Property Crash
WA housing market glut the worst in the nation, and
it's only getting worse
Western Australia's housing market is the most
oversupplied in the country and it is only going to get worse, a new report on
the future of the building market has found.
Buying, renting or selling?
Home owner: Oversupply means prices are unlikely to go
up for some time. Although one analyst thinks bids for entry-level homes in
good areas are still competitive.
Renter: It's time to re-negotiate your lease.
Oversupply means you have lots of options and your landlord will be keen to
hang on to you.
First home buyer: Prices have softened, but we
probably haven't reached the floor yet. According to one analyst, you can
afford to hang on a bit longer.
BIS Oxford Economics is forecasting a national decline
in the building market over the next three years, including WA where building
starts peaked in 2015/16.
According to the latest BIS report, there are already
25,000 unnecessary homes in the state and that will increase to 26,000 by 2019.
About 70 per cent of these are freestanding homes, as
opposed to NSW or Victoria where oversupply is a more serious concern for
apartments.
The slowdown in population growth linked to the end of
the mining boom has seen the rate of new houses being built contract, but it is
not enough to offset the significant oversupply.
"The bottom line is there's excess stock out
there. We need to see construction fall well below demand," BIS Shrapnel
managing director Robert Mellor said.
"Underlying demand's probably close to about
19,000 dwellings a year, so current dwelling commencements have yet to fall
below what the underlying requirement is, and if you've got an oversupplied
market, that basically means you're going to stay in oversupply for some
years."
He said without population growth or falls in the
number of new homes being built, oversupply would continue, meaning possibly
further falls in home prices.
"I think we're pretty close to the bottom of the
market — by the end of this year, early next year we'll have come to the end of
price declines in the Perth housing market," he said.
"But is it a good time to get in? I wouldn't be
getting in yet, I think you could wait another couple of years, certainly
another 12 or 18 months."
"Any price growth is probably not going to come
before 2019/20, or more into 2020/21, because I don't think there are the
economic drivers."
Activity in entry-level homes
Perth property analyst and licensed valuer Gavin
Hegney said as prices drop, a lot of first homebuyers were getting into the
market, while household sizes were getting smaller and people were looking for
entry-level homes in the western suburbs.
"That tends to mean [a price slump] won't last as
long as you think it will, because it will change behaviour as a result of
dropped prices," he said.
"All those entry-level homes are up 10-20 per
cent, but at the same time investors are in a world of pain because they've had
a 30 per cent drop in rents and a 30 per cent increase in interest rates."
He said because a lot of first home buyers believed it
was the time to buy, the activity in the lower end of the market was dragging
the median price down.
"People think 'oh, values are falling', whereas
actually we've got the highest [proportion of] first home buyers
percentage-wise in the country, at 22 per cent."
Perth Electrician Zak Plakakis, 21, just made his
first foray into the market with a block of land in Alkimos, in Perth's north.
He said while he looked at the market, he decided it
was a good time for him to buy.
"To be honest, I just thought I was ready for a
house," he said.
"The interest rate's really low at the moment, …
and there's not heaps of work out there for builders, so a lot of people are
doing things cheap.
"I'm building, so we're getting a lot of really
good deals through that."
Renters "should hold out for deals"
Mr Hegney said because of the supply of homes, renters
should be able to re-negotiate.
"If they haven't had a 30 per cent drop in their
rent in the last year or so, then they're probably not taking advantage of the
soft rental market," he said.
"They should be churning out of what they're in
and … saving extra to buy a property."
But he said there were indications the market was not
going to fall forever. Latest figures showed more full time jobs in the state
and hours worked, as well as anecdotal evidence of capital raising in the
mining sector, indicated the economy may be no longer contracting.
(Source: Australian Broadcasting Corporation )
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