They're back: first-home buyers are taking over investors

Courtney Trenwith

May 14, 2011

First-home buyers are reaping the benefits of a sluggish Perth housing market, with an increasing number snapping up apartments and townhouses that may otherwise have been bought by investors.

The Real Estate Institute of WA said investors had lost interest in the city's over-priced properties, reducing competition and forcing down prices, particularly for multi-residential properties typically attractive for investors.

REIWA's March quarter figures released today show the median price for a grouped dwelling (apartment, unit, townhouse or villa) in Perth dropped by about $7000 to $402,000, while outside the capital it fell about $2000 to $325,000

"Multi-residential properties are often preferred by investors, but they are thin on the ground," REIWA president Alan Bourke said.

"Conditions seem to be favouring first-home buyers who have been reasonably active and represented about 23 per cent of buyers during the quarter."

The latest state government data shows the median purchase price for first-time buyers in Perth was $415,000, and $325,000 for those in regional areas.

The statistics follow controversial comments this week by Premier Colin Barnett encouraging first-home buyers to lower their expectations to enter the market.

Healthy first-home buyer activity during the March quarter was in contrast to existing home owners looking to trade-up.

Mr Bourke said many of them were "caught in a bind", unable to commit to selling before buying, causing the property market to stall.

WAtoday.com.au revealed yesterday the state's property market had fallen into the worst slump in nearly two decades.

Activity in the housing market has dropped 15 per cent in just 12 months and more than one-third since the height of the boom in 2005-06, according to Landgate, the government's official land information authority.

REIWA said although sales activity had improved during the March quarter, overall turnover remained 25 per cent below average in Perth and 35 per cent below in the country.

Mr Bourke said it had become a buyers' market, with 50 per cent more properties for sale than required to meet demand.

"Most sellers are dropping their asking price by around 7.5 per cent to get the deal done, while those who need a quick sale simply adjust their expectations and asking price before going to market," he said.

However, Mr Bourke said the fall in median price from December 1 was expected to be only 1 per cent.

Preliminary data suggests the median house price for the March quarter will be about $485,000 for Perth and $375,000 elsewhere, Mr Bourke said.

Despite a flooded market, the rental vacancy rate has tightened, leading to the first rise in rental prices in 12 months.

Rents in Perth rose by $10 to $380 per week during the March quarter, while the vacancy rate remains just above 3 per cent.

"Usually, when the market floods with properties many investor-sellers decide to withdraw their listings until conditions improve," Mr Bourke said.

"In the mean time they shift their properties into the rental market which relaxes the vacancy rate. That doesn't seem to be happening at the moment."