Perth still affordable as home prices rise

Western Australia’s residential property market continues to defy the national trend, with median house prices crashing through the $300,000 barrier in the September quarter this year and house values increasing a massive 17.7 per cent on the same period last year.

While Sydney property prices are down almost 10 per cent on a year ago, Perth continues to surge ahead of all capital cities apart from Darwin, which had 21.9 per cent growth in the past year.

The number of people buying houses in WA is also on the rise.

Australian Bureau of Statistics figures for WA show a 12.8 per cent jump in the number of homebuyers in the 12 months to October, while mortgage approvals are double the national growth rate at 6.4 per cent.

In terms of affordability, measured by the proportion of family income required to pay the average mortgage, Perth sits at 26.9 per cent, compared with the national average of 32.1 per cent.

According to the Real Estate Institute of Western Australia, the 30 per cent threshold is considered to indicate stress in the housing market, so although affordability declined in Perth during the past 12 months, the market is still healthy.

In 2004-05 the supply of new houses could not keep up with demand, with 19,200 new dwellings completed at a time when new housing demand was at least 20,000.

With net migration from interstate and overseas expected to remain strong, dwelling commencements are likely to stay around 23,000 for at least two more years.

Chairman of the Western Australian Housing Industry Forecasting Group, Warwick Hemsley, said the economic funda-mentals driving WA’s economy, and in turn the population growth and housing demand, were unlikely to change over the forecast period.

“However, the housing industry capacity issues that are regulating output to around 19,000 dwellings per annum are not adequate to meet the current housing demand,” Mr Hemsley said.

“Therefore the current level of activity is expected to continue for the foreseeable future, as both the established housing and private rental markets are also experiencing tightening conditions and have limited capacity to absorb the anticipated demand.”

But Perth home owners have been cautioned about overpricing their properties despite the surge in the median house price.

CEO of the Roy Weston Group, Geoff Baldwin, said the strength of the Perth real estate market was highlighted by the fact that, during the March 2005 quarter, there was nearly the same number of established house transfers in Perth as in Sydney.

“The high number of sales in Perth is resulting in a growing shortage of houses for sale, and this in turn has resulted in rising house prices during 2005 for many Perth home owners,” Mr Baldwin said.

“But while Perth homeowners have achieved significant price growth rates during the past year, there are now more homes that are failing to sell because of overpricing.”