Property News

Property hotspots starting to cool

09 October 2006

The nation's last two red-hot property markets are running out of steam in what could signal the end of the biggest real estate boom in Australia's history.

Preliminary figures from the Real Estate Institute of Western Australia show house price growth in the state finally slowed in the three months to September. Those figures add to a raft of negative data that has led analysts to predict that the dream property run in Australia's largest state is drawing to a close.

While less pronounced than in Perth, the Darwin property market is also beginning to show signs of weakness, with demand falling away, according to the Real Estate Institute of the Northern Territory.

In the year to June, Perth median prices rocketed by $108,000, or 37 per cent, making housing in the city the second-most expensive in the nation after Sydney. But BIS Shrapnel senior analyst Jason Anderson said the Perth market had now peaked and that house price growth was expected to fall to as low as 6 per cent this financial year.

"We expect the boom is over and we are looking for price growth to slow a lot, and we think that greater evidence of that will come through in the next couple of months," Mr Anderson said.

One of the biggest signs of a cooling Perth market was the withdrawal of first-home buyers from the market, a "lead indicator" that had preceded the downturns in Sydney and Brisbane.

Mr Anderson said loans to first-home buyers, which had surged in the first half of last year to 4400 a quarter, had eased to 4200 in the June quarter and were expected to be about 4000 in the three months to September. Those falls were a result of declining affordability.

"The average earnings in Western Australia are higher than in Melbourne but even taking that into account, we have affordability being worse than in Melbourne because of the higher prices," Mr Anderson said.

The cracks in Australia's two strongest property markets began to appear this week when figures released by the Australian Bureau of Statistics showed Perth and the Northern Territory had recorded the biggest falls in residential building approvals in the nation in August. While those figures came off a high base and building approvals remained strong, they are a sign that builders are beginning to slowly withdraw from those markets.

REIWA spokesman Brian Greig said that while preliminary data for the September quarter showed prices in the state had not yet plateaued, price growth had "certainly slowed".

In another indication of the faltering Perth market, Australian Property Monitors said the auction clearance rate in the city fell to 45 per cent in August, after consistently tracking at about 60per cent each month since May last year. APM research director Michael McNamara said that although those figures came from a relatively small sample size in a market dominated by private-treaty sales, they gave a strong indication the Perth market was beginning to cool.

Demand for lower-priced property in Darwin remained strong but the top end of the market was beginning to suffer, according to the REINT.