Western Australia's property market continues to defy the national trend. While property values are falling across many capital cities and regional areas, WA is still surging. In Perth, property values rose 23.9% in the year to June, according to research firm Cotality, while Melbourne and Sydney recorded declines during the same period.
For the latest edition of Australian Broker's Spotlight Series, where we highlight standout professionals across Australia's mortgage and finance industry, we caught up again with Amol Agrawal, founder and finance broker at Juice Finance. Based in Bunbury, in WA’s southwest, Agrawal offers a broker’s perspective from the heart of one of the country’s strongest property markets.
Agrawal discusses what sets WA apart, what brokers need to know when working in the market, and the challenges they face. He also weighs in on whether it’s too late to enter the WA market and how brokers and borrowers can navigate increasingly volatile conditions and shifting market dynamics.
The following interview has been edited for grammar and clarity.
AA: National and even Perth-based property statistics don't always tell the full story of regional WA. Since COVID-19, growth across Bunbury and the southwest has been extraordinary. Many properties and pockets have more than doubled in value, and some have easily tripled. It hasn't just been Bunbury either. Areas 15, 20 or 30 minutes out — such as Boyanup, Brunswick Junction and Dardanup, and further out towards Harvey and Collie — have seen values skyrocket as well. That creates a real challenge for first-time homebuyers.
A good example is the 5% deposit scheme, formally known as the Home Guarantee Scheme, where eligible buyers can purchase without paying lenders mortgage insurance (LMI). For much of regional WA, including the southwest, the property price cap is $600,000, compared with a higher limit in Perth. The problem is that it is becoming incredibly difficult to find a suitable family home for under $600,000 in many of these areas. Even an average three-bedroom home, villa or unit in a number of Bunbury pockets can now be around or above that level. So, while the government scheme is available and the no-LMI benefit is fantastic, the $600,000 property cap can make it very difficult for first-time homebuyers here to use it.
One positive has been the recent WA stamp duty changes, with the increased first-time homebuyer concessions and no stamp duty at eligible price points, providing some genuine assistance. Regional WA has experienced enormous growth in a relatively short period, and I don't think the national numbers always capture just how dramatically affordability has changed on the ground in places like Bunbury and the southwest.
AA: As a finance broker, my role is really within the lending and finance realm, so I don't tell clients whether now the right or wrong time is to buy property. What I can talk about is what I'm seeing from a finance and affordability perspective, and the challenges are very different depending on the type of buyer.
For first-time homebuyers, it has become significantly more challenging, because prices have moved so quickly. Deposit requirements, borrowing capacity and simply finding a suitable property within budget are much bigger hurdles than they were a few years ago. For people who are selling and upgrading, the challenge can be a little different because they are generally buying and selling in the same market. If their existing property has increased in value, they may also be carrying that increased equity into their next purchase. For people who bought 12 to 18 months ago, or earlier, the growth I've seen can also create opportunities if they're looking to sell, upgrade or move on, because they may now be sitting on considerably more equity than when they purchased.
For investors, higher property prices have made the numbers much tighter. At one stage after COVID, rents were increasing extremely quickly and rental yields remained very attractive. Over time, property prices have caught up significantly. Looking across roughly the past six years, rental yields have now returned to much more conservative levels, and from what I'm seeing, it's very rare to see yields above 5% now, depending of course on the property and location.
So yes, there are challenges for every type of buyer, just in different ways. I have a few long-term clients who often say to me, 'the best time to buy real estate is now. If you can buy it, then buy it.' I always find that an interesting perspective. Of course, my role isn't to tell someone when to buy, but to help them understand whether they can buy, what they can comfortably afford and what the finance looks like if they choose to proceed.
AA: All these factors contribute to volatility and, more importantly, consumer confidence. Rate hikes have always dented confidence, whether you're talking about investors, existing homeowners or people trying to enter the market. The budget has definitely had an impact as well. Changes around negative gearing for established property purchases have affected borrowing capacity for most investors, and when you combine that with higher rates, inflation and general uncertainty, people naturally become more cautious. I think a lot of people simply got cold feet. There was a lot happening at once. As people become accustomed to the new environment, we may start to see confidence return, but it's still very early.
My advice in tougher times is actually pretty simple: if you have to Pay in 4 for it, it's probably not for you, unless, of course, it's a necessity. It goes back to the old needs versus wants conversation. Ask yourself: Do I need it? Or do I want it? When things are uncertain, focusing a little more on the needs and a little less on the wants can make a significant difference. That applies equally to existing homeowners and would-be buyers. For an existing homeowner, it can help maintain a healthy repayment history and create some breathing room in the household budget. For someone preparing to buy, it can help continue building savings, demonstrate good credit conduct and put them in a stronger position when they're ready.
From the lending side, this is also where having access to one of the largest lender panels in Australia becomes extremely valuable. Different lenders can assess the same client very differently, whether that's their assessment buffers, how they treat different types of income, rental income, existing commitments or other aspects of servicing. My role is to research those differences and find the right lender match for that particular client's goals, objectives and circumstances, rather than trying to make the client fit a particular lender. Volatile conditions don't necessarily mean there aren't options. They just mean research, good financial habits and getting the lending strategy right become even more important.
