Every now and again we’re asked by purchasers whether it’s best to buy now, or wait, in the hope that prices will drop further.
They’re mindful of the real estate adage: ‘timing is everything’.
The answer varies, but it’s fair to say that 2019 represents a good time to enter the West Australian property market – whether as a first home buyer, a homeowner upgrading to a more substantial home, or as an investor.
Some key factors lead us to think that 2019 represents a great opportunity.
Several months ago, it was announced that WA had become the most affordable state for property in Australia.
According to a housing affordability study produced by the Real Estate Institute of Australia and the Bank of Adelaide, only the Northern Territory and the ACT were more affordable.
The report also found that the proportion of income required for meeting loan repayments in WA improved to 22.7% in the September 2018 quarter, a decrease of 1.2% from the June 2018 quarter, while the average loan size reduced 4.6% to $339,943.
By comparison, the proportion of income required to meet loan repayments in NSW is 36.6% with an average loan of $469,589.
Further, rental vacancies across Perth are down to 2.6% – a significant decrease from 9% a few years back.
Rental vacancy rates have decreased dramatically in quite a few locations, and if the common trend ensues, rental yields will begin rising when the vacancy level falls below 2.5%.
2) Massive new mining investment forecast
It seems set to happen all over again!
2014 saw the end of a property boom in WA driven predominantly by massive spending from the mining industry on mine site expansion and large scale construction.
Forecasted investment in upcoming projects in the Goldfields and Pilbara regions totals around $75 billion.
This spending on infrastructure and mine site expansion includes projects related to Iron ore, Lithium, Liquid Natural Gas, Mineral Sands, Gold Mining, Urea production, and a Nickel smelter.
As these projects get underway, there will be considerable demand for workers.
Already, demand for skilled professionals has risen dramatically, leading to an increase in the tempo of top-end property sales with median prices of exclusive localities experiencing substantial gains.
The Western suburbs have fared nicely as well as the Canning Riverside suburb of Mt Pleasant.
The median price of homes in Mt Pleasant has increased by 26% in the 12 months to March 2019.
People who purchased while the prices were low have fared very well, and there is little doubt that the next few years they will see further capital growth.
According to reports, around 40% of Perth suburbs experienced price growth over the year. We believe this represents an opportunity.
By contrast, quite a few suburbs – particularly those in the outer areas – have seen decreases in the median price as supply has consistently exceeded demand.
The question arises: how long will it be before they see a turnaround as well?
Massive demand for tradespeople and semi-skilled workers will likely follow the current demand for professional workers.
This influx of people will likely generate a significant increase in business confidence and, as a result, rental vacancies will decrease markedly to follow a similar pattern as the previous mining construction boom.
As the cycle goes, the property market will strengthen across the board, making 2019 a golden opportunity for people to buy in areas where prices are at their lowest.
3) The Election!
If the Labor Party wins the upcoming election, we can expect them to take action on negative gearing in the 2020 budget.
Their current platform is to allow negative gearing on established homes purchased before its budget. From then, negative gearing will only apply to new property purchases.
Timing is everything, so we make a point of monitoring the prices of established suburbs with strong investment potential.
These investments will have excellent long term rental potential, and if you hold for the long term, there is potential for strong capital growth.
The current market presents an excellent opportunity. We would urge prospective buyers to act soon rather than leaving their move to the point where everyone is trying to get in for Fear Of Missing Out. FOMO is real, but it’s not quite a reality. Yet.
Buying Perth Real Estate are experts at helping investors and homeowners to find properties that best suit them – saving them time and money.
If you’re considering a move, call us for a chat. There’s no obligation, and you will be surprised to discover what BuyingPerthRealEstate.com can do for you.
Clive Elliott – Principal