From The Desk of the CEO - Happy New Year!

Now that 2018 is behind us lets focus on the coming year. We entered last year, and I think for many, thinking it couldn’t be any worse than last year. Sadly I think in many ways we got it wrong and certainly from a real estate sales point of view sales continued to be slow and in many areas we saw declines in pricing. On a positive note, in the second half of the year we saw increased activity in the area of property management where vacancy rates had reduced in many areas and the potentially bottoming of the declines in rent returns. People have to live somewhere so if they’re not buying they need to rent.

The most recent changes in the national market have seen Sydney and Melbourne slow considerably. Sydney seems to do it more of an extreme than Melbourne and many expect that these two capital cities will continue to be slow in 2019. Now in the last fifteen years we have seen the Perth market move quite differently at times to the east coast and we expect it will be doing this again in 2019. The initial indicators are that first home buyer activity has improved slightly and unemployment rates will improve early in the year which will flow eventually through to the economy. Confidence is everything so people will take more risks and make decisions quicker once they feel things are improving. Mining will be part of the confidence and the agricultural sector have had better returns in recent times as well. Tourism could be also an extra one with some of the changes we have seen in terms of direct flights to London and other destinations being added.

The building industry has also been hit badly with over four years of declining building approvals in Western Australia and there is talk of new incentives to help kick start the building industry as we know is a large employer of people and a measurement of confidence. During the past year we have also seen a fair amount of bank bashing as well with APRA overreacting in some areas particularly around the guidelines for interest only loans which now APRA has admitted were too harsh and changed much of its decisions about this type of lending. So we may see the banks more approachable in 2019 than they have been in recent times.

The first three months of 2019 should be a good guide, during the year we will also see a federal election. It does look like there may be an announcement of a surplus for the first time in a number of years before the election but I think the biggest talk will about negative gearing which may slow growth in real estate if tampered with. The opposition do appear to be focused on building more government housing than working with investors but we will see if they do get in power.

2018 was a tough one in Western Australia and let’s hope the potential of improvement does happen in the coming year.

Written by Milton Rendell – CEO, Real Estate Plus Group