Yes, the drop in the mining industry was a blow for WA, but no, Perth is not down and out. If anything, the region looks to be dusting itself off and jumping back in the ring
Fortunately for WA, there is much more to the region than just mining. But when talking about the area, it is almost impossible to avoid discussing the natural resources industry, and of course the slowdown in global demand has had an effect.
Experts wholeheartedly agree that Perth’s housing market is slow. The slowdown in the mining sector caused a decline in the market, but fortunately the ship seems to have steadied.
“I think the dropping interest rates have helped quite a bit to stop the market falling too far back,” says Callen Deverell of Propell National Valuers.
“With low iron ore prices and employment in that sector, a lot of people have lost their jobs and had to look elsewhere. It’s on everyone’s mind, which definitely adds to that market uncertainty.”
PRDnationwide Perth director Angus Murray shares a similar view.
“The market has definitely slowed in this calendar year, as against where the market was at 12 months ago,” he says.
“At some point low interest rates will revive the market for domestic purchases in Perth. That’s just a confidence thing.”
Filling in the gaps
A key aspect of maintaining strong market sentiment is having a healthy workforce. Around 12,000 jobs have been lost over the last two years in the mining industry, which has opened up a huge hole in WA. Fortunately, local businesses and infrastructure developments are showing some encouraging signs.
“There are some big projects in the inner city coming to market,” Murray says. “A new hotel is being built at the Crown Casino; the new complex will add 2,500 permanent jobs. Coles came out and said they’ve employed an extra 6,000 people in WA in the last two years.”
The continued expansion of Perth is also showing that the state could well be on the rebound.
“The numbers sound dramatic and do frighten people a bit, but the reality is Perth still had the highest percentage growth in population in Australia last year.
“We just cracked over the two million mark for the first time in 2014.”
Rise of the inner city
As Perth’s population surges, the benefits of living close to the CBD are becoming more apparent. Many of the inner-city suburbs have undergone recent zoning changes to allow for higher-density building.
“There’s quite a bit of activity around inner-city developments,” Deverell says.
“More developments of units and apartments are in close proximity to the CBD ... there seems to be a bit of a change in the market that people do want this kind of product. There’s much better demand then what history has said.”
While rising vacancy rates have sparked concern about an oversupply, Murray says this is nothing to be alarmed about. Demand to house fly-in fly-out workers initially pushed up rents, but now they are returning to realistic rates.
“Large mining companies were paying two years ago about $1,000 a week for two-bedroom apartments in the CBD,” Murray says.
“It’s transitioning from a super high rental rate to a more equitable equilibrium rental of around about $550 a week. There are some alarming statistics in regard to falling rentals in the inner city, but the real news was that rentals were extraordinarily high to begin with and it wasn’t sustainable.”
Murray says that in its current slow state, now could be an excellent time to enter the market.
From an investment point of view there are now some amazing new products coming to the market, and that’s what will stimulate demand.”
Keep an eye on the outer rings
While the inner city is seeing considerable development, the outer suburbs could potentially be at risk. Expansions in estates around the city’s outer rings have initially attracted healthy interest, but the changing nature of demand in Perth could easily leave them behind.
“We’ve gone from 1.4 to 2 million in the last seven years,” Murray says. “Imagine throwing 600,000 extra people into a city in under 10 years. How does the infrastructure manage to keep up with that?
“As more exciting options come to the inner city, young people are going to prefer to live in and around the city rather than 40 or 50km away.”
SUBURB TO WATCH
Hamersley: The secret is out
Hamersley has largely remained out of the spotlight for the past 20 years. Rapid growth around Perth’s fringes directed focus elsewhere, but now the suburb is back on the scene. With listed properties receiving an average of 537 visits and only spending 15 days on the market, competition is fierce. Savvy investors need to get in quick if they want to take advantage of this slice of northern paradise.
Hamersley is a family-oriented suburb with a strong sense of community. Older couples whose children have flown the coup are slowly moving out as the new generation of families cast their eyes on the suburb. With rich parklands, lush bush and a peaceful atmosphere, it is not hard to see why. Two schools are located in the suburb and many are dotted around the surrounding areas. There is no significant shopping in the direct area, but the major commercial hub, Warwick Grove, sits just outside it in neighbouring Warwick. Cinemas, supermarkets, cafes, restaurants and other small businesses litter the area. A light industrial area sits to the south of the suburb, accommodating a range of businesses and companies.
Located 12km from the CBD and 6km form Perth’s northern beaches, Hamersley provides a lifestyle of ease. The Mitchell Freeway makes a trip to the CBD less than 15 minutes and the Reid Highway provides easy access to the city’s west. Popular areas include Blissett Way and Rannoch Circle as they provide easy access to parkland, shopping and the arterial roads.
