Perth Property Market Update | Covid-19
Before Covid-19 hit, the Perth property market was at the beginning of a rebound, with pent up demand and renewed optimism starting to fuel prices.
This was confirmed by CoreLogic’s Hedonic Home Value Index, with Perth house values up 0.5% for March and 0.9% for the quarter.
But since the coronavirus crisis, the resurgence is on hold, with a decline in active buyers in the market and no upward pressure on prices.
Market in Balance
To date, the market has not been flooded with properties for sale. Perth listings are down 25% from this time last year, while the number of sales is down 23% on same period last year, according to the Real Estate Institute of WA (REIWA).
Maintaining this balance between buyers and sellers helps support home values. Core Logic data reflects more evidence of this balance with a decline in both buyer and seller activity.
Signs of this at the coal face include sellers withdrawing their properties from the market or freezing upgrade plans until after the crisis. At the same time there are buyers withdrawing from the market and some from existing contracts of sale, due to uncertainty or job losses.
So, where is the Perth property market heading? It is inevitable that despite the government assistance packages, some property owners in financial trouble through coronavirus job losses, business closures or loss of rental income will be forced to sell and sales volumes will drop further.
Last week 287 Perth properties were sold, compared to 560 four weeks ago and it will require listings to drop further for the market to stay in balance.
To assist holding up the sales volumes, REIWA is calling for a reduction in stamp duty for buyers and expects this request to be considered in around 6 weeks from now.
In the meantime the market is being supported by home buyers, who need a home for the long term and are aiming to buy while rates are historically low. Property Wizards is also seeing a number of investors keen to capitalise on the potentially lower house prices.
Borrowing conditions are probably the best they have been, with interest rates at their lowest. Buyers with secure jobs or businesses, are being welcomed by lenders on the lookout for new business.
In addition, existing mortgage holders may qualify for a better rate or package, saving much-needed funds every month. Where possible, many borrowers are paying ahead into an offset account to be prepared if needed.
For mortgage holders in trouble there are relief packages available, such as banks placing repayments on hold or changing to interest only payments. There’s a caveat, though – interest will still be charged to the loan. This means the borrower will end up with a higher loan balance, but it could be a welcome rescue if facing job or tenant losses.
Residential landlords whose tenants lose their jobs, find themselves in a difficult position. At the moment property managers are negotiating solutions, while waiting for the government to provide further guidance or a code, such as the commercial property code released on 7 April 2020.
To a degree, the banks are helping, with packages to put mortgage repayments on hold, with interest accumulating on the balance.
Similarly, the government Jobseeker and Jobkeeper packages may help tenants to continue at least part of their rent payments.
CoreLogic calculates that 77% of Perth couples on JobKeeper payments and 1.7% of singles will manage their rent payments without stress. For those on JobSeeker only a third of couples will manage without any stress, while singles virtually all singles will be under stress to pay their rent.
For landlords whose tenants remain employed, there is no incentive for the tenants to move. The risks of interacting are also a disincentive to create an unnecessary upheaval in their affairs.
Relaxing of WA state planning regulations was brought in on 8 April allowing developers postpone their development commencements without worrying about the DA expiring. Developers whose approvals are due to expire receive an automatic 2 years extra to start developing.
The rules also make it easier for businesses to start up without waiting for approval for their use of the premises.
It is too early to predict when the market might normalise. What we can say is that when the corona crisis is over, Perth will be in a good position because of the underlying demand for homes.
If you have any questions about the Perth property market, please call us on 08·9381·7450 or enquire here.
To learn more about buying property safely in the current environment, please enquire on our Covid-19 safe buying page.
If you’d like to enquire about finance, call us on 08·9381·7450 or review our Finance Services information.
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