah.
Nigel Satterley
Satterley chief executive
The residential business never stops.
The economic outlook for WA is showing some positive signs for our industry.
It is great news that the State Government has continued to offer West Australians 2 per cent low deposit loans under Keystart again this year.
Not only is it a great initiative to help people enter the property market, but it will also stimulate activity and greatly assist our industry.
Now is the optimal time for anyone wanting to build or buy.
Building your own home has never been more affordable, with so many incentives offered by builders and developers.
For buyers, there is no better time to enter the market and invest in your future before prices increase.
If you plan to buy or build, the number one tip that I always tell people is to look for real value.
Cheapest is not necessarily best – you want to be close to shops, schools, transport links and employment to maximise your investment in the long term.
After all, the family home is the largest investment most people will make in their lifetime.
APARTMENTS
Paul Blackburne
Blackburne managing director
2018 panned out almost exactly as we expected with strong demand in the larger owner occupier market and slower demand from investors and first-home buyers for smaller apartments.
In the past quarter investors have started to come back strong with at least 26 per cent of enquiry now coming from investors.
In 2016 we changed some of our designs to cater more for the growing market for larger, more luxury apartments and these have been selling well and increasing in value.
The new restrictions on lending were tougher than expected so this has caused some short-term pain in some segments of the market.
Last year was certainly the low of the market, but with the WA economy starting to turn the corner this will flow on into the property market over 2019.
Rents are starting to go up and eventually this leads to more people wanting to buy rather than rent.
With the east coast markets at the peak of the cycle, interest rates are likely to remain low or may even go down – this is great news for WA as we will be entering a growth phase.
In WA there is a significant shortage of larger, higher-end apartments in the western suburbs and north-west corridor.
As a result we bought the old Subiaco Pavilion Markets site and have redesigned it into three buildings and 250 much larger apartments.
These are being released this year and we expect most buyers will come from Subiaco, City Beach, Dalkeith, Nedlands and Claremont.
It will be great to see Subiaco come alive again after years of neglect due to lack of forward planning.
With WA’s population growing, unemployment dropping, vacancy rates dropping and supply decreasing I think we are at risk of a major shortage of apartments within two – three years.
This will lead to another excessive price boom which is not good for anyone.
Slow and steady rates of growth are always much preferable so hopefully banks loosen lending restrictions soon to lessen the impact of the impending supply shortage boom on prices.
Darren Pateman
Finbar managing director
Finbar goes into the 2019 calendar year with a definite sense of positivity about the Perth apartment market on the back of strong sales across our projects in the last quarter of 2018.
The sentiment is certainly far more positive than it was at the end of both 2016 and 2017 and I think we can now safely say that the bottom of the Perth market is well and truly behind us.
The developers who remained in the Perth market after a tough few years will benefit from the tightening of supply which will ultimately have a positive effect on pricing.
The resurgence of activity in the resource sector is always mirrored with an upswing in activity in the Perth property market and we are definitely seeing strong signs of recovery in terms of sales activity across our projects that reflects this.
If you put that against a backdrop of strong economic recovery nationally, with a tipped return to surplus this year and the realignment of the GST back in WA’s favour, then you have all of the necessary ingredients for a return to stronger market conditions.
Investors remained the missing piece in 2018, but prudent investors are already returning to the market and we expect to see a further upswing in investor activity during the course of 2019.
2019 will see the practical completion of our Vue and Palmyra Apartment developments before mid-year, construction at our Sabina development in Applecross continue to progress on schedule and the One Kennedy development in Maylands set to begin construction in March.
Source: https://www.communitynews.com.au/
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