Another boom in the offing?
WA looks set to launch yet another industry boom, with property development poised to take the baton from what was once a dominating resources sector
Last month we spoke about the possibility that WA was tipped to become one of the country’s leaders in property development. Since then industry speak has added fuel to the fire with further predictions that our western state is set to ignite the market for property development in Australia.
According to economic forecasters BIS Shrapnel, approvals for new dwelling developments have increased exponentially of late, breaking records across the state.
BIS Shrapnel associate director Kim Hawtrey says total dwelling commencements in WA have surged by 38% over the past 12 months to reach 25,600. The multi-residential sector has posted the strongest growth (49%) while detached houses have also increased (35%), reaching almost 20,100 commencements.
“Urban renewal projects in inner Perth
provided a sizeable boost to high-density starts and will continue to feed the pipeline over the forecast period. Strong growth is also being experienced in the medium-density sector,” Hawtrey explains.
Regarding potential development boom areas, Hawtrey names Bunbury, Esperance, Albany, Mandurah, the Goldfields and the Wheatfields as areas that would benefit most from residential development.
“Western Australia is already exhibiting a sizeable housing stock deficiency which will maintain pressure in the property market and promote new residential building activity,” he says.
“As prices rise in Perth, the natural effect is for buyers to look beyond the main metropolitan area for housing that is more affordable.
“This will drive development in places such as Bunbury, Esperance, Albany, Mandurah and Wheatfields regions. Activity will spill over from Perth into these surrounding regions. Improved transport links to these areas will also contribute to growth.”
He says the Goldfields will also experience a rise in value because they are coming off a very low base, post-GFC.
“In Goldfields, although work is expected to wind up on the Super Pit and Tropicana mines in 2014, two other gold mine projects are set to commence and these will continue to support demand for housing.”
According to Hawtrey, the demand for new dwellings is being driven by two factors: high population growth and strong investor demand.
“Australia’s population growth rate is running at a vibrant 1.8%, which is amongst the highest in the advanced industrialised world,” he explains.
“This reflects a pick-up in net overseas migration flows attracted by Australia’s mining boom and stable economy. After averaging an impressive 200,000 persons per annum from 2009 to 2012, net overseas migration picked up even further to 244,400 persons in 2013. This historically strong pace is creating a housing stock shortfall and supply is responding.”
Ripe for another boom
Real Estate Institute of WA spokesman Joe White also agrees the state is set for another boom on the back of skilled labour and efficient industry, so long as government does not get in the way of land supply.
“WA deserves to be a boom state because we have taken risks and deserve it,” he says.
“The fundamentals of the Western Australian economy are built on efficient mining, efficient agriculture and efficient industrial development, rather than on subsidised mendicant, and boom economies need skilled personnel. If you don’t encourage it at all levels, the price of these personnel will rise to a point where wage costs make us inefficient and we cease to become an attractive place to invest money into.
“Housing costs are part of the same efficiency equation; government needs to encourage, not discourage, land supply or we will kill the goose which laid the golden egg.”
With the WA property cycle now at one minute past midnight, White believes the focus needs be on ensuring land supply is available to developers.
“Our greatest threat is becoming a victim of our own success because we continue to stuff up and frustrate land supply as we did in Karratha and are now doing in Onslow,” he explains.
“On one hand we encourage people to come, and on the other, the inability of government to get out of the way of land developers is doing everything it can to drive them back home.”
SUBURB TO WATCH
Created as a planned community, Ellenbrook is made up of numerous housing burrows referred to as villages. The area’s first home was constructed in 1995 and subsequent villages include the Bridges, Coolamon, Morgan Fields, Charlotte’s Vineyard, Malvern Springs, Lexia, and Ellenbrook Town Centre.
Located to the northeast, Ellenbrook is about 21km from the Perth CBD and has established transport links, including train and bus networks.
The appeal of the area is its community feel and infrastructure aimed at attracting young families. With 12 schools nearby and a host of parks, sporting facilities and natural green spaces, Ellenbrook is quickly becoming home to a growing number of families.
In fact, the area was recently named the fastest-growing residential area in the state, with predictions that the population will double by 2036 to 64,000.
As the population grows, so too will infrastructure in this self-sustaining community, driving the local economy and demand for further housing.
Local agents report a strong mix of buyers over the past 12 months, including first home buyers, trade-up buyers and investors.
‘‘We are still seeing predominantly first home buyers at about 50%; however, the trade-up market has also been active in the past six months with our premium stock in The Vines (Reserve, Woburn Park and Equis Lake) selling fast and far exceeding budget expectations at around 15–20% of sales. The remaining sales have been to investors.”
According to RP Data, the median price of a four-bedroom family home is $430,000, with a gross rental yield of 5%. Average time on the market is 54 days, with 12% growth each year during the past 10 years.