Upbeat buyers storm the Perth market
The Perth market is defying the sceptics and appears to be on its way to sustained recovery.
The shift in sentiment is palpable in WA. Much like the remainder of Australia, the rise in median house price by 3.5% as shown by the initial data from the Real Estate of Western Australia (REIWA) was a welcome piece of good news for the market participants. While Residex showed that house prices fell by more than 1% to $469,000 in the July quarter, median unit price climbed by 3.02% to $380,000 over the same period.
"Up until about six months ago, the Perth market was wallowing in low confidence," says Mark Sinclair, CEO, Raine & Horne WA. "Some vendors realised that the market had changed so they brought their selling prices down. However, starting March this year, a general confidence in the market has returned across the board," he says.
Katie Lucas, state manager with Century 21 WA says their offices in Perth are reporting a large number of buyers coming through home opens, with a number of homes selling at the first home open.
"The time it takes to sell a property is reducing to 31 days for houses and 23 days for units. Primarily this has been driven with sales in the lower price brackets, with a first home buyers taking advantage of government grants. However, we are seeing an increase in sales in the second and third time home owners buyers market. We are already recording a number of investors coming into the Perth market, they are taking advantage of the softer prices and a lot of them are turning back to bricks and mortar as a safe investment compared to the stock market."
The surge in demand has left many agents scrambling to find stock. The total number of properties on the market has dropped to 12,800 at the end of June. This figure is down 15% when compared to March and 26% lower when compared with June 2008.
"We're definitely experiencing an undersupply situation. It's not severe yet, but we've seen over the last 2 months that at the lower end of the marketplace, stocks have been absorbed quickly," says Sinclair.
Gorgon effect
The market is abuzz with the recent approval of the Gorgon LNG project located 130km off WA coast. The $50 billion project is expected to create around 6,000 jobs during its construction phase alone and around 3,500 there after. The gas project will become the biggest resources project for the Australia and is forecast to lift WA's gross product by 4%.
The Gorgon Project is operated by the Australian subsidiary of Chevron (50%) in joint venture with the Australian arm of ExxonMobil (25%) and Shell (25%). The Gorgon joint venture has also recently signed a major, 20-year LNG sales deal with India's Petronet LNG Ltd. Woodside-led North Shelf Pluto LNG Development worth $12 billion is now under construction.
"These types of projects which will bring people from the east coast and overseas for employment opportunities putting substantial pressure on housing stocks," says Sinclair.
Outside the gas sector, there are new projects on the horizon in Perth including the Ocean Reef Marina which is set to revitalise the northern coastline says Aylmore. "The plan is to create a multi functional residential and commercial precinct that combines both low and medium rise buildings, restaurants and world class boating facilities. The area has been designed as a 'family friendly' area providing ample open space and parklands," he says.
"The city is also in desperate need for additional boat pens, with rental rates soaring for the well positioned Marinas. Perth is still seen as an establishing City and it is important to spend money on new infrastructure, which will draw people to the Northern Suburbs, especially newly establishing suburbs on the Perth peripherals."
WA has recorded as the fastest growing state for the calendar year of 2008 with a population growth recorded at 3.1% according to the latest data from the Australian Bureau of Statistics.