WA property market update

WA property market update

On today’s show, we check in with Damian Collins about the WA property market with reports that it is a bit of a cot case.

Read the transcript here:

Kevin:  You may have heard of some of the stories coming out about the West Australian market – horror stories. I’ve been talking to Dr. Andrew Wilson about what’s happening around Australia, as well.
I want to get a bit more on-the-ground information about that, so I’m talking to Damian Collins from Momentum Wealth, who has got his ear very close to the ground for us.
Good day, Damian. How are you doing?
Damian:  Good, Kevin. And yourself?
Kevin:  Good, mate. Now tell us what is happening in the WA market. Is there any reason for concern there?
Damian:  Kevin, the market is patchy; there’s no doubt that. We’re finding that Perth is still traveling along okay. In terms of pricing, it’s up about 4.5% last year. We’re expecting this year to be relatively moderate gains, maybe up to 3%, but certainly nothing of substance.
Having said that, within particular suburbs, we’ve seen last year even though the market only did 4.5%, some suburbs were up 18% and some properties were up even a little bit more if they were the right properties in the right locations.
There are still opportunities, but it’s very much a selection market. But yes, certainly, in some of the regions, there are some significant price falls happening.
Kevin:  Is this on the back of what’s happening with mining?
Damian:  WA has always been a resource-based economy, Kevin, and that affects the property market. It is a bit more volatile than you’ll find some of the other locations around Australia. Having said that, Perth is not nearly as volatile as some of the regional areas. As I said, we’re expecting moderate growth. Even though e had a slowdown in mining last year, we’re still expecting moderate growth – even at worst case, sort of flat.
The regional areas, particularly in the Pilbara, have been hit very significantly by the mining downturn, and that’s reflected in their pricing and the rents that we’re seeing come back quite a lot.
Kevin:  What’s happening with the returns there?
Damian:  We’re seeing, certainly in Karratha and Port Hedland, rents down in the order of 25% and even in Karratha, down towards 40%, and prices down similar sorts of levels. Look, it was always obvious. We were telling clients in 2012, “Don’t go there. You’ve missed that boat. That has had its run.”
When you were paying $1.5 million and $2500 a week rent for a three-bed, one-bath, pretty average property, it was pretty clear it was unsustainable, and once the supply came on, it was always going to happen. Unfortunately, some people just wanted to see blue sky forever and got in at the wrong time.
Having said that, if you had got in eight or nine years ago when the pricing was right, you could have bought a house in 2006 in those areas for $300,000, now still worth $700,000. Those areas are really speculative. You’ve got to get in at the right time. We still think there’s a little bit of downside, but it’s getting closer to where it’s worth having a look at.
Kevin:  Damian, if I were to come to you with $500,000 to spend, where do you recommend I should spend it?
Damian:  For our clients with $500,000, we’re looking around in areas that are proposed re-zoning. We’ve been buying quite a bit in High Wycombe and Forest Hill over the last 18 months. It’s starting to get up there. We don’t see it as undervalued as much as we did 18 months ago, but it has certainly had a good run.
They’re the sorts of things you want to be looking for in Perth. Even though we’re going to have a flat year, there are still areas that will do relatively well. Study the Directions 2031 strategic plan for Perth, and you’ll see the activity centers. That’s where we’re seeing opportunities – near train stations, around areas that are likely to be re-zoned. That’s where we think the market out-performance will be in the next two years.
Kevin:  Damian Collins from Momentum Wealth in WA, thank you very much for your time.
Damian:  Thanks, Kevin.

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