Beth Dungey – PropertyESP

Apartment supply update

Samantha Reece of PropertyESP recently attended and participated in the Property Council Apartment conference where Urbis revealed their First Quarter 2017 results.

At present 20% of Perth’s building approvals are for apartments compared to 60% in Sydney and 46% in Melbourne. This equates to 3797 apartments currently under construction.

There are at present 134 active apartment developments in WA and 11,194 apartments, which only represents about 10% of the apartments nationally, which tends to put WA’s supply somewhat into perspective.

There were 258 sales in the first Quarter 2017 with an average price of $650,000. These sales were primarily in the CBD and Western Suburbs. 25 of these sales were attributed to Essence apartments alone, located in Claremont.

58% of the buyers were owner occupiers while 25% were identified as investors.

2017 will be a peak year of construction with an anticipated 3200 apartments delivered. While the number of sales matched the apartments launched in Q1 2017, there will be another 800 apartments delivered in Q2 and 1200 in Q4.

Certainly the data still upheld Urbis’ prediction that there will be a shortfall of apartments by 2020. This is primarily because not all projects will proceed to construction phase.

This data also aligned with REA’s research which showed that the top suburbs searched for apartments were as follows:

East Perth
Perth
Rivervale (The Springs)
South Perth
Scarborough
Fremantle
North Perth
Burswood

There is no doubt that Perth is still far behind the other states in terms of apartment supply – but it also shows that demand is relatively strong and more so now from the owner/occupier market than ever before.

Certainly the next 12 months and commencement (or non) of a number of projects will impact on these forecasts and hence it will be an interesting market to observe.

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)

Finally East Coast recognises Perth market upswing

Today two East Coast companies, CoreLogic and Moody’s, publicly declared that the worst of Perth’s property market was behind us and they predicted 3% capital growth for houses and 5.6% for apartments over the forthcoming 12 months.

Now for some time PropertyESP has been blogging about the upswing in Perth property prices and especially with apartments. That’s because we look at the micro while others look at the macro.

For example in Scarborough if you purchased a 3 bedroom apartment in 2011 – by 2016 you had achieved 28% capital growth.

Or in Applecross/Mt Pleasant 2016 apartment prices are now back to 2011 boom-time values.

Or even houses in the Western Suburbs (valued below $1 million and which were renovated), PropertyESP demonstrated they achieved 21% capital growth/annum (despite what was reported in the media).

Plus analysing apartments in Churchlands and West Leederville, we were also able to demonstrate property growth from 2013 – 10% and 2% respectively.

But regardless of what a WA analyst says, it appears that we need the nod of approval from the East before we actually believe the good news!

Despite our level of cynicism for our Eastern States counterparts, PropertyESP is still glad for this national endorsement as it may actually infuse a sense of optimism with WA buyers and that is good news for the industry overall.

If you would like to see a WA company provide detailed analysis about your suburb of choice then contact us for a chat. We make sense of property – and we are proud of it!

Robust discussion needed for infill

Samantha Reece of PropertyESP recently attended the South Perth planning workshops which dealt with the proposed train station precinct and its overall design.

Now in an earlier career path, Samantha was Director of SMR and responsible for a number of community consultation projects including the Gidgegannup town centre. But what was interesting for Samantha in this case, was that the sessions were hosted by a Council and not the developer and hence this allowed for a sharing of a range of views and hence some much needed robust discussion.

Now when the South Perth Town Planning Scheme was passed in 2013 this was done so without discussing height – but rather based on the provision of a train station. A very dangerous move because it did not deal with the elephant in the room!

As a result, when development started in 2016 and residents were faced with 39 stories – not only did they take proactive action to stop this occurring – but the train station became a dirty word (literally).

To the credit of the Council they have decided (after many inconclusive months) to now take charge by listening to all parties.

As such Samantha was delighted to see that some of the “anti development” factions were really challenged on their assumptions while developers also had a chance to revise the mandatory plot ratio for the commercial vs residential (which at present is making a number of projects in the area nonviable).

While the planning sessions were to a certain extent very much “wish list” orientated – they did allow a forum for developers and supporters of high rise, to challenge and dismiss some of the hype that the anti development factions had created. And no doubt by allowing for this robust and sometimes very aggressive debate, the “nay sayers” were shown to be just a marginal party in the overall context.

PropertyESP wishes to congratulate the South Perth Council because they could have taken action that would have hindered their community’s growth – and yet they took the bold move to in fact challenge people’s paradigms and hence allow for the stretching of minds and concepts. Plus they did deal with the elephant – and talked height!

At the end of the day – any decision will upset some parties – but it is the deep seated understanding that you look after a whole community (and not just the vocal minority) which the South Perth Council has heeded! As such they have set an example for others that also need to take this bold and proactive approach. Change will not happen by chance – but rather through leadership!

Applecross apartments defy the norm

We recently conducted some research on behalf of a client of ours examining what was happening in the apartment market in Applecross and Mt Pleasant from 2011-2016. This data was very interesting because despite having some initial setbacks, these two suburbs have once again rebounded.

Looking at 164 apartment sales in the five year period, the analysis showed that the median sale price in Applecross in 2011 was $875,000 and peaked at $1,250,000 in 2014 before settling at $1.1 million at the end of 2016.

Mt Pleasant apartment sales on the other hand started at median price point of $1,125,000 in 2011 before plummeting to $660,000 in 2013 before then rising again to $1,195,000 in 2016.

The data also demonstrated that regardless of one, two or three bedroom apartments, there was an upswing in the median property price for both Applecross and Mt Pleasant in 2016.

But what was most surprising was that being on the rivers edge (no road in front) or river front (with a road in front) reflected no price difference and as such we believe that this a paradigm that will definitely shift in years to come with the $235 million Canning Bridge redevelopment.

The data also demonstrated that rental yields were approximately 4.2% for apartments compared to 3.3% for houses in these areas.

As you can imagine this company now has good news to share with its buyers and that will only build confidence.

If you want to know what is happening in your suburb than contact the team at PropertyESP. We delve into the nitty gritty and unveil good news!

Compare the data – the devil is in the detail

We had a client contact us the other day with a Realestate.com report and asked us how our services compared.

The report provided this snapshot for unit sale prices:

Now for those of you who know Landgate – when they use the units classification that includes townhouses, duplexes, flats and also apartments.

But when PropertyESP looks at sales for apartments – we take away the rest of the data that is not relevant and then we get graphs such as these:

And this:

Or this:

Or even this:

The question is – what data gives you more guidance? Our data analysis is priced according to the number of sales records we review. So if you have 250 sales to look at the price is $750. If there are 500 sales then $1500, 750 sales $2250.

If you are serious about understanding the market and what is happening in your locale an investment of $2250 will give you the data you need to configure your next development and set the pricing. Basically – it guides you on what is selling, in which location, so that you can build a development that will sell (rather than having apartments that you can’t shift).

It is all about the detail and that is what PropertyESP does best!

If you would like to know more contact Sam Reece on 0452 067 117.

Wangara Enterprise Park still a winner

After doing a number of blogs about residential and apartment sales, the team at PropertyESP thought we would deviate for the start of 2017 and look at industrial lots and in particular, the Wangara Enterprise Park.

This estate was established in 1989 by LandCorp and actually very little sales occurred until its sixth anniversary. But regardless of its start, the Enterprise Park has since performed -and is still doing so – some 27 years later.

Our research of sales for this time period showed that vacant land had an average sale price $120,000 higher in the Enterprise Park in comparison to the Wangara industrial land located in close proximity.

But because the Enterprise Park lots were larger, vacant land in this precinct sold for approximately $410/sqm compared to the rest of Wangara at $449.

Yet the Enterprise Park certainly had some areas that performed well.

Enterprise Park factory units achieved $1773/sqm compared to the remainder of Wangara which was $1600/sqm.

Plus vacant land that was resold undeveloped in the Wangara Enterprise Park achieved 44% capital growth per annum in comparison to 22% for the remainder of Wangara.

And property that was redeveloped between purchase and subsequent sale in the Enterprise Park secured a capital growth on average of 63% per annum.

The analysis we conducted also demonstrated that those that purchased in the Wangara Enterprise Park tended to stay there, with only 28% properties sold more than once. This compared to 42% of the properties outside this locale exchanging hands more than once.

To us, this suggests a high level of satisfaction from owners within the Enterprise Park concept and its robustness to meet their business needs over the 27 year history.

It also tends to indicate that precinct planning has its key benefits, with the ripple effect benefiting neighbouring properties and the multiplier upshot coming into play.

It also tends to argue the benefits of Agencies such as the MRA and LandCorp leading with these kinds of projects so that they can gain the traction and provide ongoing investment returns.

Overall the Enterprise Park has been a worthy investment and we look forward to examining the newly launched Nambeelup Estate in the next 10 years to see if it follows suit!

Did you learn something new today? Then just imagine what we can do for your potential investments and projects.

If you are curious, call Sam Reece on 0452 067 117.

Because at PropertyESP, we make sense of property.

Grass shoots for CBD office

Samantha Reece of PropertyESP attended the Property Council’s Office Breakfast for 2017 this week.

It was pleasing to note that the statistics and panellists were united in their views on the future for Perth’s CBD office vacancy rates.

While the overall vacancy rate is relatively high, in January the CBD showed its first positive sign of recovery in five years.

And while the current market has been touted as one of the worst, we were reminded that in the 1990s the office space vacancy peaked at 31%, considerably worse than the current 22.5% vacancy rate.

While the CBD is showing promising signs, the West Perth market in contrast is still experiencing some challenges with the vacancy rates growing by 3.1% since June 2016.

What is more interesting though is that the vacancy rates are worse for B, C and D grade properties, with vacancy rates peaking as high as 37.5%. What we are seeing is a flight to quality as companies are able to secure Premium and A Grade at highly competitive prices.

The panellists also made it quite clear that now was the time to strike any deals for office leasing.

With major mining companies now removing their sublets from the market (30% reduction), the CBD is beginning to see a retraction in vacancy rates and a sense of optimism.

Predictions are that the vacancy rates will be at 17.6% in the CBD by 2020 with only one more building to come to market in the next four years.

There is a sense that by 2021 Prime office vacancy will be at 13.8% while secondary stock will be more like 23.6%.

With 20 major office refurbishments already in the pipeline and the proposed World Trade Centre, the face of Perth is about to undergo a transformation which will shape our City for the next 15-20 years.

And while mining has come off the boil somewhat, the CBD is now becoming the preferred location for second tier mining companies, legal and accounting firms who are relocating from the suburbs and, alas, West Perth.

There was a concession as well that the core investment that the State Government has made over the last 5-6 years with Elizabeth Quay, Waterbank and Northbridge Link, has set the City up for expansion in all these directions.

Perth is evolving and is now home to global companies such as Woodside, BHP, Wesfarmers and the soon World Trade Centre – and that is a fabulous advancement!

We keep talking about an era of disruption and we have certainly witnessed that on the global political level. In regards to Perth, now is definitely the time to hang on, but also to think outside the box.

Old office will undergo upgrades, there will be an influx of workers into the CBD and perhaps West Perth will become more residential based?

Regardless – now is the ideal time for action!

2016 in review – commentary from Managing Director Samantha Reece

Well true to its predictions, 2016 did show some green shoots in Perth’s property recovery.

I remember hosting the 2016 Property Council Outlook lunch in February, where experts such as Paige Walker and Lloyd Jenkins stated that they felt that we had hit the bottom of the market and we were in a period of stabilisation.

And since then we have had these claims reconfirmed by the likes of Warwick Hemsley and REIWA President Hayden Groves.

As Lloyd also predicted, education has come to the fore with Curtin University’s plans to house 20,000 students in its own dedicated city well under way.

And the hospitality and retail sectors are also now playing a more pronounced role in the state’s economy.

The construction of 5 star hotels such as the Ritz Carlton, the 50,000sqm expansion of Carousel Shopping Centre and the $250 million Kings Square redevelopment all spell positive outcomes for Perth.

Add to this the construction of Perth Stadium, the Swan River Pedestrian Bridge and the train line to Perth Airport and on to Forrestfield, and I am beginning to wonder what else we need to see to demonstrate that Perth is far from faltering.

We have several precincts also undergoing revitalisation including Scarborough, Canning Bridge, Murdoch and Canning City Centre which will densify the CBD ring and apartment living.

When you consider all these developments, it is quite evident that Perth is going through a period of disruption and, despite what some may protest, this is a good thing.

At PropertyESP, we have seen some areas such as Fremantle, Scarborough and The Springs hold their own and even grow in property value over the past five years. And where there are improvements to infrastructure, our research shows that there are positive flow on effects to property values.

And as we stare ahead to 2017 we can expect to see some interesting twists, with of course the State Election in March. Any change in government will be followed by a period of adjustment, with major projects in the pipeline of works, the legacy of the Barnett Government will continue for several years yet regardless of the election outcome.

Despite what faction you may favour, it is clear that Perth needs this wave of investment to continue and the injection by the State Government to date of Elizabeth Quay, Northbridge Link and Perth Stadium has given the private sector the confidence to also invest and that has been a major sustaining factor to our ability to ride out the mining downturn with some robustness.

So as we say adieu to 2016 – we have to do so with some mixed feelings. We have seen some green shoots but other sectors such as the office sector are certainly feeling the pinch.

But as they say – no pain – no gain?

And so maybe these tough times in the office sector will spur some other investment wave?

Regardless, I am looking forward to 2017 and the ongoing evolution of Perth!

To all our readers and their families – may you celebrate the conclusion of 2016 with great gusto! Regards the team at PropertyESP.

Fremantle’s vision continues to grow

Fremantle has been in the news lately with the recent announcement of the $250 million Kings Square project now being a physical reality.

But after Samantha Reece attended the official launch of the “Oval to the Ocean” function, which was hosted by the City last night, we have come to the realisation that Fremantle is setting its sights even further afield.

In the last two years the City has attracted $500 million of investment including the Heirloom apartments ($60 million), Knutsford St apartments ($18 million), Atwell Arcade ($7 million), MSC Building ($8 million) and Quest apartments ($15 million).

But with the Ovation of the Seas docking yesterday for the first time in the Fremantle Harbour, the Council is now keen to refurbish the outdated passenger terminal and create an attractive entrance for visitors into the town centre.

Currently being used as a car park for imported vehicles, the City has recognised that they are wasting prime real estate within South Quay and have set 2029 as its date to celebrate not only the bicentenary of the establishment of the Swan Colony but also the launch of this new precinct.

Predicting private investment of $3.5 billion and 3700 new jobs, the City is both ambitious and proactive for South Quay and in this climate, that is the ideal mix.

In conjunction the City has prioritised the Fremantle Oval and Hospital precinct and a master plan is under way with the intent to host sporting and community events all year round, as well as establish a WAFL Centre for Excellence.

It appears that Mayor Brad Pettitt and his Council are seeking to restore Fremantle to its heyday of the Americas Cup and quite frankly, it is long overdue.

The City has been strategic with approving apartments to house another 4000 residents within its CBD and this will increase its discretionary spend from $11 million to $70 million and this will only bolster the local businesses as well as economic prosperity.

This City not only has a vision – but it is actually fulfilling it – and for that we wish to commend the staff and Councillors. It takes guts and determination to move a community forward with such momentum and the City of Fremantle is demonstrating that in the right climate anything is possible.

If you are wanting more information than contact the City directly – they have made it quite clear that they are open for business and this proactive approach is very refreshing indeed!