Residential property values in Perth are likely to continue to fall throughout 2019 before bottoming out in 2020, according to CoreLogic analyst Cameron Kusher, continuing the longest and largest price correction in the city’s history.
Residential property values in Perth are likely to continue to fall throughout 2019 before bottoming out in 2020, according to CoreLogic analyst Cameron Kusher, continuing the longest and largest price correction in the city’s history.
Speaking at a property industry conference hosted by mortgage broking network Resimac in Perth this week, Mr Kusher said CoreLogic data showed median prices in the city had fallen by 17.8 per cent since 2014, the deepest and longest correction on record.
Mr Kusher said Perth’s property market had begun to exhibit signs of a bounce-back in late 2017, but regulatory changes in the banking sector derailed any sustained recovery.
“At the end of 2017, things were starting to look a bit more positive, we were seeing a couple of positive monthly median price increases, sales volumes were lifting a little bit, but since that time the performance of the market has faded,” Mr Kusher said.
“Accessing finance became more difficult about that time and that faded any hopes of a recovery in the Perth housing market.
“Generally these downturns historically have been driven by an economic slowdown like the recession in 1989-1991 or the GFC in 2008-2009, or they have been driven by higher interest rates.
“The economy has slowed a little bit but it’s still chugging along and doing reasonably well, interest rates are obviously a little bit higher for investors but are pretty much the lowest interest rates we’ve ever seen.
“This slowdown, particularly over the last couple of years, is more closely linked to what’s happening with getting finance out there in the housing market for purchasers.”
Mr Kusher said CoreLogic’s forecasts indicated values were likely to continue to fall in Perth, albeit at a slower pace, throughout 2019.
“All the changes to lending policies are a bit of a shock to the system at the moment, but as time goes by people will understand what it takes to get a mortgage, and what seems very difficult now to get a mortgage becomes easier over time as people become more accustomed to what is required,” he said.
Mr Kusher poured cold water on the notion that an uptick in mining investment in Western Australia would be the catalyst for a quicker housing recovery, with the memories of mortgage defaults following the end of the last mining boom lingering in the minds of many potential owner-occupiers and investors.
In 2015, after the last mining boom began to taper off, WA had the highest rate of mortgage arrears in the country, according to research by Moody’s.
The percentage of loans in arrears rose by 40 per cent from December 2015, according to global ratings agency Standard & Poor’s, with high unemployment, low wage growth and falling property prices contributing to high levels of mortgage stress.
“A lot of people were burned last time at the end of the mining boom,” Mr Kusher said.
“I’ve spoken to a few people close to the mining industry here and they’re saying that there are some really good jobs available in mining but they just can’t fill them because people know that if the iron ore price starts falling in 18 or 24 months, there are going to be redundancies and these people are going to be back out on the street.
“There may be some benefit from the increased mining investment under way in WA, but I don’t think it’s going to be as significant as what we’ve seen in the past because people still remember what happened at the end of the last mining boom.”
The one positive for Perth property, Mr Kusher said, was the nascent stages of a revival in the rental sector.
“Rents are finally climbing,” he said.
“Rents have actually fallen by about 20 per cent from their peak, so they are still significantly lower than they were when the market peaked, but we are starting to see some rental pressure coming into market.
“Rents are up 2 per cent over the past 12 months, the last time they were growing at that sort of rate was back in 2013.
“If you continue to get more rental growth, there might be more pressure on first home buyers to come back into the market, because if rents are starting to get more expensive (and) prices of properties have come down a lot, maybe they start getting some wage growth and they will look at it and say ‘why am I renting, maybe I’ll go out and buy my own property’.”
