Positive prospects for Perth property

Perth property appears to be on the upswing, with sales rebounding, rental vacancies shrinking and investors eyeing potential returns as confidence continues to grow in the WA capital.

As 2019 rolled into 2020, Perth property professionals were cautiously optimistic that the New Year would bring a long-awaited recovery in Western Australian real estate.

Days on market were dwindling, transactions were on the rise and CoreLogic median house price data was showing the first sustained stretch of growth since the market began its downturn in 2014.

Of course COVID-19 caused a confidence crash, with lockdowns and social restrictions bringing the early year burst of momentum to a screeching halt. 

But while January may seem like an eternity ago considering the world-changing events of the following few months, the sentiment emerging in Perth property circles is eerily similar to that felt at the start of 2020. 

The Real Estate Institute of WA recently reported that sales volumes had bounced back to pre-pandemic levels, with transactions 68 per cent higher in July as compared to April. 

Land sales were up 121 per cent in July, with both house (58 per cent) and unit sales (51 per cent) rising significantly.

Highest lot sales were recorded in the City of Swan, with more than 1,000 blocks sold in the quarter at an average price of $228,000.

The City of Wanneroo was also a hotspot, with the UDIA recording more than 800 sales in the three months to the end of June at an average price of $215,000.

The burst of sales has been helped by the WA state government’s Building Boost, with its $20,000 payments for homebuyers building new homes nicely complementing the federal government’s $25,000 HomeBuilder grants.

Urban Development Institute of Australia analysis showed there were 3,322 blocks of land sold in the June quarter, a 126 per cent increase on the previous three months and a record quarterly result dating back to 1990.

UDIA WA chief executive Tanya Steinbeck said the stimulus measures had clearly had a significant impact on the Perth market.

“Despite significant economic impacts across the country and indeed the globe, the Perth market is holding strong and providing fantastic opportunities for new home buyers,” Ms Steinbeck said.

The growing confidence, however, is not restricted to the land development market.

Overall sentiment in the WA property industry was revealed to be the second-most positive in Australia midway through last month.

The ANZ/Property Council’s quarterly gauge on sentiment also showed WA laid claim to the smallest proportion of respondents to the survey that believed conditions would worsen for the rest of 2020.

Property Council of WA executive director Sandra Brewer said confidence would likely continue to build in coming months, as the stimulative impacts of the Building Boost and HomeBuilder scheme translated into new housing starts.

In Perth’s inner city, sales agency Realestate 88 founding director Peter Wright said the increased confidence had also translated to property sales, with investor enquiry steadily increasing.

Mr Wright said property investors accounted for around 30 per cent of enquiry at Realestate 88, more than doubling the investor activity experienced at this time last year.

“If you had told me in April that I would be flat out busy in May, June and July, I would have said ‘no way, I think we’re probably going to go into a recession’,” Mr Wright said.

“Most investors are looking for a minimum of 5 per cent return, and if the property is priced well and it’s got a 5 per cent return, investors are starting to secure inner city apartments, it’s quite amazing.

“It’s starting to turn because there is so much uncertainty in stock markets internationally, and if you have money in the bank you’re not getting anything for it. 

“I think some people are diversifying their portfolio and saying ‘I’ve got some shares, I’ve got a little bit of money in the bank so I think I’m going to get a little bit of property'.”

Mr Wright said a big factor in the increased investor interest was the city’s falling rental vacancy rate, with REIWA data showing there is currently about half the number of properties available to rent now as there were at this time last year.

Other influencing factors include record-low interest rates, Mr Wright said, and the large price gap between established apartment stock and off-the-plan dwellings.

He said investors had been targeting properties priced at less than Perth’s median house price, which REIWA said was steady in June at $475,000.

“A good example is we have been selling some 1-bedroom apartments in the city, in a building that’s 10 years old,” he said.

“All of the sales last year were under $300,000 for a 1-bedroom. 

“We have just sold quite a few of them for around the $330,000 mark, but they are renting for about $450/week and the leases are signed up for the next 12 months.”

Large-scale developers are also feeling the fun, with ASX-listed Finbar Group to relaunch a marketing campaign in September for its $400 million Civic Heart, a two-tower mixed-use development to be built in the inner city suburb of South Perth.

Civic Heart will comprise 309 apartments across two towers, of 38 and 21 storeys, complemented by a retail and hospitality precinct at the lower floors.

Finbar chief operations officer Ronald Chan said the company had secured an average of $1.6 million in daily sales in just over two weeks since pre-launch, with more than 5,000 sales enquiries registered for the project.

Mr Chan said sales across all of Finbar’s developments had risen in June, with July trending similarly, as buyers recognised the strength of WA’s resources sector-driven economic recovery. 

He said while the government grants were not applicable for apartments buyers, they had nonetheless stimulated the market.

“The government grants available to buyers have increased enquiry levels more broadly across the property market, which has overflowed on to the apartment sector,” Mr Chan said.

“Certainly our sales figures for June and July reflect this.’

Private equity funds manager Sirona Capital also returned to market recently, launching a new campaign for a Bates Smart-designed apartment tower, also in South Perth.

The project, known as 28 Lyall, is Bates Smart’s first high-rise development in Perth, with the 37-storey, 98 apartment tower illustrating the architecture group’s signature flair.

“The concept grew out of the DNA of South Perth, a distinctive place with its own identity characterised by single storey homes and four to five storey apartment buildings,” Bates Smart director Philip Vivian said.

“Ours is the first building in the area to offer a collection of larger sky villas as homes.

“Instead of creating a singular tall building, we took South Perth’s two dwelling types and stacked them vertically.

“Single storey villas separate five story apartment volumes. They are vertically stacked in recessed slots and framed by horizontal planes to create a feeling of floating.”

Sirona Capital managing director Matthew McNeilly said the project was pitched squarely at owner-occupiers, with large apartments and north-facing views expected to be a hit with buyers.

The company is developing 28 Lyall in joint venture with CEL Developments, a subsidiary of Singapore’s Chip Eng Seng Corporation.