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Healthy market seen in the numbers

Ronald ChanSponsored
Finbar Chief Operations Officer Ronald Chan.
Camera IconFinbar Chief Operations Officer Ronald Chan. Credit: The West Australian.

The local Perth market for homes and units seems unfazed by the recent rise in interest rates, with listings for both houses and units continuing to rise week on week.

But demand is still growing faster than supply, with construction costs, labour and the usual approvals process causing constraints and listings down 8.9 per cent compared with a year ago.

This imbalance in demand and supply, complemented by the increasing population growth we anticipate in Western Australia as interstate and overseas immigration numbers return to more normal levels, is underpinning continued increases in house and unit prices.

When we also consider that the rental market is still very strong – there are 13.5 per cent fewer properties available for rent in Perth than this time last year – low vacancy rates and strong rental growth are leading to solid returns for most landlords and investors.

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I have said before that investors would only return to the WA market in the numbers we had seen previously after a reasonable period of time with capital growth, as well as reasonable expectations that capital growth would continue.

Australian Bureau of Statistics (ABS) data released recently would suggest that these conditions have been reached, and we are seeing the return of investors as a result.

The ABS figures cover the March quarter for WA and show investors have strongly returned to the market to be more than 20 per cent above the long-term average. Investor finance has also recovered to return to the long-term average, reflecting a big increase of 450 per cent from May 2020 when the investor market was in the doldrums.

It should be noted, however, the ABS statistics show that the owner-occupier market is still strong at more than 40 per cent above the long-term average, with the average loan size for owner-occupiers at a record high – about 17 per cent above the June 2020 results.

First homebuyers remain the biggest component of the owner-occupier market in the country, rising 6.5 per cent to 34.5 per cent.

Little wonder that, as we all vote today, both major parties have policies focused on homeownership and the first homebuyer market.

During the week, the Liberal-National Coalition released two policies aimed at increasing supply of homes and helping people with their initial deposits to enter the market.

On the supply side, the Coalition proposes that Australians over the age of 55 will be able to downsize their property and invest up to $300,000 into their superannuation fund outside of the existing contribution caps from the proceeds.

Pensioners who downsize will also be given greater flexibility by exempting the proceeds of the sale of the property from the assets test for longer. Currently this benefit is available to Australians over the age of 65 and making this change will see up to 1.3 million people become eligible to access it.

On the demand side, the Coalition will allow first homebuyers to use up to 40 per cent or $50,000 from their superannuation to buy a home.

I have previously said saving for the initial deposit to buy a home was one of the biggest challenges for first homebuyers – the ongoing mortgage payments were usually no more onerous than what people were currently having to pay to rent.

The Australian Labor Party has its own policies designed to promote homeownership and, if this is an important issue to you, I urge you to consider what has been proposed.

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