Perth market remains hot as buyers compete over fewer listings

The days of Perth property bargains are over and buyers who really want a home need to put their best foot forward or they’ll miss out, property experts have warned.

Damian Collins from property advisory firm Momentum Wealth said Perth buyers were being driven by a serious fear-of-missing-out (FOMO), similar to conditions seen about 18 months to two years ago.

“Particularly for single houses in that mid-point price range from $600,000 up to $1.5 million to $1.6 million – that’s the real hot spot,” he told realestate.com.au.

“There’s regularly 60-plus groups through a home, and you’ll get five to ten offers, and that’s certainly far more common in the market at the moment.”

His advice to home hunters competing with multiple offers is to reduce their buying conditions, obtain bridging finance if necessary, and consider negotiating a long settlement to allow time to sell their current home.

A major imbalance of supply and demand is driving the Perth market, he said, estimating there are fewer than half the number of properties listed for sale now, compared to the last boom two decades ago.

“So given the population is up 40%, 50% since then, pro rata it’s even worse – it’s a real problem,” he said.

“We’re a long way behind just keeping up with new demand, let alone backfilling about 14,000 or 15,000 houses short.

“Across the state, we’re pretty close to 20,000 short of what we need for a balanced market. So we certainly think prices and rents are going to have to continue to rise.”

The latest PropTrack Listings Report shows the number of new homes listed for sale in Perth during August was down 19.4% on year, with total housing stock down 3.4% compared to a year earlier.

Bill Dimou, Raine & Horne Group network performance manager in SA, WA and NT, said coupled with low stock, homes were not on the market for long, selling on average in about 15 days.

“There’s no doubt when properties are low, when someone wants to sell a property, they know they probably will get a premium price,” he said.

“But at the same time, they may not be able to find a property that they want, unless they’re going to pay a premium on the new property.

“But if you are someone who just wants to sell a property and offload it, then you’re going to do very well.”

Mr Dimou said in the current market some sellers had unrealistically high expectations of what buyers will pay for their property.

“I think that’s where they need a good agent to work with that will give them more of a realistic price of what they could get,” he said.

“Because at the end of the day the market will decide what the value of the property is.”

Perth home prices continue to rise

Perth home prices rose a further 0.6% in August to $865,000. Over the past 12 months property prices have jumped 9.2% according to PropTrack.

While conditions have slightly cooled from peak levels seen last year, REA Group senior economist Anne Flaherty said by no means was the Perth market significantly slowing down and it was still a strong performer.

With a shortage of properties up for sale, coupled with a tight rental market, Ms Flaherty said people in a situation where they might need to rent in between selling and buying a new home was proving a barrier in making the move to list their home for sale.

“For people who are not in a situation where they’re selling and buying in the same market, some might choose to delay selling to maximise the value at which they can sell the property for,” she said.

Investment market fundamentals remain strong

Ms Flaherty said while the investor market has cooled from last year’s levels, there was still reasonably strong investor activity.

“I think certainly some investors may feel as though Perth is a very competitive market right now and price growth has been very significant recently so that might lead to a bit of a cool off but having said that the fundamentals of the Perth market are still really strong,” she said.

“Prices are likely to continue to rise, there is certainly a shortfall in new housing supply which is going to underpin the market or a while so I think it’s definitely going to continue to attract investors.”

Mr Collins said while there were less east coast investors buying in Perth than what took place a couple of years ago, there were still many locals choosing to buy investment properties.

He said if economic conditions of population growth remained similar, the Perth market still had a bit of a “run to go”.

Solutions to the housing shortage

New dwelling approvals for WA during the last 12 months to July increased 28% compared to the previous year, which Ms Flaherty said was a positive sign for new developments in Perth.

“So most of that development is house-and-land – so properties in a lot of new areas – and that’s good because it is helping increase the options out there for people to buy, and that also leads to higher listings down the road,” she said.

“But of course, the dwelling approval, it’s not even being built yet, so there is absolutely a lag.

“But it is really positive to see that there’s a big increase in new houses coming, but it’s going to take a bit of time flow through.”

Mr Collins said Perth had many Baby Boomers with no children at home, who were living in four bedroom, two bathroom homes they longer needed.

A short term solution to alleviate the single level house demand, was stamp duty exemptions for downsizers.

“Even if it’s only for a couple of years that would certainly help those people saving them $30,000 – $40,000 so they can get into a villa/ townhouse,” he said.

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