Perth’s Home Prices Tumble 5.8% as Mining Boom Bypasses Property Market
Property prices in Perth, the center of Australia’s mining boom, may fall further this year after slumping the most out of any state capital in the past 12 months, an Australian Property Monitors economist said.
“Perth will probably bottom out toward the end of the year and we’re not looking at a positive turn around until next year’s first quarter,” Andrew Wilson, senior economist, said in a phone interview from Sydney yesterday. “There’s entrenched low buyer and seller confidence in the market and it’s hard to turn that around.”
Perth home prices fell 5.8 percent in the 12 months to June to a median A$535,617 ($588,750), compared with the 2.4 percent national decline to A$546,121, Wilson said in a report yesterday. The city’s home prices fell 1.5 percent in the three months to June, compared with the national average of a 0.6 percent decline. Unit prices in the city have fallen 6.1 percent in the past 12 months.
Perth property prices have stalled after doubling between 2004 and 2007 even as the economy booms on the back of the resource-rich Pilbara region. Much of the A$264 billion of investment planned for Western Australia is being overseen in the state capital, with work starting on Chevron Corp. (CVX)’s A$43 billion Gorgon liquefied natural gas project and BHP Billiton Ltd. and Rio Tinto Group’s expansions to iron ore operations.
Demand Next Year
“We probably won’t see any improvement in prices this year,” Alan Bourke, principal at Bourkes Real Estate, said in a phone interview from his South Perth agency today. “Hopefully things will start to recover next year. Some of the top-end rental properties are starting to be taken by executives in the resources sector, with a lot of people coming in from Chevron and the other major players.”
Western Australia’s economy is growing as demand for its resources remain high, the state’s Chamber of Minerals & Energy said in a July 20 statement. Gross state product is expected to expand 4.4 percent in the 12 months to June 30, 2012, it said.
“Western Australia remains the heavyweight champion of the Australian investment landscape,” Deloitte Access Economics said in a separate report yesterday. “The volume of resources projects underway is huge. Western Australia also has no shortage of major investment projects in planning.”
About A$264 billion of investment is planned for Western Australia, compared with $184 billion for the next closest state, Queensland, Deloitte Access Economics said.
While Western Australia’s mining and energy industries are booming, other sectors of the economy, including real estate, are struggling. Australia’s economy shrank 1.2 percent in the first quarter, the most since 1991, because of natural disasters.
Australian retail sales unexpectedly dropped in May and consumer confidence this month plunged the most since Lehman Brothers Holdings Inc. collapsed in September 2008. Credit to home buyers in May increased at the slowest annual pace since 1977, when central bank data begins.
“Once we break the pessimism affecting the non-mining sector parts of the economy, prices will improve,” said Bourke, who is also president of the Real Estate Institute of Western Australia. “For the long term it’s one of the greatest places in the world to buy and even the medium term looks good.”
In the Pilbara, 1,500 kilometers (930 miles) to the north of Perth, mining and energy projects are causing a housing shortage. Karratha’s median home price in March was about A$805,000, and the suburb of Port Hedland’s was A$1.06 million, up 25 percent from the year before, REIWA figures show.
Australia’s largest state by area, with 2.6 million square kilometers (1 million square miles) of land, earned A$93 billion from minerals and energy exports during 2010, or 68 percent of the national total.
“Sentiment in Perth’s property market will turn around because incomes, already the highest in the country, will rise further, there will be a strong need for accommodation, and new supply has been limited,” Wilson said. “The resources sector in Western Australia is extraordinarily strong. The work coming through is in the pipeline and not speculative.”
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