Latest REIWA Data
Despite increasing sales and listings at the lowest levels in years, Perth recorded a slight decline in property prices this week. Sales increased by 5%, with Perth recording 1,123 sales while listings remained steady with 7,903 properties for sale. Sales and listings are currently at very similar levels to February and March last year, when Perth recorded the best property price increases since the end of the mining boom.
The current property supply and demand levels make it surprising that Perth recorded a slight decline in prices this week. The chart below shows the effect of the -0.028% price fall in our projections. As we are at the early stages of our 12 month Perth price analysis and forecast, this week’s negative result has decreased our projection from a 6.5% to a 6% annual increase. However, the more weekly observations we add, the less sensitive the forecast.
The main WA drivers of property prices at the beginning of 2021 and 2022 are very even. As mentioned above, sales and listings are at similar levels, interest rates have not changed, population growth is not dissimilar, and if anything, employment is stronger now than in 2021. Nevertheless, price growth between the two periods is vastly different, with 2021 outperforming 2022 so far.
The latest WA employment figures reveal unemployment increased from 3.4% to 3.7% but is still the lowest unemployment of all the states and territories. There was a substantial increase in monthly hours worked (our preferred measure of employment) in January. The 1.5% increase illustrated in the chart below provides a good indication of how well WA’s economy is performing. Furthermore, it adds to the complexities as to why property price increase is more significant in January 2021 than 2022.
There is always plenty of talk regarding housing affordability for first home buyers in the media and academia whenever property price increases. The truth is that housing affordability and declining homeownership rates are a reality. This reality is a big deal because homeownership plays a significant role in a range of social and financial outcomes, including people’s retirement plans.
The Grattan Institute recently released a research paper demonstrating the severe decline in homeownership rates for younger people, as shown in the chart below.
As a result of the declining homeownership rates in Australia, there is a growing chorus for the Federal Government to intervene to assist younger, lower-income, first home buyers. Here in WA, we already have a long-running first homebuyers scheme, WA Keystart, which has been recommended as a model for the Federal Government by the Grattan Institute.
WA Keystart provides home loans to those who do not meet the requirements of major financial institutions. The main requirements are that you do not own another home and plan to live in your home for the duration of the Keystart loan. One of the attributes of the scheme is a sliding salary cap; singles $105,000 couples $130,000 and families $155,000. There are further benefits with a 2% deposit, and lenders’ mortgage insurance (LMI) is not required (we have expressed our views on LMI’s previously).
The benefits of homeownership are well established, so first home buyers who meet the income cap but are having trouble saving the required 20% deposit should take advantage of WA’s nation-leading first homebuyer scheme.