Western Australia€¦ · Western Australia PERTH For investors and rentvestors, the Perth market offers plenty of value. Investors who may be using the significant wealth gains from

Western AustraliaProperty Report – April 2017

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Western Australia – Property ReportApril 2017

National Overview

Across Australia, the property market has been proving that there is no such thing as a single national housing market. In some states, prices are climbing rapidly; in others, the growth is slower or even stalling. The challenge for beginner investors and rentvestors, who may have limited funds to invest, is to identify those suburbs that are affordable yet have good long-term growth prospects and plenty of tenant appeal. This quarter, we aim to pinpoint those locations.

WHAT IS A RENTVESTOR?A rentvestor is someone who purchases a rental property as an investment while renting another property in which to live. The challenge of affordability has caused a rise in the number of rentvestors to 3% of first home buyers nationally, according to industry research.

Additionally, many a would-be first home buyer has switched from planning to be an owner-occupier to taking the first step on the property ladder as an investor. The research found that 13% of first home-buyers nationally are opting out of buying an owner-occupied home, and instead choosing to purchase an investment property while living in the family home. This figure rises to 24% in New South Wales and 20% in Victoria – home to Australia’s most expensive state capitals.

Other investors may be tapping into their home equity for the first time in order to become a landlord.

Whatever the case, the common thread is the need to buy in an affordable location with decent capital growth prospects. And infrastructure often holds the key.

PROXIMITY TO TRANSPORT IS ESSENTIALIn Sydney, our most expensive housing market, the south-west growth corridor offers affordable house and land packages that allow investors to maximise depreciation claims on newly built dwellings. This region is the beneficiary of major infrastructure projects that are reducing travel times to the CBD and creating employment opportunities.

In Melbourne, pockets of value exist for investors and rentvestors willing to look beyond the city centre. Noble Park is one such suburb, close to all the services and amenities of Dandenong and well served by two train stations.

....research found that 13% of first home-buyers nationally are opting out of buying an owner-occupied home, and instead choosing to purchase an investment property while living in the family home.

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Western Australia – Property ReportApril 2017

In Adelaide, the outer suburb of Seaford is an affordable alternative to neighbouring suburbs, and it ticks all the boxes for local retail outlets, an electrified rail link to the city and proximity to the beach.

LOOK FOR TENANT APPEALHobart has been a quiet achiever recently, enjoying one of the fastest rates of capital growth across Australia. With tight vacancy rates, a controlled housing supply pipeline and the benefit of a flourishing tourism industry, suburbs worth a look include South Hobart, Moonah and Warrane, where the ripple effect of rising prices in nearby postcodes will propel values upwards.

In Western Australia, locations within 10 kilometres of the Perth CBD offer potential for long-term investors. In particular, Fremantle offers the benefit of waterfront living, while Cockburn Central features excellent shopping and employment opportunities that appeal to tenants and will help to support long-term price appreciation.

In Darwin, prices have cooled over recent months, but the city has long-term growth potential thanks to continued defence activity and the investment commitment of Chinese company Landbridge.

In Queensland, as Brisbane spreads outwards, Ipswich offers some of the city’s lowest price points, with a median house price of $250,000. Along with affordability, investors and rentvestors can enjoy the tenant appeal of proximity to public infrastructure and transport, and high rental yields of 5-6%.

I invite you to read this report to discover where the best opportunities lie for investors and rentvestors around the nation.

Brendon HulcombeCEO - HERRON TODD WHITE

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Western Australia – Property ReportApril 2017

Western Australia

PERTHFor investors and rentvestors, the Perth market offers plenty of value. Investors who may be using the significant wealth gains from rising property values in, say, Melbourne, Sydney or Brisbane should be looking to Perth for their next move.

Capital values in Perth are the lowest they have been in 10 years, and in many cases, yields are superior to those found on east coast properties. As a guide, figures from CoreLogic show the median dwelling value in Perth is now $477,000 compared to $795,000 in Sydney and $610,000 in Melbourne; and yields across Perth range from 3.7% for houses to 4.2% for units.

So, where to buy? The key for investors and rentvestors on a tight budget is to be selective. The new home market is volatile and likely to decline further. Land values in new estates on the outskirts of the metropolitan area continue to correct, while construction costs are bottoming out.

The upshot is that investors would be wise to consider locations within 10 kilometres of the Perth CBD. In particular, Mount Lawley, South Perth, and, slightly further afield, Fremantle, Cockburn Central and North Coogee all offer lifestyle benefits that appeal to tenants.

INNER PERTHSouth Perth, where the median apartment price is $627,500, offers a wide range of property types plus proximity to the CBD, the University of Western Australia and Curtin University. A number of local private schools, shopping facilities and employment options further enhance the tenant appeal and growth prospects of this location.

Mount Lawley and surrounding suburbs feature a variety of dwelling types that will appeal to a cross-section of tenants. The wealth of local facilities includes bars, cafes, restaurants and Edith Cowan University, all within proximity to the Perth CBD. Rents are holding up even though capital values have declined slightly, with the median apartment value currently sitting at $420,000.

Rivervale, particularly The Springs locality, has proved popular with tenants and investors alike. Originally developed by LandCorp, it contains a number of complexes that are now complete, with apartments constructed by several of Perth’s major developers. This means investors have a variety of apartment options available, both new and established.

So, where to buy? The key for investors and rentvestors on a tight budget is to be selective.

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Western Australia – Property ReportApril 2017

Rivervale boasts proximity to the Swan River, and plenty of local pathways and cycleways. Nearby transport infrastructure means residents have fast access to the CBD by train, bus and freeway. Prices in the area start at $375,000, and savvy investors should ask for a Tax Depreciation Schedule on new units to maximise their tax write-downs.

CITY OF COCKBURNNorth Coogee, 23 kilometres south of Perth, offers a very affordable apartment market at present. Values are softening and some units may even deliver breakeven returns for investors, or in some cases be positively geared.

The ocean-side section of North Coogee close to Fremantle is being developed with infrastructure including a marina and associated shopping precinct. With values ranging from $400,000 for a 1-bedroom apartment through to $550,000 for a 2-bedder, demand remains steady, supported by the beachside location and proximity to Fremantle town centre.

Further inland, apartments in Cockburn Central and neighbouring Atwell have dropped in price, yet as an investment they continue to offer the ongoing benefit of negatively geared returns with the potential for future capital appreciation. The median apartment value for Cockburn Central is currently $392,000, making this an affordable location, especially for rentvestors. Both Cockburn Central and Atwell are growth suburbs offering easy access to the new Fremantle Football Club training facility and associated community amenities, as well as proximity to the Kwinana Freeway, train lines, major retail outlets and a variety of schools. It is possible to be a one-car couple in Cockburn Central, a feature that is very attractive for tenants.

For investors considering off-the-plan apartments, a number of new developments have come, or are coming, to the market in Fremantle town centre. These offer sustained tenant appeal backed by a variety of entertainment and employment options, train links to the Perth CBD and lifestyle benefits.

SOUTH WESTAffordability has been an issue for some time in the South West. Until recently the main options for rentvestors and investors with limited funds were the more affordable smaller country towns such as Manjimup and Donnybrook, where median prices are around $250,000 to $300,000. By comparison, the median house price in Busselton is $540,000. Bunbury is a little more affordable, with prices averaging around $350,000 to $400,000; however, this figure takes into consideration the larger lower socio-economic areas and older homes. Margaret River is similar, with an average median house price between $450,000 and $500,000.

Further inland, apartments in Cockburn Central and neighbouring Atwell have dropped in price, yet as an investment they continue to offer the ongoing benefit of negatively geared returns with the potential for future capital appreciation.

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Western Australia – Property ReportApril 2017

In recent years, developers have begun offering more affordable housing solutions. New areas featuring small cottage-size blocks between 200 and 350 square metres include Greendale; Millbridge; Dalyellup; Provence estate, in Yalyalup; Vasse; and Brookfield estate, in Margaret River. Builders are stepping in to offer house and land packages for smaller 3-bedroom, 2-bathroom houses between 100 and 150 square metres in size. These small-lot dwellings are available for under $275,000 in the Busselton region, under $260,000 in the Bunbury region and under $320,000 in Margaret River, prices that are very affordable for many investors and rentvestors.

Investors in Perth and other major capitals should consider the possibility of buying a holiday home that can also be leased through Airbnb or local tourism facilitators, providing their own holiday home and a return on the investment.

While the capital growth of these smaller developments is yet to be tested, it is envisaged that they will appreciate in price in line with the developments in which they are located. They are very attractive to investors, providing good rental yields yet calling for limited capital outlay. Future demand may also be underpinned by retirees looking to downsize.

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