When numbers are misleading

When the new month rolls around, there’s a rush to comment on housing values and sales activity.

However we at PropertyESP have decided to outline why calling the market, a few days post month, can sometimes be somewhat rash.

Case in point, we recently took a look at Maylands sales for the month of May 2018 – reported as settled as of 30 June 2018. As can we seen – you would have been led to believe that there were 2 house sales and 3 unit sales.

Maylands sales 1 may 2018

But if in fact, you had decided to wait until 10th September to report on the settled sales for Maylands enacted in May, the data would be substantially different with 9 house sales (not 2) and 11 unit sales (not 3).  Furthermore average sales has risen for a house from $547,500 to $630,000 and fallen from $320,000 to $315,000 for a unit.

Maylands sales May 2018

Looking at settled house sales for May as at the end of each month from June 2018.

maylands sales 2 may 2018

And unit sales over the same period.

maylands sales 3 may 2018

So why do you have this variation in price between properties in suburbs within such a short time frame?  Because the median price depends on what is being sold – so if a number of one-bedroom flats are sold, then the median price will naturally be lower.  And the same for the sale of premium 4 bedroom homes, with regards to inflating the median price.

Data can change the entire forecast for an area – and that is why you have to make sure you are looking at the entire picture!

At PropertyESP we always like to look at the nitty gritty and longer term – plus we only report on WA.  And that is what makes us unique! Call Sam today on 0452 067 117 to talk property and see what we can reveal for your suburbs!

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700 is the magic number for Perth

A recent presentation by land guru Colin Keane, has shown that Perth could achieve optimal sales with just a few tweaks to market conditions.

There is no doubt that population growth is a major key to changing the dynamics of the Perth land market and as Colin stated, all we need is 1000 additional people per month in our state to allow us to achieve the optimal target of 700 land sales per month. And the good news is, we are already on our way, with Perth the only state to have grown nationally from overseas migration in the last 12 months with 16% uptake.

Currently selling 420 lots per month, Perth’s median price point of $224,000 is certainly the cheapest when you consider our other cities including Sydney ($468,000), Melbourne ($330,000) and South East QLD ($263,000). It is also interesting to note that Perth’s land prices are undervalued by approximately $6000 while Sydney is overpriced by $70,000 and Melbourne $42,000.

However when also considering Perth in contrast to our counterparts and our median lot size, we appear to be the smallest nationally with our median size 375sqm in contrast to Melbourne (400sqm), Sydney (447sqm) and SEQLD (436sqm).  And it is this sameness that is also depressing our market to a certain extent.  Variety after all is the spice of life!

For every 100 people employed in Perth we are assured 45 land sales and again this contrasts starkly to the East with the ratio in NSW 14:100 and Victoria 24:100.  However as Colin stated, if you consider Geelong which is the 2nd largest land market in the nation, the majority of its land sales growth has not necessarily come from employment, with this centre also reflecting an unemployment rate which is 18% above the state.

As Colin stated, of the extra 1000 people per month in WA, we only need 40% employed and the remaining 60% just need to choose Perth as their preferred home.  And with WA creating employment growth 30% above the forecast, all we need to do is become experts in tourism marketing!

As we see it at PropertyESP, Perth needs to start promoting our good news about mining investment ($64 billion committed), our affordable pricing and our great lifestyle and the rest will take care of itself!

We can certainly be the creators of our own destiny and this is very reassuring – because with a concerted effort we can achieve the magical number of 700 land sales per month!

If you like the proactive way that PropertyESP thinks – then you should chat to our team about how we can catalyst your sales with our marketing prowess.  Call Sam on 0452 067 117 for an insightful chat!

How a few streets can make a big difference to property values

As always, keen to see what is happening in the Perth apartment market, PropertyESP recently took a look at settled sales for the East Perth area from 2015-2018.

Looking just at apartment houses, apartment units and penthouses we found that the East Perth market was showing signs of price recovery across the board.

east perth graph 1 2018

But when we broke East Perth into precincts we found that Wellington Square compared to Claisebrook and the remainder of East Perth, definitely demonstrated a price difference.

east perth graph 2 2018

And this was evident whether talking about apartment houses, units or penthouses or even 1, 2 or 3 bedrooms.

east perth graph 3 2018

east perth graph 4 2018

Who would have known?

It is quite evident that while sales vary across suburbs they can also do so within suburbs and hence before you purchase land for development it really is best to check your facts.  At the end of the day it can play a major factor in your pricing and profit and hence it is essential to know how the sums add up!

If you are seeking that level of detail then contact Sam at PropertyESP because we are all about drilling down into the nitty gritty! And we are the only company in Australia that provides this kind of insight!

Women are taking over the world (did you get the memo?)

After a number of recent events including International Womens’ Day, PropertyESP Director Samantha Reece thought she would share some insights into how women are forging ahead with property ownership.

“Westpac’s annual Home Ownership Report recently revealed that women are overtaking men when it comes to home ownership.

A survey of more than 1,000 Australian home owners and first-home buyers found that women are ahead of men in most categories:

  • more women have bought a home to live in (women 28 per cent of survey respondents compared with men 20 per cent)
  • more women have bought an investment property (16 per cent compared with men 13 per cent)
  • more women are renovating (29 per cent compared with men 27 per cent)
  • and more women are selling a property (17 per cent compared with men 14 per cent).

The report also found that more women than men ‘strongly believe’ that ‘owning your own home is a reflection of your success in life’ (up 26 per cent on last year) and that ‘property is a pathway to wealth’ (up 10 per cent on last year).

Female first-home buyers were twice as likely as men to consider good investment potential in a home as essential (35 per cent vs men 18 per cent), and were also twice as likely to consider buying an investment property in the next five years (22 per cent vs men 11 per cent).

Overall, 71 per cent of women are ‘considering housing actions in the next five years’, as opposed to 61 per cent of men.

And data from the ATO shows the number of female taxpayers receiving rent has risen from just under 14 per cent in 2010-11 to 15.4 per cent in 2014-15. By comparison, over that period men only saw an increase from 14.7 per cent to 15.9 per cent. The ATO data also indicates that approximately 47 per cent of all investment properties are owned by women.

With an increase of 3000 females in the workforce in WA over the last quarter, it is evident that women are securing greater financial independence and hence making their own business decisions when it comes to property.  This is also affected by the fact that the average age of a woman who marries in WA is now 29 and the State recorded the highest proportion of divorces nationally at 48.3% in the 2016 census.

But more close to home, PropertyESP recently conducted research with buyers of the Stockland Completed Homes and found that women had a huge influence over the final purchase.  While the husbands took their wives to other houses that were cheaper and bigger – it was futile – because when these women inspected the Completed Homes, it was literally love at first sight!  There were also cases where the women sourced additional income from lenders and family in order to stretch their budgets and buy what they wanted!

These trends will ultimately have an influence over how a company markets and sells their properties – especially on a face to face level in the sales office.

The question is – are you ready for this new wave?”

Perth does offer apartment choice

PropertyESP just completed some research on behalf of the Property Council examining the number of 3+ bedroom apartments located in the Perth LGA.

Contrary to popular belief, PropertyESP actually identified 1135 sales of 3+ bedroom apartments from 2012-2017, with the bulk of these in East Perth (697).

But other locations including Crawley (134), Perth CBD (127) and West Perth (134) also reflected these larger apartments.

But what we also witnessed was the decline in sales for these larger apartments with 279 sales recorded in 2012 and just 95 in 2017.

It makes us wonder if this decline is due to these apartments being tightly held onto or alternatively a lack of supply?

Over 900 of these sales were also apartment houses in contrast to penthouses or home units and interestingly it was these apartments that reflected an increase in median price from $690,000 in 2012 to $860,000 in 2017.

On the other hand penthouses which were selling at a median price point of $1.7 million in 2012 are now selling at $1.5 million and home units (smaller complexes without lifts) which had started at a median price point of $534,000 in 2012 were priced at just $477,500 in 2017.

12 Jan blog

However, considering trends with baby boomers and the family sector, apartment developers will have to consider increasing the ratio of three bedrooms within the City, beyond a token gesture.

Data has shown that Perth is second to Sydney across the nation for the number of families residing in apartments.

Plus nationally only 5% of our seniors in fact choose a retirement village when looking to relocate out of their traditional family home.

Perth is evolving and people are choosing to reside in the City because of its strong employment base and vitality (as a result of improved infrastructure) and on that basis we need to reflect this in our ongoing housing options.

If you are seeking this kind of intelligence (and who wouldn’t?) then contact the team at PropertyESP.  We make sense of property.

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.

 

 

 

 

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?