Finding Perth’s investor hotspots when land sales have soared 92 per cent
Property investors are flocking to Perth's red hot property market, where land sales have taken off and new infrastructure is creating the next selection of suburbs likely to experience high capital growth.
Investors are heading west as Perth’s relative affordability, strong economic conditions and continued population growth fuel demand for housing across Western Australia’s capital.
The latest figures from UDIA WA’s Urban Development Index show that lot sales increased by a massive 92 per cent over the last 12 months, with 2,440 lots sold for the December 2023 quarter compared with 1,273 in the December 2022 quarter.
The breakdown in buyer profiles shows that 37 per cent of buyers were investors and 29 per cent were first home buyers.
The high level of sales in the new land market has not been experienced since the peak of the boom brought on by Federal and State Government stimulus measures back in 2020. At that time, the Home Builder and Building Bonus grants, both available to those seeking to purchase new house and land packages in Western Australia, significantly boosted demand.
While Perth remains one of the most affordable cities in Australia, the ongoing demand for housing is putting upward pressure on prices, with the average price of new residential lots in Perth now sitting at $266,195.
That is a 4 per cent rise in the average price of new land for the December quarter and a 12 per cent increase over the 12 months to end December 2023.
High sales volumes are being driven primarily by the growth areas in the North Eastern and North Western corridors.
The City of Wanneroo, which is home to significant coastal growth areas, including Alkimos, Eglinton and Yanchep, recorded the highest number of sales, with 2,756 new lots sold for the December 2023 quarter at an average price of $246,663.
This popular coastal strip attracts a range of buyers due to proximity to the beach and other amenity. Given the average price for new land in the area is $20,000 below the Perth average, the value for money on offer is hard to beat.
Towards the northern inland hills and wine regions, the City of Swan, home to the long running Ellenbrook townsite as well as Aveley and Bullsbrook, which all offer value for money house and land packages, was home to the second highest number of new land sales at 1,594 with a slightly higher average price of $262,573.
In the South Eastern corridor of Perth, the City of Armadale recorded 1,041 lot sales with an average price of $262,573.
Perth property prices are growing the fastest in the nation, with Armadale leading the pack. In the past 12 months, property prices have soared by 28.6 per cent in this working class suburb.
Infrastructure, roads point to investor hotspots
All these growth areas are going to benefit from improved transport connectivity over the next one to two years, with new or extended rail lines close to completion.
The new line to Yanchep will include station precincts at Alkimos, Eglinton and Yanchep while the long awaited Ellenbrook line will add station precincts at Morley, Noranda, Malaga, Whiteman Park and Ellenbrook.
In the City of Armadale, improvements have been made with the removal of the level crossing at Denny Avenue and that rail line is currently being extended out to Byford.
Given that extension to Byford that is currently under construction, the Town of Serpentine-Jarrahdale offers fantastic value for savvy buyers. That whole area will soon be connected to Armadale and the CBD by rail and currently boasts the lowest average price for new land, at $194,585.
Supply increasing but not quickly enough
While there is exciting investment potential across the Perth market given the relative affordability that is supported by strong economic conditions, there remains an imbalance between demand and new supply levels, despite construction activity increasing.
According to UDIA WA’s figures, there is a forward pipeline of new lots set for construction over the next 12 months that is 28 per cent higher than the five-year average.
While the lift in construction activity is positive, the supply versus demand ratio remains problematic. There are significant constraints on new land supply hampering developers’ capacity to bring on enough new land in existing and new areas to meet the need for more housing.
Given those constraints, we are likely to see steeper price rises in the coming months if that supply versus demand ratio cannot be balanced out further.
Construction cost inflation is easing, however, construction sector capacity remains a key challenge with skilled migration hampered by Federal Government migration settings that impact housing and civil construction providers.
The WA housing construction market has the capacity to produce around 16,000 new dwellings a year at present. With a National Housing Accord target of at least 24,000 per year for WA over the next five years, construction sector capacity needs to be front and centre as part of the conversation about how we increase supply quickly.
UDIA WA’s housing supply solutions
In terms of getting more new housing supply into the forward pipeline and available to those that need it, UDIA WA has made several recommendations to the State Government in the lead up to the 2024-25 Budget release in May.
In relation to the new land to the market, UDIA WA has recommended a focus on ‘at the right time’ infrastructure funding to catalyse future development.
That includes establishing and resourcing a ‘Coordinator General’ role and team focused on strategic infrastructure coordination and delivery; as well as establishing a ‘Growth Area Catalyst Infrastructure Fund’ for planning and delivery of enabling infrastructure to accelerate housing delivery.
Other items in UDIA WA’s State Budget submission related to boosting housing supply include:
- Prioritising the identification and release of State Government land that is feasible for new housing supply
- Tasking the new Housing Supply Unit to undertake a cross government capability review to identify blockages to housing supply
- Investing in funding and collaborating with the Federal Government and industry to accelerate regional planning for Perth and Peel to create a planning led environmental decision-making framework
- Resourcing the development of a strategic plan and fund for offsets and rehabilitation, particularly for the Swan Coastal Plain (SCP), and ensuring multi-agency collaboration
- Funding the development and implementation of a Construction Workforce Attraction and Retention Strategy and plan for Perth and the Regions
- Piloting an innovation fund to support industry to undertake R&D into advanced construction practices and technology and digitalisation to respond to skills and labour challenges.
In relation to built form specifically, UDIA WA’s recommendations include:
- Expansion of the Infrastructure Development Fund into an Infill Development Catalyst Fund
- Making permanent the Off the Plan Transfer Duty concession
- Removing the Foreign Buyers surcharge.
We are hopeful that the upcoming State Budget will take due consideration of our recommendations and, ideally as we head into State Election Campaign mode, we expect all sides of the political divide to continue to take the housing supply crisis seriously.
