Conditions favouring buyers in Perth: Damian Collins
GUEST OBSERVATION
It is shaping up to be the year of the buyer as favourable market conditions create an opportune time for investors in Western Australia.
While capital growth is widely tipped to be moderate in the Perth property market for the year ahead, the next 12 months will provide a good platform for investors to build their property portfolios for several reasons.
Firstly, we can be confident that finance will remain cheap as interest rates stay at record lows. The large majority of industry analysts are predicting that the Reserve Bank of Australia (RBA) will not hike rates this year.
Secondly, we have seen a 28% increase in housing stock available in Perth over the past year with the number of listings surpassing 13,000 at the end of 2014.
This provides investors with a much wider choice and buyers are more likely to find a better suited property to their needs.
Thirdly, given the softer outlook for the Perth property market, many buyers will delay their decision to acquire a dwelling until conditions improve.
This simply boils down to human nature as many investors take a herd mentality and become discouraged when the market isn’t recording robust capital growth.
As many buyers delay a property purchase, those that do choose to invest in property will encounter less competition.
Subsequently, investors can get more bang for their buck or are able to secure properties for less, or even below asking price, as reduced competition means buyers are less likely to be forced to outbid others.
Finally, buyers in softer markets will have more control over contract negotiations as less competition means they can be more demanding of sellers. We are already seeing great properties being purchased at fair prices.
While we don’t expect huge capital growth for the Perth property market, the fact is that cheap finance, higher stock levels and reduced competition means buyers will have the upper hand.
The long-term fundamentals for Perth remain very strong. It is forecast to have the fastest growing population and fastest growing economy over the next 10 years.
Warren Buffett famously said, “Be fearful when others are greedy and greedy when others are fearful”.
Those who make the most of the current favourable conditions and invest wisely in the next 12 months will be best placed to take advantage of the next upswing in the property market.
Damian Collins is the founder and managing director of Momentum Wealth, a Perth-based property consultancy that specialises in building the long-term wealth of its clients by assisting in the strategic selection, financing, acquisition, development and management of their investment properties.
