WA Excerpt from the 2013 May Market report

Perth property a powerhouse

As property investors along the eastern seaboard increasingly turn their attention to the western state, the best place to park investment dollars may not necessarily be in mining towns.

A growing number of interstate investors are choosing to leverage their hard-earned funds into the WA property market, and for good reason.

“Just in terms of overall investment, Western Australia is a powerhouse,” confirms Andrew Peterson of NextHotSpot.com.au.

“In dollar terms, Western Australia attracts far more resource investment than any other state or territory in Australia.”

The state’s appeal to property investors is the double whammy of strong capital growth predictions and increasing rental yields, adds Ryan Crawford, managing director of the Crawford Property Group. These, when combined, are giving would-be landlords “growing confidence in the Western Australian property market”.

“Investors are beginning to understand that, on a national basis, Western Australia now offers some of the best rental returns and potential capital growth rates in Australia,” he says.

“The economy is mining based, and the Perth property market is starting to benefit from the impact of the massive investment in the resources sector. This impact is very apparent in suburbs surrounding Perth airport, where there is now a huge demand for rental accommodation from fly-in, fly-out [FIFO] workers, and property values in these suburbs are now beginning to surge.”

Proceed with caution

While it’s clear that the resources-rich western state is benefiting heavily from mining in terms of economic prosperity, Peterson warns investors not to jump into a mining town investment too quickly. This is because it’s not the actual mining towns that landlords should be focusing on, he clarifies, but where the miners are settling down and spending their income.

“Where are FIFO miners spending their dough? That’s the question investors should be asking,” Peterson says.

“It’s where they live – that’s where they buy their clothes and go out for dinner, and buy a house. They might work in remote mining areas such as Port Hedland and Newman in the Pilbara, but no one really wants to live at Port Hedland unless they have to for work. Buying into expensive towns is way too much money for mum and dad investors to put on the line.”

These mining ‘boom towns’ have attracted much attention for their escalating house prices – in Port Hedland, for instance, the median house price is a whopping $1.675m – and “on that basis alone, we recommend that investors steer well clear”, Peterson adds.

“Perth was identified in a recent federal government report on FIFO workers, as [being] the area in Western Australia where these well-paid transient workers spend their dough, and that’s where you can take advantage.”

What’s more, in an RP Data report put out last year that assessed the top 50suburbs for capital growth over the last 10 years, the lion’s share were in WA. “Out of the list of 50, 24 were in Western Australia. Of these, 14 were affordable suburbs in and around Perth,” Peterson says.

“It’s an indication that Perth is a strong capture point for the wages of FIFO mining workers. We like affordable areas around Midland, Murdoch and Rockingham, but there are many other well-priced areas with

strong growth prospects.”

The $500m town

Between March 2012 and March 2013, more than $535m in property has changed hands in mining town Newman (around 1,200km northeast of Perth). The highest sale was $3.75m, while the average price point was $935,000.

Owner-occupiers take the lead?

“Low mortgage interest rates and high rents may mean that it becomes cheaper for people to buy than to rent in some areas, creating an owneroccupier market and reducing demand for rentals,” Crawford warns.

“However, with the ongoing housing shortage in Australia and the rental market going strong, any increase in homebuyers is unlikely to have a significant effect on the rental market in most areas.”

Spotlight on: Rockingham

Steve Fletcher, of Acton Real Estate in Rockingham, describes a popular community that has grown by 20,000 people in the last five years

Rockingham is a growing, family friendly residential community on the seafront southwest of Perth, and south of Fremantle. Home to around 105,000 people, this beachside suburb is attracting plenty of interest from investors and owner-occupiers alike.

The neighbourhood: Rockingham has a vibrant cafe strip with wine and tapas bars, cafes, a couple of nice pubs and very good restaurants, all a few metres from the beach. The beachfront is very calm, with no massive waves, and the ocean is immaculately clean.

Proximity to Perth: We have very good public transport here. From the beachfront to the train station is only a 10-minute drive, and you can pick up the train and be in Perth in 30 to 40 minutes.

The property market: Properties from $300,000 to $450,000 are the most sought after. It’s leaning towards a buyer’s market now – we’re currently on the brink of an even market favouring neither buyers nor sellers.

Prestige buys: The Esplanade, Rockingham Beach Road, and Arcadia Drive are spectacular, but purchase prices are in the millions.

Best suburbs: The most sought after areas would be Palm Beach, Rockingham Beach, and central Rockingham, including the Meadows Estate and Rockingham Park.