The West Australian economy has experienced a major slowdown in 2015 as the impact of the mining sector downturn has taken a toll across all sectors of the economy.
Significant job losses in the mining sector as well as decreased revenue has caused the previously rapid rate of population growth in WA to stall and therefore impact on demand for housing. In fact, WA’s population has gone from the highest growth rate in the country at 3.4% in March 2013 to just 1.4% for the year ended 31 March 2015.
The property market in WA has reflected these economic conditions and a significant downward price correction in dwelling values has been the result. In particular, according to the latest preliminary data from REIWA, the median house price in Perth was $535,000 for the three months to 30 November 2015, which is 2.9% down on the December 2014 quarter.
The rental market has also suffered from decreasing demand, with the median rent down to $395 per week, compared with $450 per week at the same time last year. REIWA says that rental listings are 16% higher with 9,448 properties available to rent as at 30 November 2015.
So given these fairly negative statistics, what is in store for the Perth and WA property markets in 2016?
Firstly, it is important to keep in mind that the downward price adjustment that has occurred in the last 12-18 months followed a period of rapid growth in Perth property values which saw median house prices peak at $550,500 in March 2014. The Perth market between 2012 and 2014 experienced a massive 14.6% price growth in just two years.
This means that Perth prices are now coming back to a more sustainable level, where, thanks to record low interest rates, we are likely to see the property market steady in 2016 with only slight price movement up or down.
From an investment perspective, Perth is now a more affordable option than Melbourne and Sydney where prices have experienced rapid growth and continue to grow to the point where they have become almost out of reach for many budgets.
Buyers will be in control in 2016 with the ability to take their time to find the right property in the right location to suit their individual lifestyle and budget. Location will play a key factor in demand for property as buyers place even more emphasis on seeking property that is in close proximity to public transport and other amenity such as quality education institutions, employment centres and hospitality precincts.
As increasing travel times and traffic congestion become more of an issue for Perth residents, the importance of access to reliable and efficient public transport and/ or decreasing the distance one needs to travel on a regular basis, is moving closer to the top of many buyers essential criteria.
In terms of the type of housing that will be in demand in 2016, we are likely to see aging properties fall out of favour compared with newer homes or house and land packages that offer innovation and a diverse product range.
Newer stock attracts buyers due to the prospect of lower maintenance and potentially less costs involved in the ongoing upkeep of the property. An increasing number of people are also looking for smaller lots that require less gardening and provide an easy care, lock up and leave lifestyle.
The shrinking average household size is also a factor in people’s increasing preference for smaller homes as more singles and couples, particularly in the older demographic look to downsize.
A new trend that we will see more of in the next 12 months is the new micro lot product that has recently been introduced to the WA market. Micro lots are green titled and sized anywhere between 45m² and 120m² with a developer in the northern metropolitan region of Perth being the first to achieve approval for a micro lot product at 80m². These lots are designed to fit a compact, double storey home design that would attract a range of buyers from young professionals to downsizing retirees.
The significant amount of new apartments that are coming to market will also have an impact on demand for older units and apartments. Many new apartments that are currently under construction have already sold off the plan, however there is plenty more in the approvals pipeline.
Overall, newer dwelling stock in convenient locations will be the types of property to watch in 2016 as we see a return to a more steady market.
About the author: Warwick Hemsley is Chairman of QWest Paterson Valuers & Property Consultants, based in Perth, Western Australia. Visit the website to find out more: www.qwestpaterson.com.au