#metronet – PropertyESP

Appetite for additional car bays prevalent

Recent research conducted by WA Apartment Advocacy has shown that while 70% of the 174 respondents were happy with their allocated parking bays in their apartment development, an astonishing 50% would be prepared pay an additional $25,000 for another car space.

Of the 30% who were not happy with the number of allocated parking bays, the majority of these were residents with just one car bay.

We have often heard the mantra from developers that they would be happy to provide additional bays if buyers were prepared to pay for it and this data now suggests that the appetite for extra parking is in fact prevalent.

This largely stems from the fact that 50% of the respondents were still reliant on their vehicles for work, shopping and leisure and while the Metronet will alleviate this situation, it is still somewhat in the distant future.

Interestingly 15% of respondents who did live close to public transport were prepared to forfeit their car bay and save the $25,000 on their apartment price.

The data also showed that 30% of the respondents were unhappy with the allocation of visitor parking in their development, with many citing that residents were using these bays as an overflow measure.

For some time now Local and State Governments have been seeking to lower the ratio of car bays to apartments and yet the research does demonstrate that this planning move is somewhat premature.

The research also begs the question as to why developers are not seeking to sell car bays as an ancillary aspect to the apartment itself.

Further improvements that residents were seeking to their parking woes included electric car charging points, dedicated car washing/cleaning bays, larger parking spots and greater security.

This research – if nothing else – clearly shows that developers need to be researching their buyer’s needs before making any assumptions. This will undeniably assist with their own design process as well as overcoming imposts by planning regulators.

If you are interested in hearing more about WA Apartment Advocacy and its research results register at www.waaa.net.au.

Build to Rent is one (very viable) option for affordability

Samantha Reece, Director of PropertyESP recently attended the Property Council Build to Rent (BTR) breakfast and found the session so interesting, she thought she would share.

BTR is a new term which has only recently crept into WA’s vocabulary, but in the USA and UK this is a housing model that has begun to gain real traction.

In the USA the BTR sector is the second largest asset class. The listed USA BTR REIT sector alone has a combined market capitalisation of $144 billion, over $50 billion larger than the entire ASX REIT sector.

In the UK, (perhaps the market most similar to Australia in terms of cultural views on renting versus buying) BTR has only existed for about 6 years, however with the support of government investment funds, incentives and concessions, has grown rapidly from a standing start to over 80,000 purpose BTR apartments.

And here is the key – Government investment.

These models have been successful because it is a JV between private and public sector with investment from institutions. In turn tenants can move into these apartments/homes and secure a ten year lease at CPI giving them security of tenure.

What is also interesting to note, is that the BTR model can be applied just as well to greenfields as built form.

With this model holding $2.1 trillion in real estate value world-wide it has become a preferred investment model because of its liquidity, relatively low capital expenditures (each apartment has its own building manager) and the risk adjusted returns.

But in order for this to get off the ground in WA we firstly need a favourable regulatory environment as well as tax ratings with banks and government then contributing 80% of the funds.

Sound impossible? Well obviously it is not because Australians are investing a billion dollars in BTR in the USA and UK as we speak.

For too long we have been talking about affordability and now we are seeing the ramifications for not taking more urgent action.

Housing Choice Australia just recently released results that showed 806,100 households in Australia were seeking reoccurring rent assistance. A further 1.3 million people can’t afford to purchase a property and this is expected to grow to 1.7 million.

In contrast there has been an increase in just 4.5% of social housing stock.

The BTR model defines social housing as in fact economic infrastructure.

You build houses to accommodate people who need to work in these areas such as nurses, police, teachers and the like. The fact that they are housed in close proximity to their workplaces reduces the need for other infrastructure such as public transport and roads.

In this instance social housing is seen as long term investment for the benefit of many generations. And that is essential. Based on current trends it is likely that my own children will struggle to own their own homes in years to come.

National Developer Mirvac to their credit are already trialling this model in the East Coast and it is the bold, that in fact will create a new housing choice in Australia and in return – reap the gains.

There are certainly a number of disruptors currently in the property arena and the next five years are going to be interesting times.

Let’s hope that BTR is in that mix.

WA has every reason to be feeling confident

Samantha Reece, PropertyESP Director recently spoke at the Perth Property Expo about why the West was the best investment option nationwide.

In preparation for her dialogue, Samantha undertook her usual research and found some very interesting facts:

In the 2016/17 year iron ore revenue from WA increased by 31% to $67.3 billion
In the same period gold broke the 200 mark, which hasn’t occurred since 2000/2001 – selling 205 tonnes
Tourism grew by 1.3%
Building approvals increased by 27% from just August to September 2017
Unemployment rate fell to 5.7% on par with the nations average
Consumer confidence has reached an all-time three year high
And 30% of the population believed that the economy would strengthen in the next year while 41% believed it would stay the same

This coupled with the avalanche of new infrastructure, about to descend upon Perth including:

$65 million Yagan Square
$400 million redevelopment of QV1, Forrest Chase and Raine Square
$1.6 billion Perth stadium
$500 million Canning City Centre and Carousel expansion
$2.65 billion Metronet
$200 million Murdoch medical precinct
$235 million Canning Hwy/Bridge redevelopment

And there is no doubt that that Perth is about to transform from a City, into a cosmopolitan capital.

Certainly in ten years Perth will be entirely different City and its evolution will create more opportunity and diversity.

We however, need to be aware of just how much WA has got going in its favour – and while it can not compare to the 2011 boom time – it is certainly showing signs that are extremely positive – and it is this good news, that we should be celebrating publicly! Spread the word!

Where does suburbia fit into the Perth equation?

PropertyESP recently attended the PIA State Conference which was aptly termed “Rocking the suburbs.”

Minister Rita Saffioti opened the conference and posed the question – does every suburb wish to be rocked and went on to explain that in the East, the focus in the 1990’s was all about the inner ring and that suburbs were seen nearly as a second class choice.

In contrast – Perth is the exact opposite – even some 27 years on.

Our population growth certainly has been part of the reason for this evolution with some residents happy to travel over an hour into the City for work while living in our burgeoning outer suburbs. This is true regardless of age.

But what is evident in the Eastern States, is that now, some three decades later, the inner city is reserved solely for the wealthy.

Interestingly 83% of lawyers work in our CBD, 62% engineers, 39% white collar professionals and 26% health workers – however this is not reflected in their choice of housing suburb.

This is partially because house sizes have not declined drastically and yet the range of housing choices in the CBD continues to cater for 1-2 person households.

The Minister therefore believes that we will see a shift whereby suburbia will become more like business districts and the City will evolve into an amenity district. This certainly aligns with their Metronet model.

At PropertyESP we believe that Perth will follow the same pattern as the East, with the CBD becoming a desired location over the next decade. But first we need to see greater choice of housing and added amenities such as schools in order to cater to a broader cross section of the community.

But on the tail of that, there are many suburbs that were established in the 1970’s to 90’s that really do lack any sense of pulse and hence in order to retain their residents, their Councils will also need to be progressive in the provision of services and development of community spirit.

There is no doubt that Perth is in a flux of change and as a result of significant investment in the inner CBD and key suburban shopping centres, we will see the rise of preferred suburbs over the next 5-10 years. But that also means that there will be many suburbs that languish.

The question is, are the LGA’s prepared to rock the boat and their suburbs and evolve with WA’s changing needs?

Perth’s housing supply falls short

The question on everyone’s lips of late has been “Are we being oversupplied with apartments?” but recent research from the Australian Housing and Urban Research Institute (AHURI) and the Bankwest Curtin Economics Centre (BCEC), has shown that in fact increases in housing stock in Perth have failed to match population growth.

The study – Housing supply responsiveness in Australia: distribution, drivers and institutional settings, led by Professor Rachel Ong, Deputy Director of BCEC, examines how well supply is keeping up with demand across Australia’s regions and capital cities.

And while the rest of Australia has been able to match demand – Perth has lagged behind.

The report also found that most of Perth’s housing was concentrated in the mid to high price segments.

While typically construction of housing at the top end of the price scale tends to then allow for an increase in availability of affordable housing – this has not been evident in Perth.

It therefore appears that Perth is in fact in dire need of more apartments – but in the right locations.

The recent WA Apartment Advocacy research showed that renters were seeking locations that were close to their work as well as conveniences such as public transport, shops, gyms and restaurants. And while the Metronet will free up many opportunities for affordable housing along the train line – this also needs to be matched with services and facilities.

The fact is, we need more housing and we need affordable options and that is going to require creative thinking outside of the box. But either way – urgent action is needed!

Read more about this article and PropertyESP’s Samantha Reece’s comments in this weekend’s edition of the West Australian.

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)