Western Australian property market remains bleak

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on January 13, 2020
Western Australian property market remains bleak

Photo by Nathan Hurst on Unsplash

With economic activity in Western Australia well below its ten year average and effective unemployment significantly above the ten year benchmark, the property market, particularly units, continue to experience weakness.

However, according to RiskWise Property Research Risks & Opportunities Report, buyer confidence is on the increase in the state, particularly Perth with housing finance increasing 15.1% since February 2019. 

The table below displays some of the lowest-interest variable rate home loans currently available in Australia for owner-occupiers making principal and interest repayments.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 21, 2022. View disclaimer.

RiskWise CEO Doron Pelg said with low economic activity and high unemployment, Western Australia's annual population growth of 1% was the third lowest in the country. 

“As a result, the housing market, particularly units, has experienced continued weakness in recent years," Mr Peleg said.

"According to CoreLogic, house and unit prices in Perth have declined by 8.6% and 9% in the past year, respectively. 

“Western Australia is still in a long transition process from a mining-oriented economy and while unemployment has slightly improved from 6.1% in April to 5.7% in October, it is still projected to deliver low economic growth, a soft job market and low population growth." 

Perth continues to buck the national trend of rising house prices, with median dwelling values in the WA capital falling 0.1% over the December quarter, according to CoreLogic.

In comparison, the national median dwelling price recorded its strongest quarterly growth in a decade, up 4.0% for the quarter, largely driven by Sydney and Melbourne, where prices increased 6.2% and 6.1% respectively.  

In further worrying figures, Mr Peleg said that mortgage arrears in Perth are at an alarming level, with the delinquency rate sitting at 2.75%.

"While this has improved from 3.05 per cent as reported in August, this number has grown over the course of several years and is now well above the Australian average.

"The relatively high unemployment rate also increases the risk of credit defaults.

“Negative equity also remains a major risk especially for lenders who have a concentration of loans in this market. These risks are compounded by this high rate of arrears." 

Limited number of suburbs delivering growth 

Mr Peleg said while Perth was "very affordable", there were a small number of suburbs where houses delivered reasonable capital growth in recent years, but these were exceptions only. 

Even with record low interest rates, an expected February cash rate cut and relaxed lending restrictions, houses still carried a medium level of risk due to Western Australia's economic conditions. 

Some of the worst performing areas for houses in the past year include Perth - North East (-8.8% capital growth), Perth - Inner (-8.4%) and Perth - South West (-7.3%). 

However, Mr Peleg said units were considered worse than houses, due to a massive oversupply, low demand and state government taxes. 

“Also, units in some suburbs are subject to voluntary lending restrictions by the major lenders, such as lower loan-to-value ratio (i.e. higher deposit).

"In addition, the state government tax on overseas investors further decreases the demand for new units as investment properties.”

Mr Peleg said despite there being no unit construction defects reported in Perth, media coverage of incidents like Sydney's Opal Tower have caused consumer confidence in them to take a hit. 

“The issues with construction defects in NSW and Victoria and the publicity they have received in the media mean this situation is unlikely to materially improve in the short term."

“While there have been no major construction defects reported in relation to high-rise buildings in Perth, the events in Sydney and Melbourne increase the risk of reputational damage and, consequently, lower demand for both existing and off-the-plan high-rise units.”


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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