Perth residential market poised for recovery, buoyed by mining boom: CBRE
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There was a 13% increase in the volume of Perth residential sales in the March quarter, with first-home buyers and investors returning to the market, according to CBRE’s first-quarter WA market view report. The firm says a recovery could be under way.
CBRE recorded 5,663 sales in the Perth metropolitan area over the first three months of the year, compared with the 5,268 in the previous quarter and a “noticeable contrast to conditions in the prior 12 to18 months, when sentiment was low”, according the firm’s associate director of global research and consulting Sam Reilly.
Total house sales over the 12 months to March reached 22,676, a slight decline from the 23,032 over the previous 12 months.
Perth house sales peaked in early 2004, with just over 40,000 sales recorded. The market reached just under that peak in March 2006 and traded strongly until early 2007, when the ill winds from the GFC first began to be felt.
Perth’s inner-city apartment market has been particularly strong, buoyed by the resources sector through the second quarter, with both owner-occupier and investor demand on the rise.
Unit sales rose from 1,191 in the December quarter to 1,852 in the March quarter, with CBRE recording 6,654 unit sales over the year to March. The unit market last peaked around March 2006 with just under 10,000 annual sales.
“Perth’s inner-city unit market has experienced notable change recently, with oversupply now correcting as take up is being driven by the resource sectors, a trend that clearly highlights the tangible impact resource growth is having on Perth at present,“ says CBRE director of valuation and advisory services Michael Veletta.Click to enlarge
Perth house prices increased by 3.9% over the quarter to a median of $487,500, though they are up only 0.5% over the past 12 months, according to Residex data.
The RP Data-Rismark Daily index has Perth home values up 0.76% for quarterly growth to June but still down 1.78% year-on-year.
Reilly says it is too early to point to a full market recovery, but the increases in sales volumes suggested renewed interest from buyers following the price corrections that had substantially reduced capital values across all sectors of the market.
The increase in activity has been attributed to the flow-on effect from oil, gas and iron ore industries in the state, which CBRE says “continues to underpin the market due to high infrastructure spending and increased employment opportunities”.
Deloitte Access Economics is forecasting the WA economy to grow by 4.2% annually between 2012 and 2017.
However, Reilly warns that while the resources boom provides Western Australia with a strong advantage in terms of economic growth, the risk of a slowdown to commodities markets remained.
“If that were to occur in a substantial manner, the residential market would immediately come under pressure,” he says.
The report notes recent REIA data showing Perth vacancies trending down in the December quarter to 2.3%, compared with 2.8% in the September quarter, with population growth creating increasing demand for rental accommodation.
The Mark at Sydney's Central Park
Now, all signs point south for this market. A year ago vacancies were near zero but today they’re approaching 5%. Price growth has stopped and, according to Australian Property Monitors’ price graph, has started to dip below the red line.
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