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Understanding the Perth property market with Trent Fleskins
It’s essential for first home buyers to consider their long-term goals and lifestyle needs when selecting a property. Beyond the purchase price, first home buyers must navigate additional costs such as stamp duty, legal fees, inspection fees, and ongoing maintenance expenses.
To dive in and break down the answers you need to know about the Perth property market, I sat down with Trent Fleskens, a prominent figure in Western Australia’s real estate landscape.
Trent wears multiple hats in the industry, serving as the Managing Director of Strategic Property Group, a licensed real estate agent, settlement agent, and mortgage broker. He also hosts the popular Perth Property Show podcast, where he shares his wealth of knowledge and expertise with a broad audience.
What’s Happening with the Perth Property Market?
Trent began by delving into the foundational aspects of real estate, demand and supply. Essentially, how much demand is there in the market? And how much supply?
The Real Estate Institute of Western Australia (REIWA) provides weekly transaction data that offers insights into these numbers, breaking down the number of properties being bought and sold. Even though there may be a pool of sellers waiting to list their properties, actual market activity hinges on the presence of motivated buyers.
According to Trent, the Perth market is experiencing unprecedented demand, with approximately 900 to 1000 transactions occurring weekly. This surge in demand is fueled by factors such as interstate migration and increased investor interest. Trent highlighted that historically, during the mining boom, transaction volumes peaked at around 800 per week, dipping as low as 550 looking back five years ago.
The demand for properties in Perth has nearly doubled over the past five years, driven by population growth and economic factors. However, the supply of available properties has drastically declined from around 17,000 to just over 6,000 within the same period, influenced by political events like the 2019 federal election and exacerbated by the COVID-19 pandemic.
This imbalance between high demand and limited supply has created the tightest rental market in Western Australian history, leading to increased competition among tenants and rising rental prices. Given these market dynamics, property prices are expected to continue their upward trajectory in the near term due to persistent demand and constrained supply.
Will the Market Change in the Near-Future?
In terms of future trends, Trent expects there to be minimal change in the demand-supply dynamics over the next two to three years.
Factors such as interstate migration trends and the limited availability of skilled labour in the construction industry contribute to this imbalance. Trent’s insights suggest that buyers should brace themselves for a sustained period of competitive market conditions, with prices likely to remain buoyant.
To put it into perspective, the current construction rate in Perth is around 10,000 properties per year. This is the same number of homes that were being built 40 years ago, with less than half the population.
The Impact of Interest Rates
The relationship between demand, supply, and interest rates is fundamental to understanding house prices. The Reserve Bank of Australia (RBA) controls interest rates, primarily to manage inflation, irrespective of housing market conditions. The RBA’s mandate isn’t influenced by housing market fluctuations. Their primary focus is on maintaining economic stability through inflation control.
Predicting interest rate movements is notoriously challenging. Even experts, including the RBA governor, often get it wrong. Currently, bond markets indicate a belief that interest rate rises may be coming to an end, potentially followed by decreases in the near future.
The impact of interest rates on housing prices is profound. As interest rates rise, consumer spending decreases, impacting overall economic activity and potentially cooling down the housing market.
While the Sydney housing market experiences amplified effects due to its scale and affordability challenges, Western Australia is somewhat insulated by comparison. Even amidst interest rate rises, housing prices in Perth will only drop significantly if sellers outnumber buyers substantially, which is not currently the case due to limited housing supply.
Interest rates play a critical role in shaping housing market conditions. They impact buyer behaviour, affordability, and overall market sentiment.
Insights for First-Time Buyers
For aspiring first-time buyers, Trent offered valuable advice based on his extensive experience in the industry. He cautioned against impulsive purchases and emphasised the importance of strategic decision-making.
Investing in your first home is a significant financial decision that requires careful planning and foresight. Here are some important factors to consider:
- Recognize that buying a home is a major investment. Aim to choose a property that aligns with your long-term goals, such as staying in the same location for at least 10 years. This minimises the need for frequent buying and selling, reducing associated costs like stamp duty and selling expenses.
- Despite rising construction prices, prioritise quality when building or purchasing a home. Cutting corners to save money in the short term may lead to dissatisfaction in the long run. Ensure the property meets your needs and expectations for the foreseeable future.
- Understand the current market dynamics. Property prices are influenced by demand, supply, and economic conditions. Waiting for significant price drops may not be realistic given the persistent demand-supply imbalance discussed earlier.
- In a rapidly appreciating market, such as Perth’s current scenario, consider entering the market as soon as possible. While low deposit loans like Keystart can be beneficial, exercise caution and prioritise location and product suitability to mitigate risks.
- Aim for locations close to city centres or desirable amenities like beaches. Investing in infill land within established suburbs can offer better growth potential compared to oversupplied areas with vulnerable market conditions.
- Adopt a strategy of being the “poorest person in your suburb.” This means investing in a less expensive property within a desirable neighbourhood where value is driven by financially stable residents. This approach can lead to better appreciation over time.
Key Takeaways and Recommendations
Trent’s parting advice to prospective buyers was to prioritise location and quality when entering the property market. He emphasised the potential benefits of investing in infill land and targeting established suburbs with strong growth potential. By adopting a long-term perspective and making informed decisions, buyers can navigate the market effectively and maximise their investment potential.
Remember, your journey to homeownership is a significant milestone, and with the right knowledge and guidance, you can navigate the market like a boss.
If you’re ready to start your building journey and get advice from a building broker, you can book a call with our team to find out more!
