Perth’s housing market experienced only a 1.1% increase in housing prices in 2007, according to the Real Estate Institute of Western Australia (REIWA), while land prices increased by 12% and rents skyrocketed.
Preliminary data shows that Perth’s property market experienced no movement up or down in the last quarter of 2007; however, the growth for the entire year was around 1.1%, with the total number of sales falling by 4.5% to around 12,600 homes for the year.
“While Perth had a 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 on well-located properties,” said Rob Druitt, president of REIWA.
The only movement in the market, according to Druitt, was the upward movement of land prices and rents.
Land prices in Perth went up 5.7% in the last quarter – mirroring the 5.1% national increase in land prices for the December quarter – and bringing the total increase in Perth to 12% over the year.
However, Druitt claimed that the real story to emerge this quarter is rents.
“Housing affordability and population growth is keeping upwards pressure on rents, which rose by 6.7% in the quarter and 23% over the year,” he said.
In a move that has only occurred in the last few years, Perth’s rents are quickly catching up to the more expensive capitals of Sydney and Canberra, according to Druitt.
“With our population growing and new housing construction falling, it’s likely we’re experiencing some pent-up demand for housing as overall turnover in Perth was down by about 15% in 2007,” he said.
Druitt predicts that the increase in rental returns might mean more investors will return to property investing in Perth in 2008, 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,” he concluded.