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Is the new financial year a time for optimism? 15/07/2017

With the new financial year upon us, it is timely to consider what is in-store in the year ahead for the Western Australian economy and our individual financial and investment circumstances.

With the new financial year upon us, it is timely to consider what is in-store in the year ahead for the Western Australian economy and our individual financial and investment circumstances.

In terms of the property market, it is always beneficial to have some insight into where the market might be heading in the next 12 months, particularly if you are a homeowner, property investor or thinking about entering the market. While we have not seen a significant improvement in conditions since I last addressed the state of the market, there is room for careful optimism as property prices stabilise and even show minor movement in the right direction.

Figures recently released by CoreLogic represent a modest increase in Perth house values over the month of June 2017, with their Home Values Index recording a 1.4 per cent rise.

There was also a 0.7 per cent increase in apartment values, which is particularly encouraging for that sector of the market. While these figures are conservative, this is the biggest rise in values recorded in over 12 months.

Looking toward the future and considering if we are in for further improvements, one of the most significant influencers on housing values is buyer demand.

Buyer demand is fed by a range of factors; however, population growth is a primary indicator.

Recent census data showed Perth’s population had continued to grow, albeit at a slower pace than pre-mining downturn. Our population is at 2.47 million, which is 10.5 per cent higher than in 2011.

Along with population growth, the strength of the WA economy is another factor influencing consumer confidence and in turn buyer demand.

Looking at the positive economic indicators, unemployment is in a declining trend, now down to 5.5 per cent following the peak of 6.5 per cent in January 2017.

Along with improving employment rates, the Department of State Development is forecasting slow but improved growth in Gross State Product in 2017/18, heading toward 2.5 to three per cent following 2016/17 growth of 0.5 per cent.

Interest rates also continue to remain at record lows, providing accommodative lending conditions for owner-occupier buyers with stable income.

Overall, these indicators paint a conservative outlook for 2017/18, with a move toward stabilisation in the broader economy and slow positive growth.

These conditions will have a flow-on effect to buyer demand in the property market later this year.

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