Most mainstream media articles about real estate would have you believe that the whole of Australia has been in the midst of rampant price growth over the last 4 years, creating an unprecedented affordability crisis. You might have noticed terms like property bubble or property crash being thrown into the mix as well.
This is mostly to do with the media’s obsession with Sydney and Melbourne real estate prices and how long these price increases will continue. To curb this runaway growth, there have been calls to abolish negative gearing in Australia and place limits on landlord discretion in terms of rent increases.
Meanwhile, 3300 kilometres away in Perth, people must be reading these articles and scratching their heads in dismay. Following the mining slowdown in 2013, the Perth property market has suffered falling house prices and increased rental vacancy rates, resulting in the biggest fall in rents in 25 years.
Recently however, there are signs that the Perth real estate market has actually bottomed out and is on the rebound, while other markets in Western Australia will follow soon.
Last month NAB chief economist Alan Oster said there were clear expectations amongst property analysts that the WA market would improve relative to the rest of the country over the next two years. The improved outlook is tied to a lift in the jobs market, which is becoming less reliant on the mining industry.
Terry Ryder, founder of Hotspotting and a reliable commentator of real estate in Australia has recently identified 12 growth markets within the Perth City area and a rising number of suburbs with consistent sales. This is the best result for Perth real estate in two years, however Terry warns declining markets with high vacancy rates still exist in Perth, especially around the inner-city precinct which is dominated by units.
Along with improved employment conditions, one of the most important factors in Perth’s real estate recovery is the massive infrastructure and private investment pipeline.
Here are just a few examples:
- $2 billion Forrestfield – Airport rail link project. Funded by state and federal governments
- $236 million Mitchell Freeway Extension – Project completed under budget
- $317 million Lithium Plant – Kwinana. China’s Tianqi Lithium is planning to expand the $400 million processing plant it’s currently building.
These are big numbers. Similarly, major projects are underway in WA regional areas, however buying real estate in these markets would be too risky for the average Australian property investor. Here are some sales examples that highlight the danger:
4 Hedditch St, South Hedland WA Purchased Mar 2012 @ $800K Sold Sep 2016 @ $79K
2a Knox Way, Newman WA Purchased Jan 2013 @ $1.25M Sold Oct 2016 @ $123K
So after four years of being in the doldrums, data suggests that the Perth real estate market is finally turning the corner, however you need to proceed with caution as there are still declining markets within the city area.
And while regional markets in Western Australia are starting to show positive signs, we suggest that you have a reality check in relation to your personal risk profile and do lots of research before rolling the dice in these areas.
If you would like to take the plunge and catch the next real estate wave in Perth (before everyone else does), we can remove the guesswork and buy the right property in a great area for you.
