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Why buyers need to be cautious about Perth

Perth has been the shining property star for the past year or two without a doubt.

We started buying quality real estate assets for our clients in the Western Australian capital quite some time ago, which means those properties have ridden the capital growth uplift over that time.

But there is something unsettling happening in Perth at the moment that makes me very nervous indeed.

You see, there are buyers over there purchasing inferior properties at ridiculous prices.

There are even supposed buyers’ advocates paying through the nose for seriously warty properties.

The current buying frenzy means someone is likely to overpay for a half-renovated cowshed on a main road, next to a service station, with a bus stop out front in Perth at present.

Perth on the turn?

There are a number of valid reasons why Perth has been experiencing such significant price growth, including its affordability, strong local economy, as well as attractive yields for investors.

But all good things do come to an end, and I believe that’s becoming the situation over there.

And, according to Terry Ryder from Hotspotting, Perth may have finished last year as the best capital city price growth performer, but its market momentum has started to turn lacklustre.  

“The WA capital has been our strongest market for the past year and a growth market for longer, but this survey finds the first signs of slowdown,” Mr Ryder said at the tail-end of last year.

“Three months ago, some 79 per cent of suburbs had momentum in Perth, but now only 54 per cent do, following a jump in plateau markets, which are those that are no longer rising and starting to taper off.

“Perth has lost its position as a national growth leader according to our research — although it will take time before it shows up in the price data.”

So it’s not just me suggesting buyers adopt a more cautious approach in Perth this year — even though this viewpoint may be unpopular.

Tread carefully

One of the major problems with Perth is the quality of properties coming on to the market.

What I mean is that they’re often terrible. So, bad in fact that we’d be lucky to investigate one in 15 properties that comes on to the market.

This is often the case when markets are at, or past, their peaks, because owners of underwhelming properties decide the time is nigh for them to offload their C- or D-grade dwellings to the highest bidder.

And, alas, that strategy often bags an unsuspecting buyer who has come late to that particular party and has no clue whatsoever that have missed both the capital growth boat and are about to buy a real estate lemon.

I’ve seen it in action over recent times in Perth, where some people are buying at any cost, and will likely pay the financial consequences for it down the road. 

This even more of a serious issue in Perth because the majority of buyers are from interstate meaning they often don’t know anything about the local market whatsoever.

They don’t know which are the superior or inferior locations, down to street level, so they take a stab in the dark and hope in vain for the best.

Unfortunately, this is also the “strategy” for a bunch of supposed buyers’ advocates who are chasing volume and not repeat business and clearly don’t give a toss where or what they buy for their clients. 

So, my advice to prospective property buyers this year, is to consider whether Perth is still the go-to location around the nation to park your hard-earned money this year… or whether there are other areas that are offering better prospects that no one else knows about yet.  

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