Will the WA/Perth Housing Market Bubble Burst?

I love the way the government were so quick to bring in the ruling with regard to property owners having to pay the letting fee, I've never seen them introduce anything that reduces their income so quickly
 
Dear All,

1. According to Herron Todd White (HTW) Valuers in its latest monthly report, " the Perth market for residential dwelllings is officially levelling and receding in Perth with the median house price for June 2007 Quarter showing A$446,500, which is down by 3.8% on the previous quarter of A$464,000 in accordance to REIWA statistics".

2. However REIWA market indicators reported that at a median price of A$464,000 in June 2007 quarter, the Perth's median house price is still 11.6% higher over the previous 12 months period.

3. HTW Valuers went on to say, "There is a currently a supply of approximately 13,000 dwellings in the market , which is up from records lows of approxcimately 4,000 dwellings at the peak of the market in the middle of 2006."

4. Consequently, we need to ask ourselves, "Will the Perth property market able to digest this high number of house sales over the next few years?

5. For your kind update and further comments/discussion as to whether the Perth housing market "bubble" has officially "burst" or is the Perth Property market, simply taking a "breather" during this period before resuming its long term high growth rate over the next few years, as some of the more optimistic forumites have suggested.

6. Looking forward to learning from each one of you, please.

7. Thank you.

regards,
Kenneth KOH
 
hard to read too much into a HTW report... they are Qld-centric and if there isn't a banana tree growing out the back they aren't particularly interested. will be interesting to see what happens from here, with the WA economy so strong it remains to be seen if there is sufficient housing for the new arrivals (there definitely isn't further up north). Rents aren't doing much
 
Dear All,

1. According to the Annual Property Report, which comes together with the Sunday Times Newspapers yesterday, it was reported that despite its present slow market conditions, the median house price for Perth has continued to achieve a high annual capital growth rate of 21.1% over the last 12 months and an average annual growth rate of 17.9%pa. over the last 5 years.

2. Apparently, it seems that the Perth property market has only "slowed down" to its normal long term growth rate in 2007 so far.

3. Some of the more optimistic market commentators are further sugggesting that Perth property market is only taking a "breather" in 2007 before resuming its high growth rate again in 2008, as a result of its strong housing fundamentals.

4. Other less positive-minded market commentators are suggesting that the Perth property market will cool down further and that surplus building stocks should start to appear in the market in 2008-2009 period.

5. What do you think and say?

6. For your kind update and further comments/discussion, please.

7. Thank you.

regards,
Kenneth KOH
 
Hey Redwing have you had much luck negotiating away the letting fees? I am finding PMs pretty tough on lowering fees... perhaps I am not pushing hard enough. A 2 week letting for for a 6 month tenancy - getting to the point where you may as well just let it sit empty.


Negotiated one down to one week regarding the above, plus 8.8% (inc GST) for Management, rents paid to our account fortnightly
 
Dear All,

1. It has been observed that the growth in the Perth median housing price has slowed down considerably to less than 10% in 2007 so far, as was recently reported by REIWA.com.

2. The Perth median house price also appears to have more or less levelled off during the last 2 quarters in 2007, after its housing market has last peaked in August 2006.

3. In most of the suburbs within the Perth Metropolitan Region, there are presently many signs of house sales slowing down, lesser number of new houses sold being reported, followed by increased number of available houses being listed for sale, together with existing housing/land stock inventory in many suburb areas, starting to accumulate.

4. REIWA.com recently reported that there are now twice as many house sale listings available as there was in 2006, and that it is taking longer time to sell a house, today, on the average under the present Buyer's housing market conditon in Perth.

5. Many investors in the Perth Property market have now turned to investing overseas and inter-state in the rising property markets in Melbourne, Brisbane and Adelaide, as an effective alternative towards continued investing into the present slowing-down Perth property market.

6. Will the present commodity resource boom and tight labour market conidition and full employment status in WA, increased immigration inflow sufficient to sustain the present prevailing high housing price in Perth indefinitely over the next few years?

7. Will there continue to have cheap monies loans easily available to further drive up the Perth property market to high price levels over the next few years, after the recent credit crunch and housing slump in the USA are being openly discussed and widely publicised.

8. Will the impending ANZ-forecasted 2-3 interest rates increase in 2007-2008 period, (with the first 0.25% interest increase likely to be announced by RBA as early as later this week), be sufficient condition, to put an end to the existing supply of cheap money loans so as to cause the housing price to fall, in particular within the declining Perth housing market?

9. Should the existing house owners/investors in Perth start to seriously consider paying down their housing loans to avoid defaults on their housing loans and to protect their existing housing investments as their Amercian counterparts have been told to do so, after the news of the recent credit crisis crunch and housing slump have broken out recently.

10. Or should the existing house owners/investors be encouraged to re-finance their existing housing loans and to take on, more housing debts by investing overseas or/and inter-state in the rising markets of Melbourne, Brisbane and Adelaide?

11. For your further update and comments/discussion, please.

12. Thank you.


regards,
Kenneth KOH
 
Last edited:
tough call... some guys say never ever ever sell. never. some say churn em and burn em. I tend to run with the latter but if you churn enough a few stick.

I figure the worst case scenario is the cost of the materials and the development cost of a block of land. A house costs $200k to build now. say land returned to pre boom prices of $100k. that has to be the bottom line surely. so if a new 4x2 is retailing for say $450k, you would have to say the compenent costs, without any profit, interest, finishsing costs would be $300k. With demand on the rise and westpac tipping a resurgent housing boom in Perth later next year I would say the murky bottom would be at absolutely worst case/dark days disaster scenario a 33% drop in prices. What on earth would cause this I can't think, but plague and famine do happen I suppose.
 
With demand on the rise and westpac tipping a resurgent housing boom in Perth later next year
*****************
Dear Ausprop,

1. Which Westpac Housing Report are you referring to, whereby a "resurgent housing boom in Perth later next year" is being reported, please?

2. According to the Westpac Perth Residential Market Report for August 2007, I read that "Perth is likely to remain the least attractive of the capital cities (to invest) in the short term", together with its projection of 4%-7%p.a growth in the Perth median house price for 2007.

http://www.westpac.com.au/manage/pdf.nsf/43857041CD6F14BFCA2572900016C929/$File/PerthUpdateAugust2007.pdf?OpenElement

http://www.westpac.com.au/manage/pdf.nsf/10D027DDF43A5978CA2573470020C77F/$File/OutlookExecSumAugust2007.pdf?OpenElement

3. Looking forward to your kind clarifications, please.

4. On the other hand, ANZ is projecting a 0%-4% pa.growth for Perth Property Market in 2007, according to its ANZ Housing Report -Oct 2007 (Page 7)

http://www.anz.com/Business/info_cen...October-07.pdf


5. For your kind update and further comments/discussion, please.

6. Thank you.


regards,
Kenneth KOH
 
Dear Ausprop,

1. It was similarly reported in the West Australian Newspapers today that John Edwards from Residex is predicting that ".. an interest rate increase today will not stop Perth house prices and rents from rising in the next 6 months because of WA's (strong) economic growth."

2. Allowing for some adjustment in the different median house price reporting for Perth by Residex and REIWA, the same report goes further to add that the Perth median price will further increase by another A$9,000 by March 2008 and its median rents to further increase by A$80 per week during the same period projected.

3. REIWA was also reported to have predicted that the "Perth house price will continue to rise over the next 5 years". REIWA further believes that Perth now has a 2-tier housing markets.

4. According to Rob Druitt, President, REWIA, Perth's top tier housing market segment will be relatively unaffected by the latest interest rate increase whereas housing sales in the lower tier housing market and in the mortgage belt suburbs will become sluggish as this market segment is still basically undergoing "a shakeout from last year's boom"

5. Such optimistic projections are reportedly "at odds" with other projections made by several heavyweights Eastern seaboard market analysts like BIS Shrapnel, APM.

6. Both BIS Shrapnel and APM who believe that the Perth house prices will DIVE within the next 12 months.

7. For your kind update and further comments/discussion, please.

8. Thank you.

regards,
Kenneth KOH
 
Last edited:
Dear All,

1. With the latest interest rate increase and 1-2 more 0.25% interest rate increases being projected to occur in 2008 by ANZ, the gap between the high end of the Perth housing market and its lower end counter is likely to widen further.

2. With fuel/energy costs and building related costs for the new house construction on the increase and with local trades still in short supply and asking for high salaries levels within the present tight labour market in WA, I believe that it is also likely that there will now less number of new homes being built, with lesser orders received by the local builders both for new houses as well as renovations. this decling trend is expected to continue indefinitely into the near future.

3. Consequently, the local building industry in WA, is likely to soon experience a general "slow down" in its present ongoing building trade.

4. Some of smaller local builders are also likely to fold in the near future, due to insufficient new house orders and works received, both now and in the immediate near future.

5. Some preliminary signs have started to emerge in the local housing industry within the Perth Metropolitan Region that some the local builders have started to retrench some of its staff in the building industry, like their office staff, construction supervisors etc.

6. Previously, some construction supervisors were known to have been given, on the average, as many as 30-40 house constructions to oversee during the building heydays of 2004-2006 period.

7. Today, many of these construction supervisors are presently known to be given only some 10-15 new house construction to oversee and supervise.

8. Despite this, there seems to be a high staff turnover among the building supervisors and other related building trade in the building industry recently.

9. Some of the local builders are seen to be "accumulating" on their newly completed houses inventory being unable to sell them for the right price in today's slow market conditions. Many of these local builders are also reporting lesser number of new "land and house" packages being sold, off- the- plan now.

10. With the slowing down of the lower-end mass housing markets in many local suburbs and the local building industry in general, I am personally not very "optimistic" about Perth housing market resurging itself in the immediate near future over the next 1-3 years.

11. This is despite some recent increase in its median house price and levelling of the housing prices reported by REIWA over the last 2 quarters and its strong underlying housing market fundamentals as well as nothwithstanding that present Resource Boom is expected to last for another 10 years period.

12. For your kind update and further comments/discussion, please.

13. Thank you.

regards,
Kenneth KOH
 
Last edited:
Dear All,

1. In the article entitled, "Housing prices up at a cracking pace" the RP-Data Research Director, Tim Lawless, was reported in the Australian Newspapers today as having said that, "

"The Perth market continues to fall back with price growth over the quarter just 2 per cent."

"The average days on market figure has blown out to two months, which is three times higher than the same period one year ago, and preliminary figures suggest the market will slow further over the coming months."

http://www.theaustralian.news.com.au/story/0,25197,22752995-25658,00.html

2. For your kind update and further comments/discussion, please.

3. Thank you.

Cheers,
Kenneth KOH
 
Dear All,

1. According to the Property Report liftout found in the Western Australian Newspapers today, it is reported that according to REIWA.com, the median Perth house price is leveling off at A$455,000, representing a 0.7% change over the last 3 months as at 30th Sep 2007. It also represents only a mere 3.4% change over the previous 12 months period.

2. In the mean-time, the rising stocks of property sale listings have increased further to 14,300. The average time taken to sell a property in Perth has also further increased to 68 days as compared an average norm of 38 days over the previous 12 months period.

3. With the median rental at A$300 per week reported at the end of 30th September 2007, the Perth vacancy rate has now also increased to 3.4% compared to its previous 1.6% over the last 12 months period.

4. Rob Druitt, President REIWA, was reported as saying that " while the Perth property market still have some settling to do, but the fundamentals to drive the market forward, remains strong". This is reportedly because the continuing strong housing demand coming from the increased population growth into WA and its ongoing strong resource boom.

5. According to Gavin Hegney, Chairman, Hegney Property Group, " the speculative demand of 2006 would become the over-supply in 2007 as speculators dumped their (housing) stocks, causing an increase in the number of properties available" for sale in the Perth property market. He goes on further to add, " Investors are buying in other States or not buying at all (in the Perth property market)".

6. Gavin further believes that " the so-called affordability issue would correct itself as prices drop in some suburbs but increased in others".

7. In addition, Gavin also believes that, "the land market (in Perth) had slowed but apartments sales and top-end housing housng were still strong".

8. Having said all these, Gavin however, believes that the present "strong population growth and economic fundamentals (in WA) would ensure that the housing over-supply did not equate to a price crash."

10. This is reportedly because with 42,000 people migrating into WA each year and continuing thereafter, and with an annual housing demand for the 16,900 additional new households in WA, which the Perth propert market can be expected to be able to absorb its present housing over-supply quickly, in due course.

11. For your kind update and further comments/discussion, please.

12. Thank you.

Cheers,
Kenneth KOH
 
Last edited:
Dear All,

1. The ANZ Property Outlook for Jan 2008 has reported that the Perth Property Market has managed to achieve a low 2.8% growth over the year as at Sep 2007.

2. Residex, on the other hand, has reported a 2.39% growth over the same period with Perth median house price reported to be at A$505,000. This is well below the average 14.38% annual growth rate for the last 10 years.

3. REIWA however reported a A$455,000 median house price and 3.4% growth for the Perth property market as at 30th Sep 2007.

4. According to Michael Yardney, " the property boom in Perth is clearly over and it is likely the market will slow further over the coming months."

5. Michael further sees "property investment over the next few years has having significant downside risks. There is really no good reasons why Perth property prices should be the second most expensive in the country after Sydney."

6. However, ANZ Bank has reported that " but the underlying fundamentals of the market remain supportive and should see robust house price growth return towards the end of 2008." This is also the same views being reported by WESTPAC.

7. For your further comments and discussion, please.

8. Thank you.

Cheers,
Kenneth KOH
 
Last edited:
more reports on the market for you in today's West Australian Kenneth. In summary:

Per Hegney - the market should fundamentally be set for 15% growth next year, tho he says this is too simplistic and there are external factors at play

Satterly was quoted as saying the fragmented market is likely to see lesser growth in the dream homer burbs than inner city and prime, such that dream homers may see around 3%, inner city 10%, prime 15%. he was quoted as saying the situation will change come mid 2009 when the supply crunch will start to be felt.

suburbs to wathc include mosman park, warwick, cottesloe, those are the ones I remember anyway
 
more reports on the market for you in today's West Australian Kenneth. In summary:

Per Hegney - the market should fundamentally be set for 15% growth next year, tho he says this is too simplistic and there are external factors at play

Satterly was quoted as saying the fragmented market is likely to see lesser growth in the dream homer burbs than inner city and prime, such that dream homers may see around 3%, inner city 10%, prime 15%. he was quoted as saying the situation will change come mid 2009 when the supply crunch will start to be felt.

Hi Ausprop,
Thx for your insights on many topics.
Can I ask a further one here (or should I start a new thread??)?

How do the commentators/experts make their predictions? For it seems to me that many use lots of emotive terms to try and get you believing what they want you to believe, but when all the gush is stripped away they seem to know nothing more than Bob the Punter.
Are there any particularly good property market analysts that you would highly recommend?
In fact in following this particular post now for many months, it seems that Kenneth is not too bad in seeing how things are going to turn out....
Thx again for all the help,
JB
 
Yes you do have to wonder how they dream these numbers up. I really respect the opinions of Gavin Hegney who has IMO always had a pretty realistic and an 'as accurate as you could expect' outlook. Given that he has the valuation business and the buyers agency I would expect that he has finger on the pulse.

guys such as Satterly are worth listening to, as their mega millions are on the line.

when lookign at opinions, always look at what the core business of that person is, what markets are they operating in, is the opinion biased etc.

Kenneth is waiting for a global financial collapse so I am hoping he has got that bit wrong!
 
Kenneth is waiting for a global financial collapse so I am hoping he has got that bit wrong!
*************************
Dear Ausprop,

1. I also wish I am "wrong" in my own assessment for Australia and all the investors' sake.

2. Having said this, by factoring the worst scenario into our present investing considersations, we would be better prepared and more likely and able to invest safely and profitably, in the near future, than if we were to disregard them in our forward planning purposes.

3. Perhaps, the following extracts offers us some new hope that Australia may again be able to escape the present global financial crises, relatively unscathed again, as follows:

"Macquarie Bank head of property research Rod Cornish said that over the last 20 to 30 years, the US housing market had followed Australia. "

"He said: "Our market is running at a different cycle to the US. "

"We peaked in 2003 and the US market did not peak until 2005. We had our downturn between 2004 and 2006. The US market has started going down."

"But the markets in Australia had been patchy between capital cities and within cities. "

"Melbourne, Adelaide and Brisbane saw price rises of 10 and up to 20 per cent in highly sought-after suburbs, according to property analysts."

"Sydney continued to lag behind, but showed signs of recovering this year.
Mr Cornish said he expected price growth in the faster-growing cities to moderate in 2008."

http://www.theaustralian.news.com.au/story/0,25197,22977878-25658,00.html


4. The present housing slump that is presently happening in the US, UK and Spanish housing markets has failed to occur in Australia during its last property boom in 2003;- nor does it look likely to be repeated in the various local housing markets in Australia so far, saved for the limited housing slump occuring in the Sydney's Western and Southern Western Suburbs during the 2004-2006 period, which has been widely reported.

5. Apparently, the various housing markets in Australia are now entering into their new property cycles at this stage in time, without experiencing a prolonged housing slump, especially those in the capital cities of Melbourne, Brisbane and Adelaide.

6. For your further comments and discussion, please.

7. Thank you.


Cheers,
Kenneth KOH
 
2. Mining Boom can't go on forever.

forever? of course not.

although i read in the australian that 20 years is the conservative prediction by the WA Govt.

can you predict commodity prices 20 years from now? If not, then think of all the tails the companies will be able to re-refine to extract even more minerals.

I can tell you there's at least another 5 years in that process and about a further 15-20% yield.

so, 25 years of solid fundamentals for WA.

5 years of stagnation in prices (not a drop or correction unless you're a nutter that kept buying) is fine if it means 20 years of growth.

remember all the latest figures in are for one quarter - a quarter with

a federal election
interest rate rises
US meltdown

so it's hardly your "average" quarter.

i'm still optimistic about Perth and OZ as a whole. a bit of flatlining never hurt anyone.
 
Back
Top