Perth Property Watch Q1 2011

The following Property Watch investigates the house and unit
markets comprising the Perth Statistical Division (SD). This report
highlights trends influencing these property markets and the factors
contributing to its competitive environment.


Area Characteristics
Perth is the state capital of Western Australia and is the fourth most
populous city in Australia. The metropolitan area of Perth has evolved
around the Swan River, where the central business district and most
established suburbs of Perth are located. However, a significant
portion of Perth's premium premium real estate markets are located
along the coast line. Notably, this city currently holds the prestigious
title of eighth place in The Economist's 2011 list of the World's Most
Liveable Cities. The local economy is heavily leveraged off the
Western Australia mining boom which has helped facilitate a
significant amount of development within the SD. This has seen a
great deal of growth within the residential arena, to help cater for
significant population growth and growing demand.


Although geographically isolated on Australias West coast, Perth is
easily accessed by the Perth Airport in the city's east for regional,
domestic and international flights. Within the metropolitan area of
Perth, there is a high degree of connectivity aided by a nexus of
freeways and metropolitan highways. Travelling by public transport is
supported by frequent train, bus and ferry services, which are
provided by Transperth. Perths rail network underwent a significant
redevelopment and was opened on 23 December 2007. This
consisted of a new railway line linking Perth and Mandurah, which
doubled the length of Perth's railways.


Demographics
The Perth SD recorded the second highest population growth in
Australia at 2.78%, equating to a population of 1,559,178 residents
as at June 2009.


The majority of houses are family variations accounting for 71.5% of
households.


The dwelling landscape is predominantly houses, which make up
79.8% of the total dwellings.


House Market
Sales activity has been historically low throughout Australia over
2010, following decreased confidence and lack of active buyers in the
market. With the household savings rate increasing to 10% of annual
net disposable income, this indicates that an uncertainty in the
housing market has lead to families opting to save their disposable
income and service existing debt, rather than making further large
financial commitments. The Perth house market is no exception to
this trend, exhibiting decreased sales activity over the past 12 months
in line with a stabilising median price. However, this shortage of active
buyers is fostering investment opportunities as the market has transitioned into a buyers market.

The median house price recorded for the Perth SD over the most
recent six months to September 2010 was $490,000. Over the past
12 months median price has jumped 8.9% or $40,000. However, this
increase is predominately due to a decrease in sales activity
transacting in the sub $500,000 market segment, as opposed to
increasing capital values. PRDnationwide Research has undertaken
a resale analysis of all houses sold within the six months to
September 2010. This has revealed a strong average annual capital
growth of 8.1% per annum. This product was held for an average
period of around five years.


After a 29.6% decrease in sales from the six months to September
2009, the Perth SD has recorded 12,283 settled transactions over the
corresponding 2010 half year period. This registers 3,620 sales under
the five year average of 15,834 sales per six month period. The most
active suburb within the Perth SD over the September 2009 half year
was Canning Vale with 217 sales. This was followed by the suburbs
of Thornlie with 176 sales, and Morley with 174 sales. In terms of
growth in sales activity, the suburb of Stirling has recorded an
increase of 12 sales from the September 2009 half year to reach 78
over the corresponding period in 2010. Gooseberry Hill and Mount
Hawthorn also recorded increases of seven sales each to register 31
and 70 transactions over the September 2010 half year. An
investigation into the price point distributions has revealed that the
sub $500,000 market segment has absorbed the majority of the sales
softening accounting for 82.6% of the decrease in activity.


Unit Market
Similar to houses, the Perth unit market has shifted from an incentive
driven period of strong sales activity, to one of its softest periods in
ten years. This has occurred in line with falling buyer confidence over
2010, which led to potential purchasers sitting on their hands and
waiting for an uncertain market to unveil itself. However the reality of
the market is that from mid 2010, property has swung to favour the
buyer. Rising interest rates (which remain historically low), stricter
lending criteria and strong listing activity have culminated to provide a
strong stand point for buyers. This has led to discounted pricing from
vendors over the 2010 September half year as vendor expectations
have had to drop to meet the market.


The median unit price recorded for the Perth SD over the most
recent six months to September 2010 was $420,000. Over the past
12 months median price has jumped 9.1% or $35,000, taking median
price to a peak. However, this is also the result of a decrease in sales
activity transacting in the sub $500,000 market segment as first home
buyers exited the market. PRDnationwide Research has undertaken
a resale analysis of all units sold within the six months to September
2010. This has revealed a strong average annual capital growth of
8.0% per annum. Interestingly, units had a longer holding period than
houses at just less than six years.


Perth units have recorded a smaller softening than the house market,
with a 21.6% (742 sales) decrease in sales from the six months to
September 2009. This equated to 2,681 settled transactions over the
corresponding 2010 half year period. This registers 789 sales under
the five year average of 3,470 sales per six month period. The most
active suburbs within the Perth SD were mostly located close to the
Perth CBD. The highest volume of sales transacted within East Perth
with 186 sales, followed by Perth and Maylands with 150 sales and
93 sales respectively. East Perth and Perth also recorded the
strongest increases in sales activity, registering 120 sales more than
the corresponding period in 2009. Perth and West Perth also bucked
the trend to recorded an additional 73 and 22 respectively. In terms of
the price point distributions, the sub $500,000 market segment has
also contracted significantly by 780 sales, while sales above this mark
have recorded strong increases.