17/03/2011 - 00:00

A long road back but property will recover

17/03/2011 - 00:00

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Newly released data highlight the sharp decline in the WA residential property market in the past 12 months.

A long road back but property will recover

IN 2010 there was a slump of 44 per cent in the number of residential lots sold compared to the previous year.

In the state’s best selling estates, both north and south of the river, there was a marked decline.

In the top seven selling local government areas there were almost 12,000 lots sold in 2009 and this plummeted to only 6,762 lots last year. That’s a fall of 44 per cent.

In the leading estates, lot settlements fell from 2,281 lots to 1,297.

Statistics, compiled from Landgate, REIWA and internal research by Satterley Property Group, underline the steady drop-off in settlements throughout 2010.

Consumer confidence is at a low ebb with potential buyers alarmed at: interest rates; affordability issues; very high changeover costs; Western Australia’s high cost of living; rapidly rising utility charges – power, water, gas, rates and taxes; the over-supply of residential listings (22,000 from Yanchep to Mandurah); the struggle to sell existing homes before trading up; and the glut of sellers with for sale signs ‘everywhere’.

With the metropolitan median house price at around $465,000 buyers are worried that more than $35,000 of this price is absorbed in changeover costs.

These charges range from the selling agent’s fee and stamp duty, marketing and advertising and removalist costs.

There is, however, an upside to this situation.

The market will remain soft until the end of the year but the fundamentals are very sound and I predict our market will pick up in early 2012, albeit slowly.

The Reserve Bank has kept interest rates steady, investors are returning and it is a buyers’ market.

It’s a great time to buy because of the wide choice of affordable lots and dwellings that can be built on best quality estates where infrastructure and amenities are among the best in Australia and superior to estates in most advanced western countries.

Retailers across Australia have been on the back foot, but if the price is right buyers will respond positively.

The Satterley Property Group’s affordability initiative, launched two months ago in collaboration with 17 leading builders, has met with a very positive response.

The bonuses, incentives, rebates and rewards being offered in the campaign have proved attractive to buyers.

Our group has sold close to 350 lots in the past two months but in the December quarter total land and lot settlements for all of WA by all developers was only 250 lots a month.

The market drivers that will lead the recovery towards the end of the year are:

• the strong population growth of 40,000 a year (an additional 400,000 by 2021);

• steady employment opportunities;

• increased immigration to address the WA skills shortage;

• the strength of the resources sector, with more than $170 billion worth of projects in the pipeline;

• new construction and infrastructure projects, both private and government, remain strong;

• agriculture, although drought affected, is steady;

• expanding logistics and transport and general services are steady;

• slow development approvals and tighter finance are adversely impacting on second and third tier builders; and

• rising rents will make it cheaper to build.

As the table above indicates, the comparison of the best selling localities in WA highlighted the sharp contrast between sales in 2009 and 2010.

It is likely the $465,000 median house price in the greater Perth region will fall by a further $15,000 before the market bottoms out and starts to ‘head north’.

Buyers are showing a preference for new homes over established homes because home-land packages in master-planned estates could be bought for at least $100,000 less than the median established home.

If home and land buyers continue to shop around they will find many opportunities to live on award winning community estates.

The market and affordability is the best it has been for years.

The home and land industries are so competitive that people who buy a well-priced property in a good area now will be rewarded with strong capital growth in the years ahead.

• Nigel Satterley is chief executive of Satterley Property Group

 

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