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Perth and its market

The last few years in Perth and across Western Australia haven’t been the greatest for the housing market in the West. We’ve seen a sharp drop in Perth’s median house prices and an apartment glut in the CBD has pushed unit prices to flatline. This all being the fallout from the receding mining industry. Property market analysts are seeing at a state-wide house price drop of more than 3%, and more than 5.2% in Perth alone.

 
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Research firms are predicting that the home value declines are due to settle in 2018 and the city will be looking at a great recovery as families from the east begin looking for an affordable home in the city. One of the major reasons behind the market slump, aside from the mining boom decline, was the city’s high vacancy rates, which are now starting to subside. At 7% in 2018, vacancies are dropping steeply and rental properties are looking at higher returns, and sale prices are climbing in pockets across the entire city, particularly in more rural areas like Rockingham and Baldivis.

Data analysts from Domain and CoreLogic are now predicting that the full effects of the market slowdown will end by mid-2018 as apartment vacancies in the city, which are affecting the entire city’s sale rates, drop substantially and push prices back up. This will also be the case for homes across the city, where vacancies will fall, and new developments make the outer suburbs a more desirable place to live.

The general consensus from government and bank analysts is that the worst is over for Perth’s real estate market and 2018 is looking to be the most positive year in almost 2 and a half years. The number of home sales is expected to grow, the apartment oversupply is predicted to dry up and home values across the board should grow by at least 4%.

 

Best Suburbs for Investment

Although most of Perth has endured a slowdown, there are still some suburbs with values growing at rates of over 25% and these give investors a great opportunity to get into those markets while they’re still red hot. So far in 2018, the fastest growing suburbs in Perth are North Fremantle, Applecross and Dalkeith with homes and apartments increasing in value by 26.3%, 24% and 20.9% respectively, and there aren’t any tell-tale signs of a slowdown in the near future. These suburbs, however, have a combined median house price of more than $1,780,000, making it difficult for some investors to enter the market.

Head over to the outer suburbs and down the coast though, and buyers will find markets that are just beginning to experience massive growth as the government improves transport connections and commercial businesses start the development of new stores and dining options. Rockingham is tipped to climb the capital growth ladder in 2018 as new cafes, boutique stores and bars pop up in the area.

The city government has also invested in easier access to the CBD in suburbs like East Perth which has prompted Paul Blackburne, the managing director of Blackburne, to claim that the suburb is anticipated to grow in 2018. Perth’s new Optus Stadium just opposite East Perth is also a new selling factor for the suburb, which may have been a contributing factor to the 2.6% uptick in rental yields.

Established favourite suburbs for Perth investors continue to be Leda with its 5.5% rental yield and low-end average rent of $300 per week, which keeps a steady flow of renters in the area. Being close to Rockingham also means the suburb is expected to benefit from the expansion of new bars and dining options. Armadale should also be on an investors list as the suburb is about to undergo mass expansion regarding new homes, shops and transport upgrades, making its 5% rental yield likely to balloon within the next 12 to 18 months.

 

Future Growth

Areas within the city that are expected to experience the most growth through 2018 and into 2020 are the suburbs of East Perth, Rockingham and Ascot Waters. All of which are currently undergoing major redevelopments and upgrades to make city access easier for residents as well as to fill gaps in the market, like Ascot Waters focusing on filling the high-demand for luxury waterfront homes, which currently don’t exist in the area.

The CBD is also looking at one of the largest increases in real estate and population in more than 40 years, with a population explosion expected to almost double its size in just a decade. Investors looking to get in early, or to buy an apartment as an investment stepping stone could benefit from looking in Perth’s CBD. The state government is focusing on major overhauls, services and attractions additions for Perth’s CBD, and these are all expected to contribute to a major price increase in the near future.

 

The best areas for apartments

With Perth’s apartment stock at an all-time high, the city is looking at its biggest slow down in years for unit prices. This is bad news for investors, but great news for first home buyers as the market is starting to open up to them.

The best areas for first home buyers to look for apartments are in the CBD and East Perth as well as Scarborough, all of which have great median apartment prices of below $600,000 and in some pockets below $450,000. Scarborough will also work out well for investment buyers with its lower than average median unit price and relatively high capital growth of 2.8%, which is higher than the surrounding suburbs.

Victoria Park is boasting one of 2018’s highest capital growth rates for apartments, at 6.8%, well above the Perth average. Apartment prices are hovering around $470,000 and are expected to continue to increase as infrastructure developments in the area increase and make the area more popular and in-demand place to live.

Investors looking for the highest capital growth rate for apartments in all of Perth should look towards Crawly, just south of the CBD. Current growth data is putting the suburb at more than 8.9% and on a median home price of $660,000 the area is attractive for lower-end investors too.

 

New Estate Developments

As the city’s market has cooled off so have new developments, though these are expected to reappear by mid-2018 and early 2019 as the city returns to positive wage, population and dwelling value growth. The good news though is that the city’s newest estate developments are also the leaders in value growth, with the suburbs of Dayton seeing value growing more than 102% in the last 5 years.

New estates of Callaya and Holland Park in Perth’s south are great starting places for first home buyers or investment buyers who want a slice of Perth’s fastest growing areas. The majority of new estates in the area are in high demand due to their close proximity to schools, or new-build schools and their easy access to public transport. Holland Park in Piara Waters is looking at more than 2% growth for 2018 and a 4% rental yield.

The CBD, which is now out of its slowdown, and has returned to a growth rate of 3.7% for 2018 will see an influx of new buyers for countless new high-rise apartment developments. The West is reporting that more than 60 new high-rise developments are set to appear in the next 12 to 18 months in order to keep up with the dramatic growth of the city’s population of more than 12 families each week.

 

Cheaper Suburbs & First Home Buyers

The city of Perth has become a great place to buy for first-time buyers due to the fall in average house prices over the last 5 years. Now Australia’s second cheapest capital city, Perth’s average entry-level estate home now costs just $450,000. This decade-low starting price for the city has meant first homebuyers are flooding the market and helping to stabilise it, good news for investors. The president of REIWA, Hayden Groves says that over the next few months prices city-wide are expected to rise and a $520,000 median is expected by the end of 2018.

In Western Australia the first home buyers grant is capped to homes of $430,000 or less, making some newer family friendly off limits for first home buyer families, but now couldn’t be a more perfect time for first home buyers to hit the market. New developments are plentiful and the median house price is still hovering at record lows.

 
New Estates for First Home Buyers

New entry-level estates on the city’s growth corridors are offering first home buyers great new modern homes for a far lower cost than those closer to Perth’s city. Some of the more popular suburbs of Baldivis are experiencing massive population growth and a number of new estates are appearing. Brightwood in Baldivis can give first home buyers a house and land package for just $283,000, more than $200,000 lower than the city’s average.

Another major development in Perth’s north, Crest at Landsdale offers investor and first home buyers new homes with great growth opportunities, easy access to surrounding shopping centres, schools and Perth CBD via Hepburn Ave and the Mitchell Freeway. With a steady growth rate of 1.2% and a median house price of $545,000, Crest is an attractive location for first home buyers as well as investors who want a slice of Perth’s rapidly developing north.

A second development in Baldivis, Greenlea, is looking towards pleasing the first home buyer market too, with its capped $417,000 pricing and family-friendly facilities of parks, schools and great modern new build homes. Investors can also get on the action in Greenlea as the area is looking at a 4.4% rental yield and monthly incomes of more than $100.

 

The 2018 Outlook

As the mining and natural resource section continues to slow and stall, Perth’s housing price slump will continue, though it isn’t expected to remain bleak for too much longer as housing developments and apartment construction are put on hold, pushing up demand and prices for homes.

The suburbs of Eglinton, Alkimos and Boyup Brook boast the highest growth rates in Perth so far in 2018, with capital gains of 12.2%, 12.1% and 10.9% respectively. Good news for all buyers in the area is that none of these gains are expected to slow down or decline, but rather keep growing, even faster than they have been. By 2019 Eglinton could see a total capital gain of more than $20,000, and a rental income increase of over 4%.

Almost all property and market analysts agree that 2017 was the worst of the property storm for Perth and that there is growth in the near future. As first home buyers begin to buy into the new affordable estates and fill out the existing suburbs demand will begin to grow and house prices will begin to increase again, especially in the suburbs of Baldivis, Rockingham and Ascot Waters.

Investors in search of the absolute best returns that Perth has to offer should focus on growth corridors in the city’s northern and southern suburbs. As the city grows, these areas are often the first suburbs new home buyers look to purchase a home, and therefore the area is also a top spot for commercial development. This combination of things keeps growth high and rental demand steady, creating the perfect market conditions for investors (find out how much you can borrow). The city, however, should stay off-limits for investors for a while, just until the oversupply declines and prices start to grow again.

Domain has focused on the fact that as the number of vacant homes has dropped from 12,000 in 2016 to now 9,000 in 2018 that investors will soon be in a position to be able to pull rents and asking prices back up. The lucky number of vacant properties that investors need to see is 6,000. Once the market reaches just 6,000 vacant properties then a number of suburbs will be in the green and capital growth will start to climb.

 
 

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