Perth Properties 10% undervalued – time to buy & develop is now!
Sitting early this morning at a quaint river coffee meet up after a weekly exercise regime, an Accountant, Surveyor, GM Logistics & Exports, Pharmacist and myself spoke briefly on our local experiences and current market conditions in Perth.
To sum up our thinking on this one of many subject matters, there was general agreement that many families were operating under constrained budgets with concentration on savings and paying down their mortgages with uncertainty on future economic times, despite low interest rates and the good news on continued low CPI in the Perth market.
Thinking of our discussion and my previous article on the Premier’s launch of Invest & Trade WA and the push for Diversity WA, outside specific focus in the mining sector, I thought relevant to place emphasis on why the best time to invest, renovate, build or buy into the WA property market is now, given current economic times and economic forecasts for the next 5 years.
As locals, we all understand the property market in Perth has been flat since 2014, yet there are many signs of an improving market for 2020 and beyond, pointing towards investment now and a time not to miss opportunity.
I do not use the phrase ‘green shoots’ or ‘positive market growth in 12-18 months’ as we at QuayCo have found a diversity of property opportunities, yielding conservatively consistent 7-8% pa returns and in many cases double digit per annum returns for many of the projects we are involved – both in investment, services and management.
No doubt, we’ve all read and watched a lot of commercial media around the housing market, with many noting Sydney and Melbourne properties being increasingly unaffordable and limiting in growth potential. SQMs Managing Director Louis Christopher points out in a recent ABC news article, their research analysts anticipate house prices rising substantially in 2020.
The table below, from this article, showing Perth properties for October 2019 being undervalued, with Corelogic data substantiating a 10% undervalued WA housing market.
Now the take aways from the article and table for myself are placed in the highlights below:
- Home price gains of up to 17% in Melbourne and 16% in Sydney next year, with Perth showing consistent average of 5% in scenarios, excepting scenario 4;
- All forecasts depend on an improving economy and no new regulatory restrictions on home lending; and
- Perth is expected to mid single digit price increases in 2020.
So Why Invest in Perth?
Simply looking at this forecast, Sydney and Melbourne would appear the better cities in Australia to invest with percentage gains anticipated in the high teens on capital appreciation.
"Well, yes, but our view at QuayCo is more localised and focused on helping make WA great."
Let’s take our largest and most marketed global Australian city, Sydney, being the drawcard of many an overseas investor – and why not, Perth is one of the most remote cities of the World and if I hadn’t been born and brought up in this Oasis State, I too would be drawn to Australia’s coastal metropolis.
"Yet, from an investment perspective, Perth property out performs Sydney on rental yields, by 1% for apartments, and 0.7% for houses"
How? Well if you bought an apartment in Sydney for $600,000 and one in Perth for the same price, with the average Sydney rental yield of 3.7%, and Perth’s rental yield of 4.7%, $6,000 per annum back in pocket in Perth, more than Sydney or $115 more per week. Not considering what your monies would be able to afford in each city for the value noted.
Perth is simply considerably more affordable and with the apartment stamp duty rebate recently introduced by State Government, makes purchasing in Perth, even more attractive on newly developed apartments.
Don’t wait to Invest
The current vacancy rate in the housing market is at 3% in Perth with population growth starting to improve (steady 1.5% p.a. for next 3 years), so vacancy and rents are stabilising, giving investors’ confidence on property investment in this city.
WA Ministry of Finance also predicts the State’s economic output will increase and remain stable at 3% by 2023, helped by the current resurgence in mining and ‘Diversify WA’, diversifying employment to reduce the State’s past dependency in mining sector - aiming to create 150,000 new jobs by 2024 (30,000 based in rural areas).
So, in a City of a diversity of property opportunities and ourselves yielding conservatively consistent 7-8% pa returns across residential, mixed-use and specific focused industries, why waste time? The data supports our city's at a flatline, the signs of the future are positive and with public and private enterprise collaboratively showcasing the State, all you need is trusted partners, true to their word and their promises - any YES there's a number of us locally in market that do exist.
Get in Contact
We at QuayCo find quality investments and projects, with reliable cashflow and growth potential above the budgeted hurdle rates. We support Perth and the State, having access to many projects, ticking all the right boxes and keeping our stakeholders, partners and clients well informed in making the right choice based upon heavy analysis, informed choices and quality projects – and if not with us, we collaborate with reliable peers, focused on quality assets, delivering performance and maximising returns.
So, get in contact now, as the timing is right and WA’s property market conditions have never been more affordable.