State of Markets - WA January 2015
While some areas in the Western Australia market appear to have stabilised, the state is still underperforming.
Perth continues to lag behind Australia’s other capital cities in terms of property value growth.
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House values in the state still appear to be reeling from the recent mining downturn.
According to CoreLogic RP Data, in October, house values in Perth grew by 3.4 per cent, year-on-year. This modest figure will leave some underwhelmed, particularly when compared to the value growth of other capitals, like Sydney, where growth this year is valued at 13.1 per cent.
Not everyone can agree on WA’s performance, though, with Port Hedland currently a point of contention. At its peak, the area commanded rents of over $3,000 a week and asking prices in excess of $1.5 million, according to SQM Research.
The research house’s managing director, Louis Christopher, says that asking prices for houses in the area have fallen from $1,500,000 to $900,000.
Although this 40 per cent value loss is severe by any measure, Mr Christopher says that the worst may be over. SQM reports that vacancy rates in Port Hedland appear to have finally stabilised at six per cent, and that listings have also fallen in recent months.
Citing data from the REIWA, however, Crawford Property Group’s Ryan Crawford hit back at these figures, saying that since their very peak around 18 to 24 months ago, comparable prices in the region had declined by 25 per cent, rather than 40 per cent.
To the east of Perth’s inner district, property values may yet rise through the initiatives being pushed forward by the state government.
The City of Swan has developed an Urban Housing Strategy (UHS) in response to the state government’s Directions 2031 and Beyond report, which outlines a potential doubling of the city’s population by 2031 and anticipates an additional 35,510 dwellings.
David Whait from Property Wizards says that buyers who aren’t afraid to do their due diligence and invest in a proposed rezoning area could find potential in the City of Swan suburb of Beechboro.
Beechboro is in the City of Swan’s proposed rezoning area. Mr Whait says that once the proposed changes are approved, increases in buyer activity and decreased availability of development sites should push prices up.
Dwellings in Sorrento are predominantly single residential houses with block sizes between 700 to 900 square metres. The suburb was developed from the 1950s through to the 1980s with a mixture of three- and four‑bedroom houses.
Sorrento is a coastal suburb with a primarily owner-occupier bias. The main demographic group is empty-nesters, who were some of the earlier inhabitants that moved to the area. In addition, Sorrento is popular with families because many of its schools are well regarded.
The upper end of the market, in the $1 million-plus range, has a large portion of properties seeing discounts off the asking price and longer days on the market. The lower end of the market, in the sub-$1 million category, has experienced much stronger buyer demand. This trend is consistent with the Perth metropolitan area as a whole.
The rental market is quite small – just 14.7 per cent of properties are rentals, compared to around 30 per cent across the Perth metropolitan area. Properties priced above $800 per week are more difficult to rent out, while the more affordable range has stronger tenant demand.
The suburb is part of the draft Joondalup Housing Strategy, which means we may see some increase in densities towards the south.
The main shopping centre, Westfield Whitford City, has recently submitted a draft plan for assessment by the local council. Under this proposal, construction work would substantially increase the size of retail space and incorporate a mixture of other developments into the precinct, including residential homes.
The main red flags for investors in Sorrento include busy through roads. There is some road noise for properties backing onto main roads such as Marmion Avenue.
In addition, investors should be aware that properties in Sorrento vary dramatically in age and condition. As a result, values can be significantly different, so investors should ensure they compare apples with apples.
When investors are looking to buy, I would suggest focusing on the sub-$1 million range and looking for a full-sized block of over 700 square metres. I believe the “worst house in the best street” approach would work well in Sorrento. In addition, investors should ideally look to buy into a draft rezoning area so they have the option of developing.
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