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5 Signs the market is looking up

Wednesday, 6th Feb 2013
Categories: Market News, Newsletter

market

Since the GFC, the Perth property market has been somewhat sluggish with brief glimpses of what may lay ahead. But now there are very strong signs that the next 12 months will see solid growth in property values. So, why are so many people convinced that 2013 will be a good year for property prices?

For those with their ears close to the ground, it has been coming for quite a while – a gathering of economic forces and market trends that all point to a near certain future.

In fact, there are already signs of growth in some parts of our city and according to recent figures from RP Data-Rismark the Perth market grow strongly in the 3 months to December of last year. In some suburbs, prices are back to pre-GFC levels.

Some commentators believe property prices in Perth could increase between 5 and 7 percent over 2013, and we believe certain areas could achieve even stronger growth.

So, why are we convinced that 2013 will be a good year for property prices? Here are 5 reasons:

1. Population growth

Population growth in WA, and specifically Perth, has been happening at a phenomenal rate. It has been massive not just by Australian standards but also on a global scale. Currently, around 1500 people are entering the state each week.

The growth has been driven by an influx of new arrivals, mainly from overseas, as a consequence of the economic opportunities in the state. With many parts of the world struggling economically, people are coming over for high paying jobs and to build a better future for their family. And, of course, these people need somewhere to live.

2. Rental market

When the supply of new housing can’t keep up with the rate of population growth, there is increased pressure on the housing market. It first affects the rental market, as many new arrivals choose to rent when they first arrive, then the sales market.

The rental market in Perth has been extremely tight in recent years, which has put upward pressure on rents. In 2012, Perth recorded a 17.5% growth in median house rents and 14% growth in unit rents. We’re currently seeing situations where applicants are offering above asking prices in a bid to secure a rental property. This trend is expected to continue into 2013.

It is widely accepted that rental growth is a leading indicator for price growth. As rents increase, there is simply a greater incentive for renters to buy.

3. The Economy

What can you say about the WA economy that hasn’t already been said? It’s the nation’s powerhouse.

Of the eight key indicators typically used to analyse the economy of the states and territories, WA typically leads the way on most of them – economic growth, construction work, unemployment, retail trade, population growth and equipment investment.

A strong economy means money is flowing into the state, businesses are investing and hiring, there are opportunities being created, and consumers are confident in their ability to take on and service housing debt.

4. Development and Infrastructure

Perth is developing rapidly as a city. Not only is the city centre being totally transformed, but there are various strategic centres being enhanced thanks in part to an increased shift towards suburban infill.

All of these developments are creating new opportunities for work and living, and helping to attract people from overseas and interstate.

Importantly, there is massive investment in transport infrastructure, including roads, hard rail and light rail, which is literally changing suburbs and laying the foundations for future property hotspots.

5. Interest Rates

Interest rates are currently very  low, making housing debt more affordable, and therefore increasing demand for property. The expectation is that rates may decrease further in 2013 in a bid to help stimulate struggling parts of the national economy. This will add more fuel to the fire of the booming WA economy, putting even more pressure on the housing market.

Conclusion

If you are investing in property right now or already own property in Perth, these are just 5 reasons why you should be excited about the prospect of capital growth in 2013. There are, in truth, many other positive signs as well, such as the current low stock of properties for sale and historically good levels of affordability.

While the upcoming federal and state elections may result in some uncertainty amongst homebuyers and sellers, I expect this to be only a temporary glitch.

With first home buyers, investors and change-up buyers all expected to be active in the market, 2013 is shaping up to be a year of opportunities. For some it will be opportunities maximised, and for others it will be opportunities lost.