Some new housing statistics out this week could fuel a new round of panic buying, but buyers, please beware.
Not every property will enjoy good capital gains, as about 80 per cent of sellers in one apartment block have found out this year after selling at a loss.
The statistics likely to fuel panic come from a KPMG prediction that Perth homes will grow in price at almost twice the national average over the next nine months, with values forecast to jump about 17 per cent within two years.
My advice is not to get too hung up on the specific percentages. As KPMG researcher Brendan Rynne said to me this week, all forecasts are wrong — economists just hope to get it less wrong.
A more telling statistic in my view is that under the current tardy rate of construction, Perth is delivering only one new home for every eight new people.
That means one new property is completed for every two to three families, based on the current rate of population growth via migration and natural growth. Clearly, we have a supply and demand problem, which puts upward pressure on prices.
But while it is generally true that homes will be worth more in a year than today, this is not the case for every single property.
Take The Towers complex at Elizabeth Quay for example, where most of this year’s sellers have taken a loss.
According to sales records, only two of the 11 apartments to sell in 2023 earned a profit, with nine selling at a loss, and inconclusive results for a first-time sale and one that has not yet settled.
My analysis shows these loss-making apartments were all purchased in the downturn between 2015 and 2020, with losses ranging from 2.5 to 20 per cent, or close to $300,000.
Of course, the owners who were investors benefitted from some pretty strong rental yields at The Towers. But its safe to assume the owner-occupiers are disappointed to effectively walk away with a debt.
The losses highlight that apartments tend not to increase in value as quickly as houses, and some areas suffer more than most. According to RP Data, the median price for units in Subiaco and Mosman Park are about $30,000 cheaper now than in 2008.
Houses too were in the red for years during the property downturn, especially in outer areas with few amenities. For many people, the drawcard to these estates was the prospect of a brand new home.
But they lost this sales advantage every time another nearby property replaced them as the new kid on the block.
At the luxury end, there are areas that simply have not lived up to the hype, like parts of North Coogee. Builder Dale Alcock forked out $2.97 million for a North Coogee block in 2007 and sold it last year for $1.6 million — a $1.37 million loss.
It is safe to assume the property markets wild ride is not over. Choose wisely.