October 16, 2019 by Rebecca Crommelin
On our blog this month, Phil Bertram, the owner of Candour Property Group, brings us another informative edition of Phil's Property Corner. Below, Phil reviews the most recent Perth property & economy figures, as well as why the Perth market hasn't bounced back yet. Phil also discusses the latest RBA rate cut and how customers can get a better deal on their home loan.
September saw the Perth median price drop by 0.6% to $480,000 with sales activity down on August numbers by 12%. Leasing activity was also down by 10%, with the median rental price remaining steady at $350 per week. You can find REIWA’s monthly market update here.
The recent interest rate cuts have seen Sydney and Melbourne property prices start increasing again, whilst there hasn’t really been a similar uptick in the Perth property market. This is in large part due to the oversupply of housing caused by a rapid slowdown of migration after the 2008 peak of 3.5 per cent. There have been slow and steady improvements in the migration rate over the last couple of years, but at around 1 per cent in the year to March it’s still well behind the long term average of 1.7 per cent. The ABC has a very interesting article on this dynamic that you can find here.
Another factor that has been holding Perth’s economic recovery back is consumer spending. The Committee for Perth has released a research paper recently that shows consistent increases in Perth’s affordability since 2014. They refer to a ‘boom hangover’ which came after the rapid increases in prices that occurred during the mining and construction boom and the decline in average wages that occurred after the end of this time. This WAToday article explains some details around these trends and has a very informative graph which clearly shows wage growth rate mapped out from 2003 to 2018. There is a massive drop off after the mining boom between 2011 and 2014, with wages growth dropping from +16% to -16% in a very short space of time. The graph shows that the wages growth has now improved to +6% over the last few years, overtaking the Australian average. The report showed that the prices of all essential goods and services have dropped steadily over the last five years.
We’ve seen another drop of the official cash rate by the RBA this month, this time however the banks for the most part only passed on around half the rate cut. This latest drop to 0.75% has put the Australian banking system into new territory, with valid reasons behind why the banks are able to pass on less and less of the cuts. The ABC have a great article on these factors here.
However some good does appear to be coming from this, the government has announced the Australian Competition and Consumer Commission (ACCC) will hold an inquiry into why these rate cuts are not being passed on. The enquiry is essentially based around finding out how to get consumers a better deal and it is likely to explore ideas such as making real time available interest rates publicly available. As it stands currently the major banks only advertise their ‘standard variable rates’, which are in most cases very different to the rates their borrowers actually get. The proposal is that the Government establish an online calculator that goes a long way further than the current comparison websites, including the postcode/suburb of the property being purchased. A potential purchaser and borrower would be able to see the market median interest rate offered to all home loan borrowers in similar circumstances to them. Although these types of processes rarely proceed quickly, there is quite an appetite to make the banks rates more transparent and easily understood by the public. This article by the ABC has some further information on the subject.
If you’d like to discuss any of the above and how it applies to you then the next step is to chat with Phil Bertram. There is no obligation to proceed any further than you’re comfortable with and he doesn’t charge for his time. All strategies are implemented in tandem with your Mortgage Choice Mortgage Broker.
To arrange for him to call you please email him with your name and contact number on phil@candourproperty.com.au and he’ll be in touch.
