17th April 2009
The flood of first home buyers competing for Perth's more affordable property within 5kms to 10kms of the city has sent investors on a mission to find their own market, property experts say.
Director of PRD Nationwide WA, Angus Murray says investors have been focusing their attention on houses priced above $500,000 located in established suburbs closer to the beach, where a drop in prices has opened up the opportunity for bargain hunting.
"Investors in Perth are seriously looking for property now, as there are plenty of bargains to be had," says Murray.
"These are currently available in areas located 10kms to 15kms from the CBD, such as Wembley Downs, Mount Horthorn and Scarborough."
Properties listed between $500,000 and $1 million not only offer the potential for negotiation, but present favourable rental returns and a propensity for capital growth in the next property cycle, starting from around 2010 says Murray.
"The rental vacancy factor in Perth city is still close to zero, so rental returns across the city remain strong," Murray says.
First home buyers are unlikely to follow the trend due to affordability reasons which reduces the competition for investors.
"There are better bargains to be had for investors in this price range, compared to those more affordable markets, which means investors looking in the outer suburbs of the CBD are not competing with Kevin Rudd," he says.
Rob Fitzgerald, the director of Herron Todd White in Perth says the exception to this rule is located in the coastal suburbs such as Padbury, Craigie, Beldon and Heathridge, where investors can pick up a property within the $300,000 to $400,000 range.
"These areas are less concentrated with first home buyers, and the lower priced properties means that investors can take the more subdued approach they want and their purchase is a safe haven," says Fitzgerald.
Potential for more affordable developments
Murray says building costs in Western Australia are down 20% on prices seen 12 months ago, allowing developers to produce new stock for less.
"Developers in Perth are adjusting their view of land value and with building costs down and interest costs halved, we're going to find some new off-the-plan stock come forward over the next six to 12 months," says Murray.
"And they're going to be more affordable than what we've previously seen. This will create an interesting opportunity for investors to buy in at lower prices."
Optimism begins to return
Murray says Perth's home buyers are becoming slowly optimistic of their local housing market, although it is not difficult to allow a few negative sentiments turn this around.
He says the WA economy is linked closely to the USA and China, and so, sentiment in the WA housing market often fluctuates with those continents.
"People are still unsure as to whether we're bumping along the bottom and the next turn it's for the better or whether the next turn is for the worst," says Murray.
"Once they're re-assured that no major drop in asset values is going to occur then we'll see confidence return to the property market."
Fitzgerald says investment seminars are beginning to fill up, indicating that investors see the present as a good time to brush up on their buying skills and possibly re-enter the Perth market.