The month in review: South West WA
By Herron Todd White
This month we will be focusing on investors in the South West property market. Investors are mainly active in the lower end of the market and have been looking to capitalise on a stronger than normal rental market that has seen an increase in yields over the past two years. Higher yields and low interest rates create a good market for investors and this has strengthened property values in the lower market segment.
A good opportunity for long term capital growth in the South West is along the coastal strip located on the northern side of Bussell Highway traversing the suburbs of Busselton, West Busselton, Broadwater and Abbey. This coastal strip is approximately 500 metres wide and runs for approximately 10 kilometres along the Geographe Bay.
As the City of Busselton continues to grow at a strong rate, this well located section of land will continue to grow in desirability and affluence as the urban sprawl continues to be pushed further away from the coastline. This consequently will result in good capital growth over the medium to long term as an increase in population will lead to stronger demand of a product that has limited scope to increase in supply. While the rental return of these investments is generally quite weak, purchasing within this coastal strip provides a strong opportunity for capital growth over the medium to long term.
While yields have increased they do remain lower compared to the capital city and this coupled with Perth historically achieving better long term capital growth results in many investors shying away from the South West market and looking north to the metropolitan region.
However when the property market in the metropolitan region is strong the South West property market does benefit as it attracts the out of area emotion driven investor seeking a holiday home and part time investment. Nevertheless, this particular buyer profile has weakened over the past 18 months as property values in the capital have declined resulting in a more cautious approach to investment.
Historically the South West does not attract investment purely on capital growth potential and returns but on an emotional level as the region is a very desirable holiday destination given its beaches, surf, vineyards and breweries. This investment is generally aimed at the lower market segment that competes with the first home buyer. Investment does occur in the middle to higher market segments but at a reduced level.