Perth property market recovering as supply & demand begin to rebalance
The Perth property market has entered a recovery stage denoted by tightening housing supply, while high affordability and a strengthening labour market is tipped to draw buyers back, according to a new report from Momentum Wealth Research Division.
Residential Property Spotlight: Perth analysed the key demand and supply indicators that influence property prices in the Western Australian capital.
The research report concluded that the worst was behind the Perth property market following a 3-year cyclical downturn in which supply outweighed demand amid record-high housing construction and slower population growth.
It explained that the Perth market has bottomed and it’s now in a recovery stage as supply and demand had started to rebalance, which would help buoy property prices.
On the supply side, the report shows that the number of properties for sale has hit a 2-year low in July, meanwhile the amount of new properties being built has returned to average levels after dwelling starts hit a record high in 2015.
After 3 years of an imbalance, this tightening of housing stock will allow demand to catch up to supply and subsequently will help underpin property price growth going forward.
The record high housing construction reached in 2015 was driven by favourable government incentives for first home buyers to build rather than buy established stock, while demand was weaker following slower population growth in the aftermath of the resources construction boom.
The report explains that this created a significant imbalance with supply outweighing demand, however this is now starting to equalise.
Job stability and high affordability tipped to draw buyers back
In addition to the improving supply-side fundamentals, there are also increasingly favourable signs on the demand side.
The research report explains that although Perth’s population growth has slowed following the end of the resources construction boom, it’s expected to rebound as the city’s labour market continues to strengthen.
Perth’s unemployment rate had dropped to a 12-month low recently, and was now in line with the national average.
Add to this the city’s encouraging housing affordability, which is the second-best in the nation only behind Hobart, and the report explains that more buyers will increasingly return to the market as job stability firms and the economy continues to gain momentum.
This includes investors, who typically comprise one-third of the Perth market but have dropped to a quarter of buyers in the recent downturn, according to the report.
As the jobs market continues to adjust in the aftermath of the resources construction boom, we can expect buyer confidence to return to normal levels and strengthen as the local economy diversifies into tourism, agriculture, technology and education.
To download a free copy of the report, Residential Property Spotlight: Perth, simply follow this link.