· Perth property values outperform six-month pace of growth as sellers remain resilient amid economic uncertainties
· Sales transactions in Perth rise for third consecutive week as buyers re-enter the market, but quality stock remains limited
· Growth rates in Melbourne and Sydney slow down as market segments record sharp increase in rental stock
Continued price growth, tightening supply and an early rebound in sales transactions are placing Perth’s property market in strong stead for a faster rebound than other major markets across Australia, according to property investment consultancy, Momentum Wealth.
Despite a slowdown in buyer activity, research firm CoreLogic revealed the Western capital recorded its sixth consecutive month of price growth in April, with values rising 0.2% across the month to take quarterly growth figures up to 1.0%.
Perth was one of three capital city markets to outperform its six-month average pace of change alongside Darwin and Adelaide.
Chair of Momentum Wealth’s Residential Investment Committee, Emma Everett, said the trend could be attributed in part to strong seller resilience.
“While we did see a sharp drop in buyer activity at the end of March through to April, this was largely offset by a corresponding decline in listings for sale, including an increase in withdrawn listings, so we didn’t see high levels of seller competition or conditions conducive to widespread price discounting.”
“This is a positive sign that sellers have remained resilient despite economic uncertainties, and with stock on market continuing to tighten as a result, we are now in a strong position to maintain this price stability as buyers start to re-enter the market,” she said.
According to data from the Real Institute of Western Australia (RIEWA) the number of properties listed for sale in Perth dropped to 11,611 in the week ending 10thMay – 30% lower than the same period in 2019 – with the property market recording its third consecutive week of rising sales transactions following the initial decline, up 32.7% across the week to 527 sales.
Leasing activity was also up 31.5% for the week ending 10th May, with rental listing stock levels resuming a downward trajectory following a previous 4% rise in rental stock in April (REIWA).
Melbourne & Sydney facing higher risk
The rise in Perth’s rental stock remained significantly lower compared to other major markets across Australia.
A report from CoreLogic showed that rental listings in Inner Melbourne rose 36.2% from 22nd March to 26thApril and 34.1% in City and Inner South Sydney, compared to just 4.7% in Inner Perth across the same period.
“While these markets have recently benefitted from high levels of overseas migration as a source of housing demand, this also means they are more exposed to the downside risk, leaving them more vulnerable to an influx in supply compared to markets such as Perth where these levels have been much lower.”
“In addition, while investors were just starting to return to Perth’s recovering property market prior to the COVID-19 outbreak, both Melbourne and Sydney have been more heavily exposed to this segment of the market in recent months, which tends to be more volatile during times of economic uncertainty,” Mrs Everett said.
CoreLogic figures showed that investors accounted for just 16.9% of the total value of lending transactions in February 2020 in WA, compared to 32.5% in New South Wales and 28.0% in Victoria.
The impact of these vulnerabilities in the eastern markets is already flowing through to property prices, with CoreLogic’s ³Ô¹ÏÍøÕ¾ Value Index revealing a 0.3% decrease in housing values across Melbourne in April 2020 and growth conditions in Sydney slowing down to 0.4% – more than three times less than the six-month average pace of change.
The upper price segment of Melbourne’s property market recorded the largest price decline, with values dropping 0.8% (CoreLogic) across the month.
Affordability a key demand driver for Perth
The reversal of this trend was seen in Perth, with the State capital’s upper price quartile recording the strongest increase of all market segments in April at 0.4%.
Mrs Everett said some buyers are taking advantage of market conditions to trade-up into more aspirational areas.
“With the relative affordability of Perth following the recent downturn, we are seeing some great opportunities for owner-occupiers to take advantage of these market conditions to upgrade their existing dwelling and trade-up into their suburb of choice,” she said.
According to Mrs Everett, the market’s affordability has also been a key driver of higher levels of first-home buyer activity recorded in recent months.
The State recorded one of the highest first-home buyer participation rates of all Australian capital cities markets in February 2020, with first-home buyers accounting for 37.0% of total owner-occupier finance commitments, second only to Northern Territory at 41.9% (CoreLogic).
Mrs Everett said while it’s a great opportunity for first-home buyers to enter the market, the problem for many buyers has been the lack of quality stock coming on stream.
“We aren’t seeing the high levels of vendor discounting that many first anticipated would occur during the COVID-19 health crisis, and the experience of our buyer’s agents on the ground is that high-quality stock remains limited, with good properties moving quickly when they do come on market,”
“There is still an opportunity for buyers who are in a strong financial position to enter the market while competition remains more subdued, but the focus for buyers may not be so much on securing the “bargain deal” as it is on closely monitoring the market and getting ready to act quickly on opportunities when they arise,” she said.
