18 May The West comes alive
Despite what we heard last week about the Western Australian market, Hayden Groves, President of the Real Estate Institute in WA says there are signs of improvement in the west.
Kevin: There are some very good signs on the horizon for the West Australian market after reporting for so long that it was in the doldrums, but there are signs that it may just have turned. To get a little bit more on this, Hayden Groves joins us, President of the Real Estate Institute of Western Australia.
Hayden thank you for your time.
Hayden: Good morning.
Kevin: Thank you very much for your time. The WA market seems to be bouncing back a little bit. What are the signs that you’re seeing that that’s the case?
Hayden: We are seeing very early signs of a small recovery in the West Australian market. We’re starting to see sales volume marginally increase. It is bouncing around a little bit. But this is off the back of a very slow 2015 certainly in terms of sales volume. We had extraordinarily low numbers in 2015 in the Perth market just in terms of transactional activity. The lowest figure that we’ve seen – about 36,000 property transactions – and when you compare that to 10 years ago, we had 75,000 transactions in the Perth market 10 years earlier. So it’s really been low volumes, but we’re just starting to see them creep up in the early parts of 2016, which is a great sign.
Kevin: Are there any particular price ranges that are moving more than others?
Hayden: We’re starting to see where most of the activity was in 2014 was in that sub-$500,000 bracket and a little bit above it, so definitely first-home buyer activity was quite strong in the Perth market in 2013/14. I think in the early stages of this year we’re starting to see that $700,000 to $800,000 bracket come to the fore. So there is some trade-up activity which is very pleasing, and that’s probably why we’re starting to see a bit more transactional activity occur. This will inevitably translate in time into higher prices, because it will drag the median house price up in time.
Kevin: It will, indeed. Are you seeing that in the regions, as well, or is this pretty well just focused on the Perth market?
Hayden: Right now, I’m in beautiful Esperance down on the WA coast visiting some of our institute members down here today. Look, they’re reporting very similar conditions to what’s happening in the broader Perth market whereby very low transactional levels are just starting to creep up, a bit more confidence creeping into the property sector down here – but coming off the back of a lot of supply, so a lot of people are still on the market for sale.
We are as an institute telling people, if you’re on the market, you’re not absolutely compelled to sell at the moment and perhaps it would be best to consider coming off the market, so as to keep stock levels low enough, which of course, keeps a floor under the prices from falling back.
Kevin: I believe that your agency is in the Fremantle market, is that correct?
Hayden: That’s right. Yes, my business is in Fremantle, which is quite a unique little area in its own with a very strong local buyer base. About 70% of our buyers already live within the immediate precinct, so we don’t get a lot of investment from outside that, just people trading up through that existing market. So our market does get cushioned somewhat from other fluctuations in the broader property market.
Kevin: Has the release of the State Budget had any impact on the real estate market at all?
Hayden: We’re not getting the budget until next month. We are lobbying the state government pretty hard to leave property related taxes well enough alone. Already our state government, much like other state governments around the rest of the nation, is overly reliant on property-related taxes for their coffers.
In Western Australia, over 30% of income that flows into the state coffers comes from property-related taxes, stamp duty and land tax. Our state government has raised land tax by 35% in the last three years, so we’d be pretty annoyed if they did it to us again, because of course, as you and your listeners would appreciate, that it really does stymie investment in a time where really we do need more investment in the Perth property market. Let’s hope they don’t mess with it again.
Kevin: Speaking of investment, I was keen to get your thoughts on any areas you think that investors should be looking at that if there is a resurgence in the market there, that’ll probably grow quicker than other areas.
Hayden: I like the Rockingham area and its surrounds. It’s still very affordable, and you can live right on the beautiful coast down there for not much money. You can get a family size block close to the beach and probably less than 100 meters to the waterfront and you’re paying around $500,000 for it, so that’s very appealing. I think that will grow quite nicely, that southern corridor.
But closer to the Perth central area, Forrestfield is an area that I think will probably go very nicely, which is near the airport but there’s going to be a new train line running into that area, which will, of course, boost that area quite well because it’s a much needed additional transport link.
Also, too, I think areas around Lathlain and Carlisle, close to the city, I think are probably a bit undercooked over the years and are probably going to enjoy a little bit of a resurgence, particularly in the trade-up market sector. I think that will go quite well.
Kevin: In those inner-city markets you mentioned there, are they predominately unit-based that you’d be looking at?
Hayden: Not really. They are diversifying their densities throughout those areas, as well, which will probably increase values more rapidly than other areas perhaps, but we’re a bit slow to catch on sometimes in the west and we’re only really starting to embrace apartment living in any meaningful way.
There’s been a significant increase in apartments being built in and around particularly the CBD, and we’re talking high-end apartments here, so they’re attracting a very high rate per square meter. They are still selling off the plan very, very well despite quite a lot of choice for particular buyers in that sector. So that’s an interesting change in the Perth market. While I think we’re probably a bit oversupplied in that sector, for every one sale, there are still about 24 apartments to choose from, so we are a bit oversupplied.
Anything that’s very strongly located – the new apartments being released in Elizabeth Quay, for example, right in the CBD, a beautiful new environment – they have all sold off the plan very, very quickly for very high prices. So there is still buying activity out there for those prime and strongly located apartment developments.
Kevin: Great signs coming out of WA.
Hayden Groves, President of the Real Estate Institute of WA, thank you so much for your time.
Hayden: Good to be with you. Nice to chat to you.