The housing market in Perth, once a red-hot haven for investors, is facing a potential bloodbath, according to experts. This warning comes at a time when Australia is bracing itself for what could be the biggest property correction in four decades.
Leith van Onselen, a former economist at the Treasury, has identified a perfect storm of factors that could significantly impact home values nationwide. Rising interest rates, worsening affordability, a slowing economy, and waning buyer confidence are all converging to create a challenging environment for the property market.
"The RBA's recent rate hikes and hawkish stance on inflation are major concerns," van Onselen explains. "We're seeing a repeat of last year's peak, and the markets anticipate further increases. The RBA's commentary reflects a serious worry about inflation."
Perth's housing market has been a standout performer over the past two years, driven by population growth, a housing shortage, and booming rents. However, there are signs that the market is beginning to cool, with property analyst Catherine Cashmore reporting a softening of momentum and a dismal outlook from sellers on the ground.
"The market feels dismal," Cashmore says. "There's a real sense of uncertainty and a lack of momentum."
AMP senior economist Shane Oliver adds that while Perth is still recording growth, the pace is definitely slowing, mirroring the trends in other major cities like Sydney and Melbourne.
"The slowdown is a result of rate hikes, buyer uncertainty due to geopolitical tensions, and the upcoming budget's impact on property taxes," Oliver explains.
Van Onselen believes Australia could follow the lead of comparable economies like New Zealand and Canada, where housing prices have already corrected by around 20%. Fresh data from Cotality supports this view, showing a slowdown in housing conditions across the nation, with Sydney and Melbourne already in the early stages of decline.
"We're on the cusp of a housing downturn," warns Cotality's Tim Lawless. "Listings are increasing as demand softens, and interest rates, affordability, and serviceability pressures are all taking their toll."
Cashmore goes further, predicting a recessionary environment that could have severe consequences for both property prices and businesses.
"We're heading into a full-blown recession," she warns. "Property prices will drop, and businesses will suffer. It's a worrying time for the economy."
As the housing market faces these challenges, the implications for homeowners, investors, and the wider economy are significant and will require careful navigation to mitigate potential impacts.
