Mixed results likely in new year
REIWA president David Airey pointed to a changing market in 2015, due to a fall in population growth and a rise in the number of properties for sale.
“Consumer sentiment is weak and despite very low interest rates, first-homebuyers are dropping away and people who own their home move less frequently than they once did, ” Mr Airey said, adding that sales had been sluggish in recent months, despite a good rally in November, and it might pick up again in 2015.
“With the jobs downturn in the mining and construction sector, rental listings are well above average with more than 6000 available properties.”
Mr Airey said the highlight for 2015 would be in opportunities for buyers and tenants.
“This year will be a great time for those looking to buy or rent because the competition in the market will provide greater choice and improve affordability, ” he said.
“Interest rates have held for the 16th straight month — the longest period since the mid-1990s — and the current 2.5 per cent rate is tipped to drop a quarter of a percentage point or two in 2015, ” says LandCorp chief executive Frank Marra.
“This level of stability augers well for first-homebuyers.
“From apartments or multi- generational homes in inner-city locations, to house-and-land packages in traditional estates, the building industry, the most accurate economic indicator, is in good shape.”
Mr Marra said while the economy had cooled on the back of the resource sector moving from construction to operation, signs in the housing construction sector were encouraging.
“For example, the number of housing starts recorded in 2014 has set a record and demonstrates strength and confidence in the market, ” he said.
Record low interest rates will continue throughout 2015 where we’ll see affordability improvement for at least the next 18 months — which is great news for all land and new home buyers, Satterley Property Group chief executive Nigel Satterley said.
“With strong population growth (about 42,000 to 45,000 people expected to move to WA this year), as well as record low interest rates and housing affordability, it’s all contributing to the increase in home and land sales, ” he said.
The total dwelling demand in WA is forecast at around 15,000 in 2015 and around 1500 new multi- residential dwelling completions throughout the year.
“With the increase in the WA Government grant to first- homebuyers who build to $10,000 and changes to the stamp duty concessions, this will also underpin the first-homebuyer market for the next 12 months, ” he said.
Apartment buyers look set to enjoy more choice than ever in 2015, with the $400,000 to $650,000 price bracket likely to be the strongest, according to Ronald Chan, chief operations officer at Finbar Group Limited.
“This is where the predominant availability and demand is expected to continue to be in off-the-plan apartment sales, ” Mr Chan said.
Mr Chan anticipated first- homebuyers would be increasingly active in the apartment market in the coming year as they continued to take advantage of the $10,000 First Home Owner Grant for new builds.
“Price factors and the availability of the grant will continue to have an impact on the choices first homebuyers make when deciding to purchase, ” he said.
“Finbar has noted growing numbers of first-homebuyers buying into its off-the-plan developments and we expect this to continue.”
While there may be some flattening off in activity, Mirvac group executive residential John Carfi said the desire for apartment living in quality locations was here to stay.
“While demand may fluctuate over the short term, we firmly believe that the market for good-quality apartment products will continue to grow and the challenge will be on developers to produce high-quality, well-designed and appointed products at competitive price points for owner occupiers and investors, ” Mr Carfi said.
Mr Carfi noted several factors that had been instrumental in driving demand for apartments including a shift in Perth’s demographic to include a higher proportion of international residents, demand for high-quality well-located developments, low interest rates, cost and availability of construction services and the changing tastes of investors and homebuyers.
A mild slowdown, after a strong performance over the past couple of years is in store for the WA land market in 2015, according to Cedar Woods managing director Paul Sadleir.
“While I anticipate WA will still experience modest price growth for housing lots over the next 12 months, this will start to ease as the year progresses, ” he said.
“Having said that, the market in WA is still fairly fragmented, so house prices will depend on a range of factors, in particular location.
“As an industry, we are only just catching up with buyer demand, which should mean a more balanced market in 2015.”
Mr Sadleir said he expected a continuing trend towards smaller block sizes.
“I expect to see this continue in 2015 as the market shows more interest in low-maintenance homes and gardens, and buyers become more discerning.”
While wary about trying to predict the future, valuer Lachlan Delahunty, of Propell National Valuers, says the facts and figures don’t paint a pretty picture for the Perth property market in 2015.
“Recent years of healthy growth have been witnessed within the residential sector of Western Australia, although the prospect of this continuing looks grim, ” Mr Delahunty said.
“The resource sector here in WA is seemingly declining and this, in correlation with a slowdown in both population growth and migration, certainly portrays the idea that the bubble and boom days are behind us.
“In interpreting raw property statistics, a similar story is written.”
However, Mr Delahunty said it’s not all doom and gloom for everyone, especially first-homebuyers.
“For those who are patient, the opportune moment to buy could be on the horizon in 2015, ” he said.
Abel McGrath principal Simon McGrath said 2015 will bring an interesting market, with an increasingly softening rental market and the possibility of investors having to sell for financial reasons.
He said there was currently a flow-on effect from the rental to the sales market — the opposite of the 2004 boom, which saw the start of mineral growth and China’s aggressive expansion.
“The first signal (in 2004) was the tightening of the rental market and the appetite for investors to enter that market and become landlords, ” Mr McGrath said. “This in turn put pressure on the ‘for sale’ market and we saw a shortening of stock levels.”
Mr McGrath said today’s market saw “an unwinding of this situation”.
“The rental market is softening and vacancy rates have risen from 1.8 to around 4 per cent and REIWA is tipping it getting to 6 per cent or more, ” he said.
With the State economy slowing and unemployment slowly rising, 2015 will be a more challenging year for the Perth property market, Peard Real Estate Group chief executive Peter Peard said.
“The number of houses listed for sale is starting to increase, with more than 13,000 now advertised compared with around 8000 about 18 months ago, ” he said.
“Property sellers during 2015 need to take a realistic approach to pricing and listen to their real estate agent carefully, as selling prices may start to fall.”
Mr Peard said, in general terms, he expected a much softer property market compared with the past 12 months.
He said 2015 would bring the opportunity to buy well-priced homes in good locations, though buyers should stick to areas with strong long- term capital growth rather than trying to predict the next boom suburb.
A forecast interest rate cut during the first half of 2015 should keep buyer demand elevated for the year, says LJ Hooker WA regional manager Ken Preston.
“An interest rate cut would further assist affordability, and may be the catalyst that re-awakens the first- homebuyer market, ” Mr Preston said. “If there was a rate cut, affordable areas south of the river such as Armadale, Gosnells, Atwell and Baldivis, and north of the river at Mirrabooka, and right through the northern corridor of Clarkson to Two Rocks, could attract even greater interest.
Mr Preston said lifestyle markets — many of which were casualties of the GFC — were back on the radar.
“Areas such as Mandurah . . . Manjimup and Pemberton have been on the shopping list of buyers.”
“WA has been a balanced market throughout 2014, while the majority of other capital cities have been heavily weighted in favour of sellers.”
The property market will be entering a more normal phase, with a slight bias toward buyers, Acton managing director Travis Coleman said.
“Conditions are good for buyers at the moment and are likely to remain that way for some time, ” Mr Coleman said, noting expectations of interest rate cuts in 2015.
“We have seen listings rise during the latter part of 2014 and they should remain at reasonable levels into 2015, ensuring an adequate supply of properties and keeping the pressure off prices.
“Prices have remained fairly stable throughout the year and this will continue due to the good supply of property and buyers’ price sensitivity.”
While buyers will reap many of the benefits, Mr Coleman said sellers should not panic as the market was still moving well and would continue to do so. “However, they must have realistic expectations on price and the time it takes to sell.”
“At the recent UDIA market predictions luncheon, over 500 industry representatives participated in a straw poll of their expectations for 2015 and the vast majority saw a return to a more normal market after record land sales in 2013 followed by record building approvals in 2014, ” UDIA WA chief executive Debra Goostrey said, with sales likely to stay ahead of the five-year average.
Ms Goostrey said first-homebuyers were likely to be influenced by the high rental vacancy rate, which is minimising rent increases and reducing the incentive to buy.
“Price growth is likely to be contained to 3-4 per cent in 2015, shifting some of the power to the purchaser, which will help to maintain sales volumes across at least the first half of the year.” Ms Goostrey said confidence in the second half of the year would be influenced by employment data and the outside chance of an interest rate fall.
The WA property market is in for a bumpy ride, according to Qwest Property Services chairman Warwick Hemsley.
“After years of experiencing one of the highest property growth rates in the country, WA is getting a taste of what it’s like in a more moderate market, ” Mr Hemsley said.
“The market has stagnated due to slowing economic growth as the mining sector moved from investment to production phase and iron ore and gold prices have decreased dramatically.
“This has had a significant impact on demand for property as sales numbers are down, listings are up and rental vacancies remain at 4 per cent.”
Mr Hemsley expected much of the same in 2015, given Australia’s growth rate has fallen to 0.3 per cent. He said uncertain employment conditions would play a role in demand for housing in 2015.
© The West Australian
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