Perth house prices at three-year low after ‘surprise’ 4.26% fall in June quarter: Residex

Perth house prices fell 4.26% in the June quarter to a median of $467,000 – the lowest median price since March 2009, according to the latest figures from Residex.

The WA capital was the worst-performing detached housing market over the past three months, just ahead of Hobart, where prices fell 4.15% to a median of $357,000.

Source: Residex

Residex CEO John Edwards says the Perth result was a “surprise” as there was nothing dramatic to point to quarterly drop of more than 4%.

He tells Property Observer the interest rate cuts in May and June may have played a role in undermining confidence in Perth, where borrowers are less sensitive (in a positive way) to interest rate cuts.

According to Residex, Perth home owners have the second highest amount of after-tax income ($1,025), behind Canberra ($1,262) and thus are less concerned about adjustments to interest rates.

Perth house prices picked up in March but fell by 1.8% in May and by 1.8% in June, when the RBA cut rates by 50 basis points and 25 basis points.

Edwards says the two rate cuts may have “spooked” a market where affordability is not as much of an issue as in the other markets.

“In markets where house prices are overly unaffordable, rate cuts impact in positive ways, but the ABS census 2011 numbers showed that affordability is nowhere near as bad as we thought it was it – and Perth is one of the most affordable market,” he says.

Sydney house prices were virtually flat (down 0.18%) to a median of $666,500, with Australia’s largest housing market outperforming the national market, which recorded a modest 0.7% fall over the quarter to a median of $423,000.

The strongest-performing capital city housing market by far over the quarter was Darwin, with house prices up 7.13% to a median of $511,500.

Darwin also registered a 2.19% gain in house prices for the year to June – the only capital city to record a price gain over the 12 month period.

Melbourne house prices fell 1.31% to a median of $555,500 while the Brisbane median house price fell 3.75% to a median of $412,500.

Over the past 12 months to the end of June Hobart is the weakest-performing capital city housing market, with a fall of 7.48%, followed by Brisbane (- 6.49%) and Melbourne (- 6.41%).

Perth house prices have fallen 1.72% over the year to June, but any decline in capital value has been more than offset by rental returns, which Residex says are up more than 15% in Perth.

Melbourne and Brisbane recorded rental growth of 6.58% for the year to June, with Sydney managing rental growth of 3.7% to a median weekly rent of $560.

Edwards says the outlook for Melbourne is for very limited house price growth and rental growth.

“Perth will pick up in the medium term, and we expect quite good rates of growth with moderate rental increases,” he says.

Edwards describes Sydney, alongside Perth, as a “fragile” market in terms of confidence.

However it is a balanced market in terms of stock levels, and a lack of building activity will see it head into a situation of having a housing shortage.

Melbourne, on the other hand, “is massively oversupplied,” Edwards says.