Perth has recently emerged as the second most-liveable city in Australia. Apart from liveability, does the Western Australian capital also represent good investability?
Based on top five values, including safety, health services, housing affordability, job prospects and public transport, realestate.com.au’s “Life in Australia Index” found that Canberra is currently the most liveable of all capital cities, garnering a total score of 29.2 out of 50.
Following Canberra were Perth, Adelaide, Brisbane, Hobart, Melbourne, Sydney and Darwin.
Despite its second place ranking, Perth stood out in terms of housing affordability, with a rating of 5.6 out of 10. The capital city was tied with Adelaide and followed by Brisbane, Hobart, Melbourne, Canberra and Sydney.
Perth, Adelaide, Hobart and Darwin also proved to have more regard when it came to access to the natural environment than reliable public transport.
However, experts advise investors to be careful as the Western Australian capital continues to recover from the end of the recent mining boom.
Prices in Perth peaked in June 2014 and values have been down by more than 17 per cent since then. Compared to previous downturns in the capital city, the most recent one has run longer and deeper, thus delaying recovery.
Among the main reasons behind the softening of the property market are the weaker labour market and economic conditions, as well as the tighter credit conditions.
“In late 2017/early 2018 it was looking as if the falls were coming to an end; however, the market has only weakened further,” according to a report by Property Pulse.
Still, most experts remain optimistic about the wealth-creation potential of Perth, particularly moving forward into the new year, as declines are expected to ease through from 2019 to 2020, spurring the recovery of softening markets across Australia.
As dwelling values in most property markets including Sydney, Melbourne and Brisbane declined by 0.1 to 0.2 per cent over the last week of March, Perth joined Adelaide as it stood steady, witnessing no value change.
However, over the past 12 months, Perth house values recorded a decline of 6.7 per cent, with the largest average land size suburb Bedfordale declining by 4.3 per cent to $691,241.
Other suburbs with large average land size such as Glen Forrest, Parkerville and Roleystone also recorded declines of 0.7 of a percentage point, 8.3 per cent and 1.3 per cent, respectively. Of the top five Perth suburbs in terms of average land size, only Serpentine recorded a rise of 0.1 of a percentage point to $588,581.
Still, compared to suburbs with smaller land sizes, suburbs with large land sizes continue to defy the declining trend as they experience stronger capital growth.
According to CoreLogic’s Cameron Kusher: “As new development increasingly moves towards higher densities and smaller lot sizes for houses, large housing lots are likely to continue to be highly desirable.”
“The desirability won’t be only for more space, but also where the potential for future subdivision may exist.”
Moving forward, if cash rate declines this year, experts expect prices declining across major capital cities, including Perth.
Sydney houses and units are likely to see the largest price decline, followed by houses and units in Melbourne, Brisbane, Perth and Adelaide. Of all the capital cities, Hobart could be the only one to see house and unit prices go up.
If the cash rate declines in 2019, Perth could be seeing declines ranging from $48,947 to $7,345
Finder’s Graham Cooke said: “Right now, there’s no need to jump on the first property you like. Use this time to save for your upfront costs. Look for value before you plunk down your deposit. Buying at the right time could potentially save you tens of thousands.”
Supply and demand
Meanwhile, listing volumes in Perth declined during the final week of March, along with Sydney, Melbourne and Brisbane.
Furthermore, the Western Australian capital saw the longest average time on market for houses at 90 days and units at 110 days.
Vendor discounting was between 5.3 per cent and 8.3 per cent for houses across most capital cities, and between 6.2 per cent and 11 per cent for units, with Canberra as the low-end exception for both houses and units at 3.3 per cent, Perth as the high-end exception for houses at 8.6 per cent and Darwin as the high-end exception for units at 15.6 per cent.
The Morrison government’s federal budget focuses largely on a major infrastructure spend, committing $100 billion on infrastructure projects over the next 10 years.
According to Treasurer Josh Frydenberg in his first federal budget, the planned spending is designed to ease congestion in cities, unlock potential in regional areas, manage population growth and improve road safety.
If passed, the infrastructure projects will heavily impact the growth and property values of surrounding suburbs.
Among the major projects lined up are the Urban Congestion Fund, the Commuter Car Park Fund, various road-based projects and other project dedicated to building safer roads and and improving freight routes and access to ports.
While the 2018-19 financial year will end in deficit, a surplus is projected for the 2019-20 federal budget.
Still, experts remind investors that these infrastructure projects are still merely plans and should not be the sole basis for investing in an area.
According to Property Investment Professionals of Australia’s Peter Koulizos: “You need to be careful because these are just plans, and previous NSW governments have been unfortunately renowned for announcing plans but not going about it.”
“Wait until the first sod of soil is turned, and then you have more confidence about following up your analysis on infrastructure spending.”
Across Western Australia, $1.6 billion will be spent on transportation development, including:
- $393 million for Roads of Strategic Importance (North);
- $349 million for the Tonkin Highway;
- $115 million for the Fremantle Traffic Bridge;
- $142 million for the Roads of Strategic Importance (South);
- $140 million for the Albany Ring Road; and
- $122 million for the Urban Congestion Fund.
Apart from infrastructure spending, other policies that may impact property investors after the federal elections are One Nation, Sustainable Australia, The Small Business Party, The Liberal Democratic Party and Keep Sydney Open.
While Perth has not had significantly strong price growth for a while, some suburbs still witness significant gains today, particularly for properties priced between $200,000 to $400,000, which made up 30.7 per cent of all sales in the capital city over the last five years.
According to data from Real Estate Institute of Western Australia (REIWA), 45 per cent of statistically significant Perth suburbs were either stable or saw house prices increase.
Moreover, value decline has slowed to its lowest level since June 2018, indicating a possibility that the Perth property market is approaching the bottom of its cycle.
“Although the Perth residential sales market remains subdued, the data for March shows some signs that price values may be starting to strengthen in some areas after a prolonged period of declines,” REIWA’s Damian Collins said.
The top 10 suburbs for median house price growth for March were Mullaloo, Wannanup, Lesmurdie, Alkimos, Karrinyup, Yanchep, Rivervale, Mount Pleasant, The Vines and Warnbro.
Perth’s rental market also saw significant price growth, with 82 per cent of the capital city’s statistically significant suburbs recording stable or increased median rent prices.
While overall median rent price remains at $350, an increasing number of suburbs are witnessing upward movements in prices, according to Mr Collins.
Further, Perth’s vacancy rate, currently at 2.3 per cent, is the lowest it’s been in six years, supported by declining stock levels and increased tenant demand.
“This shows no signs of abating any time soon, and we’re confident that it’s simply a matter of “when” not “if” Perth’s overall median rent price will increase this year.”
The top 10 suburbs for median rent growth for March were North Perth, East Perth, Perth, Dudley Park, Cloverdale, Meadow Springs, Padbury, Kardinya, Lakelands and Port Kennedy.
“Of those 10 suburbs, North Perth, East Perth and Perth saw the most notable improvement in price, with their medians lifting by $20, $20 and $18 respectively, a substantial increase in February and a testament to the increasing demand from tenants,” Mr Collins highlighted.
Adding to the list of the growing rental markets in Perth are the most searched rental suburbs across the capital city, which includes
Bianca Dabu, Smart Property Investment, 8 April 2019