House prices flat – rents up; REIWA releases data for the Dec quarter of 2007
"Based on the preliminary figure, Perth’s growth rate for the entire year was just 1.1 per cent as the housing boom finally came to a stop," Mr Druitt said.
"The metropolitan median house price remained steady at $465,000, the same as the revised September quarter figure, while Perth unit prices dropped by a very modest 0.5 per cent to a preliminary median of $369,000."
Mr Druitt said the only real movement in the market was an increase in land prices and rents.
"December is traditionally a very quiet market, however there is no doubt that buyers and sellers are still finding their feet after the bumpy ride of 2007.
"While Perth had low, modest overall growth last year, the market is very patchy with rises and falls in prices all over the suburbs, and the strongest demand for housing now generally focusing in on well located properties," Mr Druitt said.
Land prices in Perth grew by 5.7 per cent in the quarter, up by 12 per cent over the year. Similarly, in the country our regional land prices grew by 5.1 per cent in the quarter, up by a modest 2.9 per cent for the year.
"It’s difficult to hypothesize why land prices rose while house prices stood still, but it may illustrate the strong desire some people have to build from scratch, and as a consequence are prepared to pay for the block of their choice," Mr Druitt said.
There was a slight increase in regional house prices with 1.1 per cent growth, while regional unit prices held their ground in the quarter with no growth and a stable median of $320,000.
"It’s been a bit of a ‘do nothing’ quarter, with no real movement in prices and the total number of sales falling by 4.5 per cent to around 12,600 homes for the end of the year.
"The real story to emerge from this quarter is rents. Housing affordability and population growth is keeping upwards pressure on rents which rose by 6.7 per cent in the quarter and 23 per cent over the year.
"The median weekly rent for the December quarter was $320, and there are few signs of this easing with the rental vacancy rate dropping to 1.6 per cent in December and recent interest rate rises adding more costs to landlords.
"Perth rents are now very close to – or match – the more expensive capitals of Sydney and Canberra. This catch-up has only occurred in the last few years and has been a rude shock for many in the local rental market," Mr Druitt said.
Mr Druitt said 2007 was characterised by a low turn over of stock and the very patchy nature of the prices corrections.
"Some areas have experienced a drop in quarterly sales price, others have stood still and some have grown considerably across the year, but there has not been the wholesale train wreck in house prices that some commentators have been predicting over the past 18 months.
"This uneven ripple in the market is not identifiable to specific market areas, as neighbouring suburbs in many instances recorded rises and falls across the year. The traditional locational factors of being near the beach, river, city and close to shops, schools and transport whilst still important have been less of a factor in the overall outcome in 2007.
"Price has remained an important consideration as affordability pressures bit the market in 2007. That said, there was price volatility across all market sectors whilst demand from first home buyers also drove price growth in a number of lower priced suburbs.
"With our population growing and new housing construction falling, it is likely we are experiencing some pent up demand for housing as overall turnover in Perth was down by about 15 per cent in 2007.
"It will be interesting to see if this demand is unleashed in 2008, with house prices finally stabilizing and the rental option becoming more expensive than it once was.
"With rental returns having increased for owners along with the instability in the shares market, we may see some investors return to the relative security of ‘bricks and mortar’ rather than risk cash on the stock exchange.
"If so, that will soak up some of the excess housing for sale, replenishing the rental stock and helping to moderate rental prices by easing supply," Mr Druitt said.
