2019 was another interesting year in the Perth property market with buyers and sellers alike asking, when’s the market going to turn?!
Fickle is a word I use a lot to describe current local conditions but I always stress the market isn’t homogeneous and that Perth consists of many different micro markets between suburbs and property types, some of which are performing very differently to others.
There are however some generalisations that we can draw upon for anyone looking to sell in 2020.
First off, expect more of the same. Until local economic conditions improve, including wage growth, employment growth and population growth, I personally think that the overall market will bump along at its current level and that minimal growth will occur in 2020. That said, we’re likely to see individual micro markets outperforming the overall market so pay close attention to individual suburbs and property types for early signs of recovery, some of which we’re already seeing.
Whilst it seems that economists agree that interest rates are likely to remain low for the foreseeable future, credit remains tight despite the removal of the minimum 7% serviceability test and local consumer confidence is also relatively subdued, albeit slowly improving.
Second, overall Perth property sales transaction activity in 2019 was at its lowest levels in in 28 years, yes, you read that correctly, plunging 47% in the last 5 years alone. We are seeing signs of a lift in activity but like anything in the Perth market it’s not across the board so talk to your agent about what’s happening in your specific area.
Because of market conditions more home owners are choosing to stay put, mostly because they feel that they’ve lost money since the boom, but buyers have also been holding off from making a decision to buy. It’s not unusual to meet buyers that have been shopping for a new home for years because they haven’t yet found the perfect one – something they didn’t have the luxury of when it was a sellers market. There’s no pressure for buyers to buy and for the most part in the last 10 years they’ve been rewarded for waiting.
Which leads me to my third point, be realistic and market ready or don’t bother. I’m saying that with love.
To be frank, if you don’t invest in getting your property ready for sale, or price it appropriately to meet the market, you’re unlikely to sell or if you do plunge ahead, end up with a very poor result. Market readiness is everything when it comes to a successful sale, so make sure you get a good agent that’s not afraid to tell you what you need to hear, rather than what you want to hear, if you’re thinking of going to market in 2020.
Fourth, if you’d like to sell but are holding off for better market conditions realise that there can be a cost in waiting.
If you’ve got a newer or more newly renovated home you need to weigh up the cost of holding out for the market to improve against the loss in value that’s occurring in depreciation on your newer build or improvements – it the market movement is minimal it won’t be enough to compensate you for the losses that are occurring through depreciation. If you choose to rent your property out you’ve also got to factor in wear and tear from tenants and the potential cost of reinstating the property to its previous condition when you do come to sell. Waiting or renting can initially seem like a good option to avoid a real or perceived loss, but it’s not all upside.
Fifth, despite the above, the outlook is not all doom and gloom! There are still parts of the market where buyers are keen and active, albeit still price sensitive. If you’ve got a character home on a full block in the Mount Lawley High School zone I’d love to talk to you about off market sale opportunities!
So that brings me to my sixth point in relation to trading up. Whilst it might be difficult to accept that your property is worth less than what it was at the peak in 2014, or when you bought it, the gap between where you are now and where you want to be has probably never been as narrow in the last 12 years. Remember that a 10% jump on a $500,000 property, which is $50,000, is half that of a $1million one, so delaying making a move until the market is rebounding could cost you more money if you’re looking to buy into that next level than what you’ve made on any growth in yours.
And last but not least, my best advice if you’re considering selling in 2020 is to get good advice. Speak to a quality local agent whose primary interest is in providing you with factual information and feedback to assist you to make the best decision, not just tell you what they think you want to hear so that they get a signboard. Talk to your broker, talk to your Accountant, make a spreadsheet.
It can be very difficult to make rational decisions when you’re faced with what feels like a loss, as your brain will do everything it can to avoid the pain of one, so ensure whatever decision you make to sell or stay is based on sound logic rather than emotion, this way you can at least look back in 10 years knowing that you made the best decision for the right reasons at the time.
If you’re thinking of buying or selling in the suburbs nearby and surrounding Beaufort Street I’d love to help. Call me on 0405 812 273 or email me at [email protected].