Property Outlook in 2018

Opinion |

The WA property market is certainly a hot topic of conversation – in the media, amongst buyers and within the industry.

We sat down with our Managing Director, Danny Murphy, to ask him his thoughts on what to expect in 2018.

What do you think is in store for the property market in 2018?

Market conditions are expected to improve slowly over 2018 with the last half of 2017 representing the bottom of the cycle.

Some areas of the established market have started to improve with positive trends in the new housing market to emerge in the second half of 2018.

Sales activity will improve in the first instance with modest price increases to follow by the end of this year.

How will 2018 differ from 2017, if at all?

The key difference in 2018 is that the overall confidence levels lacking in 2017 will begin to pervade those sectors driven by consumer sentiment.

In particular, confidence around employment will encourage purchasers to move.

Where are the opportunities for buyers in 2018?

With the established market, there are still opportunities at below replacement cost around existing or future transport hubs.

In particular, the eastern suburbs of Maylands, Bayswater and Bassendean offer sound, long term value.

With new housing, there remains available significant incentives and ‘value adds’ from land developers and builders which are expected to disappear over 2018.

Do you see any difference in the established or new build market in 2018?

At the bottom of the cycle, the established market can offer a below replacement cost pricing advantage on new. This price advantage usually drives an upturn in the established market prior to the new housing market.

As we are now experiencing, this advantage is already being diluted in some suburbs.

You talk about the property cycle. Can you provide an explanation of how the property cycle traditionally works?

The traditional property cycle is an outcome of supply / demand factors.

As demand improves, supply shortens and prices increase. With the supply process often taking 1 to 2 years, price escalation is exacerbated as the perceived shortage is greater than the actual shortage.

When prices reach a certain level, demand falls away due to affordability and lack of long term value.

Again, the lengthy supply process can be slow to respond to a decrease in demand leading to oversupply with a resultant downward pressure on pricing.

Eventually factors such as improved affordability and availability of finance, release the pent-up demand and the cycle begins again.

It is noted that one off events such as the ‘mining boom ‘can distort traditional cyclical trends.

What are the differences in the WA market vs East Coast market? Is WA impacted by the market on the East Coast?

The markets are different but can be influenced by the same national economic factors.

Also at the moment, we are seeing actions by regulators which limit the availability of finance to assist in cooling the Sydney / Melbourne markets. These measures are adversely impacting on the WA market at a time when it requires assistance to boost activity.

Want to fin out more? email us and we're happy to help.