Perth land prices most affordable nationwide – but lack of variety is our downfall

Samantha Reece, Director of PropertyESP recently attended the UDIA lunch with Colin Keane of Research 4 and then participated with the panel discussion alongside David Cresp (Urbis) and Gavin Hegney.

Certainly Colin’s presentation was somewhat telling of Perth’s current status for land sales.

While Perth peaked in 2013 with 1078 lot sales per calendar month.  In 2016 our underlying demand for land is now 637 lots per calendar month and actual sales are 478.

However there are a number of reasons why we are having this reduced success rate – and it is primarily to do with population.

First of all, Perth’s demand for land is driven predominantly by employment.  For every 100 people employed there is the direct correlation of 38 lot sales.  This ratio in Sydney is 17 lots to every 100 people and in Melbourne 26 lots.

To broaden our market we therefore need to consider a number of options – including net migration with emphasis on education, temporary work visas and holiday visas.

Nationally 56% of land sales are non-local demand.  In Perth it is 16%.  This means that 84% of our land purchasers are based locally.

Perth therefore needs to emphasise our market and attractive lifestyle in order to trigger interstate and foreign investors and certainly consideration needs to be given to delaying the State Government’s foreign buyer’s tax, as this could further reduce demand.

Tourism is also a key player with our land sales growth.

Nationally 50% of short term visas are for holidays – in WA our rate is 11%.  As Colin stated we need to grow our portfolio of tourism experiences and hence concepts such as gondolas connecting Elizabeth Quay and Kings Park no longer seem so farfetched.

Perth has well recognised tourism sites such as Rottnest Island, Kings Park, Elizabeth Quay and Swan Valley.  But now what we need to do is make these experiences deeper and more impressive so as to drive tourism spend to our state in preference to others.

Immigration also catalysts further population growth and so attracting students to WA for education purposes will undoubtedly attract their families.  The same can be said for immigration as a whole.

But there were two final gems of knowledge.

Firstly that WA has the cheapest land in the nation at an average price of $225,000 compared to Melbourne $272,000 and Sydney $423,000.

But while this is positive news, it is our stagnation in the small block sizes ie 450sqm that is killing the market and hence we also need variety of lot sizes to cater to all demographics.

And secondly, WA needs variety across a number of realms – our economic basis, our population and our supply of housing options.

Undoubtedly WA needs to grow its global handshake.

While Government has reduced the FHOG and other such stimulants, what its core focus should now be, is to attract and then retain people.

As such, while the Government may be initially focused on servicing WA in regards to Metronet etc, its top priority should be to work with private enterprise, on ways to boost WA and its profile.

Major events, stimulating tourism sites and golden education opportunities are the ingredients that will return WA to a stronger population market – and one that will help the economy overall.

Perth is experiencing a period of disruption – and that is going to definitely also going to affect the land sector.  The question is – are you prepared?

 

Flight to bigger apartments evident

The first poll research of its kind in WA, with 268 apartment residents (owner occupiers and renters) has shown a real appetite for larger apartments.

The WA Apartment Advocacy (WAAA) data has demonstrated that 35% of renters moved from a two bedroom and 26% from three bedroom properties into one (35%) and two (34%) bedroom apartments.  But asked what would they move into next, 48% said two bedroom and 38% indicated three bedroom properties.

This was mirrored by the owner occupiers as well, with 35% moving from a three bedroom property and 39% from a four bedroom into predominantly two bedroom apartments (64%). However, when thinking about their next move, 33% would move into a two bedroom and 53% into a three bedroom property.

The research demonstrates that the need for a third bedroom was driven by resident’s usage of the space in their apartments, with 61% of owner occupiers and 48% of renters, using a bedroom as a study or a study nook in their apartment.

For some time now, the WA apartment market has been focused on one and two bedroom apartments but this data gives food for thought to both developers and investors alike.

 

At PropertyESP we tend to concur with WAAA in that baby boomers should no longer be called downsizers but more aptly right sizers and up-stylers.

Why? Because these people have been typically living in their family home for 25 years and so what they are seeking is a spacious apartment with all the mod cons.

While apartment analysis to date has been focusing on what has been selling – this data tells us what the next market trend is.  Those that are wise will take note!

 

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.

scarborough

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

price per annum

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).

9 May blog 11x 2

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

11 april revised

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!

Renters seek more

The WA Apartment survey – the first of its kind in WA – recently interviewed 113 renters who have shown that while apartments are their preference, they are seeking more in terms of amenities and space.

The survey showed that 39% moved from a house into an apartment and went from 2-3 bedrooms to 1-2 bedrooms.

However when asked what they would choose next, while 73% said they would consider an apartment, their preferences were clearly for 2-3 bedrooms.  This linked to the fact that 20% were using a bedroom as a study/home office.

Convenience was also a major driver when choosing an apartment, with 91% of the renters in walking distance to public transport, 90% to cafes, 86% to a grocery shop and 84% to services such as hairdressers.

Renters also tended to look first for apartments in Perth, East Perth and West Perth before then expanding out to encompass Mt Lawley, South Perth, Highgate, Subiaco, Leederville and Northbridge.  This was because most renters wanted to have a direct route to work, with 86% stating the travel time to work influenced their decision when choosing an apartment.

84% also indicated that safety and security was a major influence in their renting decisions along with being able to lock up and leave, low maintenance and affordability (75% respectively).

However what was also interesting, was that while 44% had no prior experience living in an apartment, 82% would still recommend apartment living.

There is no doubt that apartment living is becoming an evolving trend for renters, but just like owner occupiers – bigger is better!

If you are keen to learn the full results of the WAAA survey (and guarantee your investment success) contact Samantha Reece on 0452 067 117.  You can be assured you won’t find this level of information anywhere else!

 

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:

10 March graph 1

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:

10 march graph 2

And this:

10 march graph 3

Or this:

10 March graph 4

Or even this:

10 march graph 5

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.

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!

Say what you want

For PropertyESP, the last couple of months have really highlighted the need to have a dialogue with the general community about what they do want to see, when it comes to infill in Perth.

After recently working with a progressive metropolitan council, we were able to reflect on their vision for their City centre and it was clear that, despite their expectations, what was being delivered by developers was not in alignment with their long term intent.

This led to a discussion where the Council admitted that while the vision was alive internally, it wasn’t publicly understood outside of the organisation.

And that led to the staff considering, just how do we sell the sizzle to our community and beyond?

Another example is Lumiere in South Perth.  This lengthy battle, which was started by a small group of residents, has finally resulted in a positive outcome for developer Edge.  However, the residents who opposed this development (which was originally at 29 storeys) are now facing the likelihood of 34 storeys instead.

It appears that with this negativity occurring towards infill, we are witnessing delivery of outcomes that in fact compromises all parties.  If Edge was permitted to proceed with the original plans, I am sure that this would have been the preferred outcome for all parties.

While it is beginning to become accepted that apartments will undeniably be a part of Perth’s future, what developers, local authorities and planners are failing to do is engage with the people who support this concept to determine what it is they want to see.  What are the design elements, materials, height, activation at the street level, etc. that are appropriate for their community?

When faced with a prejudice or ignorance, it is the role of leaders to inform, educate and encourage dialogue.  And PropertyESP believes that through this process outcomes that are acceptable to, even welcomed by, all parties can be achieved.  And while some may consider this risky, we consider this as just good community development.

If you would like to discuss this concept further than contact Samantha Reece on 0452 067 177 because she is all about meaningful dialogue!

Housing Affordability – Part 1

Median housing prices have been falling in recent quarters, but at PropertyESP we also like to look at the long term trends. We’ve recently been delving into median price trends in the Perth market since electronic recording of property sales data began … back in 1988.

As the Median Sales Prices chart shows, and as many of us who’ve been in the property industry for that long know, residential housing in Perth has undergone a long period of growth in sales prices. And that rise in prices for houses and units has been largely driven by a rise in the underlying value of land. Yes, there have been dips from time to time, but we’ve rarely seen more than two consecutive quarters of decline.

blog 8 median sales price perth graph 1

Source: REIWA. Note: Median prices for 1988-2010 were for the calendar year. From 2011 onwards, quarterly results are provided.

So anyone buying their house to “hold” (or live in) for a decent period of time will have seen the value of their property grow.

This brings us to the issue of housing affordability. We often hear tales in the media of how this steady growth in the price of housing has made property unaffordable for people entering the property market for the first time (first home buyers). Our research has also found that divorced couples having to split the proceeds of the sale of their house so each can buy a new property with only half the value of their investment are also affected. But just how unaffordable has residential housing become?

We decided to do a little back of the paper napkin maths to gain an insight into this.

The 5 yearly Census of Population and Housing provides us with our best measure of median household income per year. Overlaying that on the median sales price chart, we can see that household incomes (the vertical gold bars in the following chart) have also grown over time.

blog 8 household income and sales price

Source: REIWA; ABS Census of Population and Housing

But they haven’t grown as much as housing prices.

Back in 1991, when the median Perth household earned $29,484 per annum, that household could buy a house for $87,500. The median house cost 2.97 times the median household income.

Ten years later, in 2001, the median Perth household earned $46,774 per annum. That year, they could buy a house for $169,000. Whilst that’s a whopping 93% increase in the median house price over 10 years, their incomes have also increased fairly strongly (up 59%). That $169,000 house cost 3.61 times their income. And if they decided to buy a block of land, they could do so for $83,000 … which was 1.77 times their income.

It was the 2001-2006 period that saw property prices really take off. That five year period saw median house prices rise 142% to $410,000. Household incomes didn’t keep pace, with the median income only rising 21% to $56,472. In 2006, the median house price was 7.26 times the median household income.

By 2011, the growth in median prices had slowed, helped by a couple of dips in quarterly trends. And median income had risen 34% to $75,868. Residential property had become slightly more affordable, but it was still expensive compared to 1991. Median house prices were 6.06 times household income, units 5.25 times and vacant lots 3.10 times household income.

blog 8 median sales price

In conclusion: Housing has definitely become less affordable over time.

The next census is due in August 2016. Results won’t be available until the following year, but it will be interesting to see whether the quarterly downward trend continues and where household incomes sit. Will it still be as unaffordable as it was in 2011?

Stay tuned for our next blog post where we discuss key worker housing affordability – once again we will provide a worthy insight.

want to read more? visit http://www.propertyesp.com.au