Perth has been performing unbelievably and leading not only the Australian property market, but also perhaps the best performing international market with an impressive 38.7% growth for the 12 months to 30th September 2006.
The big question is will this continue, and if so for how much longer.
We would all like to believe that this will last for ever, but history shows us that this is not possible. Otherwise within a few years the property prices will be beyond anyone’s budget,
We do expect growth to slow to more realistic levels in the near future,as natural market forces take over to “normalize” the market.
That does not mean that you should not invest in Perth, quite the opposite, just that you need to be careful.
The key factors that have pushed prices so high are best summarized as follows:
Catch Up
Up until 2002, Perth had been quietly progressing as a property Market with moderate returns. In fact many investors had lost patience with it and began selling around that time, a decision they would soon regret.
Through out the slow growth period, fundamentals remained strong so it was not surprising to see an acceleration in the growth rate when the inflow of people and the strong job creation of the mining boom became evident.
Shortage of Supply
As more people headed West, the state was caught with a shortage of property for the new arrivals, putting heavy pressure on prices and seeing a dramatic lift.
Bear in mind many of the people arriving where from more expensive property markets in the Eastern states and abroad, so they saw great value in Perth prices and were content to pay a premium.
The Speculation of Boom
Inevitably, as prices rose, and the market gained momentum, the growth performance has attracted a lot of speculation from developers, agents and investors which has sparked a flurry unprecedented in the market.
Projects were selling out in days without advertising, East Coast punters were acquiring multiple units confident of the ability to on sell before completion and the good economic news of low unemployment and strong economic growth just threw fuel on the fire to keep the flames of expectation burning brightly.
Reality now sets in
Even now, with growth still at lofty heights, signs of reality setting in are appearing.
More property is available to buy on the market, taking longer to sell and heaven forbid even some developers selling land parcels are even looking to offer incentives to buyers.
This is because the general market has hit saturation. Much of the stock that was being sold is now complete and ready for rent, so the urgency of finding somewhere to live is reducing as supply comes on line.
This is evident in the recent vacancy stats form the Real Estate Institute of Australia, where the vacancy in Perth for September is now the highest in the country at 2.1% in the September Quarter, up from 1.8% in June. Still an excellent result, but signs that pressure is reducing.
And now…
Perth is an excellent Property market and worthy of investment at any time. The key here is that you are investing, not speculating.
If quick profits are your goal, then maybe opportunity may have passed.
With the good market fundamentals, we expect the premium lifestyle property to still do very well as the general market cools off from its overheated status. Also the increased availability will be welcomed by those that have genuinely wanted to invest in Perth, but could not get access to any property as it was quickly sold out.
Growth for the September Quarter slowed to 6.2%, after the June Quarter recorded 8.2% growth, so it seems likely that the strength of the economy and real demand for property will ensure normality will remain in the market rather than a price correction as some forecast.
The key test will be in how much property comes on for resale when the large amount of projects under construction begin to complete. If investors hold for the long term all will be fine, and profits made to date will be locked in.
It is likely that some people may be caught out and some bargains may be available so look out for them as they will be keenly sought by investors.
My best advice is to learn from lessons of the past that have shown that quality property has resilience to any adverse market movements, and outperform the average market growth.
Heading this you can expect to continue to enjoy your successful long term investment in a fast growing an attractive property market that is Western Australia.
Click here to view properties in the Perth Metro Area.
