Falling Stock Levels

 In Investing

The market has taken an interesting turn. Over the last 3 months the stock levels have dropped 12% from 14,600 to 12,900. The last time we saw them this low was November 2014. A continuation of this would be welcome news indeed!

I talk about supply and demand all the time because it is the fundamental principal that drives price growth. However, we need to look a little more deeply into why this drop has occurred.

Speak to any real estate agent right now and they’ll probably tell you they are struggling for listings. This is because prices have comedown so much over the last 2.5 years that most owners just can’t afford the capital loss if they sold now. West Perth prices are down a whopping 15 – 25% since the highs of the 2013/14 financial year and most people have experienced zero or negative growth since 2007. Sales evidence shows we are now at 2005/06 price levels. With prices so low many owners are electing to wait until things improve, hence the drop in stock.

I definitely think we are at the bottom of the market but I still maintain my opinion that it will take a few years for it to genuinely improve. The rental vacancy rate has continued to rise and last week hit an unprecedented 7.6%. This is obviously not ideal for a suburb such as West Perth where 60 – 70% of all properties are rentals. The influx of new apartments will continue to put pressure on this key indicator. The rental vacancy rate has risen every quarter for the last 6 years and only when we see this trend reverse along with a continued tightening of supply, will we see genuine price growth in West Perth. I must say though, it’s fantastic to finally see some light at the end of the tunnel!

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