Sellers in Perth's prestige property market could be forced to drop their prices next year as commodity prices continue to weaken.
The Real Estate Institute of Western Australia (REIWA) predicts residential house prices across the West Australian capital could fall in 2015 as the number of properties on the market continues to grow and sales rates decline.
The institute says prestige property prices in the exclusive river and beachside suburbs of Perth appear to have stabilised since steep falls in 2011/12, but the high-end $3 million plus market remains subdued.
REIWA president David Airey said more than half of vendors in the mining hub of Perth were dropping their prices, with discounting tending to occur on properties listed above $1.5 million.
“If the market slows up any further that will continue,” Mr Airey .
Mr Airey acknowledged that falling commodities prices and a downturn in the local mining industry had contributed to weakness in high-end property sales as well as rentals.
“It’s had quite a big effect across the board but mostly in the rental market where we’ve had a lot of big resources companies renting expensive properties at extraordinarily high rents and they’ve virtually vanished,” he said.
Demand for those luxury rental properties had slowed to a trickle while sales over $1 million had significantly reduced in number, he said.
Western Australia’s biggest export, iron ore, is now trading at a five year low and the state’s other major export, gold, sunk to a fresh four-and-a-half-year low on Friday.
Perth properties are now sitting on the market for an average of 59 days, almost double the time taken to sell properties in hotly contested markets in Sydney and Melbourne.
Mr Airey said the total Perth market was near “equilibrium” with around 12,000 properties for sale, and listings climbing rapidly.
“Indications are that we will clearly surpass this in 2015 which will add to selling days and put downward pressure on price,” Mr Airey said.
Among those vendors offering discounts, the average price reduction is around five per cent.
The rate is higher in the leafy western suburbs where discounts are running at seven per cent and Perth city where owners are cutting prices by almost 12 per cent due to high volumes of waterfront apartments.
REIWA figures show median house prices in Perth’s five most expensive suburbs, which have traditionally been favoured by mining company bosses, fell in the September quarter.
Around 25 per cent of sales for the September quarter are yet to settle, but preliminary statistics show median prices in Peppermint Grove, Dalkeith, Cottesloe and Applecross all fell in the quarter, with Mosman Park prices dropping eight per cent.
Real estate websites have 220 properties listed between $1 million to $8.5 million in those five suburbs alone.
Based on long-term averages there has been a 22 per cent reduction in prestige property sales above $1.5 million.
“Sales over $3 million are pretty few and far between,” he said.
He said there hadn’t been much, if any, capital growth in properties valued over $3 million.
Perth is now in its eighth quarter of a reduced number of sales transactions with very little change in the median price of $548,000.