PERTH’S residential property market is in a state of oversupply and in the midst of a price correction with industry experts warning the market has been overstimulated.
PERTH’S residential property market is in a state of oversupply and in the midst of a price correction with industry experts warning the market has been overstimulated.
A return to equilibrium could be more than 12 months away.
Real Estate Institute of Western Australia figures indicate there are currently 17,300 properties for sale in the metropolitan area, while property analysts RP Data-Rismark reported last week there are currently 20,594 homes available for sale.
REIWA president Alan Bourke said there would usually be about 12,000 properties available for sale across Perth in an ‘equilibrium’ market.
The oversupply has created downward pressure on home values, with the latest REIWA statistics from the September quarter indicating a 4 per cent fall to a median price of $480,000.
According to Mr Bourke, home sellers are drastically discounting prices, as the length of time on market ballooned to an average of more than 70 days, 20 days over the usual 50 days taken to sell a house in an equilibrium market.
“Our data was showing that 65 per cent of people are having to discount properties an average of 6 per cent to see it sell,” Mr Bourke said.
“The people who are actively priced are selling, things are still selling, but prices are going nowhere. Sales volumes are down by about 20 to 25 per cent.”
Realmark director John Percudani said the current oversupply was the result of a combination of external factors.
“There has been so much intervention in the residential property market, for such a long period of time, that’s been one thing that has distorted the normal ebbs and flows in the marketplace,” Mr Percudani told WA Business News.
“When you overstimulate one sector of the market, for example first homebuyers or investors, you effectively take out demand from the future and put it into the current market, and effectively when the normal flow of properties come onto the market, then the buyers are no longer there.”
Mr Percudani added tight credit conditions imposed by the banks had also forced extra properties onto the market, not only by owner-occupiers not able to afford to stay in the properties they had bought, but also from investors dumping rental properties to liquidate assets.
“You can’t have a dramatic increase in choice and not have a corresponding adjustment in price,” he said.
According to Office of State Revenue Statistics, the biggest drop in housing demand has been among first homebuyers.
In October last year there were 1,463 houses sold to first-time buyers, compared with just 662 this October.
Professionals chief executive David Hobbs said demand for housing had cooled significantly across the metropolitan market since the Reserve Bank’s surprise decision to raise interest rates on Melbourne Cup day.
“The growth hasn’t been to what the Reserve Bank expected, and we should never have had the increase in rates that we had recently,” Mr Hobbs said.
“The growth just hasn’t been there.”
National accounts figures show the Australian economy grew by 0.2 per cent in the September quarter, for an annual growth rate of 2.7 per cent.
“At home opens we’re getting plenty of people to rock up but no-one is willing to commit, so that’s the problem we’ve got,” Mr Hobbs said. “I’ve just come back from Esperance, and between two of our sales reps in Esperance they have 260 listings, which is just crazy, absolutely crazy.
“There is a massive supply of product out there at the moment, and it’s just a matter of the economy being injected to start moving, and that will only come when the Reserve Bank realises that the growth that they predicted for our economy is not occurring.
“That rate increase by the Reserve Bank flattened the whole market.”
