As one of the premier home builders in Perth, the team at RedInk Homes are always monitoring market conditions regarding houses for sale in WA. We make a point of staying up to date on current incentive programmes, government grants and subsidies. And we can say with confidence that now is the time to build your own home in Western Australia. Read on for an in-depth look at why we think this is the case.
Interest Rates Are Currently at Record Lows
Last August, the Reserve Bank cut the official interest rate to 1.5 percent. This came on the heels of weak consumer price data, which was released earlier in the year. This rate cut was part of an effort to bolster the Australian economy and stoke price growth across several markets, including the housing market.
This measure had an almost immediate positive effect on the economy. The Australian dollar recovered half a cent on news of the rate cut, and investors seemed satisfied that this was the right move to make. Banks have also responded, passing on about half of this rate cut to borrowers.
Given the current low rate, this is an excellent time to secure a mortgage and start on a new build in Perth. Some economists say there may be further cuts in the future, but it’s worth noting that the rates don’t have much further to drop. And as the economy responds to this stimulus, there is a good chance that prices will begin to rise. That is, after all, the ultimate goal of this measure.
Buyers who lock in on these low interest rates will enjoy building a house in Perth in one of the most buyer-friendly markets in recent memory. But it’s worth acting now before interest rates begin to rise again.
Perth Home Prices Are the Lowest they’ve Been in More than a Decade
Whilst other capital cities are experiencing uncomfortable growth in housing prices, Perth is taking a different trajectory. In fact, housing prices in Perth are the lowest they’ve been in well over a decade. Combined with the aforementioned interest rate cut, buyers undertaking new builds in Perth are set to enjoy undeniably favourable finance conditions.
Another way of framing this: In 2016, the cost of servicing a mortgage dropped by $200 per month. That’s a dramatic decrease, to say the least, and many prospective homeowners are taking this as a cue that it’s time to cash in on the current market conditions and break ground. And these price cuts are not limited to Perth. You’ll also find housing prices following the same trend outside of the metro area and in the surrounding region.
But prices are unlikely to stay this low for long. Anyone thinking of building a home in or around Perth in the near future has an excellent opportunity to do so right now. Decreases in home prices and record-low interest rates mean that your monthly mortgage repayment could be significantly lower than expected.
The WA Government Has Increased the Grant Provided to First-Time Homeowners
Given these favourable market conditions, it was announced late last year that Perth was officially the most affordable capital city rental market in Australia. This announcement was based on an analysis and report published by CoreLogic, and it reaffirmed what the team at RedInk Homes already knew: now is the time to look for houses for sale in Perth.
And as if all of this news wasn’t exciting enough, the WA State Government took an additional measure to sweeten the deal for new home buyers. As of 1 January, they have boosted the First Home Owner Grant (FHOG) from $10,000 to $15,000. The FHOG is available for properties valued at up to $750,000.
Premier Colin Barnett said the FHOG increase was intended to help first-time homebuyers enter the market more easily. “We are conscious about housing affordability, and this boost will provide more families an opportunity to get into the housing market,” he said.
Homebuilders Are Trying to Secure New Business with Attractive Buyer Incentives
The housing market in Western Australia is coming off of a record high. From 2014 to 2015, ground broke on upwards of 31,000 homes. This figure fell to 25,000 homes the following year, before slipping to 21,000 last year.
Drops in housing stats are to be expected given the fact that the WA economy is normalising after extraordinary highs. However, these homebuilding figures are out of pace with other market normalisation figures. A previous surge in demand meant that there was plenty of business to go around for homebuilders. As demand normalises, builders increasingly find themselves in competition with one another.
In other words, homebuilders in WA are faced with a predicament: Find a way to remain relevant in a buyer’s market, or prepare to shut the business’ doors.
But one industry’s turmoil is another consumer’s windfall. All of this competition has spurred the more competitive WA homebuilders into action. Many are expected to offer substantial buyer incentives. The price of a new build will probably remain the same, since – as previously mentioned – housing prices are already extremely low. Instead of discounts, builders are likely to respond by offering special design features, high-end finishing, bundled appliance packages and more.
This is great news for anyone considering building a house in Perth right now. For the price of standard construction, they could end up with a wide range of extra premium features.
The Property Market Cycle Says Now Is the Time to Buy
As with many aspects of the economy, the housing market moves in cycles. It takes years to complete each cycle, and economists are able to leverage what they understand about how this cycle moves in order to predict what will happen next. Whilst there’s no guaranteeing when each subsequent phase of the cycle is going to begin, analysts can say with relative certainty what to expect in the coming months.
These are the four overall stages that the property market moves through:
- Property Boom: This phase begins as property valuations rise. There’s generally a shortage of tradespersons, and you’ll hear plenty of media hype regarding demand for new houses outstripping the supply.
- Market Slowdown: As property prices continue to rise, landlords suffer from lower overall rental yields. This pushes rents up and leads to an affordability crisis and an ultimate oversupply in stock.
- Market Slump: Given the oversupply of houses, there is suddenly an abundance of builders and tradespeople looking for work. This drives prices down and leaves us with a market with far more sellers than buyers. Overall confidence in the property market declines.
- Market Recovery: In the recovery phase, rental rates gradually increase, as less housing stock is available. Stock levels continue to tighten up, and properties and valuations both begin to rise. This leads into the boom phase, and the cycle continues.
In Perth, we’re currently experiencing the ‘Market Slump’ portion of this cycle. However, it appears that the market is approaching the tipping point, when it will transition into recovery and ultimately head for the next boom.
Investors are acutely aware of this housing market cycle, and they plan their investments accordingly. In the broadest sense, there’s no better time to buy than when the cycle is about to tick over from a slump into recovery – and that’s precisely where we are right now.
Keystart Home Loan Criteria Have Become More Accessible
Keystart Home Loans are low-deposit loans that require no lenders’ mortgage insurance. They have been designed to make it easier for Western Australians to buy their own home. And as of late December 2016, the income limits imposed on these loans have been increased by $20,000.
Colin Barnett commented on the increase of Keystart Home Loan limits: “The tight lending policies by the finance sector have left a number of West Australians unable to get a loan because they don’t earn enough or, on the other hand, they earned too much to qualify for a Keystart loan.”
These broader criteria are set to make home ownership more accessible to many more singles, couples and families in WA – yet another reason to consider building a home in Perth now.
Now Is the Time to Build a New Home in Perth
As you can see, this is an outstanding time to purchase a home in Western Australia – and particularly in Perth. And while the incentives and advantages outlined above apply to a wide range of property and land for sale in Perth, we believe that this is a particularly good time to consider building a home from the ground up.
When you build a new home with RedInk, you enjoy total control over every detail of your home’s construction. We allow buyers to make changes to any of our standard plans, to the extent that the final property we build for you is tailor-made to suit your preferences. We can also help you find the ideal lot on which to build your home. In short: we work hard to turn your dream home into a reality.
Now is the time to build a home in WA. If you’re ready to take the next step, browse our selection of homes online. And don’t hesitate to contact us should you have any questions about how our homebuilding process works.