22/06/2017 - 06:26

Perth property plunge not over yet

22/06/2017 - 06:26

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Property analyst BIS Oxford Economics believes there is limited upside for residential property in Perth and says the market has yet to bottom out, contrary to the widely held view that the worst is over for Perth homeowners.

Perth property plunge not over yet
Despite widespread predictions of a recovery, Perth's residential market is still sputtering through 2017. Photo: Attila Csaszar

Property analyst BIS Oxford Economics believes there is limited upside for residential property in Perth and says the market has yet to bottom out, contrary to the widely held view that the worst is over for Perth homeowners.

Formerly BIS Shrapnel, BIS Oxford Economics estimated Perth’s median house price would be $540,000 at the end of June, a decline of 10 per cent since a cyclical peak in June 2014.

Rents are also down significantly from their cyclical peaks, according to BIS Oxford Economics senior manager Angie Zigomanis.

“The median three-bedroom house rent and median two-bedroom unit rent have fallen by 23 per cent and 26 per cent from their 2013 peaks, respectively,” Mr Zigomanis said.

He said the steady decline in resources investment during the past few years had dampened employment and population growth, sending demand for Perth property into a downward spiral.

“Demand has weakened across all buyer segments, including first homebuyers, changeover buyers, and investors,” Mr Zigomanis said.

Mr Zigomanis said BIS Oxford Economics expected the Perth median house price to bottom out at some stage in the 2017-18 financial year, at the same time as mining investment hit the floor.

“Any subsequent upside is likely to be limited, given the weak state economic environment, weak population growth and excess supply,” he said.

“Significantly, Perth’s median house price has still not recovered from the mid-2000s mining boom, and by June 2020 is forecast to be 23 per cent below its earlier March 2007 peak in real terms.”

The commentary is in contrast to widespread analysis of Perth’s residential sector, with many agents and industry analysts saying the market had hit the bottom already at some stage in the past 12 months.

Earlier this year, a panel of local property experts at a Business News Success & Leadership event said they expected a stabilising labour market and surging commodity prices would drive an upswing in Perth median house prices throughout 2017.

However, at the halfway point of the year, data from market analysts CoreLogic and the Real Estate Institute of Western Australia suggest that BIS Oxford Economics’ predictions could be closer to the mark.

CoreLogic’s latest Hedonic Home Value Index showed Perth house prices were down 4.2 per cent over the 12 months to May 31, to $500,000, after falling 0.4 per cent in the three months to the end of May.

In its latest market update, the Real Estate Institute of Western Australia said Perth’s median house price fell 3.4 per cent in the March quarter, to settle at $506,500.

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