By Herron Todd White
July 2019

The 2019 lazy half million edition of our Month in Review could not have come at a better time, but before we get stuck into what you can purchase for $500,000 we need to touch on a few recent events. There have been a number of small wins for the Western Australian property market over the past month including the federal election result, a shift in the cash rate and proposed changes to APRA’s regulation over lenders.

The recent federal election saw a win for the Liberal National Party which was a great result for Western Australia, as Labor had proposed changes to capital gains tax and negative gearing. These changes would have limited negative gearing to new housing only from 1 January 2020, as well as halving the capital gains tax discount to 25 percent. Our general thoughts are that this policy would have only dampened investor confidence and potentially made it harder for first home buyers to enter the market, so we are happy with the election result in this regard.

APRA recently proposed changes to its regulation guidelines surrounding the way in which lenders assess a customer’s loan eligibility. Lenders are currently meant to be checking that their customers are able to pay off a potential loan at a minimum interest rate of seven per cent, or two per cent above the application rate, whichever is higher. This is to ensure that the customer would still be able to service the loan should interest rates rise.

APRA’s proposed changes would instead get rid of the seven per cent and see the minimum rate be applied at 2.5 per cent above the application rate. So, for a 3.75 per cent application rate, the lender would check serviceability at 6.25 per cent. As there are many market rates lower than five per cent, this would allow for more flexibility from the lender and increased borrowing capacity for customers. Analysts are suggesting an increased borrowing capacity of nine per cent for the average customer, so if you were able to afford a loan of $600,000 originally, you could potentially borrow an extra $50,000, which goes a long way in the search for your ideal home.

To top this off, on 4 June 2019, the Reserve Bank of Australia’s board members decided to lower the cash rate by 25 basis points to 1.25 per cent in the hope that the four major banks would pass this cut on to their customers. Together these factors should heighten affordability in Perth, adding more confidence to the market and hopefully bringing a slight boost in demand.

The latest Adelaide Bank and Real Estate Institute of Australia’s Housing Affordability Report has revealed that Perth is one of the most affordable cities compared to other capital cities in Australia. The Real Estate Institute of WA (REIWA) say that the report “found that the proportion of income required to meet loan repayments in WA improved to 22.6 per cent in the March 2019 quarter, a decrease from 23.1 per cent compared to the December 2018 quarter and the average loan size reduced 4.1 per cent to $336,186.” To compare, in New South Wales the proportion of income required to meet loan repayments is 35.4 per cent with an average loan amount of $453,101, so affordability continues to look extremely attractive through Western Australia.

Now with that out of the way we can jump into our lazy-half million! Perth’s median house price was $487,000 for the March 2019 quarter, so $500,000 can most definitely go a long way if you are thorough in your search for a property. This $500,000 can vary in value depending on which areas you are looking in and what product you are looking for. Are you an investor looking for long term capital growth and a decent rental income? Are you a young family looking for a new home with good amenities close to schools and shops? Are you a developer solely looking for a profit in a secure location? Have the kids flown the coop and you’re looking to downsize? Value is relative and we will present a few options around the $500,000 price point in different areas around greater Perth.

Greenmount is a suburb located 18 kilometres north-east of the CBD. The median house price settled at $477,750 for the March 2019 quarter, increasing 2.7 per cent over the year and 4.1 per cent since the December 2018 quarter.

Pictured above, this property sold for $530,000 in February 2019 and has four bedrooms, two bathrooms and a double garage. It was built circa 2007 on 834 square metres of land.

Presenting as a fantastic renovation project, this 2,430 square metre block sold for $510,000 in January 2019. The circa 1925 dwelling comprises three bedrooms and one bathroom. Currently zoned R20, it could also be a great development opportunity with potential for a multi lot subdivision.

South Yunderup is a township located near Mandurah, 70 kilometres south of Perth. It is a fairly diverse suburb as there are older, circa 1980 plus houses located along the Murray River canals,

but it also has been subject to land development since 2010 at the Austin Lakes Estate. South Yunderup’s median increased 12.9 per cent year-on-year, and four per cent during the March 2019 quarter.

This property (Figures 5 and 6) is situated on the Murray River Canal and comprises three bedrooms, one bathroom and a double garage. It was built circa 1988 on 612 square metres of land but has been refurbished since. It sold for $490,000 in March 2019 and won’t suit everyone due to its location, however it may fit well with empty nesters who love to entertain.

Munster is located 20 kilometres from the CBD and is surrounded by Beeliar, Yangebup, Spearwood,

Coogee and the industrial suburb of Henderson. The median in Munster is $525,000, increasing five per cent year-on-year and 1.9 per cent since the December 2018 quarter.

This property (Figures 7 and 8) was built circa 1988 on 805 square metres of land. It comprises four bedrooms, two bathrooms and a double garage and has been renovated internally. It sold for $515,000 after 72 days on the market which is just under the March 2019 quarter Perth metro average of 79 days.

Small character dwellings can be purchased in Rivervale for around $500,000 (Figures 9 and 10), like this partially renovated two-bedroom, one-bathroom construction on a 683 square metre allotment. It was originally built circa 1937 and sold for $539,000 in March 2019 after just 11 days on the market. Rivervale’s median increased 1.5 per cent to $510,000 in the last year and increased 4.1 per cent over the March 2019 quarter.

The two Balcatta properties (Figures 11 and 12) represent development blocks that sold for $505,000 and $500,000 respectively. Situated nine kilometres north-west of the CBD, Balcatta has seen a multitude of blocks developed into three or four lot subdivisions and unit developments, yet the majority of housing in Balcatta are still single residential dwellings on 700 to 900 square

metre allotments. The median in Balcatta settled at $500,000 for the March 2019 quarter and has increased by 2.2 per cent year-on-year.

Glen Forrest is a rural-residential suburb in the city of Mundaring, located 30 kilometres east of Perth. Glen Forrest has also seen significant growth over the past year, increasing its median house price 15 per cent to $560,000.

This Glen Forrest property (Figures 13 and 14) sold for $490,000 in February 2019. The circa 1975 dwelling comprises three bedrooms and two bathrooms on 1.21 hectares of land. Other well-performing lifestyle living suburbs include Mundaring and Lesmurdie, boasting 2018-2019 growth rates of six per cent and 3.6 per cent respectively.

On the opposite side of the city, Fremantle’s unit market performed well over 2018-2019. The unit median is currently $539,000, increasing 1.7 per cent over the March 2019 quarter and 11.1 per cent year-on-year. The general attractive nature of this famous cultural area tends to lure constant demand regardless of the flurry of modern apartment and unit developments in the surrounds.

This unit (Figure 15 and 16) sold for $495,000 in November 2018 after seven days on the market. It comprises one-bedroom, one-bathroom and single parking space, with a floor area of 75 square metres.

Scarborough, another coastal suburb, is situated 10 kilometres north-west of the Perth CBD. It’s unit median increased 5.2 per cent over the past year and two per cent in the March 2019 quarter. Scarborough has recently undergone a $100 million redevelopment to reinvigorate the suburb. There have been a few apartment complexes and unit developments recently completed in the area.

This new unit (Figures 17 and 18) was completed in late 2018 and sold for $515,000 in February 2019. It comprises two bedrooms, two bathrooms and two car spaces with a floor area of 140 square metres.

The suburb of Innaloo has a fair few unit developments popping up (Figure 19). Two of these brand new 190 square metre, three-bedroom, two-bathroom units sold for $510,000 and $520,000 in April 2019.

East Victoria Park is a suburb situated six kilometres south-east of Perth along Albany Highway. The unit median increased 0.6% over the past quarter and 6.1 per cent year-on-year. With a median rent of $330 per week and a median unit price of $402,500, East Victoria Park is currently achieving yields of 8.2 per cent. This seems to tick both boxes for any investor as capital growth and rental yields look extremely healthy.

This unit (Figures 20 and 21) sold for $485,000 in April 2019. The circa 1993 dwelling comprises three bedrooms, two bathrooms and a double carport, with 258 square metres of floor area.

We could keep on going with these examples for a long time as there have been a fair few sales in this range over 2019 so far. But this should be enough to show that there are enough opportunities for all types of buyers in this price bracket throughout the Perth metro area, regardless of what type of property you are looking for. Whilst debate rages as to whether the Perth market is at or close to the bottom of the market cycle, the opportunities remain plentiful and affordability is a key factor differentiating the city from other capitals.

Speak with a Perth Mortgage Broker today.

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.