New data reinforces Perth’s investment opportunities
As one of the most affordable capital cities in the country and one of the few still recording price growth, investment opportunities are arising in Perth, with a focus on one particular market segment.
Conditions are ripe for investment in the Perth property market, which still holds the mantle of one of the most affordable capital cities in Australia.
While the markets in the likes of Sydney, Melbourne, Canberra, Brisbane and even Adelaide are getting further out of reach for many buyers as prices, rates and inflation escalate, the Perth market is still providing strong yields for investors.
While Perth has a range of opportunities across the housing spectrum, from greenfield estates through to high density apartment projects, new outer suburban residential land markets have emerged as an attractive investment option, according to the latest figures from UDIA WA’s Urban Development Index.
The index is based on a survey of the major land developers that are active across the Perth metropolitan area as well as in Peel on the southern outskirts of the city and the regions.
The June quarter 2022 Urban Development Index shows that prices have remained steady in Perth’s new land market over the last few years despite the roller coaster ride the market has experienced.
With the impact of the pandemic hitting Western Australia hard in relation to strict border controls, the state government introduced generous stimulus measures in early 2020 for new home buyers.
These measures were aimed at keeping the construction industry moving during the most challenging phase of the pandemic, and they had an immediate and dramatic impact on the market.
At the time, the market had experienced about five years of relatively subdued conditions. The State Government incentives coupled with the Federal Government’s HomeBuilder Grant served to boost the new house and land market dramatically.
New land sales in Perth rose an astonishing 127 per cent between the March 2020 and June 2020 quarters alone.
Since the peak in sales that occurred in September 2020, land sales have now declined moderately to more sustainable levels.
Buyer demand is strong
Despite the drop in sales in the June 2022 quarter, the positive news is that sales numbers remain above pre-stimulus levels and, according to developers, the demand from buyers remains strong.
Indicators are positive in WA that demand for housing will remain steady, as economic growth continues, unemployment remains low and population growth also rises.
The most recent economic snapshot from the State Government reflects 7 per cent annual growth in State Final Demand to the March quarter 2022 and $42.1 billion in business investment.
According to the latest Census, despite the border restrictions, Western Australia’s population growth was robust throughout 2021 at 30,000 per annum. This is only set to continue as business investment remains strong and employment opportunities are high.
The participation rate in WA is the highest across all states at 69.3 per cent and unemployment is the lowest at 3.4 per cent.
Lot sizes increasing
Despite the rapid increase and subsequent moderation in sales, prices have remained steady in Perth and the new land market provides a fantastic value proposition for potential investors.
Land sales figures from June 2022, released this week, show that the average price of new land in Perth is sitting at $244,348.
Interestingly, the average size of new lots in Perth has increased slightly to 393 square metres. This is above the five-year rolling average of 379 square metres and a further reflection of the value on offer on the west coast.
The average price of new land per square metre is currently sitting at $613.
A challenge that the development industry is facing currently is tight supply, with worker and materials shortages combining to create delays in getting titled land to market to meet ongoing demand.
While this is certainly a constraint, the good news is that construction activity has increased over the last year.
According to the latest index figures, the number of new lots under construction predicted for release over the next 12 months have increased by 46 per cent year on year to 30 June 2022.
Wanneroo dominates sales
Prices have soared in the past year in many inner city and affluent western suburbs but the outer suburban areas present growth potential.
Drilling down to locations to watch, most of the sales action is in the North West growth corridor, with the City of Wanneroo dominating sales for the June 2022 quarter.
There are several large estates that have been able to continue to deliver new land to the market in the City of Wanneroo despite the recent constraints. With new growth areas such as Alkimos and Yanchep continuing to attract a large portion of buyers.
The average price of land is $236,374 in the City of Wanneroo, which is well below the Perth Metro average and the price per square metre is sub $600.
The second largest growth area is the North East corridor, spearheaded by land sales in the City of Swan where the average land price is slightly higher at $250,759.
Another area experiencing higher volumes of sales is the City of Rockingham, which has recorded the most sales in the southern corridor and is home to some of the most affordable land in the Perth Metro area.
The average price in Rockingham is $194,847 and with average lot size coming in above 400 square metres there is clear value for money to be had in the coastal city.
While there are challenges to delivering adequate land supply to the Perth market, investment opportunities across the northern and southern corridors are attractive to those looking to get in while pricing remains remarkably affordable.