Perth Property Market Update March 2020

In this edition, we are going to give you a snapshot of the shifting demographics in multiple areas throughout the state in an attempt to build the picture of the maturing (in some cases) of many markets.

In January 2020, approximately 30 percent of all sales occurred below $350,000, which is a greater proportion than in January 2019. With many journalists painting a positive outlook for the property market in 2020 and beyond, first home buyers could gain a sense of urgency and feel more inclined to revisit listings websites again. According to REIWA President Damian Collins, first home buyers are currently making the most of the lower interest rates. Although first home buyers’ prospects may seem positive due to the current levels of affordability and improving availability of finance, we are still in a period of the lowest number of First Home Owner Grants being approved and paid out.

First Home Owner Grant levels plummeted late in 2015 when the state government cut a $3,000 incentive on purchasing established properties in an attempt to stimulate a declining construction industry and increase the supply of housing to improve affordability. Since then, market conditions continued to decline and we have now reached the market floor in some localities – but not in those that continue to experience supply linked to this policy. Unfortunately, this policy, when combined with declining market conditions, has led to entire suburbs being burdened by negative equity.

Baldivis is a developing suburb 35 kilometres south of the Perth CBD and is widely characterised as a first home buyer location. Large scale residential development began here in the early 2000s. At this time, Baldivis was home to less than 1000 residents and since then, the population has exploded. By 2016, the suburb’s population had increased to more than 31,000 residents

Over time, Baldivis’s demographic shifted, going from a median age of 33 in 2006 down to 29 years old in 2016. The number of residents aged between 15 and 34 years old has increased the most. Children who were once part of a young family have aged to their late teenage years, whilst many young couples and singles saved enough money throughout the resources boom to purchase their first home.

The number of married residents decreased between 2006 and 2016. As wages were increasing, parents saw the opportunity to become upgrade buyers and move into established areas closer to the CBD and as a result, lone parents, lone persons and de facto relationships increased in the area.

The range of product offerings in Baldivis includes modern unit developments, townhouses, retirement villages, semi-rural lifestyle acreages and even mixed farming land, however, the vast majority of properties are modern three to four-bedroom, two-bathroom conventional single-level dwellings on a wide range of lot sizes. There are currently 178 vacant land listings on Realestate.com.au, many of these advertised as house and land packages. The median house price in Baldivis settled at $380,000 for 2019, however, there are 265 square metre lots selling for as little as $99,000, resulting in house and land packages sub $300,000. So the supply continues!

Not all first home buyers choose to live on the outskirts of Perth. Many people desire a home closer to the CBD where amenities aren’t in short supply and convenience and lifestyle are at the forefront of their minds. Sacrifices must be made with this choice however, as the average first home buyer’s budget reduces product availability and choice closer to the CBD.

The oversupply of investor grade apartments has forced a continuing downward pressure on values which comes as a relief for some first home buyers looking to purchase in these affordable times. Unfortunately, apartment construction periods can be lengthy and in a softening economy, your new apartment can be worth much less than when you first purchased it (or vice versa).

If you are risk-averse and don’t mind dated apartment complexes, there is an abundance of options to choose from, including throughout Wembley, Como and Maylands. Old one-bedroom, one-bathroom apartments can sell for as little as $110,000 in Maylands (usually in walk-up complexes that have no elevator). Surely these are bargain basement values and we anticipate attention from investors and first home buyers alike.

The property in Figure 7 sold for $225,000 in November 2019. This circa 1977, first floor apartment comprises two bedrooms, one bathroom and one open car space with 67 square metres of living area. It is currently under lease for $250 per week, showing a 5.8 percent yield.

If old is not your cup of tea then there are a plethora of modern apartments available for first home buyers in Rivervale, Burswood, Cockburn Central and East Perth. The property in Figures 8 and 9 sold for $235,000 in December 2019. The circa 2013 apartment comprises two bedrooms, one bathroom and one secure car space with 63 square metres of living area.

This apartment in Rivervale (Figures 10 and 11) originally sold off the plan in 2014 for $530,000. Completed in 2015, it comprises two bedrooms, two bathrooms, and one basement car space with a 71 square metre living area. The apartment includes a 25 square metre balcony with views of Optus Stadium. Common facilities include a pool, games room, residents’ lounge, sauna and gymnasium. It recently sold in December 2019 for $375,000 – a loss of $155,000 or 30 percent. This is a perfect example showing Perth’s current affordable market, as only five years ago most first home buyers wouldn’t have had the chance to purchase this type of product.

People who have found themselves in a comfortable enough position to enhance their living situation move on from first home buyers to become upgrade buyers. This market is often driven by parents in their 30s and 40s who have experienced promotions or wage increases. Access to the full range of amenities is key in this market as many of the upgraders are having a second or third child and need more space in the family home. Currently, there are some great opportunities within suburbs located 10 to 20 kilometres from the CBD. Leeming, Duncraig, Kardinya and Mount Lawley are all examples of suburbs that many upgrade buyers are searching in. These types of locations aren’t only accommodating to upgraders though, as first home buyers, downsizers and retirees can still find some opportunities here in the form of villas, duplexes and subdivided lots.

Leeming is an established suburb located 14 kilometres south of Perth and is within close proximity to good educational facilities as well as accessibility to main roads and the Kwinana Freeway. In 2019, the median house price in Leeming fell 5.6 percent to $670,000, although overall it has remained stable since 2017 when the median was $675,000. Sales activity in Leeming has been strong over the past year as 125 properties transacted. For the month of January 2020, Leeming recorded the greatest sales activity growth out of all Perth metro suburbs (REIWA, 2020). Upgrade buyers are making use of current market conditions as Leeming is receiving an average of 340 visits per property on Realestate. com.au. The website shows a Western Australian average of 244 visits per property.

The typical property in upgrader family locations such as Leeming is late 1980s and 1990s, four-bedroom, two-bathroom dwellings on 600 to 900 square metre allotments. The area is definitely a family destination as many residents who moved here when the suburb was developing choose to stay instead of seeking an upgrade elsewhere. Demolish and rebuilds are starting to become popular in Leeming, however extensive renovations remain more prevalent.

The property in Figures 12 to 14 sold for $737,000 in December 2019 after 20 days on the market. This fully renovated family home was built circa 1984 and comprises four bedrooms, two bathrooms and a double garage on a 704 square metre allotment. The property originally sold for $560,000 in 2009 prior to the renovations.

Mount Lawley is another potential upgrader location located just 2.5 kilometres from the CBD. It has popular surrounding amenities which make it a sought-after suburb. This includes plenty of local cafes, bars and shops, as well as good public transport links to and from the city centre. Mount Lawley’s median house price fell by three percent over the past year, settling at $921,250 for 2019. The suburb does comprise of some prestige character homes, however, there is currently good value in the unit, apartment and townhouse market.

This Mount Lawley property (Figures 15 and 16) sold for $580,000 in December 2019. The circa 2005 townhouse comprises three bedrooms, two bathrooms and a single garage on a 219 square metre allotment.

Changing demographics in Perth’s affluent western suburbs has resulted in an increase in high density, lifestyle living in the area. Claremont and Nedlands traditionally boast character homes on larger lots with plenty of garden space ideal for family living. As the children finish school and move out of home, many baby boomers realise that they don’t require the large family home with now many spare rooms and required maintenance. As a result of this, we are seeing a lot more developments that cater to this generational shift, including One Subiaco, Claremont on the Park and Essence. “We have seen a lack of supply in the western suburbs because there was never any height in them so you couldn’t get apartments in the western suburbs because of the resistance from some of the local council” (Blackburne, 2019).

There remains a shortage of supply for larger high-end apartments within the area. The demand for this style of living has increased as people who grew up or raised families in the area want to remain there despite their circumstances changing. A great example is Claremont on the Park. It is a new development bringing a range of different living opportunities from one-, two- and three-bedroom apartments, to assisted living apartments co-located with premium aged care services and intergenerational childcare. It provides a mix of living and retail essentially creating a hub where people can work, live and relax. The development is conveniently located a stone’s throw from Claremont train station, providing easy transport options. This is providing a great alternative for those who are downsizing or for those who would like to stay in the area but who need a supported living environment.

Moving east of Perth, Kalamunda is a semi-rural lifestyle suburb located just 18 kilometres from the CBD. Characterised by its sloping contour, this region forms part of the Darling Scarp and had a population of 6983 people in 2016 (ABS Census, 2016). Over the past 20 years this population has stayed relatively stable – only increasing by four percent, however, there has been a demographic shift over the same period, as is the case for many Western Australian suburbs.

In 2001 there were 5399 residents between the ages of 15 and 64 in Kalamunda. By 2016 this number had reduced almost 25 percent to 4073 persons. Conversely, there were 1122 residents 65 years or older in 2001 and by 2016, this number had increased 62 percent to 1821 persons. These figures show that the population has aged dramatically in this region, with Kalamunda’s median age increasing from 41 years old in 2001 to 47 years in 2016.

Zoning changes have been a positive outcome for residents in the transition from worker to a retiree. Many people have had the opportunity to demolish their old dwelling once the upkeep became too much of a burden. Then they often subdivide the land into two to five lots and use the profits to purchase in one of the many modern villa or townhouse complexes built in the area over the past ten years. The median house price in Kalamunda has decreased by 18 percent over the past five years, settling at $563,750 in 2019.

Down in the south-west of Western Australia, first home buyers are generally purchasing in the outlying residential areas of Vasse, Yalyalup, Kealy, Australind, Eaton and Dalyellup due to affordability. These suburbs have median house prices ranging from $315,000 (Eaton) to $436,250 (Vasse). The homes are generally modern and have relatively poor prospects for capital growth, but they do offer strong rental yields. First home buyers are either building and taking advantage of cheap building costs or purchasing from families looking to upgrade.

Many families are upgrading by selling in outlying residential areas and purchasing dated homes in good locations closer to the ocean, a move which is representing good value for money in the $500,000 to $1 million price bracket. These properties represent stronger long-term capital growth whilst prospective yields are lower than in the first home buyer locations. As these homes are older, upgraders are updating and renovating in many cases which are stimulating the south-west building sector. This is helping to offset a general reduction in new home constructions.

There has been an increase in subdivisions of well-positioned properties, providing for lock and leave detached units that are appealing to retirees. This market is active as the south-west is the fastest-growing region in the state and part of the demographic is elderly people looking to retire. In addition, there is a new retirement village under construction in Kealy to accommodate for retirees moving to the south from Perth.

The south-west market is mostly made up of families and retirees. Families are recognising the area as a good place to raise a family, with the biggest hindrance being the perception of a lack of available jobs. Many younger people leave the south-west to study or to enjoy the city lifestyle and as such, the first home buyer market is not strong but is reasonable. Affordability issues have resulted in smaller lot sizes being released (as is the case for Greater Perth), however, there are plenty of blue-collar workers in the region who seem to prefer rural residential properties. As such, there is demand from tradespeople to purchase a hectare lot to build their dream home on.

Kalgoorlie-Boulder’s demographic has barely shifted over the past 15 years, currently sitting at around 30,000 residents. Properties in Kalgoorlie range from early 1900s fibrous cement sheeting dwellings on 1,000 square metre allotments and modern conventional brick dwellings on smaller lots to mixed-age townhouses and villas. Kalgoorlie has plenty of options for first home buyers and families. For first home buyers, newly developed land is available in South Kalgoorlie with 700 square metre lots selling for as little as $25,000.

This property (shown in Figures 17 and 18) sold for $275,000 in November 2019. The circa 1925 build has been renovated internally and comprises three bedrooms, one bathroom and a single garage on a 1012 square metre allotment. The price point is perfect for entry into the property market and is just below the Kalgoorlie-Boulder median house price of $290,000. Many residents looking for an upgrade choose to move to more sought after suburbs such as Lamington and Somerville rather than renovate their existing property.

This property (Figures 19 and 20) was built circa 2010. The modern dwelling comprises four bedrooms, two bathrooms and a double garage on an 876 square metre allotment and includes a theatre room, gable patio and workshop. It sold in November 2019 for $550,000 and would be a suitable option for a family looking to upgrade.

In the Pilbara mining town of Karratha, high-vis attire and hard hats are being discarded for prams and nappies, as the mineral and gas workers traditionally associated with the town make way for young families. Traditionally, Karratha has predominantly been an investor’s market place, with individuals looking to enjoy the benefits of the once booming resource sector and to get their own slice of the remarkable rental yields on offer. This is illustrated by the town’s demographic profile, with 58 percent of the area’s population made up of men in 2011, slightly decreasing to 56 percent in 2016 (ABS, 2011). The ABS results fail to account for a dramatic reduction in FIFO accommodation throughout the townsite.

However, after the last market cycle, buyers within Karratha changed dramatically. Young families dominated the market during the downturn, finding opportunity in the town’s diminished property values. Our local valuers in Karratha report that it has become a much more liveable city for families in terms of facilities, schools, sports and playgrounds. The 2017/18 market cycle saw the most dramatic shift, with the town’s female population increasing by 446 and 1101 men leaving (The West Australian, 2017). However, this is slowly changing again as increasing mining and resource investment brings jobs back to this turbulent region. Investors are re-entering the market and prices are significantly increasing. In the future, we may see a rise in single male person households again as the cycle recommences.

Speak with a Perth Mortgage Broker today.