On page three of today's West Australian newspaper there is an article that claims that the three year decline in house prices in Western Australia (WA) is over. Over the last three years the average home owner in WA has seen about 8.5 percent wiped off the value of their property. This is the average. For many some the loss is higher, and a fortunate few have seen an increase occur over this period.
However, I have serious doubts about the decline in prices being over. The facts just don't add up.
Consider . . .
WA's population is currently dropping by about 3,500 'permanent residents' per month, and has been for the last 18 months as Australian-based workers move back to Queensland or New South Wales, and as international workers go back to Ireland, the UK, and New Zealand—a direct outcome of the end of the mining boom.
The mortgage risk rate has been increasing since about March 2015 and is continuing to climb. This is the percentage of mortgages where repayments have been behind for more than three consecutive months. A recent article in the Financial Review made it very clear that in WA this rate was expected to continue to increase.
The currently vacancy rate for commercial properties is 25 percent and climbing. A rate never seen before in WA.
Rent returns for investors have fallen by 30 percent over the last 18 months. Plus, if Labor wins the coming Federal elections then it is almost certain that negative gearing is going to be wound back in some way—which will put a little more pressure on rents.
There is just slightly over double the number of houses on the market for sale now in WA that there was at the same time last year, and all forecasts I have seen suggest this is going to increase.
I will put a reminder in my calendar to check into this at the end of the year, but at this stage I would feel very safe taking an even-money bet that at Christmas we will still be seeing housing prices coming down.