WHO would have guessed that a pandemic would have been the catalyst to rebound Australia's residential property market?
According to data from CoreLogic, Perth median house prices have risen by 6.3 per cent in 12 months and 4.8pc in the three months to mid-April.
The national trend has seen regional housing markets generally outperform their capital city counterparts, however the Western Australian regional market has lagged behind Perth.
Nonetheless, as of the end of May the regional median property prices rose by 4.9pc over the past 12 months and improved by 1.8pc in three months.
The key factor bolstering the resurgence in the WA property market has been a steep increase in sales volume.
Perth sales activity has recovered sharply from the COVID-related weakness felt in early 2020 and have now approached peak levels not seen since 2013.
The six month trend in house sales has tracked 29pc above the 10-year average, with unit values also rising at a close 25.5pc more than the decade average.
"The combination of improving economic conditions and low interest rates is continuing to support consumer confidence which, in turn has created persistently strong demand for housing," said CoreLogic research director Tim Lawless.
"At the same time, advertised supply remains well below average.
"This imbalance between demand and supply is continuing to create urgency among buyers, contributing to the upwards pressure on housing prices."
Along with the rise in newly advertised listings, sales activity has also increased.
"This rapid rate of absorption is keeping advertised inventory levels extremely low, despite the rise in new listings," Mr Lawless said.
"As a consequence, vendors remain in a strong selling position while buyers have a weak position at the negotiation table."
Elders WA real estate manager Drew Cary said property prices have been a little slower to react to the market, which was why sales volume has surged so rapidly against moderate values growth.
But he expected sales activity to eventually slow and property values to catch up.
"Listings had been on decline for the past six to eight months, but that's because going into COVID we were over listed; we had too much on the market for a balanced market," Mr Cary said.
"This first part of this upswing soaked up some of the surplus supply that was in the market and now we are under-supplied, because the volume of sales has been too great for the number of listings that have come in.
"Up until October/November 2020 we were still below the 10-year average by about 20pc, now we are about 30pc above the 10-year average on sales volumes - so we've jumped 50 percentage points.
"We haven't seen this volume of increase since the last peak in the market in 2013, which was 7-8 years ago."
Although WA was the outlier of the nation in Perth prices outperforming the region, Mr Cary said that was normal for the State.
"There's almost a three to six month lag between Perth and the regions - so we expect the regional areas to follow Perth, just about six months behind," he said.
It was back in 2014 when regional property prices were at the current level and it's looking like they will reach the peak levels of 2012/13.
After an extended period of the regional market being depressed and over supplied, Mr Cary believed there were three key reasons behind the resurgence of the regional market.
"The way COVID affected people was different - but there might have been some people who had to work from home and then they realised their house was too big or too small, or the pandemic caused some to assess their lives - to say 'what am I doing?', and some thought 'why hold off on selling? Let's get on with our lives'," he said.
"Whatever the reason, they all came to the market and we have had this massive volume lift."
Historically the regional market has been driven by regional industries, such as the Karratha market and has mimicked boom times in the mining industry.
Whereas this boost in regional property values has been driven by lifestyle decisions, Mr Cary said, referring to Collie in particular
"Collie hasn't usually been a popular lifestyle town but now we are finding it hard to get stock because it has been selling so quickly," he said.
"The people who are moving there are seeing relative value for holiday destinations, moving away from the city, or to retire to.
"They are getting a slice of the country for next to nothing in their minds compared to what they are selling a house for in Perth.
"They're buying nice big blocks with a pretty sturdy house for under $300,000 and selling their pretty ordinary house in Perth for $600,000 and moving regional, mortgage free."
According to Mr Cary, first home buyers were also a key demographic in the regions but in different areas to those seeking a sea or tree change, as they have been buying in larger regional centres such as Bunbury, Albany, Geraldton, Narrogin and Merredin.
CoreLogic also reported that owner/occupiers have been the dominant driver in the upswing in borrowing activity in WA.
Owner/occupier loan commitments surged from $1 billion to $2.5b in just three months.
Of owner/occupiers, 39pc have been first home buyers, which is greater than the decade average of 33pc of first home buyers making up owner/occupiers.
The number of investors in the WA market has been on a steady decline since 2016 and now make up just 14pc of borrowers, which is below the 10-year average of 26pc.
Based on a dollar value, investor borrowing activity has started to crawl back to 2016 levels.
Mr Cary attributed the quieter investor activity to the current rental crisis affecting Perth and the regions.
"It has taken this long for that pendulum to swing from a slight over-supply to a slight under-supply and we still continue to be under-supplied with investors so we will continue to have an under-supply problem with rentals for a period of time until more of them come back to the market," he said.
Over the past 12 months to June 1, Perth house rents have increased 16.6pc and units have risen by 14.2pc.
As for what lies ahead, pending that there is no external shock to the market, be it economic, health or geo-political, Mr Cary said the market should continue on a trajectory of growth for at least two years.
"A minimum of two years would be my guess for this growth to continue and it could be sustainable for as long as 7-10 years, but that is crystal ball gazing," he said.
"So at this stage it looks solid for another two years.
"We are also starting to see inflation increase in the marketplace which will drive people to find yield and residential yields are very good and with prices increasing that combination will make it very attractive for investors.
"I think the next wave of interest will come from investors realising that it offers an attractive investment opportunity against other investment opportunities that they could have."
