Finally – good news out of Perth. The average vacancy rate in Perth’s rental market has fallen to its lowest level in over three years.  Many investors are breathing a sigh of relief.  But is the worst behind the WA market?  Our man on the spot there – Damian Collins – says it might be and he gives us examples of locations you should consider and why.
Transcript:
Kevin:   Great news. The average vacancy rate in Perth’s rental market has fallen to its lowest level in over three years, according to recent data released by the Real Estate Institute there. Damian Collins from Momentum Wealth is our man on the spot in WA and he joins me. Hi Damian.
Damian Collins:   Hi Kevin.
Kevin:   Damian, what is vacancy rate, and what’s that telling you about the Perth market right now?
Damian Collins:   Well, Kevin it’s come from over seven and a half percent down to four and a half percent recently. So we’ve seen the number of vacant properties drop from the peak of 12,000 to just over 7,500. So it is definitely starting to turn.
Damian Collins:   We’re not seeing rental rises across the board. On some selected properties we are, but certainly the trend is heading in the right direction. And I’d expect, yeah it’s certainly a decreasing trend, and I expect that to continue.
Kevin:   Yeah, that’s a good indication of what the market doing. Is it too early to say that the market there generally apart from rentals has actually turned?
Damian Collins:   It is, it is. We’ve definitely hit the bottom as a general market, but it is still in segments. So where some segments, the premium end of the market’s already in recovery. The middle tier’s probably at the bottom and in some of the new suburban areas, there’s a lot of excess supply. They’re still struggling along the bottom and perhaps have a little bit to go. So generally across the board you’d say the bottom, but it’s a bit segmented in the market.
Kevin:   Damian, what do you think, what impact will this have on developers and construction generally?
Damian Collins:   Well, the home building market has still, I think, got 12, 18 months to go. That’s where we’ve seen the biggest overs generally in the outskirts, in the new home and land packages.
Damian Collins:   But apartments, look we are seeing owner occupiers certainly come into the apartment market. That’s the stuff that’s selling. The developers across the board are all finding that the three bedroom property is more at the premium end of selling. But investors are still quite thin on the ground.
Damian Collins:   So look overall, I think that the new home building market’s 12, 18 months away before they’ll see much. But developers are starting to feel a bit more confident, but there hasn’t, it’s been owner occupiers. Investors still haven’t come back into the market yet.
Kevin:   Of course employment’s also another key indicator for us. What’s happening with jobs there in WA?
Damian Collins:   Well, that’s been one of the stories that is certainly been for 2018, and it’s just started to feed through into property, that the mining sector is certainly in recovery. There’s been a lot of lithium mines getting, and lithium processing, processing places getting developed. Iron ore’s got some big expansion plans at [inaudible 00:02:30] and for Rio. Four and a half billion or thereabouts to BHP.
Damian Collins:   So that’s been, people in the mining sector say it’s not boom times, but certainly there’s skill shortages, and they can’t get people. So the trouble is we’ve got to get them in and ease employment and certainly the number of jobs available is the best it’s been in four years.
Kevin:   Yeah, of course with rental, the rental market tightening up a bit, that puts pressure on property availability that’s going to flow through to increased demand. When are you expecting an uptick in prices, or is that already happening?
Damian Collins:   Kevin, it’s the owner occupier market is the premium and it’s definitely already happened. They’re offering between five and eight percent already. So certainly anything above your million that’s, and that was confidence driven where people could afford it. The rates, the interest rates are low and it was just about confidence that people were worried about having a job at the mining, you know, the middle management and upper management level now feel very comfortable. So that’s moved.
Damian Collins:   The mid tier, we just haven’t seen a lot of investors back yet. There, certainly in our office, I know we’re getting people from Sydney. They’re about 30, 35 percent of our business. Local investors are still a bit thin on the ground and I think they need to see the vacancy rate go down a bit more, and rent rises start to happen.
Damian Collins:   So I still think in 2018, it’s the end to the middle of 2019, it’s going to be, in the general market overall, slow growth. But I think yeah, second half of 2019 and 2020. All the fundamentals are there to say that’s when Perth should do pretty reasonably well.
Kevin:   Well, just on the point of investors there, what’s investor stock like in Perth at present?
Damian Collins:   Yeah, there is investors, there is an over supply of finished apartments, so the investors are running around getting a few bargains in some spots. The stuff that’s in high demand we’re finding with our buyers agents out in the market, is anything that development potential. Even though the market overall you’d say it’s balanced and it’s not super strong, we find that the good quality properties near transport stations, and near infrastructure. We’re often finding we’re sometimes competing against two or three offers.
Damian Collins:   So the smart investors are looking at something that they can redevelop a bit further down the track. So that sort of stock is in fairly high demand. But your finished development stuff is still a bit, a bit soft in there. So I reckon that’ll get soaked up over the next six to 12 months.
Kevin:   Yeah. Where would you say the best opportunities for investors exist right now in Perth?
Damian Collins:   Well, Kevin, I’d certainly be saying, as an investor, you know Perth’s starting to recover in population growth, depending on whose forecast you read. We’re going to be two million now, we’re going to be somewhere between three and a half to five million over the next 30, 40 years. It’s, you follow the trend of what’s happened in Sydney and Melbourne. It’s near transport. As the city gets bigger, you want to be near the train station. Then the infrastructure, the amenity, the shopping centres, the lifestyle, the cafés.
Damian Collins:   So certainly anything in Perth, you know, close to the beach within 15, 20K at Scarborough I like. There’s going to be a bit of a development going on, but I think that’s the future Bondi of Perth.
Damian Collins:   And certainly to come back a bit inland on the southern side, it’d be like South Lake, Bibra Lake along the free land and train lines. But in the Northern Corridor, your Warwick, your Craigie. They’re the ones that you can still get a decent property for under $500,000 in Craigie and those sorts of areas, and Bibra Lake. It’s just something you wouldn’t see in Sydney and Melbourne.
Damian Collins:   So just focus on being near amenity and transport, that’s what’s going to give you the growth incentive prices as the city grows in population.
Kevin:   Yeah, well it’s certainly been a tough time in Perth.
Kevin:   So thank you for that update, Damian. And it’s really good news that that market may just be turning around at long last.
Kevin:   Good on you Damian. Thanks for your time.
Damian Collins:   My pleasure, Kevin.