Perth – 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.

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!

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.

Car parks vs infill (the debate continues)

Samantha Reece attended the recent Committee for Perth luncheon where Dr Julian Bolleter of Australian Urban Design Research Centre (AUDRC) tested the idea of finding room for density.

Dr Bolleter stated that from 2001 – 2010 Perth had seen the clearance of 351 hectares of land to make way for greenfields development, something that many will argue is simply not sustainable.

But Dr Bolleter provided some other alternatives for accommodating our growing population, which really were quite eye opening.

As he stated, 20% of the Perth suburban core are backyards which equates to 132sqm/person. In the UK this figure is 75sqm/person. If the Perth suburban core was to reduce our backyards to 75sqm/person we could accommodate 115,000 new infill homes.

Dr Bolleter then spoke about the fact that 12% of the Perth suburban core is asphalt, which represents 78sqm/person. These represent car parks and the like. In Manhattan this ratio is 9sqm/person. If Perth was just to reduce this ratio to 64sqm/person than this could accommodate 203,000 new infill dwellings.

Freeway reserves represent 20sqm/person and if we could reduce this to 16sqm/person this would accommodate 50,000 new dwellings. And as Dr Bolleter stated, if we made these light industrial areas, this could generate 95,000 new jobs and allow for the development of affordable housing where people can work and live in the one precinct.

And finally Dr Bolleter examined the golf courses. At present there is 14sqm/person of golf courses in the core suburban area but when you look at the Mt Lawley golf course, its membership base of 1000 represents 900sqm/member. With golf club memberships declining, and a golf course in the USA shutting its doors every 48 hours, this is certainly something that could be considered for density.

As Dr Bolleter stated, if we could reduce the golf course ration to 7sqm/person this alone would accommodate another 86,000 infill dwellings.

At the end of the day, it is obvious that there are opportunities to accommodate more houses and people in our city, we just need to be prepared to think outside the box and we were very grateful for Dr Bolleter’s insights and the chance to change our paradigm of thought!

Whilst some of Dr Bolleter’s suggestions would impact on Perth’s declining green space and tree coverage, an already acknowledged issue, rethinking our use of space could open up residential and employment opportunities … and create the demand needed for improved public transport – something that is also essential to Perth’s growth.

What do you think about this concept?

When urban density becomes desirable

Some words of wisdom from Beth Dungey – our research guru! happy reading!

The Sydney lobby group Urban Taskforce and McCrindle Research have developed the Urban Living Index using data sourced from the Australian Bureau of Statistics to measure the liveability of Sydney’s suburbs.

The Urban Living Index measures liveability using the five areas of affordability, community, employability, amenity and accessibility.

The Index found a link between density and liveability with some of Sydney’s densest suburbs being amongst its most liveable.

Urban density had a bad name in years gone by.

For many countries, in the post war years, urban density (flats and apartments) was associated with social housing and the need to quickly and economically house some of the less affluent members of our community.

Those areas didn’t always have the community, employability, amenity and accessibility features that create great places to live.

As a result, urban density came to be associated with urban wastelands, crime and community unrest. Lack of employment nearby reduced opportunities for the community to improve, compounding the level of disadvantage in the area.

At the same time, the more affluent members of our community fled to the suburbs, leading to the increased suburbanisation we see today in many cities around the world.

Today, with great place planning, urban areas are making a comeback.

We have TODs – transit oriented developments – where places are designed around walkability and non-car transport alternatives; a range of facilities and amenities encouraging people to live, work and play close to home; and diverse property uses to facilitate a liveable community.

Even where the car is still king, urban density today will include a mix of residential and commercial property uses, which encourage people into the community in the daytime (to work) as well as after hours (to live and play).

Increases in the working and residential population of an area encourages retail, restaurants and cafes, and service businesses to open up in the area. These create amenity for the residents and workers, create even more jobs, improve the diversity of people in the area and help to create a dynamic community.

Today, urban density is becoming more desirable as the liveability of these areas increases. And this is certainly the case for Perth as we enter the next stage of property evolution!