5 Perth suburbs set for big rebound
5 Perth suburbs set for big rebound
Near-city suburbs in Perth have endured mixed fortunes for more than the last half-decade, but in 2021 they’re shaping up as the most sought-after locations in a wider city market poised for strong growth.
January data from CoreLogic revealed the Western Australian capital was the fastest growing capital city market in the country, with the Perth home value index increasing 1.6 per cent in January and 3.8 per cent compared to three months ago.
By comparison, Sydney and Melbourne increased just 0.4 per cent over the month and were up 1.6 per cent and 2.1 per cent over the same three-month period.
Daniel McQuillan, managing director of investment advisory group Nu Wealth, said property price rises of 10 per cent, or more, were likely in 2021, joining a chorus of market analysts and real estate professionals expecting the market to boom.
Mr McQuillan identified a cluster of five inner city suburbs that he views as the most undervalued in the Perth real estate market.
However, with market conditions rebounding fast, Mr McQuillan said finding undervalued real estate in Perth would soon become a major challenge for property buyers and investors.
“Despite a major rebound in the Perth real estate market, there are still a number of ‘Cinderella suburbs’ that have been overlooked by property buyers and these suburbs are poised for a major price breakout during the coming year,” Mr McQuillan said.
“These suburbs are located in the heart of the city and have actually experienced price declines over the past nine months up until January 2021.”
“This is despite the fact that they are within walking distance to major employment hubs and close to major new infrastructure, such as the recently opened $400m Perth museum and the $700m new ECU campus in the inner-city part of Perth that will draw in 9,000 new students and staff when it opens in 2025.”
Inner city suburbs ready to rally
|Suburb||Median dwelling price||Price declines
Mar 2020-Jan 2021
Craig Gemmill, strategic advisor at Nu Wealth, told API Magazine many of these undervalued properties were near-new apartments.
“With the glut of apartments on the market over the past few years, developers were left with the choice of selling at a discount or renting them, and typically most developers have leased these properties to maintain cash flow,” Mr Gemmill said.
“With rental yields going solidly at 5 to 5.5 per cent, and prices now set to rise, the developers will be starting to turn to investors again as they capitalise on higher prices.
“It is significant there has been no major new residential developments constructed in the inner-city parts of Perth for a number of years, so the oversupply of apartments is being quickly absorbed by the market, offering strong capital growth potential to buyers who act now.”
In January, reiwa.com sales data showed the median house price had increased to $490,000. A closer look at the data for the month shows there were 53 suburbs that experienced median house price growth.
Yangebup saw the biggest increase in price in January, with its median lifting 4.1 per cent to $447,500.
Mandurah was second, with its median up 3.9 per cent to $265,000 and Mount Hawthorn was third, with a 3.3 per cent increase to $952,500. Rounding out the top five were Balcatta and Wannanup, which both saw its median increase 3.1 per cent to $505,000 during the month.
Other suburbs to perform well in January were Bassendean (up three per cent to $510,000), Hillarys (up 2.8 per cent to $873,500), Banksia Grove (up 2.8 per cent to $389,000), Spearwood (up 2.7 per cent to $445,500) and Mount Pleasant (up 2.6 per cent to $1.205 million).
Mr Gemmill acknowledged the market was slightly erratic, with the so-called Cinderella suburbs having declined in value, while nearby Mount Hawthorn had taken off.
“It gets down to supply, and Mount Hawthorn, six kilometres from Perth CBD, has limited supply and home opens attracting 80 potential buyers a day at each listed property,” he said.
Mr Gemmill dismissed lower overall sales in January – just 15 suburbs recorded higher sales in January than December – as a result of an unexpected five-day COVID-19 lockdown and holidaymakers taking the first couple of weeks of the year off."
Weighing up whether the market turnaround was down to herd mentality, FOMO (fear of missing out) or sound fundamentals, Mr Gemmill pointed to increasing employment levels and the fact the city was coming off six years of property prices declines and stagnation as key factors luring buyers from the sidelines.
“For astute property investors, near-new apartments offer a prime investment opportunity as they are being sold already tenanted and well below their initial asking price when built,” Mr Gemmill said.
“Astute property buyers that closely follow the real estate market get in early when they see the opportunities that now exist in the Perth inner city and maximise their returns, while ‘late money’ waits too long and miss out on this high returns.
The fastest selling suburb in Perth, according to REIWA, was leafy western suburb Shenton Park, where it took a median time of just eight days to sell a house in the 12 months to December – almost four times faster than the overall Perth average.