It seems the Perth property market just can’t catch a break, doesn’t it?

A year ago, commentators were hoping 2019 was the year of recovery after having paid our penance since the 2012-15 period of over-exuberance and over-supply.

Then the royal banking commission kicked off and spooked the banks to a point of nearly shutting up shop until August 2019. 

At the same time, as another kick in the teeth, Bill Shorten decided he would make the 2019 election a war on property ownership (amongst other things).

And whilst that didn’t pay off for him in May, it seems we never really came out of our shell as a state in terms of confidence until springtime when buyers came out in their droves and transaction levels went through the roof, upping itself on a weekly basis through Christmas and into February this year.

Transactions are 80 per cent higher in March than they were in Winter 2019. 

Stock levels, which had been hovering at 17,000 properties on market for the last 4 years, plummeted over spring to WA’s natural balance of 12,500 and are still trending down as homeowners are reluctant to sell when they feel so close to an uptick in 2020 and beyond. 

In other words, for every 3 houses being sold, only 2 houses are coming back on the market. That’s as simple an indicator you can get to demonstrate the buyer/seller dynamic at the moment.

On top of this, the ‘days on market’ median, which had been rising steadily to over 80 days in spring, has started to drop quickly into the 60s. More suburbs are coming into the 40s, which is where we generally see prices start to grow. 

Added to that, rental vacancies, which denote how many rentals are available on the market at any one time, have dropped from a high of 7.5 per cent down to 2.2 per cent this year. This is boom levels. We’ve gone from landlords having to offer fruit baskets to get someone in the door to having rentals snapped up on the first viewing and above asking price. Hotter than toilet paper!

So when I was asked on the afternoon news in January how I thought this year was going to go, and I rattled off these leading indicators for price growth, I was pretty comfortable we had seen the worst of what has been Western Australia’s longest and deepest property recession in recorded history, and that 2020 was actually looking moderately rosy for both buyers and sellers. Things were moving. In good, established suburbs, prices rising. 

Are we still looking for further strength in the job and immigration market to prop up the demand side into the medium-term future to resemble growth remotely close to that of Sydney and Melbourne’s? Yes. And is a lot of the current demand side fuelled by cheap credit? Yes, it is. 

But supply of new and old properties is also as low as it’s ever been (relatively), with the building industry contracted to a fraction of the size it once was and land estates lying vacant (for good reason). 

So what we are seeing right now is just a really tight market where the balance is slowly moving into the seller’s favour in more suburbs than 6 months ago, despite still waiting for our pay rise that was due in 2012. 

And then COVID-19 hits. 

And we all scratch our heads wondering what it will do to our fragile, rebounding market, hoping we don’t have yet another false start like 2019.

If you ask me why I like property as an asset class, its mainly because it’s a medium-to-long term investment. Unlike with shares, if you were planning on buying a property now with a sell timeframe within the next 3-6 months, I’d be scratching my head. You just wouldn’t do it.

COVID-19 or not, if you were planning to buy in the first half of 2020, it should be because you see value for a 5-40 year hold due to the fundamentals of the street within the suburb within the city. 

They say that ‘you make your money when you buy and not when you sell.’ And ‘Where there is chaos, there is opportunity.’

And whilst I was finding it hard sourcing good quality properties in December and January with the intention to hold for years to come due to the increased competition in the market, I see this time period as a perfect storm of subdued buyer confidence in the middle of tight supply of properties for sale and rent, at the start of a new mining investment cycle. 

It’s almost a second chance to lock a few sites down that I wasn’t able to secure over Christmas whilst my competition (everyone else buying right now) are hesitating. 

And while I understand that we are currently walking into the unknown of how many months this virus will affect our daily lives and ability to travel overseas, which will create more fear, destroy jobs in certain industries, and diminish profits/values in the equities markets, my eternal sense of optimism says this won’t be forever, and that when the dust settles, I would have been grateful to have had that second-chance opportunity to buy low when the streets were empty.