2016: A year of opportunity for astute property buyers?
While the overall property market is expected to remain subdued, there will continue to be 'breakout' suburbs where the median house price will jump by double digit figures.
Blogger: Shane Kempton, CEO, Professionals Real Estate Group
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Certain 'breakout' areas are not necessarily expensive but, because of improving infrastructure and buyer activity, they boom in price relative to the overall Perth market.
A good example during 2015 was Pinjarra, where the median house price surged by 15.4 per cent to $360,000.
Another breakout area was Midvale, where the median house price jumped by 12.5 per cent to $405,000 during the past year.
Over the coming year there will continue to be opportunities for astute property buyers to achieve significant wealth creation in the Western Australian property market, despite the fact that house prices are beginning to stabilise.
Even in a more stable real estate market, there will be a number of suburbs that will continue to achieve higher than average levels of capital growth. The main challenge for investors as well as first home buyers wanting to achieve high levels of capital growth is to find suburbs that are about to boom.
With experience this can be done and your search should start by identifying the truly undervalued properties. An undervalued house is not the one across the road that will cost $30,000 less than your place because it needs rewiring and a new roof.
The litmus test is sustainability – almost any property, anywhere will increase in value in a rising market as has been the case for most properties in Western Australia over the past five years. However, only a small handful of properties locations will actually hold their value beyond the initial growth and heightened demand.
This capital growth should be the primary goal. A potential to grow in value in the short to medium term (and for property, that’s three to seven years) and outstrip the wider market’s growth pattern.
As investors will begin to reap the rewards when you can distinguish between a “one hit wonder” and a true “sleeping beauty.” Certain factors have to be changing within the identified area, surrounding suburbs and wider marketplace.
One of the best ways to identify undervalued pockets is to watch which areas investors and first and second home buyers begin moving into once prices in the immediately adjoining prime areas go beyond their reach.
Another good tip is to find suburbs that have underperformed compared to their long-term average price growth rate. It is important to remember that house prices do not move in a uniform rate across the Perth metropolitan area.
Finally, homebuyers should look for new infrastructure projects that might boost long-term property values in a suburb.
For example, the new Perth stadium combined with other nearby infrastructure projects is expected to give property values in Burswood a major boost moving forward.
Rockingham is another suburb primed for strong capital growth due to major new investment in the foreshore area, as well as the expansion of naval facilities in the area.
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