It would be easy to get discouraged about the state of real estate in Western Australia.
For some months print media such as the West Australian and Sunday Times have reported very little positive news about the market. More recently, the electronic media such as Today Tonight have started to do the same.
It’s not all “doom and gloom” though – especially if the levelling of the market is viewed in context.
Between 2004 and the end of the 2007, the Western Australian real estate market experienced growth that was unrivalled in the country. For example, according to REIWA, the median price for a three bedroom home in Swanbourne in 2004 was $700,000. By the end of 2007 that figure was nearly 1.4 million dollars. Cottesloe, and Claremont experienced similar growth over the same period.
There were several reasons for this increase.
Firstly, real estate markets run in cycles and Western Australia was obviously in line to follow the trends that occurred in the eastern states at the turn of the century.
A second and more important force shaping the West Australian growth in those years lay in the increase in population owing to a natural influx of people from the eastern states who were attracted by the lifestyle and business opportunities here, as well as an increase in population emanating from the demand for resources in Asia, particularly China.
Despite these positives, it was inevitable that the Western Australian market would slow. As the Perth median price gradually increased to $475,000 in December last year, property became unaffordable for first home buyers. This fact, combined with an increase in the number of properties onto the market owing to a series of interest rate rises, took such a toll that by June this year, REIWA reported that the median price had fallen to $446,000.
Whether property will continue to fall is still debatable. Certainly, the fact that the Reserve Bank decided not increase interest rates again at the latest review (and is in line to lower them) should help matters. So too should the current downturn on the Australian Stock Exchange for it is rare for both real estate and share markets to be softening at the same time.
Perhaps the best hope of a speedy recovery lies in positive outlook for the West Australian economy. According to the
ABC, 1000 people a week moved to Western Australia last year, including nearly 8% from the eastern states. Secondly, the demand for resources from Asia and the associated economic growth shows no signs of abating, suggesting that the attraction to Western Australia for many will continue into the future.
Exactly how soon the real estate market rights itself is difficult to say. What is clear is that the outlook is much brighter than the media might have us think.
Jamie Harrington (Director, Altus Real Estate)