Is Western Australia a property investment hotspot?

Property investors looking to take advantage of current market trends, shouldn’t just jump into the market because interest rates are low and lending standards have been eased.

While these are generally considered positive developments a property purchase requires due diligence to ensure the investment can stand on its own as a good deal.

How to decide on a house location

Where to live, what to live in, what is affordable, required amenities, number of bedrooms, number of bathrooms and lifestyle opportunities may seem like straightforward factors in the decision to buy a property, but they are not.

Political, social, economic and environmental factors will have an influence and turn a seemingly simple decision, like when to buy, into something much more complicated.

Western Australia is 2019’s case in point.

In WA, a deflated property market has presented some apparently excellent buying opportunities, predominantly for first home buyers.

Property prices in WA have generally been flat with negative price growth a feature in Perth and regional market over the last few years.

Many owner occupiers have been staying put to see if they could ride out the downturn in WA.

Western Australia property price outlook 2020

Western Australia property prices are down 15 per cent from peak during the mining boom. The median price in the state dropped four years in a row, putting the market in the worst downward spiral in the country.

It was exacerbated by Pilbara values. Homes purchased for $750,000 in 2012 in Pilbara mining towns such as Karratha, Port Hedland and Newman, dropped below $300,000 in some cases.

The rental return, which had been $1,600 a week, fell to $370 making repayments impossible.

The downturn saw a vibrant property market, become one riddled with anxiety.

There were and still are some winners.

Properties for first home buyers have been at their most affordable during this period.

REIWA President Damian Collins told Bankwest, “It’s a really good time for first home buyers in Perth to get into the market,” says Damian. There’s the possibility of a stamp duty exemption if the property is under a certain amount, so it’s worth doing your research.

“You can go and get a nice shiny new house in the outer suburbs, but if it’s not going to be near your work or suit your lifestyle, then maybe you want to think about looking at established homes in established suburbs where the median house prices are relatively low.”

Perth, Fremantle and regional WA markets have beautiful heritage street scapes and established housing. (Fremantle CBD pictured below) Again, there is no easy decision.

Property market turnaround in WA

WA, like the majority of Australia’s property market looks like it may be now in recovery.

Which means there are other considerations surrounding when, where and what to buy. Also, what is affordable.

The McGowan Government recently announced a new $150 million housing investment package as a means of stimulating the Western Australian economy.

Mr Collins called this a win for WA home buyers, those who are currently on the social housing waitlist, and the construction industry with the additional 1,000 jobs that will be created.

“Despite the median weekly rent remaining at $350 since early 2017, for those on low incomes the private rental market can still be unaffordable, which is placing pressure on the region’s social housing system. This boost will help West Australians from across the property spectrum, for those needing to secure social housing homes right through to those looking to take their first step on the property ladder as homeowners.”

Hot investment locations in WA

Mr Collins considers Scarborough (pictured above and below), West Leederville, Morley, Armadale and Forrestfield as growth suburbs.

Scarborough is at the higher end, however the state government has spent a lot of money on the redevelopment of the foreshore, which is approximately 14km from the city and attractive enough for middle to high income earners to start looking for lifestyle opportunities.

Sydney and Melbourne property investors target WA

Interestingly, the WA property market has attracted the attention of East Coast investors, with property seekers from Sydney and Melbourne looking for bargains.

Collins told Domain, “There has been a small return of investors from outside Perth

“Bargain hunters are buying properties where they can get a decent yield with interest rates being low, meaning investment properties are usually neutral or positively geared.”

East Coast enquiries are based on property values in WA being much lower than in the East’s capital cities.

Perth has a median house price of $527,107, less than half the Sydney median price of $1,079,49. Melbourne’s median is $855,428.

“Investors can see that they can get more value in Perth for the dollar,” Collins said.

To buy or not to buy

There are clearly a lot of factors to consider when buying a home, especially in markets that are depressed or in revival.

However as Collins succinctly puts it, perhaps it isn’t so complicated. Perhaps it is simple.

“At the moment, a lot of people in Perth are sitting on the sidelines saying the market could go down further and we might not be at the bottom yet. But it’s hard to know exactly when the bottom’s going to be.”

“In the grand scheme of things, I’ve seen a lot of people miss out when they try to time it to get to the bottom. They wait and wait and wait, and then the bottom comes and goes without them realising it.

“If you want to buy a home and can afford it, I’d encourage you not to sit on the sidelines.”

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