Uncertain times for housing market

13/08/2008 - 22:00

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A series of market indicators for Perth's residential property sector have revealed the slowest June quarter in at least five years, but analysts are divided over whether the slowdown will continue.

Uncertain times for housing market

A series of market indicators for Perth's residential property sector have revealed the slowest June quarter in at least five years, but analysts are divided over whether the slowdown will continue.

The median house price for Perth fell about 3 per cent during the three months to June, to $446,000, according to figures from the Real Estate Institute of WA.

The institute's data also indicated sales volumes for houses and units were lower in the March quarter than at any point since at least the 2002 June quarter.

Meanwhile, the average time taken to sell a property has more than doubled since mid-2006, from a low of 36 days to 74 days.

Lot sales were also down, by 9.5 per cent since the March quarter, according to data from the Urban Development Institute of Australia (WA).

This was the fourth consecutive quarterly fall and the lowest total sales figure - 1,057 lots - since December 2000.

A combination of these and other figures have led national agency, Australian Property Monitors, to maintain its prediction of a 10 to 15 per cent price fall during calendar year 2008, which would require a further decline of at least 6 per cent by December.

Figures from APM show Perth has the worst auction clearance rate - 20 per cent in July - of all the states, as well as the longest average days on market (100 days).

Historically, the average listing time for a house is about 60 days in Perth.

The decline in the auction clearance rate since January has been the worst run since 2004, while the number of properties listed for sale is higher now than at any point since the agency began collecting data in 2002.

Currently, there are 28,000 houses and 4,200 units on the market in Perth.

In addition, price discounts by vendors have grown, from about 5 per cent to 8 per cent on average, which is the highest rate nationally, according to APM.

The agency's general manager, Michael McNamara, said both the discounting rate and average days on market indicated the market slowdown would persist and deepen.

"When we look at all the metrics of the Perth property market, we see the market is deteriorating rapidly," he said.

Mr McNamara said rising interest rates were also creating a smaller pool of buyers able to afford the median house price, which would place downward pressure on prices.

However, both REIWA and property analyst Residex believe the market will continue to plateau, rather than fall, over the coming quarters.

REIWA believes a fall of 15 per cent is remote and is forecasting a period of little or no price growth until mid-next year, when the market will absorb an oversupply of stock.

The institute has pointed to WA's strong employment figures and underlying demand as evidence that conditions are different to previous major corrections, such as in 1990-91.

Residex director of research John Lindeman said the Perth market was expected to remain flat over the coming quarters due to buyer uncertainty.

"People have become very concerned about what is happening in the stock market and with the spate of interest rate rises, plus the de facto rate rises of the banks, there's a lot of uncertainty," he said.

"It's likely to continue until such time as the Reserve Bank eases rates."

However, Mr Lindeman agreed with REIWA that a significant price fall in the next 12 months was unlikely.

"You've got to look at the fact that our population is growing at such a fast rate. In WA, it's running at 2.4 per cent [increase annually], which means an additional 50,000 people per year arriving, most of them settling in Perth," he said.

"These are the official ABS statistics, which hide the 457 visa [arrivals], so there's probably another 25,000 people who are living in Perth for a period of a year or longer."

Mr Lindeman said the combined factors of immigration and people delaying buying would put upward pressure on rents, and provide some support for house prices.

"I think there'll be quite a significant rise in Perth house and unit rents over the next year," he said.

 

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