Investors are returning to Western Australia’s property markets after stabilising property prices and strong rental returns provide strong buying opportunities.
According to award winning broker Rael Bricker, managing director of WA-based mortgage broker House + Home Loans, there hasn’t been a better time to buy in years.
“Investors are definitely back buying. They’ve worked out that the market has bottomed out and that from here on in it is a buyer’s market,” he says.
With new data revealing that a growing rental squeeze is gripping the state, local real estate is once again very alluring as an investment class, Mr Bricker says.
“Back in 2007 we had a massive spike in property prices – values rose by 46 per cent in just one year,
“Suddenly properties delivering rental returns of 5 per cent were delivering yields of just 2.5 or 3 per cent – so investors shied away. They couldn’t afford the shortfall,
“Now there is stability in the market and very strong rental demand off the back of the momentum in resources, with yields back up to 4.5 to 5 per cent.”
Median weekly rents in the Perth metropolitan area have jumped 8.1 per cent to $400 in the past year according to data from the Real Estate Institute of Western Australia.
Also an undersupply of properties is causing rental prices to rise, with the metropolitan vacancy rate shrinking to 2.3 per cent.
The latest figures from RP Data confirm that Perth property prices are stabilising. The city’s median price contracted just 4.6 per cent in the year ending February 2012 to $446,000, with a 0.8 per cent improvement over the most recent quarter.
“Generally at the moment I am seeing three types of investors. The first group is those buying to build, small-time developers. There are a lot of those around and this can be a good way to make a profit, if you know what you’re doing.
“The second type of investor is the seasoned investor, who has a number of properties under their belt, but is cash flow constrained – often from over-extending prior to the market correction. These investors are purchasing cash-positive properties in the northern parts of the state, predominantly mining towns. This can be a great way to help maintain a portfolio,” he says.
“And your third type is the traditional investor who is simply looking for property that is going to deliver strong capital growth over the 7 to 10 year property cycle.”
Regardless of your property strategy, Mr Bricker says it’s crucial to look at yield first and see if the numbers add up. And then look at the location, with a strong focus on infrastructure.