Hot Topics – November 2016
Welcome to the first edition of our new look newsletter which we hope you will continue to enjoy and find valuable.
Despite a Valuer trying to tell me last week that our population is in decline, Western Australia’s population actually grew 1.2% in the year to April 2016 – an increase of 29,800 people. This was twice South Australia’s rate of growth and trebles the rates recorded in Tasmania and Northern Territory. While other states were comparable to WA, only Victoria grew significantly higher at almost 2% (Australian Bureau of Statistics).
Following steep falls since March 2012, net overseas migration into Western Australia is once again on the rise increasing 3.5% in the year to March 2016. Net overseas migration was 31% higher in the March quarter than the quarterly average calculated over the past 35 years (Australian Bureau of Statistics).
It’s not hard to understand why Perth is back in favour with overseas migrants when they compare what their money will buy them in Perth compared with Sydney and Melbourne.
Last weekend I met two prospects that have recently moved to Perth from the East Coast for work…. YES… you heard me correctly, moving to Perth for work from the East Coast. Both these parties are here for relatively short stints of 1 – 3 years and both are looking to buy straight away and keep the property as an investment once they leave. I’m 100% convinced these prospects are comfortable buying because they have come from an East Coast market and they can see the value on offer in Perth right now.
As a generalisation, there is no question that Perth property owners have suffered little to no growth in values for a number of years as the supply chain moves out of sync with demand. This is bad news for those looking to retire and sell but as I have said many times before this represents a great opportunity for everyone else. Last month an old house on 812m2 of land across the road from my home in Scarborough sold for $120,000 below the price the Owner paid in 2010. I wonder whether the new Owners appreciate just how lucky they are to be able to get into the market at prices that landowners were paying close to 10 years ago.
The media spends so much time focusing on the oversupply of apartments and the risks associated with this form of investment however the reality is I can show you examples of all types of properties located within 15kms of the Perth CBD that have performed poorly over the past 10 years. This includes old houses on big blocks, new houses on little blocks, villas, townhouses and apartments. I can also show you numerous examples of significantly worse performances in the blue chip Western Suburbs and the further out you go, especially when you start entering the green field subdivisions.
Right now astute Buyers are targeting well located areas consisting of good quality, well priced property. In October the top sales agents by volume of listings sold in Perth sold between 12 – 15 properties each for the month. This says to me that there are waves of Buyers going through specific suburbs clearing out stock where they have been watching prices slide and now feel the opportunity is too great to wait any longer.
As 2016 rapidly draws to a close, at Celsius, it will be remembered as a year of unprecedented growth across all divisions and the successful completion of all major projects. The forward supply of new property out of Celsius Developments will be less than 20% in 2017 than what it was in 2016. There are numerous other residential property developers with a similar lack of future supply actually coming out of the ground. If we secure a medium density new site tomorrow it will be 3 – 4 years before the property is complete and ready to occupy.
2016 has seen too much supply and not enough demand. 2017 will see the absorption of this supply and then pressure will build on both rental and sale prices.
Who would have thought at the start of 2016 that Australians would vote Pauline Hanson’s One Nation back in, the UK would vote for Brexit and the USA would vote for Donald Trump to be their next President. We certainly live in unpredictable times. Many people think our market will remain subdued for a number of years however I think, much like our political commentators through 2016, history will prove them wrong.
All the very best
Richard Pappas