Perth property market’s monthly rate of growth has recently eased. Does that mean the property growth cycle is finally slowing in the west?
According to Corelogic, Perth residential property market’s monthly rate of growth has recently eased, from a high of 2.7 per cent in February 2021 to 0.3 per cent in September 2021.
The slump in growth rate has occurred alongside a 10 per cent drop in home lending since February and a 39 per cent reduction in lending to first home buyers.
Residential assets are in short supply, most buyers are being outbid, and novice investors are beginning to question whether they’ll find their dream home while the foot traffic in every property inspection is more unnerving than a Christmas Eve at Karrinyup City Shopping Centre.
But does this mean the pace of Perth’s hot property market is truly cooling? Has the market realised its highs?
The short answer is: no. Not by a long shot.
We’ve already seen Perth’s property prices defy gravity after years of flatlining. Those who hadn’t seen any market value increase on their home in the last ten years are now celebrating double-digit growth in under 12 months. And some who’ve held onto higher-ticketed residential assets are now considered ‘sophisticated investors’ by the standards of the Corporations Act 2001 (i.e. they now own net assets of at least $2.5 million thanks to some serious capital growth in their existing portfolio).
Stock levels in Perth are indeed low, tracking almost 27 per cent lower than the five-year average. But new listings are now almost 7 per cent above the five-year average, as homeowners take advantage of the seller’s market. There are still buying opportunities in Perth, despite the fact that many uninitiated property investors are stuffing their savings back in their pockets in hope that the market will be more welcoming to them in the future.
This is a problem.
Problem not with property, but with buyers
The issue arising from such a hot market is not that prices are too high or opportunities too competitive. The problem is that both these elements have led some buyers to believe that instead of purchasing while the market is on the up, it’s now best to sit and wait until the market cools and property inspections aren’t riddled with competitors.
That’s an issue because the Perth property market bus is not slowing anytime soon. The reduction in growth is the aftermath of a huge buying bonanza by first home owners, thanks to government incentives for new buyers and the media-fuelled urgency to buy, buy, buy. It’s likely new home owners will rally if and when the state government introduces new incentives to buy, causing that recent reduction in monthly growth to seem like a blip on the radar.
So, you’re either on board or you’re watching it drive on by, packed with passengers who’ve stuck it out and purchased a high-value investment, leaving you in the dust. You’ll soon downgrade your search to the next suburb on your list, or convince yourself the three-bedroom house in your desired area is now more appropriately looking like a two-bedroom townhouse.
If buyers do this – and trust me, they are – they are likely to be purchasing the same asset in a few years with an additional 10 per cent to 20 per cent on top of the current price tag.
There is a solution to all of this. Actually, there are two.
Investors need a buying strategy
Firstly, you can be prepared. Establish a buying strategy with strict buying criteria in mind. And don’t take due diligence for granted. If you’re style is to buy a blemished asset and spend your first few months of ownership turning it into a liveable premises, then you’ll want to keep your clipboard handy and tick off the many items on your due diligence checklist:
- What approvals are needed to complete your dream renovation?
- Has previous land use impacted the health of the soil and groundwater?
- What potential dangers exist in the property (i.e. asbestos)? Do these truly compromise the property purchase or can these issues be resolved?
- Are nearby highways and main roads audible from the premises?
- What proposed infrastructure is to be completed in the property’s jurisdiction? Will the property benefit?
- Is there a Housing Commission in the area?
- Do you have the budget necessary to bring out the property’s full potential?
I’ll cap it there, but you get the point.
Investing alongside professionals
Secondly, if you’re thinking of bowing out or waiting until prices cool, consider the alternatives to investing alone in Perth residential property.
Residential property trusts allow investors to pool their capital together and go after real estate with a much larger price tag than they’d otherwise be able to afford alone. Bigger property typically produces bigger returns. Not only will you share larger rewards, you’ll avoid the headaches of having to investigate every property that fits your budget and contending with the hundreds of other would-be property investors who saw the same online listing.
Here are a few benefits of investing alongside a residential property trust:
- Avoid the chaotic listed property inspections and take part in off-market asset; purchases (thanks to the networks of your residential property fund manager);
- Go after larger residential assets you otherwise wouldn’t afford on your own;
- Expect a far more robust return by investing with others;
- Let the professionals handle the due diligence investigations; and
- Relax knowing the due diligence is performed with the strictest buying criteria in mind.
While I think it’s important every residential buyer – individual or syndicate – should stick it out to find a high-value residential property investment in Perth before the bus drifts past them, I would prefer to see those hesitant buyers consider the alternatives to investing alone instead of missing out altogether.
Perth’s property market is moving at a fast rate. Are you on board? Or will you wait until property prices put your ideal investment well and truly out of reach?
Don’t settle for an undesirable investment. Invest with the professionals and get what you truly deserve: A robust property investment that will provide regular, long-term passive income.
Get in touch with Properties & Pathways to learn more about investing alongside us in high-quality Perth real estate.
Properties & Pathways is a dynamic property investment company. Our completed syndicates have provided investors an average annualised return of 19%, so there’s plenty of reasons to invest alongside us. For more information, contact us today.