Celsius Land Update & Perth’s House Price Growth
October has been another busy month.
One development of note is that Celsius has acquired an option to purchase a 63-lot development site in the south-eastern corridor of Perth. The site is well located near existing schools, shops and infrastructure.
We are currently completing our due diligence on the acquisition, which is so far looking positive. Subject to Celsius Land being satisfied with its due diligence we expect to issue an Information Memorandum in late November / early December 2020.
We will let you know when the Information Memorandum is available, however please contact Brenton Downing on 0467 006 122 or Brenton@celsius.com.au if you would like some further information about this opportunity. We have also looked at several other opportunities during the month, some of which we are continuing to progress and others which we have walked away from.
Perth’s House Price Growth
The expectation of price growth is one reason why people purchase property and also one of the most influential variables that developers input into any development feasibility study, in particular for developments that are completed over a long period of time.
It is interesting to look back at price escalation for the Perth median house price over the last 50 years. The Perth median price increased from $17,500 in 1970 (Source: Abelson and Chung, Macquarie University) to $475,200 in the June 2020 quarter (Source: Australian Bureau of Statistics (ABS)). The annualised growth rate over this period equates to 6.9% per annum with the annual median house price increasing 36 times, dropping 13 times and remaining unchanged once over this period. However over the past 10 years the annualised growth rate has been -0.7% per annum with a negative price change in seven out of the last ten years!
It is also interesting to look at house price growth relative to inflation. From 1970 to 1990 the Perth median house price basically kept up with inflation, ie. it didn’t change in real terms, although it had plenty of ups and downs in between. From 1990 to 2003 house prices in Perth rose by 47% more than inflation (3.01% per annum higher than inflation) and from 2003 to 2020 house price growth increased 39% more than inflation (1.97% higher per annum than inflation) (Source: Abelson and Chung (Macquarie University), ABS: Perth All groups CPI and ABS: Median Price of Established House Transfers Perth).
The above data shows that over the longer term house prices have been a good asset to own to protect value against inflation. Whilst we are wary of trying to pick short term price movements, in the longer term we believe that Perth is likely to continue to experience moderate price growth.
Sources: House Pricing In Australia 1970-2003 (Abelson and Chung) & ABS data for 2002 – 2020