Why Perth’s record housing slump won’t bring relief for everyday buyers

The national housing downturn has seen Perth’s median dwelling price slip below $1 million, but what exactly does that mean for the everyday buyer?

Perth property expert Trent Fleskens says the reality is not much.

Cotality’s latest quarterly home value index report shows the median dwelling price has dropped to $975,000.

In January, the median dwelling in Perth would cost buyers $1.08 million and stayed over the million-dollar price tag until July.

However, over the past three months, dwelling prices dropped by 4.7 per cent, which for buyers sounds like a good thing, but Fleskens said it’s more complicated than that.

“It doesn’t really matter if it’s $999,000 or $1 million or $503,000 or $507,000. A million is a number that is just an arbitrary number that reflects the median house price of a select group of suburbs in WA,” he said.

“It doesn’t specifically reflect the performance of your house on your street in your suburb.

“When the Perth median house price goes up by 10 per cent in a year, there are some suburbs out of the 400 that actually went down that year, and when the Perth median house price goes sideways and grows 0 per cent for the year, that meant half of the suburbs went up and half went down.”

Fleskens, who is the director of Strategic Property Group, said people shouldn’t characterise the median house price as a true reflection of how house performance is going.

“We also certainly shouldn’t give a shit whether the median is $1 million or $400,000 or $5 million because again, it has no bearing on whether the median went up or down, as to whether your property went up or down,” he said.

Cotality’s research director Tim Lawless said Perth’s property market peaked in March, but has taken a sharp downturn in recent months.

“When you look at Perth’s previous downturns, there’s been eight of them in the past 40 years and this is the most rapid that we’ve seen,” he said.

“But of course, it comes on the back of extraordinary growth as well, and you can see that in both the annual and the five-year numbers. In Perth over the past 12 months we’re still seeing values up 10.1 per cent … and over five years, the market’s up 74 per cent.

“The silver lining of this downturn is that prices are coming down, making housing more affordable because there’s more and more people that are getting blocked from the market just given affordability constraints.”

On Tuesday, the RBA lifted interest rates to a 15-year high of 4.6 per cent.

Despite the price of homes going down, with interest rates rising, Fleskens said buyers are hardly seeing a positive effect from it.

“Until we see inflation get under control, interest rates drop, and the broader market starts to get confidence in the economic management of this federal government, the direction of the RBA’s cash rate, and the global risk of inflation [the market will stay the same],” he said.

Fleskens said this notion is a huge inhibitor on young first home buyers mindsets.

“Not only are they obviously worried about the nominal cost of a home, which is neither here nor there. What they’re actually worried about, more importantly, is what affects them on a weekly basis, which is their monthly mortgage repayments,” he said.

“And the irony of it is, the house price could have gone down, but if the rate went up and the price of their debt is still the same on the 28th of every month. Well, then what was the benefit of that?”

Areas around Perth which did see dwelling price growth this year were all in the outer metropolitan area.

Serpentine-Jarrahdale, Mandurah and Rockingham led the way with the highest percentage increase across Perth.

Lawless said “mortgage belts” across Australia have all seen median dwelling price increases.

“This isn’t just a Perth trend; it’s happening everywhere. So we’re definitely seeing those more affordable markets, which typically describe as mortgage belts, have become much broader in their demands,” he said.

“If you’re on a median household income, it’s really hard for you to demonstrate an ability to service a loan at the median price because it’s so expensive and interest rates are so high, so their demand is getting skewed towards the lower quartile of the market.

“It’s just simply that your dollar only goes so far, and some of those sort of middle to outer ring areas have become more attainable.”