Perth’s Apartment Market Slump Is A Sign Of What’s To Come On The East Coast: Expert


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Western Australia’s slide to the bottom of the economic ladder in Australia has seen the state’s property market kicked from full steam ahead into reverse.

But while property professionals see the post-mining boom market to be a readjustment to more ‘normal’ price levels, a looming apartment glut has many analysts concerned about further pain in that sector of the market.

“We’ve had a lot of development of apartments in the inner city ring and that’s where the developments sites have really gone from being feast to famine, they were red hot a couple of years ago, not so much in mind today, said Gavin Hegney, an independent property valuer.

Building approvals in Perth have dropped 120 per cent in recent years, according to the ABS.

“People are bailing out of their investment properties, saying I’ll just quit the investment property, I don’t like this investment property anymore. So that usually spells when you’re at the bottom of the market, from here we should see some hope,” said Mr Hegney.

Recent forecasts from Morgan Stanley point to a national oversupply of apartments of 100,000 by 2018.

Mr Hegney believes the price falls in Perth are a sign of things to come for the east coast capitals.

Off the plan sales creates demand for two properties, when the real demand is only for one. When people move into their new apartment they have to move out of their rental accommodation or sell their existing home,” he said.

“That’s when you get the problem and that’s what’s coming for Sydney, Brisbane and Melbourne.”

In those east coast capitals, a recent survey revealed there are more cranes building apartments than in major United States cities. With building activity in trouble in Perth, investors are trying to offload their units.

Retiree Ron Campbell is selling his investment property after 10 years.

His concern is that in a falling rental market, upcoming changes to the pension asset test will mean he would be left with nothing to live on.

“What happens there is of course the rental value drops that there’s less income coming into your wages and plus you’ve got higher water rates, shire rates, all those sort of things come into play and your income is not enough to support, especially going back to January 1 where I might not have any income at all,” he told ABC News.

Vacancy rates in the Perth metro area have risen 2 per cent over the past two years. After dropping 9.5 per cent over the last year, Perth rents are now at their lowest level since 2011.

“It’s become more difficult to find quality tenants and we’ve had to carry out more inspections per property for example,” said Pure Leasing principal Cameron Ewers.

“During the mining boom it was the case of being in an abnormal circumstance and only conducting one viewing or lining a tenant up remotely via relocation agent.

“The May, June, July period has been probably the hardest market we’ve seen so far.”

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