State Finances

The State’s Finances will be the key driver for first homebuyers and investor markets. The Treasurers Budget’s announcement on Thursday comes soon after the Reserve Banks decision to cut rates to their lowest level since 1959 earlier this week.

The recent announcement to cut rates takes the official cash rate to 2.5%. We were pleased to see some of the big banks pass on the cuts with NAB passing on its rate cut only 3minutes after the Reserve’s announcement. This bold move by NAB was quickly followed by Westpac, Commonwealth and other lenders, which could be early indications lenders may now be prepared to be more competitive on new loan applications. This more competitive spirit by the banks will assist both home sellers and buyers into the property market.

The overall market median house price continues to trend up as the preliminary median price is projected at $525,000 for the June quarter. With the market being most active in the below median price levels, the number of first home buyer applications over the year to May rose 34% (UDIA) and the increase in grants paid for established dwellings lifted the proportion of first home buyers to 29% (REIWA) in the June quarter.

The biggest game changer is the changes the state budget will have on first homebuyers. The Treasurer announced the stamp duty exemption for first home buyers will remain but in a push to boost new construction he announced the First Home Owners Grant (FHOG) will be adjusted to $4000 for the purchase of an established home, and $10,000 for the purchase of new-build. This is a reduction of $3000 for the purchase of an established home and an increase of $3000 for the purchase of a new-build.

Although this move by over east state governments failed to produce the desired result it must be noted that WA is the only state that still offers a FHOG. An area of focus may be the availability of land supply catering to the emergence of this new market driven by new construction for first homebuyers given that the current levels of Greenfields is already low. We are hopeful an increased demand may be a catalyst for new land development releases from a state level.

The budgets move to raise land tax by 12.5% will raise an extra $338 million over the forward estimates. Unfortunately the investors will be hardest hit, which may bring some neutrality to the recent growth achieved in the rental market. The increase in first home buyer activity to May has eased pressure on rental properties, showing signs of a slow down with a higher vacancy rate and lease brakes representing on average one quarter of the current supply. Interest rates coming down may see more lessees’ opt for mortgage repayments making the Australian dream come true in acquiring a home.

But it’s not all about the hit on the hip pocket. The outlook for Western Australia remains positive despite some sectors of the market being that we are a growing state with one of the key drivers -our industrial market, responsible for the creation of employment.

NAB reports WA is the standout for income growth in Q2’13 which is expected to soften to 2%. With the Australian economy slowing and labour market pressures growing, returns are expected to be highest in WA (3%) with yields around 2 ½% forecast in all other markets.

NAB’s modeling indicates WA house prices will grow 5.1% through the year to Q2’14 and 3.1% in the year Q2’15. With the proposed urban infrastructure projects for Perth, the likely influence on local real estate markets will be evidenced over the next few years, as the projects of this magnitude will require substantial accommodation for skilled labourers.

At DQ Real Estate you can be sure whilst the market is ever changing we aim to accurately report on the market and guide you with integrity so that together we can plan for your investments to grow. We welcome to discuss with you the different categories of investment property available to meet your short or longer-term goals.

If you would like to know more about the WA property market or would like to discuss the demand for property in your area please contact one of our area representatives, whose details you will find on our website or you may call us on (08) 9309 4004. We would love to hear from you today.


Johann Dique
Licensee
DQ Real Estate



Acknowledgement of sources:
REIWA, UDIA, Sunday Times, NAB Property Index Report Q2’13