For the first time in three years Research4 Director and property market researcher Colin Keane returned to Perth to provide his thoughts on the future of the WA property market. A sense of optimism was a key takeaway from Mr Keane’s presentation at UDIA WA’s industry luncheon last Friday, along with fellow industry experts Cath Hart, CEO at REIWA and Urbis Director David Cresp.
Mr Keane pointed out that although new land sales dropped in the June 22 quarter, the first notable drop in the last two years, sales are still above pre-stimulus levels and the Perth land market is markedly more affordable when compared to other major cities in Australia.
Mr Keane’s analysis shows that the median price of greenfield land in Perth is $225,000, which compares with $382,267 in Melbourne and a median price for new land of $650,000 in Sydney.
Nationally he said the average land price across the country should be around the $400,000 mark, further highlighting Perth’s relative affordability and providing a good indication that the Perth land market will remain the most affordable, with just moderate price growth predicted in the coming years.
Interestingly, Mr Keane also believes that the new land market in Perth is significantly undervalued.
He calculates what he believes is ‘fair value’ for new land as 43% of the median house price for Perth. Based on that assumption, he says that the current median price of $225,000 is approximately $16,000 under the ‘fair value’ mark.
Mr Keane’s analysis was further backed up by the feature article in the July edition of UDIA WA’s Urban Intelligence Report that we released to members at the start of this week. In this article, UDIA WA Executive Manager – Research Toby Adams found that by the March quarter 2022 Perth’s median house price was 38% lower and the median lot price 43% lower than the combined capital city average. Click here to read the latest Urban Intelligence.
In a similar vein to Mr Keane, both Ms Hart and Mr Cresp found plenty of positives lay ahead for the Perth property market.
Ms Hart, in opening the luncheon, said she was confident Western Australians were better equipped to manage the ongoing interest rate hikes given the relative strength of our economy and the much lower median house price Perth was currently experiencing compared to those over east.
“With the median house price over here at $560,000 versus $1.6 million in Sydney, I know where I’d rather be,” Ms Hart said.
Despite the robustness and relative affordability in the market, Ms Hart did point to the fact Perth has low stock levels in the established market, both for sale and for rent, and with extended build times there would be increased competition amongst buyers with prices expected to rise as a result.
Ms Hart said part of the key to addressing the shortage of housing stock was to bring in more skilled labour from overseas, however she highlighted the shortfall in overseas workers was not down to a lack of desire to move down under.
“One of the most interesting stories over the last couple of weeks was the news there’s a backlog of 1 million visas to be processed, of people wanting to come into Australia,” she said.
“I think when people from the outside look at Australia, the market and the job opportunities here and then look at the impact of interest rates and values on the East Coast, then WA and Perth and the affordability of housing here become quite an attractive proposition.
“We might just need a policy for people to bring their own tents when they come into Western Australia, because at the moment there’s nowhere really for them to live.”
David Cresp took up the mantle to provide his thoughts on the future for the apartment market in Perth. He stated that our market is currently too far over to one side of the equilibrium with apartment developers unable to viably proceed with projects due to the increases in construction costs and labour shortages.
“Developers are wanting to go ahead with projects but can’t be confident in selling apartments at today’s prices before going to a builder and facing a potential cost increase through the construction of the project,” he said.
Luckily, Mr Cresp said there were a number of factors set to pull the market back towards the equilibrium.
“The vacancy rate is down, this means investors are going to start coming back to the market,” he said. “We’ve got that headroom in some areas to keep pushing prices up. And we’re also going to see lower levels of supply. So we will come back to that equilibrium.”
Mr Cresp did include a word of warning however as he said while luxury, higher end apartments in sought-after locations will continue to move, the lower entry level apartments in outer suburban areas are the ones that will struggle in the current market.
“The entry level apartments in outer suburban areas are just not going to work,” he said. “If you’re not close to $10,000 a square metre then prospects really aren’t looking good with apartment supply not really going to stack up.”
To finish off the session, Darren Walsh, UDIA Councillor and Executive Director of Strategen JBS&G, facilitated a panel session wherein each of the speakers provided their prediction for the area and type of product that will be most popular over the next few years with the Northeast and Northwest corridors receiving particular attention.
Mr Keane said there is good price growth in the northeast, however the northwest is entering a more mature phase, setting itself up to being a number one corridor over the next 10 years.
“In terms of product, we’re a bit stuck on 375sqm blocks of land, the mature premium market in Sydney is able to expand into the bigger stuff but the problem here is somehow getting a little bit more product diversity in the market full stop,” he said.
Ms Hart agreed, saying that the infrastructure projects ongoing in the northeast set to come online in the next couple of years will be really important for the area. Ms Hart added that while the Government is favouring medium density products, this kind of product has fallen out of favour slightly during COVID.
“If WA can crack the code on attracting more international students here and more international migrants generally, then we might see a kind of resurgence in that type of product,” she said.
Mr Cresp pointed to the northwest as being a market to watch in terms of price and volume growth with the maturity in this market along with planned infrastructure set to benefit its fortunes however, he said the success of the apartment market over the next few years was fairly reliant on the right location.
“We’re going to see a really interesting apartment market where it’s going to be very focused on if you’ve got a river front address, river views or an inner city address, then it’s going to work. If you don’t have those factors, it’s simply not going to work in this market.
“As much as the government want to know about infill, the reality is with the new construction costs, suburban apartment development is going to disappear to a pretty big extent over the next three years.”
A big thanks to Industry Partner ATCO Gas, Environmental Partner Strategen JBS&G, Event Sponsor Satterley and Networking Partner JDSi Consulting Engineers for supporting this event.
To view the images from the event, click here.