The ongoing news from Western Australia is that demand for its resources is set to fuel economic growth over the next few years, providing a significant boost to its property market. BIS Shrapnel forecasts that resource-rich WA will be among the forerunners of a construction upswing, predicting a 6% rise in building commencements during 2011-12 to reach a total of $10.9bn.
With iron ore being one of the mainstays of the WA economy, uncertainty surrounding the effect of the Japanese tsunami on the worldwide demand for iron ore will have given WA property investors the jitters. According to AAP reports, however, Rio Tinto head of iron ore Sam Walsh remains bullish about the sector’s future.
“We’re running flat out trying to keep up with existing demand, let alone take into account any impact from Japan,” says Walsh.
And while the liquid natural gas (LNG) buzz has truly taken effect in Queensland, it’s worth noting that WA, too, has its fair share of Australia’s next high-demand commodity.
EnergyQuest notes that seven of Australia’s 15 main planned LNG projects are based in WA. Property investors, therefore, will be keeping an eye on industrial hubs in the LNG vicinity such as Broome, Port Hedland and Karratha.
All of this expected resource-related prosperity is eventually predicted to filter down to the Perth property market. WBP Property Group, for example, points out in its Property Outlook report that new Perth-based mining industry jobs will have a much needed positive effect on the city’s supply and demand equation.
“With an increasing number of new office buildings in Perth’s CBD, new employment opportunities are expected to strengthen demand for residential property in close proximity to the city. In particular, the new BHP building will attract a large volume of interstate employees who will require local accommodation,” says the report. For the time being, however, WA’s two-speed property market is still very much in evidence, advises WBP WA director David Shorter, with Perth’s oversupply issues continuing to dog the state capital.
“I think the resources industry will have an effect [on demand], but I think it will take some time for the current oversupply to be absorbed before there’ll be any noticeable upwards movement in the Perth property market,” he says.
Shorter puts the long-term average for property listings in WA to be around 12,000 or 13,000. With that figure currently being closer to 17,000 or 18,000, he believes that the market won’t reach a balanced state until next year.
“Selling agents are advising that there’s an increase in volume of sales in the market, but that’s not necessarily translating into an increase in property values,” he says. “My synopsis would be that throughout the rest of 2011, the excess in supply is going to be taken up – with a view to slight price increases in 2012.”
With supply still outstripping demand in the state capital, the message from Perth’s property professionals is that it’s still most definitely a buyer’s market.
“It’s a good time to be a buyer in Perth; they’re spoilt for choice,” says Shorter. “People are sitting and waiting for the bargains to appear, and when they do, they strike. But unless it’s a bargain, or well priced, properties aren’t selling.”
He singles out Gosnells and Thornlie as a couple of suburbs that are now falling into the affordable category, noting that three-bedroom, one-bathroom houses in Gosnells are now going for around the $300,000-mark, whereas they would have fetched closer to $360,000 a few years ago. Buyer activity in these newly-affordable suburbs is therefore on the up.
“I think the writing’s on the wall that Perth will start to outperform its broader average pretty soon – largely propelled by the fact that prices have fallen since late 2007, and the fact that affordability has returned to the market due to those price falls,” says Lawless.
“I don’t think it’s due for a boom like anything we saw from 2006. Back then we saw value growth peak at around 46% over the year to October 2006,” he adds. “Perth was playing catch-up at that time, plus investors flocked in and blew prices way too high.”
Lawless also notes that Perth’s developers are starting to build up in confidence, with new house and land projects cropping up to the north around Wanneroo, and in the inner south around Rockingham and Canning Vale.
New medium to high density coastal projects are proving popular among investors, adds Shorter, and the city’s movement towards higher density living – sparked by the recent launch of the $440m Perth Waterfront Project – has also been tipped for its long-term potential by Herron Todd White’s Month in Review report.
