It may be battling some rough headwinds, but the Western Australian economy is not all doom and gloom. Just ask the experts
The phrase “all good things must come to an end” appears quite appropriate when taking a glance at the Western Australian economy. In this case, some would argue the “good things” could refer to the mining boom, strong population growth and low unemployment to name a few. Now those things have weakened to a point where the state is arguably in recession.
Thankfully, the recent rate cut is already having an impact, according to Linda Phillips of Propell.
“WA is a dynamic state and it’s following the American boom/bust model. The lower interest rates are already having a measurable impact that should hold prices up,” she says. Unit prices were down 1.9% in the past year, and Propell forecasts a 5% decrease in 2015 overall.
“Unit prices are affected by the vast oversupply of new apartments coming on to the market,’ says Phillips. “While this is creating price weakness, we are also seeing a demand increase, especially from Singaporean and other Asian purchasers.”
Bright spots emerging
While the overall trend still points to a period of weakness in prices, there are areas that are starting to see demand ramp up.
Phillips says properties within about 8km of the CBD remain in strong demand. “Areas with river views such as parts of Maylands and neighbouring suburbs are also seeing increased demand,” she says.
“Properties with proximity to, and views of, the river or the ocean will sell quickly if priced well. Well located, inner suburbs are attracting strong demand and overall we expect this to maintain or slightly improve unit prices.”
Weak markets to avoid
“These are especially to the south, extending out to Byford which are home to the entry-level 4-bedroom, 2-bathroom stock standard cookie-cutter houses.
“These suburbs are 30–50km from the CBD and with plentiful supply of land; price growth depends on continuing population growth. That growth has dried up for now and as such, these markets are likely to experience price weakness,” says Phillips.
Some regional areas are also likely to continue to struggle, especially those home to mining operations such as the Pilbara region. For example, Port Hedland saw prices dropped by a hefty 14% over the year according to the Real Estate Institute of Western Australia.
Karratha has been hit even harder, with its median price dropping by 15.4% in the quarter and down by almost 30% over the year to $499,000.
Is Asia WA’s long-term saviour?
There is still huge potential for WA to benefit from the rise of emerging Asia in the medium to long term, according to the most recent Deloitte Access Economics Business Outlook report. This should be apparent through the usual suspects, such as iron ore, not to mention other existing and emerging industries including gas, education, tourism and agribusiness.
There are also several major projects in development which will only be a boost to jobs and growth in the near-medium term, according to the Deloitte Access Economics Business Outlook report.
These include:
- Three major LNG projects (including the $61 billion Gorgon LNG project, the $29 billion Wheatstone LNG Project, and the $12 billion Prelude projects) which are due to complete their construction phases by 2017
- The $3.7 billion Cape Lambert port expansion
- The $2 billion Nammuldi iron ore mine expansion
- The 60,000-seat stadium in the Burswood precinct in Perth, which recently commenced construction
- The $218 million North West Coastal Highway project, where construction is now underway.
- The $3 billion Perth City Link urban renewal project
- The $1.6 billion Elizabeth Quay project, which is expected to extend well into 2015
To buy now or wait
With little prospective price growth, and the rental market remaining weak, Phillips suggests that investors may be better off waiting for more signs of improvement.
“This is not a strong time to enter the market, unless an investor is moving into a well-researched inner city suburb,” says Phillips.
“For a potential investor not yet in the market, it may be better to hold fire and wait on further interest rate reductions. For existing investments, the decision is whether to exit the market and enter the more lucrative markets over east, or adopt a hold and see stance.”
SUBURB TO WATCH
Lynwood: Going from strength to strength
From shaky beginnings, Lynwood has transformed from a crime-riddled suburb in the 1980s to a family friendly community. Situated just 15km south-west of Perth’s CBD, Lynwood is an up and coming area.
Easy access to buses, trains and shopping centres has led to a surge in popularity. Lynwood has one of the fastest sale times in Perth, with houses spending an average of only 22 days on the market.
Jennifer Noye of RWR Real Estate says there are a lot of opportunities to not only invest, but also to develop.
“The fact is that a lot of the properties now are blocks of land that you can purchase and put two properties on, so there’s lots of multiple dwellings happening in that area which appeals to a lot of people,’’ she says.
Changes to council zoning in the City of Canning have opened up properties for development in areas such as Hove Court and Travistock Crescent.
Large properties of 900m2 and upwards are likely to be available for subdivision.
With both the Riverton and Cannington Leisureplex only minutes away, the family friendly characteristics of Lynwood is enticing steady competition.
“Buyers were targeting that particular pocket because Lynwood tends to be a little bit more family oriented. It’s a good starter area,’’ says Noye.
Popular areas for families include Metcalfe Road, Walting Avenue and Lynwood Avenue, which are within walking distance from primary schools and high schools, and provide easy access to shopping centres.
