WA real estate is holding strong.
The number of homes currently on the market has continued to drop and is creating competition for buyers. In the last two months we’ve been flooded with enquiries, private inspection bookings and have had 12 Perth homes go under offer.
I don’t have a crystal ball, but history shows us that after a major event like COVID-19 markets tend to rebound, and rebound very strongly.
Here’s five things insulating Perth from the impacts of COVID-19 compared to other capital cities in Australia …
- Listing numbers are down dramatically (and continuing to drop)! In April there were just 6,534 homes on the market. Which is roughly 1,000 homes less than the month before in March (that’s a massive drop in such a small time frame) … And as I’m writing this blog post, that number has dropped even further to just 6,067 homes (according to reiwa.com data). To put that in perspective, this time last year we had just under 12,000 homes (excluding land and units) on the market in Perth. This is creating lots of competition for Perth buyers, because there aren’t enough homes for sale to meet the demand.
- When COVID-19 hit, WA was in the recovery phase of the property cycle. This is completely different to over east who were at the peak of their market and will likely see home price declines of 10% and maybe even 20% over the next year or so. Meanwhile, Perth has just come off the back of a 5-year economic slowdown and our property prices have already corrected (we reached the bottom of the market in 2019). As long as we don’t see many distressed sales flood the market (which the mortgage ‘holidays’ and jobkeeper payments are helping with), Perth property prices should remain insulated.
- The Perth vacancy rate is very low, currently sitting at 2.2 per cent. When the vacancy rate is this low, renters look to buy their own home, as it is cheaper for them to pay their mortgage than it is to rent. On average people spend 18 months to 2 years to buy a home, and as the Perth rental market began its recovery three years ago, we’re now starting to see more and more renters move into buying their own home. This will increase Perth buyer competition, and again, protect Perth home prices from declining.
- WA doesn’t rely heavily on tourism and immigration. Out of the 239,000 people that came to Australia in 2019 under immigration, only 15,000 of them came to WA. While in NSW, Victoria and QLD, 202,000 migrants. You can see how this will have a big impact over east, but little effect on WA. So, when you hear media reports about the Australian real estate market, be mindful that most of the commentary will be coming from over east, and be about national numbers, not local, WA numbers.
- Iron ore prices are ramping up again. Prices are currently sitting at $100 per tonne and looking to continue as China ramps up their economy after the pandemic. Brazil and India are two major sources of iron ore and they’re currently having big issues with COVID-19. So much so that they’ve needed to close down their mines. This lack of global competition should keep iron ore prices in Australia high.
So, if you’re a Perth home buyer my advice is get in and buy now because if you’re waiting for prices to drop then you’re going to be disappointed!
The only thing that I would watch out for is the end of September/October when people start paying back the loans they currently have on hold. But again, I think this is going to be more of a problem over east than in WA. If something was to happen to iron ore prices, then it may be a different outcome. None of us can say exactly what is going to happen, but if we go by history, 2020 is feeling a lot like it was in 2005/06… right before the last Perth property booms.
As always if you or your family have any questions about buying, selling or renting feel free to give me a call any time on 0439 998 867, I’m only too happy to help. Stay safe and healthy!
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