Perth Market Update May 2016

Some would argue that on Mothers Day (last Sunday) around fifteen million Australians or so were hypnotised by Mr. Turnbull when he called for an election as the country is expected to be going into a snooze during the election campaign.

From a local real estate point of view, the fact that we have an election is not going to make a huge difference. There will be some people out campaigning for their preferred candidate and so they are less likely to be house hunting but the rest will still check out the real estate portals or newspapers to check out what properties are open for inspection and they will still make an offer if they find something they like.

What about the Cash Rate?
My view is somewhat the same when it comes to a change in the cash rate. It is not going to make a huge difference for the first home buyers as their borrowing capacity is largely going to be the same. Savvy home owners will pay more attention to what they are being charged in interest and if it may be  worthwhile changing their banks or the way their loans loans set up. I suspect mortgage brokers will field a number of enquiries from their existing clients.

When determining where the market is going, I recommend that you focus on rental yield and vacancy rate as well as how the median house price is going, rather than what the name of our Prime Minister is going to be.

If you like to skip the details and go straight to the summary, please go straight to the Take Away section or click here for a short cut.

1. Jobs

There is not much of a change in the job situation. Currently there are around 8500 advertised (11 May) which is down about 200 jobs compared to March but this is marginal change so nothing to read too much into at this point in time as the 2016 trend is fairly steady.

(source seek.com.au).

2. Rental Market

The key indicators in the rental market has changed which is good and bad news.   The vacancy rate is now at 5.7% which is great news for landlords and investors as the rate has dropped from 6.0%. This could be a sign that the rental market has bottomed out. However, we still have a long way to go before we reach the rates of mid 2013, where landlords could enjoy a median vacancy rate of only 2.7%. On the other hand, the overall median rental has dropped by $5.

From our corner, we are still receiving a rental applications on properties that are priced well and presents well and this situation is unlikely to change in the near future.

Landlords in  the CBD can also expect another tough year with more new developments being completed. It has been reported in the media that up to 8000 new apartments are being completed in 2016 and a large portion of these will be investments and at least 3 large pre sales projects have recently been put on hold because the developer has been unable to secure enough pre-sales.

For tips on how to increase your cashflow on your investment property click here.

The advise to investors has not changed. Secure your current tenant at the same rent they pay now if possible. There is a good chance that you need to be prepared to reduce the rate to keep the tenant. Otherwise, you risk a period with a vacancy and more than likely you have to reduce your asking price to find another tenant.

As a landlord, if you are looking at selling your investment property, now is a good time to list it for sale. This is especially the case if a lease is due to expire in the next three to six months, as you can expect a lower rental yield. If you are thinking of selling your investment click here to discuss your situation.

3. Properties for Sale

In comparison to the last update, the number of properties has decreased again, which is likely to be due to the fact we are coming into winter.

Although the median house price is yet to be released it is expected that we are going to experience another drop in prices. Inner cities suburbs experienced around a 5% decrease in the median prices in 2015 and there is no indication that this trend will change anytime soon.

(source REIWA/Landgate).

………So what does all this mean for you?

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