Perth March 2018

The month in review: Perth

By Herron Todd White
March 2018

Whilst recent activity in the Perth residential market has been led by premium localities, secondary middle ring suburbs are catching up quickly, with selling agents reporting higher attendance rates at home opens, multiple offers and days on market falling rapidly in some areas.

The beginning of what we anticipate will be a good year for middle ring suburbs is evident by looking at the Real Estate Institute of Western Australia’s most recent analysis. Innaloo, Morley, Scarborough and Clarkson are the top selling suburbs in the northern suburbs while Canning Vale, Como, Gosnells, Willetton and Carlisle are the top selling areas south of the river. These are all within a reasonably affordable price range and located within a reasonably close radius of the CBD. Entry level homes start at just $300,000 in Gosnells whilst the more popular suburbs offer a home starting at just $500,000 and extending to well over $1 million.

Most suburbs within the 20 minute radius of the CBD are typically well established, with many undergoing gentrification and urban renewal and families are taking advantage of the larger land offerings in these areas as opposed to the more commonly found far smaller lots in outlying, newer estates. In comparison to other capital cities, Perth’s average land size is significantly larger. The government has however implemented strategies to increase density in order to accommodate for future generations which means that the larger lot sizes on offer in the middle ring are very attractive on a number of fronts. Speculative developers foresee subdivision opportunities in many localities at prices that remain below historical levels.

Carlisle is definitely a suburb to keep an eye on, given its sub par performance over the previous few years, yet it offers a wide variety of housing options, large lot sizes and development opportunities, all within just eight kilometres of the Perth CBD.

Other examples of suburbs offering similarly attractive traits include Melville and Balcatta. Multi unit development opportunities have arisen in these once single dwelling dominated suburbs, but investors are advised to use caution as history shows that oversupply can occur in a reasonably short period of time. For example, in Belmont over the previous five years, a high proportion of developments provided only 1- or 2-bedroom apartments in otherwise traditional suburban streets and as the market slowed, prices for such products tanked.

Bassendean and Bayswater are also examples of affordable suburbs where subdivision opportunities are likely to arise, although their location and lot size offerings are sufficient to attract owner occupiers regardless. The poor market performance over the past few years has served as a huge barrier to potential developments – it has simply not been feasible to develop or more to the point, have the confidence to begin a development. We are seeing signs in the market that this confidence is increasing quite rapidly at present.

Much of the purchase activity in the second ring is being driven by upgraders, either seeking a better property within the area they already live or moving into areas to which they have aspired – to the detriment of the performance of the outer ring suburbs. Hence there are multiple buyer profiles starting to hone in on the same property types and agents are reporting rapidly declining stock levels which is always a very good indicator of market performance.

However, there is another purchaser profile gaining momentum in the secondary ring of Perth – downsizers. In areas such as Applecross, Mount Pleasant and Booragoon, there has long been a lack of choice when it comes to downsizing out of the family home. Often this meant leaving the area that had been your locality of choice for many, many years. New apartment developments in the Canning Bridge Precinct and Riesly Street Precinct offer new alternatives to this often forgotten market segment, although supply rates will control the performance of such assets. We foresee strong demand in the initial projects with a focus on quality and owner occupier facilities whilst second tier developments could experience oversupply quite rapidly.

All in all, the short and medium term prospects of the secondary ring appear to be very strong. Performance over the past five years has hampered by a lack of confidence and lending restrictions to first home buyers, along with over supply in the outer ring halting the march of the upgrade market into more desirable areas. We anticipate that market confidence will continue to improve through 2018 and stock levels throughout the secondary ring will tighten throughout the year.

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