There are signs that the long-awaiting second mining boom is starting to make its mark in Perth
There’s been plenty of speculation in Perth property investment circles as to when the wealth from the state’s second mining boom will finally start to trickle down to the state capital’s property market, and it looks like there are now some early signs that Perth’s comeback is on the way.
Momentum Wealth managing director Damian Collins doesn’t expect capital growth to ramp up this year, but he’s very confident that the city of lights’ time will come over the next couple of years.
“It’s still quiet in Perth, but certainly 2012 and 2013 are looking pretty strong,” he says. “We’ve been flat for the last three or four years, while Melbourne and Sydney have done quite well. But certainly with the mining going on, 2012 and 2013 are looking good.”
Helping to fuel this bold prediction is a marked increase in the number of relocation consultants that have been knocking on Collins’ door to ask for assistance with finding suitable properties for mining executives.
“We’ve been getting a lot of calls from relocation consultants which we didn’t see six or even three months ago,” he explains. “Even in the last month we’ve leased four properties at around the $1,000 mark – all to mining executives.”
He goes on to add that, while all this mining-related activity is still in its early stages, the resources giants will eventually have to ramp up the recruitment of interstate and overseas workers to fill the new job vacancies that are being created.
“And 90% of them are based out of Perth where they fly in and fly out to the northern regions,” he says.
While property prices aren’t expected to make their comeback this year, the city’s rental market is showing signs of strengthening. Collins points out that his company’s property management arm has started to receive offers above asking rent from tenants who are keen to secure a place to live.
He warns, however, that the city’s oversupply of properties for sale will see some of those listed properties being returned to the rental market, and this will put a cap on rental growth.
“It’s going to take another six months at least, maybe even nine months, to mop up the excess stock for sale, so rents aren’t going to see runaway growth in the next six to nine months,” he says.
Confidence slowly returning
RP Data senior research analyst Cameron Kusher adds that there are a couple of early signs that the Perth market may be setting itself up for a renaissance.
“We are starting to see a little bit of improvement in the vendor discount levels,” he says.
“And time on the market has come back a little bit, so maybe some of these mining projects ramping up in Western Australia may be bringing a bit of confidence back to the market.”
He agrees with Collins that capital growth figures should start to see positive figures next year, if not late this year.
“I do think we’re nearing the end of the value falls in Perth,” he says, adding the caveat that the city’s going to see a slow and steady recovery rather than a sudden price spike.
And while it’s still a buyer’s market out there, Otan managing director Mark Butler points out that mid-priced properties in some of the city’s most desirable areas are starting to see an increase in competition amongst buyers.
“In Subiaco and those sorts of inner areas, you’re still seeing apartment projects selling out very quickly. We’ve got an apartment building in Subiaco where we’ve got 750 expressions of interest for 90 apartments,” he says.
“That’s down to the price range – they’re averaging $600,000 – and also the area. Subiaco’s like the South Yarra of Perth. It’s groovy, it’s trendy, it’s got trains, coffee shops and restaurants. So if you’ve got the right recipe, there seems to be very strong demand.”
This is a view shared by Collins, who pegs properties in the $350,000– $600,000 range in the popular cafe-centric districts as the most balanced markets. Popular areas with his clients include Victoria Park, Carlisle, Yokine and Dianella.
“We’re buying about 18–20 properties a month for our clients at the moment,” he says. “We’re still finding that it’s a buyer’s market overall, and even in those areas we’re getting some good properties at good prices, but the outer areas are significantly oversupplied.”
Can you afford to buy in this suburb? Find out how much you can borrow