The document summarizes the Western Australian residential property market in the third quarter of 2008. Economic growth in WA was supported by the resources industry and population growth, protecting the housing market. However, the Perth housing market showed signs of softening over the last 3 quarters with price reductions and slower investment. The top end of the Perth house market saw the largest drops while more affordable areas experienced growth. Rents across Perth houses and units increased. Regional housing markets varied depending on resource activity, with mining towns showing growth and agricultural areas experiencing declines.

1. Third Quarter 2008
© 2008, CB Richard Ellis, Inc.
www.cbre.com.au/research
Western Australia Residential
Hot Topics
Perth house investment•
market eases
Perth house rents increase•
Regional house market levels•
Perth unit market caters for•
younger buyers and renters
Perth unit rental yields•
trend upward
Regional unit growth far•
from uniform
Economic growth in Western Australia has been
supported by a continuation of the resources
industry growth coupled with a rapidly growing
population. These two factors have largely
protected the state’s housing market from more
significant negative adjustments but over the last
three quarters, price softening and a slowing
of investment activity across Perth’s residential
market has become evident.
This 2008/2009 financial year, Western Australia
is likely to earn more than $30 billion in exports
of iron ore alone – one-sixth of the state’s entire
income. Indeed, these dollars are still increasing
and Western Australia has been booming as
it tries to keep up with the industrialisation in
China and other emerging economies.
The risk of China reducing its demand for
resources is rising however, and if demand
for resources drops significantly, the Western
Australian economy could suffer notably. The
leading indicator of demand continues to be
industrial commodity prices, particularly iron
ore in the case of Western Australia. Over the
September 2008 quarter, commodity prices
started to decline resulting in an easing across
the resource industry.
The Perth residential market has reacted in
varying ways to the current economic slowdown
across the city’s three main pricing tiers over the
September 2008 quarter.
Perth’s top end market ($1.5 million plus)
appeared to be the hardest hit with suburbs
such as City Beach, Churchlands and Daglish
recording decreases in median house prices
of up to 30%, from the previous quarter. This
reduction is a likely response to the share market
collapse, loss of home equity and margin calls.
A combination of these factors have seen an
increase in the number of top end homes listed
for sale, fewer buyers and minimal sales.
Perth’s mortgage belt housing market started
to experience a negative flow on effect during
the September 2008 quarter due to employment
rationalisation reaching middle management.
House price reductions have typically been
widespread across the Perth Metropolitan area
and were generally in the order of 2% over the
September quarter. The next six months is likely to
reveal the full effect of easing employment levels
and its influence on Perth’s mortgage belt.
Perth’s more affordable housing market recorded
over 40% of all sales for the September 2008
quarter, resulting in those areas experiencing
good capital growth of approximately 3% for the
September 2008 quarter. This market activity in
the lower priced tier is likely to continue over the
short term resulting in further easing of Perth’s
overall median house price.
Across other WA areas, demand has also
reduced. A distinct lack of sales over the last
quarter has made defining the true market
values in Mandurah difficult. A number of new
unit developments within Mandurah’s marina
precinct have recently been completed or are
under construction, but their take up rate has
been extremely slow. An oversupply of properties
in and around Mandurah appears to be keeping
investors at bay due to market uncertainty.
The state’s South West Region namely
Bunbury, Busselton and Dunsborough residential
markets have shown a similar trend to Mandurah
with limited demand for vacant land across all
price brackets and an oversupply of established
properties for sale. The South West Regions
recent sales evidence and asking prices indicate
that prices have fallen some 10% to 15% over the
past six to 12 months across most markets.
Market Overview

2. © 2008, CB Richard Ellis, Inc.
Page 2
Perth House Market
In reaction to the current financial and economic uncertainty, Perth house sales fell 5.9%
over the September 2008 quarter. Median house prices have largely stabilised across
the Perth market during the quarter, experiencing growth of just 0.04%. Perth’s median
house price of $505,000 was influenced by 40% of all house sales occurring at the lower
end of the market during the quarter. This resulted in growth for some of the lower priced
suburbs such as Forrestdale, Armadale and Eden Hill, each recording capital growth of
over 3% during the third quarter. It remains to be seen what influence the government-
backed Keystart shared equity scheme and increased First Home Owner Grant will have
on the Perth housing market, as these initiatives are more likely to benefit homes under
the current median price of $505,000.
Perth House Rents and Yields
Over the year to September 2008, house rents increased by $30 per week or 9.4%,
producing a weekly median of $350. The high demand for rental accommodation
and increasing rent has pushed Perth’s average rental yield to 3.6% as at September
2008. With Perth house rents still lower than most other Australian capital cities, rents
should continue to improve in 2009, increasing the average rental yield further. Western
Australia’s rapid population growth and lack of affordability is mainly due to the state’s
temporary residents. According to the Australian Bureau of Statistics, Western Australia’s
requirement for new dwellings is approximately 22,700 per annum and supply currently
appears balanced with demand. When the state’s temporary residents are added to the
mix however, an additional 10,000 dwellings are then required. This explains the state’s
high rental accommodation demand and current dwelling shortage, which are likely to
result in further rent increases in the short term.
WA Regional House Market
The Western Australian regional market covers an enormous area of the state, including the
wheat and mining towns, the ports and coastal resort areas. The September 2008 quarter
revealed little activity in the regional market overall, with a 0.7% increase in capital growth
resulting in a median house price of $406,000. The highest growth has been experienced
in the resource development areas and port towns including Port Hedland, Kalgoorlie and
Coolgardie, which had increases in the September quarter of between 7% and 8% and
annual growth up to 30%. Much of this growth is reliant on continuing resource exports to
Asia. Below average rainfalls in the grain belt regions, however, have hampered farming
activities with some areas in drought and witnessing declines in median prices. This is the
case in Balingup where the median house price has fallen by over 4.5% in the September
2008 quarter. The third quarter recorded further increases in the regional median house
rent to $290 per week. Over the year to September, regional house rents have increased
by 20% producing an average rental yield of 3.86%. Regional areas benefiting from
resource development have average rental yields ranging from 5% to 7%.
$250
$260 $255
$265
$280
$300
$320 $320
$330
$350
$350
M
ar
2006
Jun
2006
Sep
2006
D
ec
2006
M
ar
2007
Jun
2007
Sep
2007
D
ec
2007
M
ar
2008
Jun
2008
Sep
2008
$0
$50
$100
$150
$200
$250
$300
$350
$400
Weekly Median Rent
Perth Median House Rent
Source : Residex/CBRE Research & Consulting (as at Sep 2008)
Sep
1999
Sep
2000
Sep
2001
Sep
2002
Sep
2003
Sep
2004
Sep
2005
Sep
2006
Sep
2007
Sep
2008
0%
5%
10%
15%
20%
25%
30%
35%
(% growth per annum)
House Capital Growth
WA Country House Capital Growth
Source : Residex/CBRE Research & Consulting (as to Sep 2008)
M
ar
2006
Jun
2006
Sep
2006
D
ec
2006
M
ar
2007
Jun
2007
Sep
2007
D
ec
2007
M
ar
2008
Jun
2008
Sep
2008
$200
$250
$300
$350
$400
$450
$500
$550
Median House Price ('000)
0
2
4
6
8
10
12
14
No. of Sales ('000)
Median House Price Number of Sales
Perth Median House Price
and Sales
Source : Residex/CBRE Research & Consulting (as at Sep 2008)
House Market
No. of Sales
(year)
Median Price
(Sept Qtr)
Median Price
(last year)
% Growth
(last year)
Median
Weekly Rent
Rental Yield
(last qtr)
Wembley 105 $1,076,000 4.07% 16.62% $430 2.09%
Watermans Bay 8 $1,664,500 3.75% 18.18% $455 1.43%
Waterford 23 $1,130,000 3.75% 17.85% $460 2.12%
Woodlands 40 $888,500 3.67% 18.22% $400 2.34%
Mount Lawley 95 $1,112,000 3.57% 18.09% $430 2.02%
Applecross 62 $1,732,500 3.50% 15.68% $585 1.77%
Perth Houses 23,221 $505,000 0.04% -1.22% $350 3.62%
Source: Residex
Perth’s Top Performing House Suburbs – September 2008 Quarter

3. © 2008, CB Richard Ellis, Inc.
Page 3
Perth Unit Market
Perth’s median unit price has slowly decreased over the 2008 June and September
quarters. The September quarter fell 1.51% to produce a median unit price of
$387,500. Perth has a small unit market totalling only 21% of all annual dwellings
sold and recorded a drop in sales of 5.2% over the year to September. Perth’s
unit market has typically attracted young buyers and renters in popular inner
suburban and riverside areas. Low maintenance, amenity packed, medium density
apartment developments have been constructed along the Swan River banks as
well as in localities such as Northbridge, Subiaco, Ascot and Belmont, serving in
some cases as an affordable alternative to a house. According to Cordell’s, there
are approximately 2,880 new units proposed within the Perth Local Government
Area over the next five years, with 38% currently under construction. We have
seen over the September 2008 quarter however, an increased number of deferrals
or abandonment’s of unit projects, a possible reaction to the decreased demand
from investors, increased construction costs and tighter lending policies of
financial institutions.
M
ar
2006
Jun
2006
Sep
2006
D
ec
2006
M
ar
2007
Jun
2007
Sep
2007
D
ec
2007
M
ar
2008
Jun
2008
Sep
2008
$100
$150
$200
$250
$300
$350
$400
$450
Median Unit Price ('000)
0
250
500
750
1,000
1,250
1,500
1,750
2,000
No. of Sales
Median Unit Price Number of Sales
Perth Median Unit Price
and Sales
Source : Residex/CBRE Research & Consulting (as to Sep 2008)
Perth Unit Rent and Yield
Over the September 2008 quarter, Perth recorded a $30 per week rise in its
median unit rent to $340. Unit rents have increased by 13.3% over the year in
response to steady demand due to their affordability. As of September 2008,
Perth’s median unit rent was only $10 per week cheaper than the median house
rent, supporting further increases to house rents in the short to medium term.
Perth’s average unit rental yield of 4.58% is trending upward, particularly in
suburbs along the Swan River. Perth has continued to deliver new units to the
market pushing up its vacancy rate to 2.6%, double that of Sydney, Brisbane and
Melbourne. This is likely to result in the city’s current median unit rent flat-lining
in the short term.
$230
$240
$225
$240
$270
$290
$300 $300
$320
$310
$340
M
ar
2006
Jun
2006
Sep
2006
D
ec
2006
M
ar
2007
Jun
2007
Sep
2007
D
ec
2007
M
ar
2008
Jun
2008
Sep
2008
$0
$50
$100
$150
$200
$250
$300
$350
$400
Weekly Median Rent
Perth Median Unit Rent
Source : Residex/CBRE Research & Consulting (as at Sep 2008)
WA Regional Unit Market
The Western Australia regional unit market is small consisting of 272,000
dwellings. The market mainly consists of small rural communities, coastal resorts
and resource development areas. Following a poor June quarter, the September
quarter regained the losses to record capital growth of 3.95%. The median unit
price of $329,000 was the second highest of all country markets across Australia,
but due to the great divergence of markets, there is a wide range of prices and
growth. Growth was recorded in the mining and port towns of Port Hedland (up
7.01%), Broome (5.08%) and Boulder (5.47%), whereas units in Albany (0.67%)
and Bunbury (0.77%) stabilised over the September quarter. An increase of $20
per week over the September 2008 quarter resulted in a regional median unit
rent of $280 per week. The rental yield increased over the quarter to sit at 4.4%.
Due to the small size of Western Australia’s regional unit market, investors should
take care in assessing local conditions and rural outposts before coming to an
investment decision.
Sep
1999
Sep
2000
Sep
2001
Sep
2002
Sep
2003
Sep
2004
Sep
2005
Sep
2006
Sep
2007
Sep
2008
0%
5%
10%
15%
20%
25%
(% growth per annum)
Unit Capital Growth
WA Country Unit Capital Growth
Source : Residex/CBRE Research & Consulting (as to Sep 2008)
Unit Market
No. of Sales
(year)
Median Price
(Sept Qtr)
Median Price
(last year)
% Growth
(last year)
Median
Weekly Rent
Rental Yield
(last qtr)
Lathlain 13 $463,000 3.09% 16.71% $275 3.10%
Trigg 10 $546,000 2.91% 15.26% $335 3.18%
Clarkson 13 $349,500 2.85% 10.68% $280 4.20%
Beaconsfield 10 $439,000 2.82% 15.50% $310 3.69%
Jolimont 11 $293,000 2.69% 14.66% $245 4.40%
Ocean Reef 10 $425,000 2.62% 8.75% $335 4.08%
Perth Units 6,358 $387,500 -1.51% 0.18% $340 4.58%
Source: Residex
ThirdQuarter2008WesternAustraliaResidential
Perth’s Top Performing Unit Suburbs - September 2008 Quarter

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Western Australia Residential
Were it not for its resource powered economic
growth, Western Australia’s residential market
may have experienced greater declines in
median house and unit prices and demand. Even
though the resources industry is starting to show
signs of easing, Perth average house prices are
not anticipated to fall significantly over the next
six months, instead a continuation of the current
minor corrections are expected.
The Perth unit market over the next six months is
predicted to see a distinct slowing in activity. This
has resulted in some proposed developments
being deferred or abandoned. Perth’s unit
market expanded quickly over the last few years,
saturating the market with a new quality product
replacing some of the older style units in and
around the city.
Sales activity in the top end of Perth’s housing
market is anticipated to continue to falter in the
upcoming year, as global factors impact further,
the stock market remains volatile, and serviceability
of lending commitments is reduced.
The next six months could find Perth’s mortgage
belt seeing an increase in the number of homes
on the market and lengthening selling periods,
which in turn is likely to decrease sales prices as
some home owners become desperate to sell.
This market activity is in part due to continued
employment rationalisation.
Perth’s lower priced stock in the residential
market is anticipated to see an increase in sales
over the next six months, however prices are likely
to stabilise rather than improve. A combination
of Stamp Duty relief, the increased First Home
Buyers Grant and more affordable housing is
expected to encourage this forecast sales activity.
We are likely to see an increase in land sales
priced in the sub-$250,000 range with adjusted
pricing attracting first homebuyers. Areas such as
Forestdale, Ellenbrook and Aveley are more likely
to benefit from this increased market activity with
ample stock available for immediate sale.
Looking at other WA residential markets,
Mandurah over the next six months may see a
slight increase in sales activity in its lower priced
new house and land packages. With a current
oversupply of stock on the market, some buyers
may take advantage of the already adjusted
pricing and government subsidies. Mandurah’s
mortgage belt is set to see a levelling of price
growth with many homeowners keeping spending
to a minimum given the employment uncertainty
and proposed economic easing forecast to
continue. The unit market in Mandurah has a
number of new unit developments starting to
settle and given the decrease in price growth,
many may have to sell their units for a significant
loss.
The state’s South West Region residential
market is not likely to see the traditional holiday
market upswing prompted by the Christmas
season, as purchasers are scarce and the number
of properties on the market has doubled over
the past few months. A number of wealthy Perth
residents who bought holiday homes in this South
West region are now looking to minimise their
risk by removing secondary investment properties
from their portfolios, hence the increased number
of ‘For Sale’ signs.
Western Australia’s residential market over the
next six months is likely to rely heavily on the
buoyancy of its resources industry and population
growth. If China retains its current acquisition
levels, retrenchments are kept to a minimum
and population growth continues, the state’s
residential market could avoid further significant
price easing and market downturn.
Please note that the statistics contained
within this report are obtained from
Residex unless otherwise stated.
Market Outlook Local Offices
perth
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House
216 St George’s
Terrace
Perth WA 6000
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MarketView, please contact:
Toni McKnight
Senior Manager, Residential
CB Richard Ellis (C) Pty Ltd
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Level 33, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
T 61 7 3833 9773
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toni.mcknight@cbre.com.au
Michael Veletta
Director Residential Valuations WA
CB Richard Ellis - Residential Valuations
Level 6, 12 St Georges Terrace
Perth, WA 6000
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mandurah
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Mandurah WA 6000
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