Perth land prices most affordable nationwide – but lack of variety is our downfall

Samantha Reece, Director of PropertyESP recently attended the UDIA lunch with Colin Keane of Research 4 and then participated with the panel discussion alongside David Cresp (Urbis) and Gavin Hegney.

Certainly Colin’s presentation was somewhat telling of Perth’s current status for land sales.

While Perth peaked in 2013 with 1078 lot sales per calendar month.  In 2016 our underlying demand for land is now 637 lots per calendar month and actual sales are 478.

However there are a number of reasons why we are having this reduced success rate – and it is primarily to do with population.

First of all, Perth’s demand for land is driven predominantly by employment.  For every 100 people employed there is the direct correlation of 38 lot sales.  This ratio in Sydney is 17 lots to every 100 people and in Melbourne 26 lots.

To broaden our market we therefore need to consider a number of options – including net migration with emphasis on education, temporary work visas and holiday visas.

Nationally 56% of land sales are non-local demand.  In Perth it is 16%.  This means that 84% of our land purchasers are based locally.

Perth therefore needs to emphasise our market and attractive lifestyle in order to trigger interstate and foreign investors and certainly consideration needs to be given to delaying the State Government’s foreign buyer’s tax, as this could further reduce demand.

Tourism is also a key player with our land sales growth.

Nationally 50% of short term visas are for holidays – in WA our rate is 11%.  As Colin stated we need to grow our portfolio of tourism experiences and hence concepts such as gondolas connecting Elizabeth Quay and Kings Park no longer seem so farfetched.

Perth has well recognised tourism sites such as Rottnest Island, Kings Park, Elizabeth Quay and Swan Valley.  But now what we need to do is make these experiences deeper and more impressive so as to drive tourism spend to our state in preference to others.

Immigration also catalysts further population growth and so attracting students to WA for education purposes will undoubtedly attract their families.  The same can be said for immigration as a whole.

But there were two final gems of knowledge.

Firstly that WA has the cheapest land in the nation at an average price of $225,000 compared to Melbourne $272,000 and Sydney $423,000.

But while this is positive news, it is our stagnation in the small block sizes ie 450sqm that is killing the market and hence we also need variety of lot sizes to cater to all demographics.

And secondly, WA needs variety across a number of realms – our economic basis, our population and our supply of housing options.

Undoubtedly WA needs to grow its global handshake.

While Government has reduced the FHOG and other such stimulants, what its core focus should now be, is to attract and then retain people.

As such, while the Government may be initially focused on servicing WA in regards to Metronet etc, its top priority should be to work with private enterprise, on ways to boost WA and its profile.

Major events, stimulating tourism sites and golden education opportunities are the ingredients that will return WA to a stronger population market – and one that will help the economy overall.

Perth is experiencing a period of disruption – and that is going to definitely also going to affect the land sector.  The question is – are you prepared?

 

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Would you invest $100 into WA’s future?

So at PropertyESP we are big fans of infrastructure and especially have been advocating that Metronet becomes a key priority with the newly elected Labor Government.

However contrary to our views, a number of developers have been reticent to endorse Metronet as they believe the development sector will be the ones forced to contribute with the value capture model.

Always focused on solutions, Samantha Reece Director of PropertyESP invited John Del Dosso from Colliers to present at the Property Council Residential Committee about other options that were also available to fast track Metronet.

John advised the Committee that if the Government was to charge a $100 levy/household per year they would raise $72 million.  If that same levy was placed on commercial businesses then this would add another $72 million per annum.  If you were to consider this as a perpetuating levy than in 5 years the Government would have raised over $600 million.

This is the exact model that Jeff Kennett applied in Victoria and as a result leap frogged that state into a growth phase (http://www.theage.com.au/victoria/regrets-only-a-few-20120928-26qme.html).

John went on further to recommend that a toll be placed on the Northern Freeway – which at the moment is one of the fastest growing corridors.  His reasoning was that the businesses travelling to work in this locale would be the ones paying the toll and residents – wishing to avoid this fee – would be more likely to catch the train (which would mean that this transport system may in fact become sustainable).

Samantha thought that this was a brilliant concept – despite being somewhat radical.

But when she raised it with other colleagues, their first reaction was to state that they didn’t think they should be forced to donate $100 so that Ellenbrook could get the train.

This led Samantha to think – just when would we as ratepayers, start to believe and hence invest in our own state?

This “What’s in it for me” mentality is in fact preventing us as a State to bloom – but at the end of the day $2/ week is very little to give up, in order to gain so much.

Perth is definitely in a precarious position – destined to grow with the most recent infrastructure which has been created – but also facing potential failure if our mindset is not right.

What do you think – would you invest $100 a year to help Perth’s transport network grow?

PS the good news is that Mark McGowan announced the Federal financing commitment for Metronet in today’s press (http://www.perthnow.com.au/news/western-australia/23-billion-jobs-boost-for-wa/news-story/b53b044c6aa3848a4c809169a1ea7645)

Car parks vs infill (the debate continues)

Samantha Reece attended the recent Committee for Perth luncheon where Dr Julian Bolleter of Australian Urban Design Research Centre (AUDRC) tested the idea of finding room for density.

Dr Bolleter stated that from 2001 – 2010 Perth had seen the clearance of 351 hectares of land to make way for greenfields development, something that many will argue is simply not sustainable.

But Dr Bolleter provided some other alternatives for accommodating our growing population, which really were quite eye opening.

As he stated, 20% of the Perth suburban core are backyards which equates to 132sqm/person.  In the UK this figure is 75sqm/person.  If the Perth suburban core was to reduce our backyards to 75sqm/person we could accommodate 115,000 new infill homes.

Dr Bolleter then spoke about the fact that 12% of the Perth suburban core is asphalt, which represents 78sqm/person.  These represent car parks and the like.  In Manhattan this ratio is 9sqm/person.  If Perth was just to reduce this ratio to 64sqm/person than this could accommodate 203,000 new infill dwellings.

Freeway reserves represent 20sqm/person and if we could reduce this to 16sqm/person this would accommodate 50,000 new dwellings.  And as Dr Bolleter stated, if we made these light industrial areas, this could generate 95,000 new jobs and allow for the development of affordable housing where people can work and live in the one precinct.

And finally Dr Bolleter examined the golf courses.  At present there is 14sqm/person of golf courses in the core suburban area but when you look at the Mt Lawley golf course, its membership base of 1000 represents 900sqm/member.  With golf club memberships declining, and a golf course in the USA shutting its doors every 48 hours, this is certainly something that could be considered for density.

As Dr Bolleter stated, if we could reduce the golf course ration to 7sqm/person this alone would accommodate another 86,000 infill dwellings.

At the end of the day, it is obvious that there are opportunities to accommodate more houses and people in our city, we just need to be prepared to think outside the box and we were very grateful for Dr Bolleter’s insights and the chance to change our paradigm of thought!

Whilst some of Dr Bolleter’s suggestions would impact on Perth’s declining green space and tree coverage, an already acknowledged issue, rethinking our use of space could open up residential and employment opportunities … and create the demand needed for improved public transport – something that is also essential to Perth’s growth.

What do you think about this concept?

Is it really infill vs greenfields?

Samantha Reece recently MC’d the Future Directions event for the Property Council on the infill vs greenfields debate.

The event came hot on the heels of the Property Council’s Perth Design report which stated that infill only cost the State Government $50,000 while greenfields costs were closer to $150,000.

On the panel were a mix of greenfields and apartment developers as well as LGA representatives and as such the discussion became quite lively.

Certainly the greenfields developers rebuked Property Council’s statements re the cost of outer ring development and reinforced that often they are the ones that in fact incur the costs of infrastructure.  They also felt that WA led the rest of the nation in terms of the calibre of communities and liveability.

On the other side of the fence, Mayor Brad Pettitt of Fremantle Council spoke of the need to accelerate infill in their CBD in order to sustain the businesses and restaurants, which suffered outside of the non-peak weekend periods.

Certainly Fremantle Council appears to have fully embraced infill (unlike other LGA’s) and their focus on delivering excellence rather than ordinary should be truly encouraged!

But Brad also acknowledged that homes in greenfields could also reflect sustainability principles and Josh Byrne’s home, which is 10 star rated and built for the same cost as an average home, is living proof of this principal.

Interestingly Brad raised the point that maybe we should rate homes with the same star rating as dish washers and fridges, and that this may be the starting point for raising awareness of the true costs of operating an unsustainable home.

However what became quite clear from the panel, was that choice was important.

While Psaros have made it their trademark to focus on sustainable apartments, the likes of Stockland and Cedar Woods are dealing with a variety of buyers and budget certainly is an influencing factor.

Hence both companies seek to have a variety of builders for their projects and while some residents may rate sustainability highly – others may not – and that is their prerogative.

There certainly was a feeling that State Government needs to play a stronger leadership role in championing infill and sustainability and once again Brad felt that if some Councils continued to advocate “the no change” status, that in fact they should be penalised by reduced allocation of State and Federal funding.

Overall there is a growing consciousness of the need to demonstrate best practice and while WA may be still behind the eight ball, times are a changing.  Watch this space!

Many thanks to the panel Dr Brad Pettitt (Mayor Fremantle Council), Col Dutton (Stockland), Chiara Pacifici (Psaros) and John Silla (Cedar Woods).