As many capital cities are seeing some signs of warming regarding home prices, the city of Perth is projected to see stable and possibly lower prices in the near future. This gives investors and home buyers a brilliant opportunity to acquire reasonably priced assets.
So What Makes It a Good Time to Invest?
Recent reports from the Australian Mines and Metals Association reveal that the AMMA recognised upwards of $41 billion in mining projects likely to begin within the next five years.
From an investment standpoint, this looks like the perfect time to purchase property in and around Perth. It is easy to see the path property values will take once the mining operations commence.
What is the Housing Climate in Perth?
Since the end of the mining boom, the housing market was experiencing a decline. Because a great number of people residing in the area were associated with the mining industry, they relocated as the number of jobs dwindled. This left a high number of vacancies, but in general, the unit market took a greater hit than the housing market.
As the area prepares for the projected influx of jobs and workers, prices for individual residences as well as units are low and rebounding slowly. Workers are beginning to settle in and around Perth, but not enough to fill available housing spaces and drive the price up. In a short period of time, these prices will rise and eventually peak. Those looking to invest in property or purchase a primary residence would do well to look to the west for value and potential for growth.
How Does Perth Compare to Other Capital Cities?
While other states hit their peak real estate prices in 2017, Perth’s housing market has seen a 13 per cent decline in housing costs from 2014 through 2019. When housing was at its peak in the Perth area, the median price of a home was $616,000. By contrast, these are the current median home prices in capital cities as of June 2019, according to the QBE Australian Housing Outlook 2019-2022
- Sydney $983,000
- Melbourne $770,900
- Brisbane $548,600
- Perth $519,000
- Adelaide $488,200
- Hobart $499,300
- Canberra $705,000
- Darwin $500,000
What Are Some Significant Factors That May Impact the Perth Housing Market?
According to the latest report, the overall belief from the QBE Australian Housing Outlook is that Perth will maintain growth through 2021. Of course, nothing happens in a vacuum, and several influencing factors exist.
The Top Four Factors That Can Shape the Perth Housing Market
- Apra Regulation – Last year the Australian Property Regulatory Authority or APRA, set regulations to curb what they viewed as risky lending practices. As a result, obtaining credit for personal use as well as investment property is more difficult than it has been in ages. Many close to the situation view the Australian housing market as a slippery slope that will experience more slowing. The limiting of interest-only loans brought about a reduction in investors over the past year.
- Negative Gearing Repeal – If the Labour party can successfully repeal the practice, economists believe that rent prices will be affected. This could hinder the recovering rental market in Perth.
- the Reserve Bank – The future decisions of the Reserve Bank of Australia hold considerable weight in terms of the potential impact on the development of the Perth housing market. As interest rates are stable at the present time, the RBA may opt to bump up rates if the market continues to appear stable.
- the Trade War Between the United States and China – The international struggle between the two giants could impact the Australian economy. Any actions on the part of the US or China that lead to a decrease in iron ore demand has the potential to wipe out the promising recovery. This is because a drop in the price of iron ore has the potential to halt the recent growth. Any negative impact on the recovering iron ore industry will directly affect the housing market in Perth as mining makes up 29 per cent of Western Australia’s gross state product.
Positive Signs Regarding the Perth Housing Market
- The rate at which Perth housing prices are falling slowed and is near zero. A sure sign that prices and property values will rebound in the near future.
- The price of renting is becoming stable. According to data from Domaine, the median price for unit rent in the Perth area is $300 a week. There are no fluctuations in the median price, and it remains steady for a period of one year.
- The ratio of sales to new property listings is holding steady. The lack of fluctuation in this area indicates good price growth.
- The population in the region is growing ahead of the projected mining boom. A minor increase of foreigners entering the vicinity also boosts the area’s population. In fact, the population growth rate of Perth grew one per cent over the past 12 months. This is the first time in nearly a decade the area experienced such growth.
- An improving outlook for the mining industry as mining exploration is at the highest level since 2013 and growth for the iron ore and lithium is on the horizon.
- Sales of homes and units are up according to Domaine’s report.
- QBE’s forecasts suggest there will be overall growth of five per cent.
Does Perth Have Too Many Available Units?
While expectations for a slower rebound in the unit market prevail, the forecast for units in Perth is not especially bleak. Current reports point to the expected growth of two per cent in 2020 and two per cent in 2021. By 2022, the unit market should rebound a full five per cent.
Because of the intense period of growth during the last mining boom, units were in high demand. Workers in the area for mining did not need stand-alone houses. However, as the mining industry took a sharp downturn, the vast majority of mineworkers returned to their original homes.
The increased vacancies in the units in the area led to an abrupt decline in prices. The QBE reports that since the end of 2014, when unit prices peaked, median Perth unit prices declined approximately 20 per cent.
Investors see the value in units, especially in light of the impending growth in the mining sector. Even though rigorous lending standards slowed the investment community, the promise of a vigorous rebound in mining points to an optimistic future for units.
What Are the Best Suburbs of Perth for Investing?
The prices for housing in the Perth area remain low with the potential for reaching slightly lower levels in the immediate future. Because of this and the upswing in the mining industry, the housing market, especially for stand-alone houses, looks to be bright.
An Overview of the Top Perth Suburbs for Investing
- Stirling – The City of Stirling is home to approximately 10,000 residents. Located approximately 10 kilometres north of Perth’s Central Business District, Stirling is primarily a residential suburb. While there are no schools situated within Stirling, there are numerous schools in other nearby suburbs. The city is home to Stirling Train Station which provides a nine-minute commute to Perth’s Central Business District or CBD.
- East Fremantle – Located about 13 kilometres south-west of the Perth CBD, East Fremantle once was considered an outlying fringe area serving the town of Fremantle. Today it is coterminous with the Town of East Fremantle. The suburb is home to nearly 7,000 residents. There are two primary schools located within the city of East Fremantle.
- Cottesloe – The suburb of Cottesloe is situated along the Indian Ocean approximately 11 kilometres west-south-west of the Perth CBD. Slightly over 7,000 residents call the beachside suburb home. Cottesloe boasts a brilliant beach area which was named the 2and best beach for families by the travel guide publication Lonely Planet in 2009. The beach is central to life in Cottesloe, and during the high season, numerous tourists visit the area.
- City Beach – The suburb of City Beach is an oceanside community located on the Indian Ocean and is primarily a residential area. In addition to serving as the town’s name, the term City Beach also denotes a beach located within the city. Situated 10 kilometres west-northwest of Perth’s CBD, City Beach is home to nearly 7,000 residents. Three primary schools, The International School of Western Australia, and The Japanese School in Perth are all within the suburb of City Beach. The area is well known for its contemporary style and affluence. Homes in the suburb of City Beach typically list for $1,500,000 to $3,000,000 with virtually all property selling for at least $1,000,000. The modern beach lifestyle attracts many visitors to City Beach each year.
- Kardinya – Located within the local government area of the City of Melville, Kardinya is a suburb with a population of close to 10,000. Many of these residents are international students who live in the area while attending Murdoch University. The suburb is about 12 kilometres west of Perth. The suburb of Kardinya was mostly farmland as well as a pine plantation and reservation for the Forest Department and the University of Western Australia. Kardinya has good public transportation and is home to Murdoch railway station. The area is primarily residential and boasts a sizeable shopping centre. Kardinya has a single state primary school as well as three private schools and Murdoch University’s main campus.
- Coolbellup – A suburb located within the local government area of the City of Cockburn, Coolbellup is a residential suburb situated 15 kilometres from Perth. Once land inhabited by indigenous people, Coolbellup is now an up and coming suburb and home to about 5,000 residents. The area reinvented itself during a 1990’s suburb renewal project. The dwellings that were once low-income housing are now highly sought after three-bedroom one-bathroom houses, which are very popular with young couples.
- Bedford – The suburb of Bedford, located within the local government area of the City of Bayswater, is home to approximately 5,000 residents. Bedford has an area of 2.2km2 and is seven kilometres from the City of Perth. Bedford is primarily a residential suburb comprised of many maturing and older adults. Bedford is a highly sought after area with excellent opportunities for rental property.
- Kelmscott – Located approximately 23 kilometres from Perth, the suburb of Kelmscott lies within the local government area of the City of Armadale. Now the home of over 10,000 people, Kelmscott is one of the earliest towns to spring up in the Swan River Colony. The Canning River cuts through Klemscott dividing the town vertically. The town is a mixture of light industrial as well as residential zoning. Kelmscott has three primary schools, a senior high school, and a private Anglican school serving students from kindergarten through 12th grade.
- Harrisdale – The suburb of Harrisdale is one of the southeastern suburbs of Perth as well as a western suburb of the City of Armadale. Harrisdale also lies within the local government area of the City of Armadale. Gazetted in 2007, Harrisdale has a population of approximately 9,000 residents. The Government of Western Australia began a joint venture with Cedarwoods Property Limited on a 30-hectare area in the northwest part of Harrisdale. The focus of this development is sustainable living and affordable housing. Called Harrisdale Green, the area has space for 500 homes. A Baptist school serving children from kindergarten through grade 12 operates in Harrisdale
Getting in on the up and coming surge of growth, development, and profit in the Perth suburbs could be a golden opportunity.
*Please note all material in this blog post is for informational purposes only and does not constitute a guarantee of future market performance. *