Perth’s real estate leaders say the residential property market is shaping up to be more resilient to pandemic-induced fluctuations than initially anticipated.
Perth’s real estate leaders say the residential property market is shaping up to be more resilient to pandemic-induced fluctuations than initially anticipated.
Mark Whiteman says COVID-19 joins a notable list of crises the Ray White business has endured over the past century, world wars and The Great Depression among them.
The Western Australian chief executive for the Ray White real estate franchise, Mr Whiteman said the business had plenty of practice in building resilience during its 118-year history.
“The pundits used to refer to us as, ‘Ray White sails well in light breezes’,” Mr Whiteman told Business News.
“We have always seen opportunity in a challenge.
“In the heat of COVID, there was a lot of talk about what you couldn’t do; what we focused on as a company was what we could do.
“You’ve just got to keep moving forward and growing.”
Mark Whiteman says Ray White has focused on growing its WA market share. Photo: Ray White
Ray White is the state’s largest residential real estate business, as ranked by number of staff on the BNiQ database, and one of the largest real estate franchises in Australasia.
Mr Whiteman said the business, which was still owned by the White family, had used the downtime over the past few weeks to focus on what was in its control.
One of those ‘controllables’ was expansion plans, with Ray White recently adding a Morley division to its offering.
“The biggest challenge facing any business or leader at the moment is maintaining good energy and confidence and keeping your team positive,” Mr Whiteman said.
“The only business that should see any falling market during tough times is a business with 100 per cent market share, and we don’t have that; we’re good, but not that good.
“You might find you’re running a great business in a particular area, but there are a few suburbs that you’re not that dominant in.
“We’re working with all of our franchisees around building their businesses so they are in the best position in each of their markets to take advantage of the better times ahead.”
He said although there had been an initial slowdown when the pandemic hit, activity had increased with the easing of restrictions.
“We’ve had some offices in our WA network do all-time personal bests last month in terms of sales … that’s not every business, obviously,” Mr Whiteman said.
“As a marketplace, the only properties that aren’t selling at the moment are properties that aren’t well priced or the expectations are too high.”
He said a lack of new listings to market was an emerging challenge, however.
“From a sales point of view, stock levels and listing numbers have been coming down dramatically since COVID,” Mr Whiteman told Business News.
“After five years [of] a long period of decline … WA is on the cusp of a once-in-a-generation opportunity.”
LJ Hooker WA state director Andrew Friebe shares similar optimism for Perth’s future.
“We expect the market to hold up better than first anticipated when the COVID crisis began,” Mr Friebe said.
“This is primarily driven by a supply-demand imbalance.
“There is currently a distinct lack of homes on the market for sale, as vendors hold off listing until restrictions are fully eased.”
He said buyer inquiry had been rising steadily in recent weeks, primarily driven by first homebuyers and young families looking to upsize, as both groups sought to capitalise on record low interest rates and stimulus measures.
These measures include both federal and state government packages targeting the residential sector, unveiled earlier this month.
The federal government’s new $25,000 HomeBuilder grant has been designed to go towards new builds or renovating an existing home, while the state government’s Building Bonus package provides $20,000 cash grants for new homes, as well as properties in a residential development under construction.
Activity
But until the anticipated boost to new home construction materialises as a result of the stimulus measures, Perth’s real estate leaders expect housing supply to continue to tighten.
Momentum Wealth residential client advice manager Emma Everett, who is also chair of the group’s residential investment committee, said the impact of COVID had so far been surprising.
“The challenges are different than expected and that is that we’re now running low on stock,” Ms Everett told Business News.
“We’ve got a six-year low of property [listings] stock for sale and for lease.”
Ms Everett said her team had kept busy, with property managers turning to virtual inspections and agents conducting online home opens.
She said she had heard of relatively few cases of real estate agencies applying for JobKeeper.
“If your customers can’t show up to buy, it’s a bit like restaurants and cafes,” Ms Everett said.
“Certainly in our office we’ve seen a lower rental arrears than we expected coming into this, we’ve had a smaller percentage of tenants genuinely affected by COVID-19, no doubt largely supported by the government stimulus.”
Data from the Real Estate Institute of Western Australia shows that for the week ending May 31, total properties listed for sale and rent were down by 30 and 35 per cent respectively, in comparison to the same time last year.
“While we did see a sharp drop in buyer activity at the end of March through to April, this was largely offset by a corresponding decline in listings for sale, including an increase in withdrawn listings, so the market maintained a level of relative equilibrium,” Ms Everett said.
“This resilience from sellers, in addition to the various economic stimulus and the effective government response in flattening the curve, means we didn’t see a sharp drop in housing values as some predicted through April to May, when market activity was more subdued.”
This didn’t apply to every suburb, however, and Ms Everett said there were still some pockets of Perth with listings well over 100 days on market.
Nevertheless, she said WA’s existing housing affordability was a key factor supporting Perth’s market resilience overall.
According to the Real Estate Institute of Australia’s ‘Housing Affordability’ report for the March quarter 2020, WA was the cheapest state to buy and to rent.
Additionally, for that quarter, the proportion of income required to meet loan repayments in WA sat almost 10 per cent lower than the national average.
Ms Everett said while the east coast property markets had benefitted from high levels of investors as well as overseas migration, this had left them more exposed.
CoreLogic figures show that investors accounted for just 16.9 per cent of the total value of lending transactions in February 2020 in WA, compared to 32.5 per cent in NSW and 28 per cent in Victoria.
“We aren’t seeing the high levels of vendor discounting that many first anticipated would occur during the COVID-19 health crisis,” Ms Everett said.
“The experience of our buyer agents on the ground is that high-quality stock remains limited, with good properties moving quickly when they do come on market.”
That appears to be the case at the upper end of Perth’s housing market.
William Porteous, the director of William Porteous Properties International, based in Dalkeith, said the volume of inquiry for properties in the western suburbs had increased during COVID.
“The trophy home will sell in any market,” Mr Porteous told Business News.
“I have been through quite a few recessions. Usually when the market drops for some reason, like in 1987 we had the drop in the share market, it was a short period then all the money came out of the woodwork.
“A lot of people at the high end [of the market], they’re travelling all the time, flying here and there, and don’t have time to scratch themselves.
“Something like COVID comes along and they’re stuck at home for 10 weeks, they’ve got time to sit and think.”
In some cases, Mr Porteous said, those who were willing to make offers on houses weren’t meeting sellers’ expectations.
“Our sellers want to sell but don’t need to. If you’ve got your house on the market [and] you think it’s worth $5 million, and someone offers you $4 million, then you’re not going to sell it,” he said.
“Journalists try and generalise these things. You can’t say house prices have dropped because you’re looking at (places like) Rockingham … you can’t apply that when you come into an established market.
“The wealth is obtained from [these] people well before this and they still have it; whereas the people on the outer fringes, unfortunately, it’s job related and they’ve got big mortgages, so if they get laid off it hits them very hard.”
