The month in review: Perth
By Herron Todd White
The median sale price in Perth has decreased from $550,000 in July 2015 to $530,000 at present, hence the lazy half million dollars goes a little bit further than it did 12 months ago.
Given the subdued nature of the residential property market, there are many areas with good growth prospects where you will get change out of your half a million, or enter into highly desirable suburbs that were previously out of reach.
From an investment point of view, the suburbs of Armadale and Kelmscott stand out.
These areas saw a flurry of demand from investors several years ago and rents remain quite solid. The volume of new product under development has declined significantly, while the population of the area continues to grow due to being more affordable than other areas closer to the CBD. Hence a villa with 3-bedrooms and 2-bathrooms which could have cost $330,000 three years ago, is now able to be purchased well below $300,000, while still achieving a rental of $330 per week.
For those of you who are good with a hammer and a paint brush, areas such as Greenwood and Kingsley in the northern suburbs are ripe for the picking. In these areas just 18 kilometres from the Perth CBD, the lazy half a million will snap up a 735 square metre block with a 1970s 3-bedroom house thrown in for good measure, while just a good stone’s throw away, 424 square metre blocks are currently being advertised for $429,000. The area is very popular with families, has arterial transport links on both sides and is only five kilometres from the coast.
Similarly, suburbs such as Ferndale, located just 14 kilometres from the Perth CBD offer 700 square metre allotments with circa 1970 built dwellings for well under $500,000; in fact the median sale price has decreased by some 6.8% over the previous 12 months to $468,000. Several prominent schools are located in nearby suburbs and the Carousel Shopping Centre in neighbouring Cannington is set to undertake an expansion of some 50,000 square metres of retail space to claim the crown of the largest shopping centre complex in Perth.
In the apartment market, things are a little harder to interpret. Developer asking prices are often very different to contract prices and many re-sales are occurring well below purchase prices from two or three years ago. However this may provide an opportunity for first home buyers to find well priced, well located apartments that have been overlooked by a somewhat dismissive or lack lustre investor driven sector. Many opportunities are available in the Perth CBD, with 2-bedroom 2-bathroom apartments available well below $500,000 and 1-bedroom apartments available well below $400,000.
When we discussed where we would spend our lazy half a million twelve months ago, we decided the best bet was to sit on our hands and wait for the market to adjust to the rapidly declining confidence in the residential market. We are somewhat happy to say that our advice was sound and comparatively the lazy half a million goes a fair bit further today.
We consider that the market is nearing the bottom end of the cycle and the challenge now is whether to try to pick the bottom of the market or simply to take advantage of the incredibly competitive cost of borrowing currently available. Either way, for the astute investor, we think it’s getting very close to decision making time. Will the market continue to trend south or are the positives starting to outweigh the negatives? The big unknown at the time of writing is the market reaction to Brexit and how such a proposal will affect local consumer confidence. I guess we’ll be able to judge that in 2017!