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)

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

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.

How far will buyers travel?

We have been doing some number crunching for Debra Goostrey of the UDIA about how far buyers are typically prepared to travel, when seeking to purchase their next property.

This analysis is important, as I have often advised clients against advertising in State papers and focusing more on a localised marketing approach, which represents a better bang for your buck!

For this exercise we examined three greenfields locations including Baldivis, Ellenbrook and Byford.

Baldivis residents, we discovered, by far tended to move from somewhere else in Baldivis (31%).

In addition half of the buyers typically moved only 10kms when purchasing a new property. This means that they tended to move from Port Kennedy or Rockingham. The furthest buyers tended to travel was 20kms.

For the Byford locale, 20% of buyers moved from within this suburb, and then half of them moved 13kms, which was typically from Seville Grove and Armadale. The furthest they travelled was 17kms.

For Ellenbrook 34% moved from within this suburb, with half the buyers moving 15.4km, which was typically from the suburbs of Stratton and City of Swan. Again the furthest they travelled was 17kms.

Where the suburbs where more established eg Baldivis and Ellenbrook there was a higher migration within these suburbs, which tends to show that buyers in these outer lying suburbs tend to be loyal to their locale.

As you can see, it does provide substantial evidence that supply of greenfield lots is also an important part of Perth’s future growth.

This data was extracted from the 2011 ABS Census and then analysed by our team, and can be done for any suburb. So if you would like to explore your own buyer’s habits more, then contact PropertyESP and we will provide some real insights!

PropertyESP loves to research sales and property trends and then share the news through motivational speaker Samantha Reece. If you are looking for an interesting insight contact PropertyESP at 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.