According to the Residential Property Spotlight: Perth report by property investment consultancy Momentum Wealth, Perth has begun to enter its recovery period, which a number of commentators have warned investors would be happening soon.
The report stated that Perth’s property market had finally finished its three-year cyclical downturn, where supply outnumbered demand, despite record levels of housing construction and slow population growth.
Damian Collins, Momentum Wealth’s managing director, said that demand is catching back up with supply, which he predicts will balance property prices out.
“The research report concludes that the Perth market has bottomed and it’s now in a recovery stage,” Mr Collins said.
“On the supply side, the report shows that the number of properties for sale has hit a two-year low, meanwhile the amount of new properties being built has returned to average levels after dwelling starts hit a record high in 2015.”
“After three 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 situation in Perth progressed to this point due to government incentives in 2015 making construction preferable to buying existing property, coupled with low demand due to slow population growth.
The report explains that this created a significant imbalance with supply outweighing demand, but this is now starting to equalise.
However, even with the market entering its recovery period, there is a chance that demand will bounce back.
“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,” Mr Collins said.
“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.”
These buyers are inclusive of investors, who currently make up a quarter of the Perth property market, the report states. Before that, investors made up a third.
“As the jobs market continues to adjust in the aftermath of the resources construction boom," said Mr Collins, "we can expect buyer confidence to return to normal levels and strengthen as the local economy diversifies into tourism, agriculture, technology and education.”