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About 18 months ago, something happened that changed the dynamics of buying an investment property in Perth.
Blogger: Jarrad Mahon, Investors Edge Real Estate
R-codes were changed which allowed many to receive multiple dwelling approval for apartments to be obtained on properties zoned R30 or above, but only if they meet certain criteria such as being close to amenities and transport.
Almost immediately, the smart investors in our circles started buying these kinds of properties up at original prices from sellers whose agents didn't understand the hidden potential. This resulted in many buyers obtaining approval for between 6 and 8 apartments on sites that were formerly zoned for only a duplex or triplex.
These investors who got in early were seeing returns of more than 40% and some made even more on their investments as the prices uplifted.
As more and more real estate brokers and agents finally started advising their clients that they could price this potential in, prices rose to a point where even those who didn't know why prices were uplifting knew enough to ask for more money.
At this point, our buyer's agents aren't finding as many bargains on investment properties in because most people now know the true value of their property. However, those who can afford to develop at this higher density are now paying a lot higher price for investment properties that are in the inner Perth area, less than 15 km from the CBD and close to transport and amenities such as cafe strips.
The effect is that we will soon see a lot more apartments in suburbs like Victoria Park, Cloverdale and Rivervale. Our buyer's agents have helped many Perth area investors buy in those suburbs over the last 12 months., ,
While these apartments are successful as investment properties now, Perth buyers weren't ready for apartments in these areas as little as 5 years ago. Perth buyers used to favour a villa over an apartment any day, but house prices are rising and Australians have less time for gardening.
As a result, apartments are now making great investment properties as many Perth residents are fully embracing apartment living. However, unlike the high-density monstrosities we are seeing in the eastern states, we in the Perth area prefer apartments in groups of 12 or less units. This minimises the common area and keeps the strata fees low.
The End Result
Obviously, a great deal only lasts until everyone finds out about it. The end result has been that properties zoned R30 and above that qualify for apartment development of 6 or more units are rising to a point where those who only want to develop a lower-density duplex or triplex can't afford to pay for them because they are being priced out of any chance to make a profit.
That means that these investors are now having to look in outer areas where villas are still in favour over apartments.
The Small Investor: What it Means to You
For the smaller investor who can't afford to develop properties with 6-8 apartments, there is still plenty of good news. The outer areas are still great for developing lower-density properties such as a duplex or a triplex.
For small investors who didn’t plan on developing apartments, you will receive benefit from investing in near new property in these lifestyle locations as they will begin to transform at a greater rate. Property prices are rising but interest rates are still low. Those who want to invest in new homes may find a favourable market soon—thanks to the new budget which increased the First Home Owners Grant from $7,000 to $10,000 for buying new.
The Large Investor: What it Means to You
If you can afford the higher property prices and the amount of money it takes to develop properties with larger density, there are still plenty of good investment properties in the inner Perth areas. You may have to pay more and it may be tougher to find a bargain, but there are still a few out there.
About Jarrad Mahon
Jarrad is the director of Investors Edge Real Estate.
Jarrad thrives on helping hundreds of investors every year formulate a clear plan to get the best returns from their Perth property. This requires a carefully thought out and innovative approach to understand your situation and help you to make the right move at the right time.
His renowned personalised "Property Success Plan" takes you step by step through how to make thousands of extra dollars and avoid the costly mistakes that Jarrad has learnt the hard way by investing himself all around Australia.
Over the last five years he has used his engineering background to build and refine a unique property management, sales & investing process that is sure to impress while getting you real results.
A sales and marketing expert, Jarrad combines the latest technology and cutting edge sales strategies to sell homes across the whole of Perth metro area.