Perth still has $400 million of redevelopment in the pipeline

Samantha Reece recently attended the Property Education Foundation’s (PEF) Retail briefing with representatives from Westfield (Kate Holsgrove), Perron Group (Andrew Byars) and Vicinity (Andrew Hall).

And while Carousel, Cockburn Central and Morley Galleria are all poised for redevelopment – Perth CBD is also looking to undergo a major spruce up.

Jim Tsagalis, Director Lease Equity outlined a number of upcoming projects that would transform the City of Perth including Forrest Chase’s $100 million face lift and QVI and Raine Square’s estimated $300 million in remodelling.

Additional projects such as the addition of around 1,000 sqm at 480 Hay Street incorporating the 356 room Westin Hotel, would also inject another layer of food and beverage.

Jim stated that these developments coupled with Yagan Square and Elizabeth Quay would revolutionise the way Perth interacted with its national and international counterparts.

As he said – these extra projects will now create a night economy – and that is a great balance to what otherwise is a relatively 9am-5pm City.

 

There is no doubt that Perth can still feel somewhat buoyant as the capital investment that is still being injected into commercial fit-outs and retail expansion can only have a positive effect.  And that is certainly worth celebrating!

A new look at the Mandurah Train Line TODs … the apartment living options

Those of you who have been following the PropertyESP blog for a while know that we have an appetite for TODs (transit-oriented developments) because of their economic impact.

So we decided to take a look at two TODs on the Mandurah train line, in Cockburn Central and in Wellard.

Wellard is the site of Perth’s first Mandurah line TOD, but like nearby suburbs it started with a focus on houses.

The Cockburn Central TOD however was established with apartments and home units in mind, and the first home units came onto the market in 2008. Wellard followed suit with its first units sold in 2012.

Home units are the more popular accounting for 72% of the units sold from 2008 onwards. The bulk of the other options were apartment houses.

What’s the difference between the two?  Home units are completely self-contained and a better standard than flats (which are rarely built these days).

Apartment houses on the other hand, are considered more luxurious and have more amenities.

Two bedroom apartments and home units dominate the Cockburn Central and Wellard TODs… with 40% of sales since 2008 being of 2 bed-2 bath-1 car park and 25% being 2 bed-1 bath-1 car park.  17% were 1 bed apartments and home units.

The dominance of the single car park is a reflection of the property being close to the train line, with good access to the City, but may not reflect the reality of living 10-14km from the beach.  In fact, more than 80% of the properties sold had room for only one car.

But with more train stations coming online, we can expect to see more TODs and more developments that will take full advantage of these transit links.

If you are interested in the full results of the sales analysis for Wellard and Cockburn then feel free to contact Samantha Reece on 0452 067 117.

PropertyESP we make sense of property.

House Price Slump? … The Devil is in the Detail

Just before Christmas, there was an article discussing how house prices had slumped and there was an increasing number of home owners who were selling their property for lower prices than they’d bought them for.  In a market where the median house price is declining, there is an increased likelihood of this happening, however the majority of sellers would have been making a profit and, as the same article noted, some are making quite substantial profits.

At PropertyESP, we like to delve into the detail to gain real insights.

Last year we posted blogs on residential sales trends in East Perth (analyzing 22 years of sales), Ellenbrook (23 years), the suburbs surrounding the Cockburn TOD (23 years) and the suburbs surrounding Fiona Stanley Hospital (12 years).

When we look at that volume of data, one of the most interesting pieces of analysis is to look at resales – when a property has been sold multiple times in the time period.  This gives us the true value of price trends in an area.

Before we do that, we need to weed out the dodgy data or analyse them separately.  There’s always a number of sales where the increase or decrease in sale price is influenced by other factors (e.g. renovation, divorce, subdivision) so that the sale is not a reflection of the true market value.  When analysing resales, it’s important that the property is essentially the same each time it is sold (PS no other company weeds out this data before doing the analysis).

Having flagged those properties and removed them from the data, our analysis identified a number of interesting trends in resales.

Firstly, the vast majority of properties increased in sale price between sales.  The increase in price ranged from 89.3% for apartment houses in East Perth that were resold between 1992 and 2014 through to 97.3% for houses in Leeming that were resold between January 2003 and June 2015.

Jan 2016 graph 1

Secondly, for most of the markets reviewed, the properties that declined in sale price tended to have been held for a shorter period of time between sales and the properties that had increased in sale price tended to have been held for a longer period of time between sales (for ease of reading the chart, we’ve removed the average time between sales for properties that did not change price between sales).

Jan 2016 graph 2

When we looked at this data across all of the suburbs, we noticed that there was a magic number of 8 years.  Properties that were held for 8 or more years between sales increased in sale price; none declined in price.  In contrast, 8.3% of properties that were held for just up to 5 years between sales, declined in sale price.

Jan 2016 graph 3

And this 8 year point held true in all of the markets we examined and, in some markets, was actually lower – 7 and 6 years.

This makes sense in the context of the generally increasing long term residential property prices across each of the markets reviewed, but with the occasional decline from one year to the next.

Jan 2016 graph 4

However, this 8+ year sweet spot will only hold true in the context of the trends observed in the Perth residential property market.  If those trends change, for example long term instability or decline in prices, the vendors would need to hold on longer between sales, to achieve growth in sales prices.

And there are other more localised factors that can also affect the time required to achieve growth in sales prices.  Small area speculation (such as the impact of the mining boom and decline on Pilbara property prices); a change in buyer preferences for house type (such as a change in preference from Federation houses to modern houses which reduces the premium price certain styles of property will attract in a local area) and the introduction or removal of key employment generating infrastructure (such as we recently blogged about on the impact of Fiona Stanley Hospital) will all impact on the time it takes for a property to grow in value.

But the good news is that the market is not as dire as you may first assume!

And as always – you can’t speak broadly about the Perth market as some analysts do, because it is quite clear that once you get into the nitty gritty there are some good news story to be told!

PropertyESP we make sense of property!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan 2016 graph 1

Retail focuses on personal touch

A slight deviation from property this week, as I write this post as a judge for the 2015 Property Council Retail Awards.

For the past three years I have judged these retail awards and this year presented some great cases of Shopping Centres, that thought outside of the square.

In particular Livingston Marketplace and Stockland Baldivis Shopping Centres demonstrated that a personal touch still goes a long way to creating tangible results.

Livingston mixed a social media focus with in-store shopping, through their “Make a wish” campaign. This marketing initiative provided a prize pool and shoppers were encouraged to visit the centre and photograph the items that they would spend the prize pool on. Then in order to enter the competition, they posted the photos of their wish list on the Centre’s Facebook page.

This programme was very successful and what was interesting, was that a number of shoppers actually returned to the Centre on several occasions in order to “tweak” their wish list.

Anyone understanding the psyche of female shoppers would have to feel confident that those that didn’t win the prize pool would still ultimately buy something (if not all of the items) off the wish list and hence this would trigger increased spending (which it did!).

The Stockland campaign for Baldivis was an entirely different offering.

Working collaboratively with the local Baldivis community, Baldivis Shopping Centre sponsored two key services, The Children’s Forest and Baldivis Fire Fighting Brigade, as part of their marketing initiatives.

The company then built on this further by creating two story books about these not for profit agencies, in conjunction with the local schools.

Both these books were printed and distributed as a means of creating a local story which kids and parents could relate to.

This truly altruistic approach was very refreshing, in what is otherwise a very commercial environment.

Too often, as large companies, we forget to tantalise our customers or even be seen as good corporate citizens and as such these two submissions were literally a breath of fresh air.

As we approach 2016 I urge you to think about your marketing efforts for the forthcoming 12 months and generate something that your staff can be proud of and which may also create a degree of legacy!

Rental rates on the rise

So as PropertyESP was looking at various suburbs in Perth, we saw a growing trend of rental occupancy, from the 2001 to 2011 census.

This made us wonder, was this movement confined to just these suburbs, or was it in fact occurring across the whole of Perth?

There is no doubt that we had been looking at modern suburbs such as East Perth, Cockburn Central and Ellenbrook when we discovered this increasing rate of rental occupancy, and as such we thought that the age of a suburb, maybe had some influence over this trend.

So we decided to pull some random suburbs dating from 1950 through to 2000’s to see if there was in fact any indicators just waiting to be revealed. These suburbs included Booragoon, Innaloo, Dianella, Bullcreek, Aubin Grove and Banksia Grove, to name just a few (20 in total).

What we found was that this random sample of suburbs all experienced an increase in rental occupancies from 2001-2011 census (see table 1). Some eras such as the 1980’s and 1990’s jumped from 10% rentals to 16% during this ten year period, while the majority averaged 3-4% growth.

rental increases

Table 1

Could it be possible that these 1980/90’s homes had been vacated by their baby boomer owners as they upgraded, and as such were now being treated as an investment?

In conjunction, with Y Gen being somewhat transient, this was another possible contributor for the increasing rental occupancies across the board.

And of course there are hotspots, such as South Perth, where the rental market represents a much larger proportion ie 46% and with strong development occurring in that locale, I believe this number will only grow.

But one thing is for certain, rental occupancy is on the rise and this shows once again that the dynamics of Perth’s property cycle is continuing to evolve and that is a good thing.

PropertyESP is a company that likes to get into the nitty gritty of sales data. If you are wanting a full and detailed snapshot of sales for an area, then contact PropertyESP today to find out more!

Car bays still part of the equation

So PropertyESP has just finished taking a look at car ownership for the Cockburn/Atwell/Success and Ellenbrook areas, after conducting our recent TOD study (see last blog J).

We were interested to see, if a Transit Orientated Development (TOD) did in fact impact on car ownership and secondly we wanted to understand, just what were people’s expectations, when it came to car bays – especially for the built form.

What we found was that Cockburn did in fact have a larger percentage of one cars (36.2% compared to average 27% for the other 3 suburbs).

But second car ownership was still high in Cockburn Central, with the population recording 41%, which was surpassed by Atwell at 52.8%.

And then we saw Ellenbrook, Success and Atwell all showing high signs of third car ownership (kids getting their licence/P Plates) at an average of 13%.

The fact is, Perth’s train system has a core spine running south and north but what it seems to be lacking is interconnectedness. While residents can get to work and walk to the shops etc, they can’t catch transport for socialising – such as grabbing a beer in Fremantle.

I believe that at this stage car bays are still an important consideration, and it appears to work on a 1:1 ratio as per the number of driving persons residing in the home.

But developers can also be effective in creating change.

This is, we believe, the era of innovation for Perth after all.

Developers could work collaboratively with shopping centres and allow residents to park in these car bays during night time, when they are not in use (this is particularly so for TOD’s who generally have a retail component).

Or alternatively developments could provide 2-3 apartment pool cars, which people can rent at a nominal fee. Similar to the bike pools, you now see in the City.

These are the changes that we now need to think about. But one thing we are confident about, is that the first developer who makes transport a necessity for their developments, will in fact be at the fore.

Just as Satterley led the way by providing schools and shopping centres within his estates at an early stage, so too will the developer, who now makes transport one of its essential criteria.

We want there to be less reliance on cars and for that to happen we have to supply solutions – and TOD’s and transport amenity are just one part of the answer.

We hope that this has given you something to think about – and maybe stimulated some creative brainstorming to boot!

PropertyESP is a research company – that makes sense of property. We get into the nitty gritty which allows for effective decision making, and most importantly innovation.

TOD’s offer real value

There has been much conjecture about Perth’s transport system and hot debate about the importance of TOD’s and even light rail.

But a recent study we just completed in fact spells out quite clearly that TOD’s do provide a capital advantage to neighbouring suburbs and their properties.

Our study analysed 20 years of sales for Success/Atwell and Cockburn Central in comparison to Ellenbrook in the north (totalling 24,386 sales from 1994-2014).

Both these locales were prospering areas and also offered extensive retail space.

As can be seen by graph 1, house prices were on par for all suburbs and demonstrated steady growth until 2007, when the TOD at Cockburn Central was introduced – and this is when we saw prices begin to diverge.

house sale price TOD
Graph 1

The same can also be said for land sales as well (graph 2).

vacant lot sales TOD
Graph 2

In conjunction from 2001 – 2011 we saw an increase in professionals and managers in Atwell and Success, unlike their counterpart suburb Ellenbrook.

This is a trend that we have seen with other TOD based suburbs including East Perth.

When you see the economic gains that are clearly linked to a TOD it demonstrates why developers and Local Governments should be lobbying State and Federal Governments for more transport networks.

I believe that TOD’s and transport linkages are vital to Perth’s ongoing success and while there may be arguments back and forth about who will fund these, it is quite clear that there are real gains to be made from all parties, if you actually commit to this investment.

PropertyESP is presenting the full research findings at the National Housing Conference in October – but if you can’t wait that long, then call us today for a private briefing – I can assure you – the numbers will amaze you!

PropertyESP can be contacted on 0452 067 117 or info@propertyesp.com.au.