For those who don't know Perth, Greg Rossen is one of the leading agents over here, and the development he is talking about is about as blue chip as it gets. In the article, he suggests Perth may fall 18% by Sept next year.
www.postnewspapers.com.au Some buyers who committed to pay by next month for luxury apartments in the Steve's Hotel development on the Nedlands riverfront have struck trouble.
Seventeen apartments in the twin blocks have been advertised for sale over the past 12 months for up to $3.6 million, but none has sold.
Others have been offered for lease for between $1000 and $3000 a week, but there have been few takers.
Some of Perth's best known footballers, business, media people and staff members of the developer Multiplex joined in a buying frenzy in 2006 to put up 10% deposits to buy apartments off the plan.
Eagles footballers were attracted to the project by the presence of a partner in the development, Steve's Hotel owner and Eagles' board member Murray McHenry.
His hotel is now being converted to apartments, and more apartments and a small bar are being built next door.
Steve's had been the Eagles' pub since the team's formation in the 1980s.
Buyers of new apartments in front of the hotel paid a non-refundable 10% deposit and contracted to pay the balance when building was finished.
They did not own the apartments but had the right to trade them until the day of reckoning, June 11, when settlements are scheduled.
Before then, buyers could on-sell their units in much the same way as a futures contract is traded on equity markets.
If the property value rises 10%, purchasers make a 100% profit on their deposits.
But if values drop, the process reverses.
Building is now almost complete. It is expected that on June 11 all buyers will be requested to stump up an average of $2.45 million in the highest interest rate market for 13 years.
In one remarkable 36-hour period in July 2006, 37 apartments were contracted to sell for a total of $96.2 million.
It is believed that during the selling frenzy, demand lifted prices as supply dwindled.
Some of the rear apartments, with no river view, went for $2.5 million.
Prices ranged from $1.9 million to $4.6 million for properties nearest the river. The average penthouse price was $4.3 million. Broadway rentals manager Peta Buchanan, of Rossen Real Estate, said the enquiry rate from owners wanting to rent their apartments in the complex had increased in recent months.
She said her company had listed numerous units in the group for lease on behalf of owners not intending to live in them.
Agency principal Greg Rossen said rentals being sought were between $1000 and $3000 per week.
"There is only a thin volume of well-heeled tenants with corporate support," he said.
"High supply of units may cause a moderation in the rents that are achieved.
"We believe there are at least 21 of the units potentially for re-sale.
"It appears many units were bought for short-term speculative gains.
"If there is now an over-supply, owners must be prepared for competition between sellers.
"If this happens, they may either break even or lose money."
Mr Rossen said prices paid during selling seminars in 2006 had clearly taken into account future growth in prices of the units then under construction.
He said median prices in Perth began to drop in February this year and declined 2.7% in the March quarter.
Since December 1996 the Perth market had shown an unprecedented rise of 364%.
"That is a freak increase in property prices. It has never happened before and it never will again," Mr Rossen said.
"It was caused by a global tsunami of cheap liquidity exported from America.
"That supply has now dried up. American and UK house prices are in a significant downward trend with some economists predicting grim scenarios.
"With the change will come inflation and higher interest rates."
The property boom has left Perth with some of the least affordable housing in the world.
Mr Rossen said that in the slump of the 1980s he had been involved in finding buyers in the distress sales of apartments bought off the plan at 22 The Avenue, Nedlands, and in the Mayfair apartments in Crawley.
"In one case an over-committed purchaser had to sign a lien on his Ford LTD car," he said.
"The corrective phase of the real estate market historically averages 18-22 months before the bottom is found.
"The upswing and regaining of the previous high can take up to a further five years.
"If the downturn averages 20 months and assuming that the correction started in January 2008 prices will continue falling until September 2009.
"If prices continue to drop at .9% a month we are looking at a reduction in prices of 18% by September next year."
He said the average number of houses on the market in Perth was 12,000. It dipped to 4800 in May 2006, but was now 17,600 and over 20,000 if you took into account Mandurah properties.
"The turnaround in such a short time is staggering," he said.
In 1990 and 1991 there were 20,000 houses on the market.
"On the credit side, WA is in the box-seat and is benefitting hugely from the demand by China and India for raw materials," Mr Rossen said.
He said WA's population was increasing by 1000 people a week.
"That does not mean they need 1000 houses a week," he said.
"New babies don't need houses of their own. A family of four, five or six settling here needs only one house.
"And it is ludicrous to say we have a land shortage. If you looked on Perth from outer space and said there was not enough land, you would be called crazy."
He said the most urgent need was for the government to provide much more affordable housing by releasing cheap land.
Additionally, the excellent initiatives of Planning Minister Alannah MacTiernan in increasing residential density in inner city suburbs would assist, he said.
