WA Budget sustains the state

Yes this is another commentary about the State Budget, but unlike the media, I believe that the dynamic Mike Nahan and the Barnett Government are in fact taking the right steps to move WA’s economy ahead.

The Government is in debt by $2.7 billion and while some people may appear aghast, I believe that sometimes you have to go into debt in order to take your business, or in this instance the WA economy, to the next level.

Quite frankly when the rest of the country was having a “GFC” WA was having an iron ore boom and I believe that the Government did the right thing by taking the revenue from this “boom” and spending it in WA, which ultimately bolstered the economy.

But unfortunately with mining, it is cyclical, and as you would expect, with the recent drop off in iron ore prices, the Government is feeling the pinch. So one strategy is to dispense with aging assets – especially, before they need further capital works, such as the Fremantle Port and that is the tactic that the WA Government has taken.

Basically they have decided to wear the deficit, rather than pass it entirely onto households.

What I thought was most interesting however, was the disparity over the GST allocation. If in fact WA had received South Australia’s portion of the GST revenue, not only would the Government have covered their deficit but had a $900 million surplus.

But it is, what it is – so steps have to be taken.

Regardless of the changes in iron ore prices, the fact is we have experienced an unprecedented period of business investment and when projecting to 2018/19 we can still expect continued good times.

And there is no doubt that WA is outperforming the other states when it comes to unemployment rates and GSP output. In fact WA created an additional 40,000 nett jobs in the last 12 months.

Plus the Barnett Government has led the way, with major infrastructure projects such as the Midland Health Campus and Perth stadium etc which will create 93,000 jobs over the period of construction.

So the Government intends to sell the TAB, Forest Products Commission, GROH Stock Housing, some Government buildings and LandCorp land holdings to name the majority.

Plus they are going to cap public sector wages and of course increase some taxes such as land tax.

The spending for the next 12 months therefore is more focused on social elements such as disability services, education, public transport and roads. But the Government has still committed $24.1 billion over the next four years to an infrastructure programme and this is a good sign for our economy.

And the Government believes that after the next 12 months, we will start to see growth again of approximately 5.5%.

The fact is, when you look around Perth, all you can see is nodes of growth and huge private sector investment.

I believe that Perth is in fact about to revolutionise into a new era, and I am excited. While the Government has got some work to do in gaining a more equalised budget, I do believe that the fact that they have decided to invest in WA is a major benefit. It has whet the appetite for the private sector to follow suit and we are in a good place for it.

If you want to know more click onto http://www.ourstatebudget.wa.gov.au/.

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Commercial market needs to diversify

I attended the Property Council lunch last week which outlined the status of the Perth office market.

While vacancy rates are currently at 16% with projections that it could reach as high as 23%, the news still has a positive spin.

Interestingly, the Perth office market has grown steadily over the past 24 years, but we have held all our hopes on a one horse race – that is the mining sector.

Graphs shown be Deloiite clearly showed that mining began to play a major role for the WA economy in the 1980’s and we subsequently have ridden that high without then thinking about growing other sectors of our economy.

However with all the building works occurring at The Springs, Elizabeth Quays and Waterbank, what is clear, is that Perth is now moving into a new era – and quite frankly I am excited!

While we have been somewhat remiss in building our economy so that it is robust, now is the time and Deloitte predicted that there were five key markets that they believed would fuel WA’s future including gas, tourism, agribusiness, health, international education and wealth management.

The beauty about building these sectors is that there is obviously spin off industries including gas processing and transport etc.

However what this means is that we have to stop relying on the mining sector to be our saviour and actually take some control of where we take our economy – and that takes decisive action from the private and public sector alike.

This next ten year phase is definitely therefore about taking Perth to a new standard and with 150,000sqm of office space coming onto the market, there is no doubt that companies will look favourably at relocating into newer spaces at more competitive rates.

And if you happen to be holding onto older stock, now is the time to invest and be creative with how you may attract major sectors such as education into the CBD.

But if you stay still then you will undoubtedly suffer.

The writing is on the wall – so make some sound decisions and stay ahead of the pack – or otherwise you will find the next phase of Perth’s evolution will undoubtedly eclipse you!

Foreign investment continues to grow

So following on from the Multi Unit Conference, another speaker at the event was Joanne Chin, formerly of Colliers.

Joanne spoke of the increase in FIRB purchasers, with some development projects showing sales as high as 40% attributed to foreign investment (average was 5%).

These purchasers were local students, overseas residents anticipating relocation and then also foreign investors.

Typically these purchasers were seeking projects in Northbridge, East Perth and CBD.

Joanne made the valid point that some projects in the CBD were ideally suited for overseas markets.

It is worth therefore assessing if your project meets this criteria, before entering into this marketing realm, as it can be a very expensive exercise.

Certainly food for thought!

PropertyESP is a research and analysis company that makes sense of property.  To learn more visit http://www.propertyesp.com.au

Government must plan for greenfields too!

With the Sub-regional planning framework released last week – PropertyESP has something to say about planning for greenfields sites!

Independent property analysts, PropertyESP have released results this week after the company undertook research of greenfields sales as well as infill, over a two year period (October 2012-October 2014).

The company examined key areas such as Byford, Baldivis and Ellenbrook in comparison to Victoria Park, Belmont, East Perth and Midland as part of the overarching study.

The company found that demand for land lots in the greenfields areas ranged from 982 blocks to 2256 for the two year period (average 1557) in comparison to 712 apartment sales in East Perth (the highest volume).

Samantha Reece, Director of PropertyESP stated that while demand for infill was certainly increasing, demand for greenfieds lots was still a significant factor when planning land supply.

“The research found that the buyers of infill properties versus greenfields were two very different groups of people,” Ms Reece said.

“In addition the purchasing patterns of these buyers indicated that Greenfields buyers were highly unlikely to become owners of infill properties.”

The research discovered that house size was also a major player in the purchasing decision.

“Whether they purchased in greenfields or infill, the purchasers were still looking for an average of one bedroom per resident and as such families were seeking 3-4 bedrooms while baby boomers and Gen Y were seeking 1-2 bedrooms.”

But as Ms Reece observed, the terminology of infill as being a solution to affordability was also a misnomer.

“When we examined price per square metre for townhouses, apartments or even blocks of land, the price indicator demonstrated that infill was consistently more expensive across the board,” Ms Reece said.

“While there are many gains for purchasing an infill property, it is certainly favoured by a select group of residents and as such planners must recognise the need to continue to offer choice options for the market.”

The full research results will be presented to a UDIA function on Friday 15 May. To find out more or to book contact UDIA on 9215 3400.

The Springs is ready to boom!

I attended an interesting breakfast the other day, hosted by the Property Council and which outlined what is happening at The Springs in Rivervale.

This is a 14ha parcel of land nestled between Polly Farmer Fwy and Great Eastern Hwy and of course central to the new stadium, Crown Casino, Swan River and trainline into the city.

There are a number of developers in this precinct, which is being project managed by LandCorp, including Finbar, BGC, Psaros and Hillam.

While the majority of The Springs is residential (1900 apartments), there will also be 10,000sqm of commercial space, plus the first Sheraton Aloft hotel for WA.

The Aloft hotel will offer amenities for local residents to use as well as guests and will feature a rooftop bar as well as XYZ bar. This venue has attitude and will boast live music and tech forward thinking. Very exciting indeed!

At present there is $389 million of apartments being constructed with most being available for occupation mid 2016.

To date 36% of buyers have been investors and 64% owner/occupier.

Plus these buyers are coming from a range of areas including Como, East Perth, Rivervale, Ascot, South Perth, Southern River, Canning Vale, Thornlie, Victoria Park and Nollamara.

The breakdown of buyer ages is also just as varied:

springs graph 1

As can be seen by far, the 26-35 age group represents the biggest portion with 35% of buyers and it is not surprising considering the setting and the price advantage!

At the end of the day we believe that The Springs will in fact be the next East Perth and it is one of my hottest investment tips for Perth!

PropertyESP will be doing some further analysis work on The Springs precinct in the near future – so stay posted!

 

 

Bunbury ready to grow

I attended a breakfast briefing last week with the City of Bunbury Mayor Gary Brennan and CEO Andrew Brien.

The Mayor predicted that there would be cranes in the Bunbury skyline within 12 months and he has good reason to feel optimistic.

The CBD of Bunbury is undergoing a retail renovation with several major precincts including Bunbury Forum, Minninup Forum, Plaza Shopping Centre and Stirling/Centrepoint undertaking significant expansion plans.

It was also particularly pleasing to see the City’s focus on connecting the Centrepoint Shopping Centre to the foreshore and while it will impact on the flow of traffic, it will also allow the City to be truly connected to its waterways.

In addition a Brisbane syndicate have purchased one of the 5 Koombana North land parcels in order to construct a six storey residential development which also encompasses a level of retail and commercial. This will add to the existing Marlston waterfront and is long overdue!

The City also has over 100 land parcels which they are currently rationalising and on that basis the CEO is attending Eastern States conferences with a prospectus of available parcels which are now for sale. It is obvious that the City is keen to get the ball rolling and build on its existing strengths.

Economically the City of Bunbury has a high ratio of residents that own their own home outright and commercial investment is strong ($120 million in sales in 2013/2014).

As such, as the Mayor stated, we just need to lift the market’s confidence and this wave of investment will undoubtedly have a positive knock-on effect.

If you are interested in viewing the City’s prospectus please contact me at info@propertyesp.com.au. It is an interesting read!20150415_085301-1

When to be cautious of mean and median

After much speculation that the Western Suburbs prices are on a downward trend, property consultancy firm PropertyESP has undertaken a detailed analysis of Mosman Park, Cottesloe, Applecross, Peppermint Grove and Dalkeith to see the true story behind the sales.

The company has found that over a two year period (January 2012 to September 2014), the suburb of Mosman Park had several peaks and troughs, including a price spike in September 2013 quarter of 27% and another in January – June 2014 of 32% (14% + 18% respectively). In contrast the area experienced a median price decline in the December 2013 quarter of 32%.

Median house prices Mosman Park January 2012 - September 2014
Median house prices Mosman Park January 2012 – September 2014

But as Samantha Reece, Director of PropertyESP states, this was because of the types of houses that were available for sale and not the ongoing trend.

“The median price in June 2013 was $1.4 million and this increased to $1.7 million in September because there were more four bedroom houses (65%) sold in this latter quarter and the average block size also increased from 595sqm to 746sqm,” Ms Reece said.

june quarter

“In contrast the 32% decrease we saw in the December 2013 quarter was due to the average block size sold decreasing from 746sqm to 527sqm and 55% of the houses sold were 1-3 bedrooms.

“This is why it is essential that property buyers don’t just look at median and mean as an indicator of a suburb, but rather the data behind the numbers.

“Furthermore, when you don’t have a high volume of sales, and in Mosman Park’s case, an average of 34 sales per quarter, then median house prices can fluctuate widely from one quarter to the next.”

PropertyESP is a newly formed company that seeks to drill down into the figures and provide the why for property movements.

“From the recent news, buyers would assume that the Western Suburbs is in fact depreciating in value but when you have such a wide variation of property types and a small number of sales, you really need to look at the individual sales, the quality of the homes and even the views to work out what is truly happening,” Ms Reece said.

“We have formed PropertyESP because we want to provide the full picture and give buyers accurate data and so that their decisions are more thought through.”

The company will be providing free regular blog posts about these kinds of insights and property buyers can register at www.propertyesp.com.au.

“At the end of the day there is so much information about property and we just want to provide the data, that helps make sense of it all,” Ms Reece said.