PROPERTY experts looked forward to 2019 with some optimism, but the banking Royal Commission and resulting credit crunch and a Federal election had a detrimental effect on the market, with prices, sales and building starts continuing to decline.
Things were looking grim and industry bodies joined forces to lobby the State Government to support the ailing market.
Over the year a range of measures were introduced to boost the property market, and while the experts say the effects have not been fully felt they, combined with low interest rates, improvements in the mining sector and economic conditions, have seen the mood lift in the industry.
Add a slight increase in property prices towards the end of the year and an improving rental market, which saw the vacancy rate drop over the year, and WA property experts are feeling more positive about 2020.
From the established home market to new builds, land, apartments and finance, we asked them to share their thoughts on the outlook for the next 12 months.
The WA property market should experience better conditions in the new year, with some positivity expected in both the sales and rental market.
The New Year should see some positive changes in the property market, including greater sales activity, the return of investors and moderate increases in rent prices..
We saw lower sales activity at the start of the year, followed by an uptick in the second half of 2019, while listings for sale in Perth decreased from 17,000 to 14,000 – stock levels this low were last seen in 2014.
We expect sales activity in 2020 will continue to gain momentum, however there is a possibility that rising consumer confidence levels, coupled with improved housing affordability, could translate into higher sales volumes than we have seen in the last few years.
The full impact of the rate cuts and tax reforms put in place during 2019 have not yet been felt in WA, but it is expected the onset of these initiatives would be seen later in 2020.
With the current low interest rates and Perth’s population growth slowly but steadily improving, Perth’s median house price could improve over the next 12 months, however, we do not expect this rise to be consistent across all sectors of the market.
The Perth rental market outperformed the sales market in 2019, with stable median rents, reasonable leasing activity levels, declining listings and a plummeting vacancy rate to sit at 2.3 per cent.
This upward trajectory should continue through 2020 with consistent demand in line with improving population growth and reduced supply the key drivers for this improvement.
We are already seeing competition for good, quality stock which means we can expect this to pick up at the start of the new year, and continue to gain momentum later in 2020.
Perth has recorded an overall median rent price of $350 per week since April 2017, the longest period of stable rents experienced since Reiwa first started recording rental data in 2001, but this could change in the new year.
We’re at 32 months and counting of stable median rent prices in Perth.
If listings continue to decrease, new build stock continues to decline and leasing volumes remain healthy, we should see the overall median rent price gradually increase.
Perth currently has the lowest median house value of any major capital city and this, combined with strengthening rental conditions and the opportunity to get into good suburbs at an affordable price point, meant investors are likely to re-enter the market in 2020.
An increase in investors looking to take advantage of the favourable market conditions will help boost the available supply of rental property, keeping rent increases to moderate levels.
Reiwa expects overall market conditions to improve in regional WA during 2020 as a direct result of investment in the mining sector.
Karratha has already seen improvements during the latter half of 2019 with increased rental demand and sales activity.
In addition to Karratha, Port Hedland and Kalgoorlie are areas to watch in 2020, with the new mining projects going a long way to restoring confidence in these regions.
These projects are expected to create thousands of new local jobs, which should continue to support population growth, improve demand for housing and aid recovery.
The WA Government’s push for tourism looms as another positive for regional WA, as it could provide some much-needed support to WA’s tourist focused regions.
Mr Collins said after a prolonged period of turbulent conditions following the slowdown in the mining sector, the WA market appears to be stabilising, but while the worst appeared over, Reiwa cautioned against expectations of a rapid recovery during the next 12 months.
UDIA WA chief executive
This time last year we were predicting that residential property market conditions would be flat for at least 12-18 months before a potential upswing.
Unfortunately, 12 months later we are still waiting for a sustained uplift, however remain hopeful that the worst of the property market downturn is behind us and we are likely to see relatively stable conditions moving into 2020.
A recent report from the Housing Industry Forecasting Group (HIFG), of which UDIA is a member, reinforced our expectations, predicting that dwelling commencements will remain flat for the next year, with a moderate lift in 2020-21 off the back of a range of more positive indicators, including increases to the Keystart income limits earlier in the year and reasonable signs of recovery in the state’s economy.
Since the release of the HIFG report, the state government has made a further announcement of a $150 million housing investment package aimed at supporting more people into affordable housing while also boosting the housing and construction sectors.
On top of 300 new public housing homes, the package also includes 200 additional shared equity opportunities, as well as extending the relaxation of the Keystart income criteria and an additional increase to Keystart’s borrowing limit by $437.2 million.
These are all positive moves for the market moving forward and we are hoping to see a lift in demand for housing off the back of these initiatives.
We are also amid record low interest rates that are predicted to drop further along with more relaxed rules around access to finance, which may make it easier for potential buyers to get their foot in the door in 2020.
Five areas to watch:
Located near the Swan Valley, Brabham is a large masterplanned community in the early stages of development as a joint venture between Peet and Department of Communities. It is close to the future Whiteman Park Metronet station and will accommodate up to 3300 new homes. The location is great for families, it will be well connected and offer diverse lifestyle options in the coming years.
Included under the auspices of ‘Metronet East’ (formally the Midland redevelopment area), planning is underway in Bayswater for major redevelopment and upgrades to the local train station as part of Metronet. The redevelopment will result in more diverse housing options and other services and amenities in and around Bayswater that will benefit local residents and likely have a positive impact on property prices.
Subiaco makes this list for a second consecutive year as activity in the local area continues to lift. The local Council is working on supporting the growth of local business and reinvigorating the inner-city location to attract more visitors and residents alike.
The Subi East redevelopment is moving ahead and there are several high-end apartment projects currently on the market that are receiving a high level of interest, particularly from local downsizers.
Canning Bridge precinct
There has been a lift in activity in this burgeoning area as downsizers look to the quality apartment projects that are emerging as an opportunity to secure a lock-and-leave lifestyle that still features plenty of amenity. The area is close to public transport, freeway, restaurants and shops, it also has the natural beauty of the swan river at its doorstep.
Natural beauty, retail and hospitality precincts on the foreshore and the most affordable land in the Perth metropolitan area means Rockingham ticks a lot of boxes for young families and first-home buyers. Upgrades on the foreshore and the new marina are all drawcards.
Master Builders housing director
The data over the past couple of years on building approvals, finance approvals and dwelling commencements make it impossible to ignore the fact that residential building has been going through a tough period.
As an example, dwelling commencements in WA fell by 14 per cent in 2018-19, with 15,608 actual commencements.
Master Builders expects conditions to remain flat in the months ahead but with a subdued recovery over 2020.
The biggest factor is population growth which, despite some improvement, remained slow at 1 per cent in the year to March 2019.
Population growth is a key factor in the recovery and is expected to gradually increase over the coming year.
The rental vacancy rate has continued to fall, sitting at 2.3 per cent in the three months to November 2019, which is a sign of improvement.
The housing market remains soft overall, with further declines in the median house price over the past year, although there are significant variations at the individual suburban level.
The amount of stock available in the established market continues to suppress prices in many areas but recent data has shown the number of dwelling listings has been declining rapidly since March.
Forward-looking indicators such as building approvals and finance commitments were soft, although the rate of decline has slowed, suggesting new housing activity is beginning to pick up.
There are positive signs continuing to emerge for a general economic recovery in WA, with some improvement in labour market conditions.
The pace of recovery remains slow but the data suggests the market is turning a corner.
Reductions in interest rates have had some positive impact on finance serviceability and experts are predicting the Reserve Bank of
Australia will further reduce the cash rate in coming months in response to continued soft economic conditions.
We should see a slow but sustained and welcome recovery in 2020.
Record low interest rates, positive general economic data and increases in Keystart income limits to help West Australians into the housing market have made this the ideal time to build.
HIA executive director WA
2019 was one of the toughest on record with the perfect storm of soft conditions in the domestic economy, challenges accessing credit after the Royal Commission and consumer caution in the lead up to the May Federal Election.
Thankfully, that’s behind us now and 2020 is looking better.
The big disruption for the housing market in 2019 was adjusting to a post-Royal Commission operating environment, but the industry and consumers understand the “new normal” now and so feel more certain about what is required when seeking finance.
We’re also looking forward to the roll out of Premier Mark McGowan and Housing Minister Peter Tinley’s recently announced $150 million Housing Investment Package in 2020 which includes a 300+ social housing construction program and a six-month extension to Keystart threshold changes.
These moves will help more West Australians into homes and will also sustain jobs and training in the residential industry while the broader market gets back on track.
We expect consumer activity will slowly but surely rise throughout 2020 in WA.
We saw 15,608 starts in 2018-19 and forecast this to rise to 16,774 in 2019-20.
Overall, WA will remain one of the most affordable places for home ownership in the country in the new year.
The fundamentals in the WA economy are sound – confidence is the key now.
Ensuring we have enough skilled trades and apprentices coming through when confidence returns and we’re building at more sustainable levels is one of the emerging issues in the new year.
One of the other big policy areas we will be advocating for is that the residential construction sector be exempt from the proposed security of payments regime.
The red tape it will create will have a disproportionate impact on our sector as it is recovering from the prolonged downturn.
Large-scale government or commercial contracts often have very long payment terms, whereas for subbies in the residential construction sector its usually 7-14 days so we just haven’t seen the same types or scale of issues in regard to subcontractor payments.
Resolve Finance managing director
We started 2019 with many economists predicting we would see the first increases in official interest rates for some time and what we actually experienced was three drops to a new historical low of 0.75 per cent.
While interest rates vary, it’s fair to say that most now have a ‘3’ in front of the number.
I expect we will see further decreases in interest rates during 2020, possibly two cuts of 25 basis points taking the official cash rate to 0.25 per cent.
Of course there are always factors that are difficult to predict that may also influence further rate movements – property price escalation, GDP figures and overseas trade challenges to name a few.
Rates could be low for an extended period of time, offering a level of confidence and boost for first-home buyers who are taking on their first major commitment.
Updated guidance from the regulators late in 2019 will assist in a lenders’ approach moving forward into 2020.
We expect that focus will remain on the understanding and disclosure of all discretionary expenditure although all lenders vary in their approach.
The role of the mortgage broker has become even more important in helping customers to navigate as conditions remain challenging and lending criteria are a little different than in the past.
I do believe the learnings over the prior 12-month period have effectively made it easier for us to assist a customer through the process and 2020 will see a more stable environment.”
With the Federal Government’s First Home Loan Deposit Scheme commencing in January 2020, 10,000 first-home buyers will be able to borrow up to 95 per cent of a property’s value without paying the traditional Lenders Mortgage Insurance.
This means they can get into the market with less and it will save them thousands on costs.
While I’m a believer any initiative to support first-home buyers should be applauded, the scheme is expected to be over subscribed and will likely cater for less than 10 per cent of national demand.
The WA property market looks set to improve with Corelogic reporting the first increase in prices in Perth for the some time.
This trend is expected to continue into 2020 with population growth improving slowly, and properties on the market decreasing.
Edge Visionary Living managing director
After five years of relatively poor performance, the property market in WA is expected to return to growth in 2020.
We are seeing the State Government initiatives in 2019 starting to have an effect, with the more generous rules around Keystart and the 75 per cent stamp duty rebate for off-the-plan purchases being well received by the market.
Add to this an extended period of low interest rates, a low rental vacancy rate of just 2.5 per cent and an improving economy, a period of sustained growth can be anticipated.
The cumulative investments in Optus Stadium, hotels and airport infrastructure, along with a more focussed government approach to tourism, has resulted in soaring numbers of international tourists.
Combine this with a resurgent resources sector and there are plenty of reasons to be optimistic.
It also appears we are set for a prolonged period of stable or lower interest rates, which bodes well for the property sector.
A trend we expect to continue is the aspirational downsizer looking to swap a big block in an outer suburb for a more central location, perhaps near the beach or river, with great access to social infrastructure.
These buyers see apartment living as the way to make this switch.
While Edge Visionary Living focus almost exclusively on the owner occupier market for apartments, anecdotal evidence suggests the investor market will also strengthen next year.
Not just in city and inner-city locations, but also in premium suburban locations where a strong rental market is developing for apartments.
Yields are not dissimilar to inner-city, but the capital appreciation potential is generally much greater in the right apartment development and location.
Apartment living trends
There is still strong demand from the more mature buyer.
These buyers typically have no children living at home, and are looking for the safety, convenience and social opportunities apartment living offers.
Buyers are becoming increasingly savvy, and their apartment selection process is becoming more sophisticated.
Our buyers typically want a location that offers them the lifestyle they’re after, along with a range of world-class resort-style amenities.
More mature buyers are looking for the convenience of nearby cafes, restaurants and transport hubs, along with a relaxing and serene environment away from the hustle and bustle of a busy high street with its residual issues of traffic and retail noise.
Our projects in Floreat, South Perth and Applecross are all good examples of a quiet environment close to local facilities, all in a riverside and/or parkland setting.
Buyers also want the ability to work closely with us to add in features that suit their lifestyle needs.
Regular requests include adding in a wine cellar, or creating or extending a scullery.
Communal facilities promoting an active and healthy lifestyle are also popular; lap pools and day spas with yoga spaces and large functional gymnasiums are in high demand.
Blackburne managing director
The general property market has certainly bottomed out.
This is a normal part of all market cycles, and after a period of lower prices they start to increase again at some point.
History would say that point is around now, and so we’re starting to see signs of improvement in the market.
In the residential rental market vacancies are lowering and rents are increasing, both indicators of a shortage of supply of investment properties.
With interest rates so low many tenants will start to buy, as it is now cheaper to buy than rent.
The past year has been Blackburne’s strongest in a decade for sales volumes.
As a developer we made the decision to only purchase new sites in areas that were undersupplied with larger high-end apartments.
This proves that there is no such thing as “one market”.
Areas like Subiaco, Claremont and Karrinyup that are well situated and have good amenity have a limited supply of new apartments.
We see prices increasing in these suburbs in the coming years.
Blackburne has been able to secure land in prime locations and we will be releasing some stunning new apartment projects during 2020 to meet the demand that we’re seeing.
The big advantage of buying off the plan is that people don’t need to settle for two years, and they also save up to $50,000 in the stamp duty rebate from the government.
We’re predicting that sales off off-the-plan apartments will be very strong.
Prices for apartments have been very low for a long time, but that won’t last forever.
Now is without doubt the right time to buy.
We hear concerns from people who are “rightsizing” about selling in this market and the effect that will have on the value of their property, but the big advantage of buying off the plan is that people can secure their apartment now at today’s prices.
It works for them because they won’t need to sell their home for a few years, when the market will likely have improved.
It’s a smart strategy that many people are using now to get the best of both worlds.