Perth price drops promote growth prospects
The WA property market continues to suffer from a lack of consumer confidence as the economy grapples with the slowing mining industry
It’s a tough time for Western Australians, as locals are not hopeful about the state’s growth potential in any sector.
“The government’s inaction to introduce meaningful reform, including the urgent introduction of strata title reform, fairer property taxes and better provisioning of infrastructure like public transport to support urban infill and keep Western Australia growing, has driven down confidence,” says Lino Iacomella, executive director of Property Council WA.
“In the Western Australia marketplace, the key factors impacting the industry include high rates of office vacancies, reduced demand for industrial property aligned to the resources sector, and a slowing rate of population growth, which is shaving demand for housing.”
Homes are selling more slowly and at greater discounts, even as the number of listings goes up.
New growth potential
Although the outlook for WA’s growth is bleak, Ken Morrison, chief executive of the Property Council of Australia, says expectations of eventual property market growth are improving.
“Perth’s property market has moderated over the last year or two, [but] it’s encouraging for homeowners that there are pockets throughout the metro area that have performed well and enjoyed positive price growth in more complex market conditions,” says Hayden Groves, president of REIWA.
“High-growth suburbs are all within the trade-up sector, rather than first home buyer territory. This shows that more homeowners are recognising there is plenty of opportunity in the current real estate market to take their next step.”
In Perth, the decline in median home prices from $550,000 in the last year to the current value of $530,000 has actually gifted some suburbs with new capital growth potential. Coveted suburbs have now fallen within reach, and investors continue to profit from solid rental rates, according to the Herron Todd White Month in Review
report for July 2016.
For instance, the northern suburbs of Greenwood and Kingsley are appealing to families because they are not only just 18km from the Perth CBD but also close to the coastline. These areas are quite accessible via arterial transport links. Rental yields clock in at a solid 4%.
The unit market, however, is slipping, with properties being resold at prices far below the original purchase prices. Within the CBD itself, two-bedroom, two-bathroom units are being offered for less than $500,000. The lack of investors in the market is opening up the playing field to first home owners.
Coastal suburbs highly sought
In the southwestern area of the state, waterside suburbs like Busselton, Broadwater
and Abbey are expected to generate medium- to long-term capital growth, especially as the City of Busselton becomes more and more high-value.
The population in this area is predicted to rise as a result of its growing popularity, which will inevitably drive up demand. Given the limited housing supply, property values should improve in the medium term.
Moreover, South Bunbury was recently rezoned, along with East Bunbury, which has inspired investors to develop duplexes and triplexes. The tourist hub of Dunsborough
is also sure to offer strong long-term growth.
Herron Todd White regards the Perth property market as approaching the bottom of the cycle and says the fallout from Brexit may have an effect over the next year. So the gamble for buyers is whether or not to trust that the market will recover soon and make the most of the current low prices.
SUBURB TO WATCH
Lathlain: Inner-city suburb rises up amid market slump
Just a 10-minute drive from Perth, Lathlain’s excellent central location makes it an attractive option for city workers looking to reside in a community-oriented area.
The average rental yield for units is a reasonable 4.6%. In terms of average annual growth, Lathlain recorded an increase of 11% in the year leading up to May 2016, according to REIWA.
The suburb has many established parks, including Lathlain Park and Rayment Park. The latter is adjacent to the local primary school. There are local shops on Lathlain Place, cafes at the Lathlain Oval, toy libraries and a playground.
Lathlain also benefits from its surrounding suburbs, which provide many of its amenities. For instance, Victoria Park and Carlisle are home to pubs and restaurants, while Burswood
has an entertainment complex with a theatre. Meanwhile, Belmont
is home to a large shopping centre.
Many of these nearby suburbs are within walking distance. Transport by bus and train (from the
Victoria Park station) is also easy and convenient.