Western Australian housing is still very attractive for young people who were experiencing "lowish" interest rate levels and solid employment prospects. The "number one" risk factor which prevented first home buyers from entering the market has been due to the banks tightening their lending criteria through loan to value ratios (LVR) and a lack of genuine savings appears to be the main factor preventing Generation Y from becoming first home buyers.
However, houses are still affordable and in demand especially when comparing to the ever increasing rental prices which clearly indicate in some cases it is cheaper and more beneficial for a tenant to buy rather than rent.
While the market has slowed somewhat in WA, and has the potential for softening even more by year’s end, it is expected the market will show an increase of between 5 – 10% in values over the next 12 months, after falling slightly in the second half of 2010.
As interest rates stabilise and the economy shows signs of recovery, confidence will be regained in the property sector. Housing is still the number one asset that can be purchased and regarded as a fairly solid investment.
The Western Australian property market is definitely on track for strong growth and house prices will go forward slowly over the next two years. The only way house prices could fall would be from a major shock such as China falling over, sky rocketing interest rates or a massive increase in housing supply making demand less.
There is no question the recent six interest rates rises are having the effect of slowing the market down but the fierce debate regarding the 40 per cent mining tax is also taking its toll. This debate is certainly having an effect of consumer confidence in general.
Talk of succession here in the West can be highlighted by a recent radio station stating that over 75 per cent of respondents agreeing to it [mining tax]. Whilst not promoting cessation it is true that WA would rank about 60 out of the top 200 economies in the world, being a larger economy than the majority of the world's economies.
The caution here is not so much the effect this proposal is having today, but the flow on effect to the property market in two to three years’ time if this is not resolved quickly and some of these future projects do not start as a result.
The survey of our Western Australia members has shown that there is a growing number of people being forced to sell as a result of mortgage defaults, with 60 per cent of respondents saying these people had increased in numbers.
Investors currently account for more than 20 per cent of overall sales for 60 per cent of Western Australia survey respondents; between 10-20 per cent for 20 per cent of respondents; and between 5-10 per cent for 20 per cent of respondents.
For the remainder of 2010, the majority of respondents said they did not expect investor activity to change, while 20 per cent said they expected it to increase by up to 10 per cent; and 20 per cent said they expected it to decrease by up to 10 per cent.
Interest rates are expected to increase by all respondents, but by varying degrees, between 0.25 per cent up to 1 per cent by the end of the year.
For the second half of 2010, sales are expected to increase by 75 per cent of respondents, after experiencing a decline in the first half of the year.
