Infrastructure projects and solid population growth are driving Western Australian property prices, but they are still well below their peak.
A string of recent reports are confirming what everyone already knew about Western Australia: the future is looking up. WA is known as one of the three states on the right side of Australia’s two-speed economy, but many would tell you it is much more than that; perhaps it is almost single-handedly responsible for keeping Australia ticking along during uncertain economic times.
Property performance
Perth recorded a 0.2% rise in median value for the quarter, which adds up to a total of 1.7% for the year, according to APM.
“Western Australia is ticking all the boxes at the moment,” says Andrew Wilson, senior economist at APM.
“Perth is leading the pack in terms of price growth for the year and that’s no big surprise. We’re seeing growth in rental income due to a big shortage of accommodation there. We are tracking 7–8% rises over the quarter in median asking rentals, for both houses and units, which reflects the lack of available property.”
Wilson says Perth’s upsides can be attributed to a combination of fundamentals and market conditions.
It has Australia’s strongest economy there and is looking at an annualised population growth of 3%, which is very strong.
“There have been low levels of construction over the last few years, making it hard to play catch-up when you haven’t built enough housing. When you’re getting a 3% annualised increase in numbers, that makes it really tough,” he says.
If things continue as planned for the economy, a conservative estimate would see the Perth median rise a further 2–3% by year end. “Perth is still about 7% off its peak, so, with the lowest rate of unemployment and highest incomes, there’s still plenty of upside there,” Wilson says.
Solid fundamentals
Deloitte Access Economics Business Outlook agrees that there is plenty to cheer about in WA.
“Growth is good – verging on great – and the pipeline protection offered by projects already underway means that, even if the global outlook were to worsen, activity in WA would have the handy buffer of projects still being finished. This could help sustain growth for 18 months or even two years.”
However, the report warns that the outlook for China and other emerging economies is not as risk-free as many commentators seem to have imagined. “There are no miracle economies – and China in particular can’t lay claim to that title,” it says.
Recent developments in China have both dampened expectations on short-term growth and, more importantly – for WA’s medium-term economic prospects. “They’ve dampened views on what happens in a longer timeframe. At the same time, commodity prices are down, with these short- and long-term question marks weighing on their pricing,” it says.
On the bright side, the economic forecaster says it is a mistake to think of WA as a one-trick pony, with plenty on the cards apart from current mining activity. Engineering projects under construction include: the $43bn Gorgon LNG project on Barrow Island; the $29bn Wheatstone LNG project in the Carnarvon Basin; and Santos’ $12bn Prelude floating LNG platform in the Browse Basin. There are also $17bn in iron ore projects under construction and a further $43bn in projects under consideration.
On the commercial construction side in Perth, the $2bn Fiona Stanley Hospital in Murdoch, the $1.2bn New Children’s Hospital at Nedlands and the $550m Perth Arena are all well into progress.
