- The Perth property market declined for six years 2014-2020
- The current boom is certainly happening, but how long will it last?
- With government stimulus ending, there are more mortgage repossessions
Various media outlets published screaming headlines this week that Perth’s property houses will reach new highs. Various experts were interviewed.
This is quite a story, given that the Perth property market had been in almost continual decline from 2014 through to 2020, when it was then hit with a global pandemic. Until recently, it was generally regarded as the best value to buy in the country.
While there had been a few ‘false dawns’ during the previous six years, the Perth property market just bumbled along.
[Select part of the chart to zoom in on various years, and ‘reset zoom’ button to return]
Looking at the SQM Research ‘Asking Prices’ data (see chart above), it is clear that property prices peaked in 2014. In November 2014, house prices were $767,000. They then fell about $100,000 (-13%) to $650,000 by April last year.
Unlike reported sales prices (which take weeks and often months to be collated), ‘asking prices’ track what the properties are on the market for right now.
While asking prices have stabilised somewhat since, they are $668,000 this month, still some way off the 2014 peak.
The word on the street
Prash Nayar works as a sales representative for the Perth Realty Group. He started out in the industry just as the previous boom ended in 2014.
He said there were times in the intervening years that he wondered why on earth he had got into the industry in the first place.
“I started out in real estate December 2014, and as we moved into 2015 and 2016 we could see the property market was declining,” he told The Property Tribune.
“Stock levels reached an all-time high, there was lower buyer demand, and hence prices declined. We saw a lot of mortgage repossessions and fire sales in 2016 and 2017. There were many distressed properties.”
Mr Nayar plies his trade in Maylands and surrounding suburbs, centring on Mount Lawley. His suburbs are all within a 10 kilometre radius of Perth CBD, a desirable commuting distance.
Despite the current boom, easily the best market he has seen in his 6-year career, there is an alarming underbelly that harkens back to an earlier time.
“We’re seeing mortgage repossessions again, because government support – such as JobKeeper – ceased at the end of March 2021,” said Mr Nayar.
“Despite low interest rates, more people can’t pay their mortgages, so banks are coming back.
“Classic example – I have an auction this Sunday, a 3×1, which is a mortgage repossession. I hadn’t seen this for years, apart from the very occasional case.”
In any given month, about 250 to 300 properties come onto the market in his area, across 6 or 7 suburbs. At the moment, he says that 10% or so of these are repossessions.
“This could continue, and may increase,” he said. “So I don’t think the current market is sustainable. I’m an optimist, but there are less buyers coming through home opens now.”
Mr Nayar believes that “reality may sink in” around the third quarter of this year.
“Time on market will rise, and prices may have to adjust back. Few people are talking about this, but I expect this will happen,” he said.
The Real Estate Institute of WA (REIWA) publishes sales data based on what its member agents report.
Their quarterly median price chart (below) shows a decline from $525,000 in June 2016 to $475,000 in June 2020, then a rise back to $500,000 in March 2021.
Perth Median Prices, Quarterly data 2016-2021
If we extrapolate its current growth trajectory, then it could reach new heights. It is clear the market bottomed out in June 2020, but how long the current rise will continue for is anyone’s guess.
We will have to wait to see if Perth hits new heights, or if other effects stabilise it beforehand. Talk about ‘hitting new heights’ is perhaps premature.
As Paul Barry put it on this week’s ABC TV show ‘Media Watch’, be very cautious listening to anyone in the media who thinks they can predict where the property market will go.
Prash Nayar is a contributor to The Property Tribune.