After predicting the bottom of the market in 2017, I put that crystal ball out for verge collection and got myself a new one. Local property values have been dribbling along a very long bottom since 2015 with 63 consecutive months of negative or flat growth since that time. Buyers had been hard to find with 2018 and 2019 returning the lowest levels of sales activity for thirty years. Investors made up about fifteen percent of buyers based on financing data, well below long-term averages.
Rents had been flat too stuck at a median of $380 per week for about fifteen months.
How things have changed.
This week last year, metropolitan Perth reported 603 sales; this week we had 946 a 56 percent increase. Buyer choice has reduced too with just over 10,000 listings to choose from compared to more than 14,000 last year. Sales are occurring quicker than new stock is coming to market, tightening supply, increasing competition and pushing up values.
It is no longer a buyers’ market.
Westpac economist, Bill Evans predicts Perth’s property values will be up 18 percent by 2022/23 and I think he’ll be proved right.
Residential rents are also rising with supply down to sub-3000 listings and a vacancy rate the lowest in the country at less than 1 percent. Vacancy rates hit 7 percent in 2017.
Westpac’s consumer sentiment measure of “time to buy a dwelling’’ has WA leading the nation now back at pre-COVID-19 levels. Home financing levels are increasing once again after two years of a slow downturn with ‘upgraders’ the main group of buyers leading this recovery with investors not far behind.
Interest rates are falling too with two to three-year fixed rates likely to dip to around 2 percent in a competitive mortgage market underwritten by 0.1 percent bond rates. The Reserve Bank of Australia is likely to reduce the official cash rate next month to 0.1 percent and is determined to not increase rates until inflation returns to the 2-3 per cent target band; likely to be some way off.
Household savings have shot up with pandemic-related fears, Job-seeker and Job-keeper motivating saving over spending with average percentage of wage savings at near 20 percent. Pre-COVID-19, we saved only 3 percent of our wages and spent the rest.
Our well-controlled pandemic management and the promise of a vaccine sometime in 2021, should get us out spending those savings. Westpac reports that card spending on housing-related (think Bunnings and JB HiFi) is already running at above pre-COVID-19 levels.
It would seem all indicators (apart from perhaps population growth and unemployment forecasts) suggest we’re in the early stages of Perth’s next property boom.
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