Perth property market on slow recovery path: RiskWise

RiskWise CEO Doron Peleg has stated that while there were positive signs the mining sector had begun to recover (with exports of LNG and coal having hit record figures), the Perth property market would take longer to recover.

“It should bode well for the local property market; however, WA’s effective unemployment is still significantly above the 10-year benchmark,” Mr Peleg said.

“Consequently, its population growth of 0.83 [of a percentage point] is very low, the third-lowest nationally. As a result, the housing market, particularly units, has experienced continued weakness in recent years.”

The CEO continued: “According to CoreLogic, house and unit prices in Perth have declined by 4.3 per cent and 6.5 per cent, respectively, in the past year.

“So, while WA is in a long transition process from a mining-oriented economy to a more diverse one, it is still projected to deliver low economic growth, a soft job market and low population growth, which, of course, has a flow-on effect to the property market.”

The Riskwise CEO went on to suggest that the state government’s overseas surcharge (of 4 per cent) could decrease demand.

“Perth prices, which had stabilised, once again started falling. And this impact is expected to increase if a blanket approach is also taken when introducing Labor’s proposed taxation changes if they win the election,” he suggested.

Mr Peleg’s comments come after WA Treasurer Ben Wyatt complained to APRA that lending restrictions introduced across Australia were hurting the Perth property market and wider economy.

“Furthermore, mortgage arrears in WA are at an alarming level. This number has grown over the course of several years and is now well above the Australian average,” Mr Peleg said.

“While Perth is very affordable, the overall demand for both houses and units is low, and the risk associated with units is even higher than the risk associated with houses. While there is a small number of suburbs where houses have delivered reasonable or good capital growth in recent years, these are exceptions only.

“Overall, houses carry a high level of risk due to the economic conditions in Perth. However, it is units which carry a very high level of risk to deliver poor or negative capital growth, due to the combination of oversupply, lending restrictions, low rental returns and low demand, as well as fears over Labor’s proposed changes to negative gearing and capital gains tax.”

[Related: Fall in property prices ‘far less severe’ than reported]