Perth’s housing market decline looks to be slowing, but it will be a long, slow grind before it recovers from a post-mining boom slump, according to experts.
Industry analyst and economic forecaster BIS Oxford Economics’ recent report points to an overall slowdown in the Australian property market.
Perth’s house prices appear to be bottoming out, with the year until June 2018 showing a decline of only 1 per cent, the lowest since the market peaked in 2013/14.
Perth’s median house price is predicted to grow 10 per cent in the three years to June 2021, just keeping up with inflation.
Meanwhile, median unit prices could rise only 5 per cent, which equates to a 3 per cent decline after inflation.
But despite signs of recovery, study author Angie Zigomanis said excess stock, low population growth and weak economic growth was stifling a price recovery.
Perth’s median house price is 25 per cent below its peak in March 2007.
Mr Zigomanis said while vacancy rates lowered to 5.1 per cent in the 2018 March quarter from a 7.1 per cent peak in the 2017 June quarter, they were still well above a balanced market rate of about 3 per cent.
Rent prices have dropped from 31 per cent for a three-bedroom house, and 29 per cent for a two-bedroom unit from their 2013 peaks.
At the heart of the issue is an increase in housing stock built while growth in WA was strong.
Mr Zigomanis said as the new dwellings came online, it coincided with a downturn in mining sector investment which in turn saw the economy slow.
“A lot of people who were coming into Western Australia during the mining boom [started] to leave,” he said.
“It’ll take some time for that oversupply to be absorbed, and that’s probably a good couple of years away.”
Mr Zigomanis is forecasting minimal growth between 2018 and 2020, with stronger growth emerging toward the end of 2021.
Slow recovery is not a bad thing
Real Estate Institute of Western Australia President Hayden Groves said the Perth market had by all indicators already bottomed out, and a two- or three-year period before any strong growth would not necessarily be a bad thing for the market.
“Generally speaking, if history does repeat itself, it does take some time for Perth markets to recover any lost time, and it takes about as long to recover as it did to fall,” he said.
If it looks like a housing bubble…
“On that basis we could see several years ahead of us of relatively slow growth.
“That’s actually probably a good thing, particularly in relation to affordability and supply levels.”
Mr Groves said sales figures remained at historic lows with people cautious after 45 months of continuous downward or flat market conditions.
“One quarter here and there of growth hasn’t convinced the marketplace yet that the worst of it is over,” he said.
“The economy is improving all the time, we have bright prospects on the jobs front with some mining interests recommencing and pulling a lot more jobs back into Western Australia.
“So with that population growth we will see an increase in demand.
“The rental market has already recovered from its lows and that’s been in recovery for more than 12 months now, and that’s the first place that we look to to see markets improving.”