Market Realty
Notwithstanding that the WA economy will continue to be positive and strong for at least the next couple of years there are underlying turbulent world economic conditions that will affect us. The rising petrol price and interest rates are obvious examples of this impact.
The recent boom period in the Perth market is well and truly behind us. This market was driven by cheap easy credit, this is no longer going to be the case. In 2008 we are now faced with conditions were credit will become less available and increasingly more expensive. The single most influential factor on the property market is always interest rates (the cost of money). Some analysts will go as far to say that there is a pending debt crisis that is sitting like a set of poised dominos ready to fall.
The Financial Review on the 1/1/08 forecasted that only five (yes 5!) Perth postcodes were expected to avoid negative price adjustment in 2008.
Pricing Sensitivity Will Be Acute
In 2007 we saw that the Perth property market moderate but also splinter with various suburbs performing differently. In 2008 buyers and sellers will carry a sense of unease in relation the property market. Recent press has delivered a strong negative tone that both sellers and buyers would have absorbed. This sentiment will be fueled by;
- affordability will tighten even harder (especially in Perth which is the second least affordable capital city in Australia)
- tapering demand with upward interest rates will force a further correction in property values, particularly in outer suburbs or those not offering lifestyle attraction
- mortgage sales will continue to increase
Conversely there are great opportunities in the top end of the market due to the lifestyle choices the wealthy and retiring baby boomers have the ability to pursue. In particular, coastal - water front and CBD will present the best opportunities. Under $500,000 especially on the outer fringes will be severely challenged and the $500,000 - $1m range will continue to moderate significantly. Facing price reality will be critical in 2008.
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