Depending on whom you speak with and which media outlets you follow, you will get differing points of view when it comes to Perth property. This can get confusing; so in an attempt to debunk some of the more sensationalist opinions that tend to drive the conversation at the weekend BBQ, I have outlined some of the facts.
Generally, Perth property prices are no longer falling. According to REIWA, the Perth House Median Price has been stable at around $510K since the June ¼ last year (2017). A spike in property purchases in the December 2017 ¼ gave a little bit of false hope but overall a stable year in the property market.
There are better performing markets than others. There are pockets that are outperforming the market with Applecross, Bicton, North Fremantle, Cottesloe, Nedlands and Kallaroo making the top 10 list of highest growth suburbs. Interestingly, it is not the higher value properties in these market that are moving, it is astute buyers taking advantage of the lower value entry price in these typically affluent areas. That said; there are also poorer performing areas that may still have some pain ahead before these suburbs stabilise and these are typically the outlying suburbs that have seen rapid expansion and therefore an oversupply of stock. The same story continues for apartments in Perth.
Overall the Perth market appears to be on the mend, but there are some macro-economic drivers to factor in that point to a slow recovery, being:
Slow wage growth in WA is presently sitting at 1.4% for the year which is the equal lowest in the country.
Low inflation which somewhat offsets the low wage growth with Perth having the lowest annual change at 0.8%. Low inflation, however, is typically a symptom of people generally not spending or delaying spending and this is a common story at present as many people are choosing to repay debt rather than spend and take on debt to fund these purchases.
The good news is that the leading indicator to consumer spending, the Chamber of Commerce and Industry WA’s Consumer Confidence Survey, states in their March quarter report that WA is sitting at a 4-year high. With this in mind, we are also hopeful that there will be more positive trends as the benefits of income tax cuts are felt after the financial year end.
So, what to expect from here of course depends on who you listen to, some opinions are more bullish than others. Our expectations for the next 12-24 months are for continued market stabilisation with pockets of slow to moderate growth. This is a good outcome as it starts to give home and business owners confidence and they will start to make investment decision off the back of this stability.
The key points you should know about your lending strategy at present are:
Get advice and perhaps consider how exposed you are to property before making an investment purchase. As certain properties may offer good rental yields, but short to medium term capital growth may be stymied.
Consider your repayment type. All the lenders have repriced their interest only loan books making principle and interest loans significantly cheaper. Also, without the aid of significant capital growth property equity will be built by repayment of debt.
Review your rate and bank the savings. Lenders are very competitive for investment and owner-occupied principle and interest debt, so use this to your advantage and to review and switch to a lower rate. By banking the interest savings on the loan, you could save thousands of dollars and years off your mortgage lending.
Restructure to use available products to your advantage. Make sure that your transactional account and savings accounts have the ability to offset your lending to save interest, many loans have redraw options allowing you to quarantine savings in the mortgage account itself and redraw this when the need arises.
Don’t get stuck. Many business owners they feel they have limited choice or are stuck with what their business banker can offer. This is not true. We specialise in working with self-employed people to get the best from both home and business lending arrangements and where possible work towards a path to release home equity from business debt arrangements and, in some cases, split the business relationship from the home bank.
If you are looking to make a purchase, please get in touch on 08 9442 0095 and we can send you a free CoreLogic Property report on the subject property. This can give you all the property and sales history and comparable sales, where available, in the area. This report has already helped a number of clients in making the right decision for them.
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