Western Australia Housing Prices Falling Up To 30%
Recently NZ Herald and Australia ABC news has reported that Western Australian housing market has fallen around 30 per cent from the peak of the market in 2009. In Perth, the median housing price has dropped 8 percent in two years and is expected to further drop off another 2 percent over the next year.
Just two years ago, Western Australia had short of 11,000 houses. But now, it has shown an oversupply of 14,6000 dwellings. There will be more oversupply by next year.
It is the worst nightmare to house owners, especially to property investors. People are facing the huge pressure of paying back mortgage.
Perth was once the Australia's fastest growing city, with population surged from 1.44 million in 2006 to 1.69 million. Between 2005 and 2009, the number of ASX 300 companies based in Perth rose to 63. With its strongest economies in the nation, the housing prices reached to higher level comparing to Sydney and Melbourne.
The contributing factors for this fall is the boom time since mid-2000s over, China's economy slowing down. One example is that the iron ore price reached an average USD $187 a tonne in February 2001, fallen to USD $50-60 a tonne at 2016. With economy cooling down and fewer job opportunities, the population growth slowed down. Actually people were moving out of the state at a fast rate. There were more departures than arrivals in Western Australia for 2014 and 2015. This has seen Perth's housing prices and rent dropped significantly.
Will NZ Housing Prices Fall?
New Zealand has most unaffordable housing in the world today, according to The Economist. The figures show that in New Zealand, house prices have risen 8% on average per year in the past 46 years, comparing to 7.65% in United Kingdom, and 6.4% in Australia.
We have all seen our house prices skyrocketing in last few years. With the better economic performance comparing to our neighbour Australia, large amount of migrations flooding into the country, shortage of dwellings supply all pushed the house prices up. Is that possible the Western Australian housing prices collapse happening here?
Actually it happened at New Zealand in the early 1970s. Before 1973, New Zealand experienced a fast increase in house prices because of large amount of migration and shortage of building supply. The house prices increased nearly 60% in 3 years time. With government's response by loosening planning controls to allow more flats to be built, oil shock hit, and British entering the common market, the house prices dropped by around 40% till 1980.
There is a point of view that New Zealand economic boom is driven by many aspects, comparing to Western Australia, mainly driven by the mining industry. But there are still a lot of other factors can affect the house prices, such as government policy. Currently we can see that high LVR restrictions have already affected the housing prices. The proposed changes to immigration laws will affect thousands who are trying to achieve residence. A pull-back by chinese investors because of China's capital controls can be one of the factors too. Don't forget that the interest rates will not stay on current low level for long time.
Housing prices in New Zealand have risen by 30% in last 3 years. Household debt soared too. Credit rating agency Moody’s has rated New Zealand as one of the four countries most susceptible to a housing market crash. Real Estate Institute data shows that the national median house price reaches $546k in March 2017, up 10% comparing to previous year. Auckland median selling price is now $900k, more than 10 times the average household income.
Western Australia's property market shows that the price corrections could occur anytime including when interest rates are low.
At 1970s, New Zealand also experienced the house prices collapse as it is happening today at Western Australia. The house value dropped by 40% from 1974 to 1980.
Today we are experiencing the sharp increase of house prices and median house selling prices hit 10 times the average household income.
Moody’s has rated New Zealand as one of the four countries most susceptible to a housing market crash.
Should the house owners and investors in New Zealand, especially Auckland, take note on these?