THE BALANCE OF RISK HAS CHANGED. ESTABLISHED HOME OWNERS IN PERTH ARE WAITING FOR PRICES TO RISE AND BUYERS ARE RACING TO GET IN THE MARKET OUT OF FEAR OF MISSING OUT. THIS HAS A PROFOUND EFFECT ON THE NEW DWELLING MARKET.
The Perth property market continues to gather momentum after reaching a trough in 2010/11. Average selling days and property listings are declining and sales volumes are strengthening significantly.
No longer is the worry about prices falling but rather the fear of missing out. The number of listings in Perth has fallen dramatically from 14,000 to 8,400 over the past year – well below the 2010 high of 18,000 listings – with buyers eager to purchase before expected price increases and vendors holding out until prices rise. Supply is especially tight at the affordable end of the market with signs of buyers paying above asking price.
The combination of increased activity in established property markets, first home buyers entering the housing market at record levels not experienced outside the FHOG Boost period, tight rental conditions that saw Perth’s median rent jump 12.5 per cent in 2012, and large reductions in mortgage rates is driving demand for new dwellings, especially in Perth.
The largest developers in Perth sold 57 per cent more serviced lots in 2012 than the previous year, and in early 2013 sales volumes have reached levels not experienced since 2006. These increased land sales are starting to translate into more construction on the ground, however, supply pressures are growing. Given the time and costs to develop land, there is inevitably potential for land shortages. The Institute’s research has already highlighted several areas where land development activity may not keep pace with demand in 2013.
There are genuine concerns that significant latent demand after several years of subdued dwelling construction levels will cause construction timeframes to widen and inevitably lead to increased prices. There is the risk that there will be shortages of capital equipment and skilled labour, particularly as the housing construction industry is competing with the mining sector. This happened back in 2004-07 when increased demand for new dwellings stretched the housing construction and land development industries, resulting in extended construction timeframes and the doubling of median land prices.
Overall, the cyclical upswing in the established and new dwelling markets in Perth and the south west of WA is underway. It is not yet a boom, but we are starting to experience supply pressures and the tentative return of ‘camp outs’ in new housing developments. With interest rates set at stimulatory levels, finding an appropriate block and builder may be one of the biggest challenges in 2013.