{"id":7805,"date":"2016-05-02T01:00:05","date_gmt":"2016-05-01T15:00:05","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=7805"},"modified":"2016-05-02T01:00:05","modified_gmt":"2016-05-01T15:00:05","slug":"the-lessons-from-wa","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/the-lessons-from-wa\/","title":{"rendered":"The lessons from WA"},"content":{"rendered":"

 
\nNext we go to Western Australia where Damien Collins<\/strong> says the market there continues to suffer from the downturn in mining and the over building for first home buyers.\u00a0 Lots of lessons coming from that part of the country.
\nTranscript:<\/strong>
\nKevin:<\/b>\u00a0 One of the markets in Australia that is suffering a little bit is Western Australia. Let\u2019s take a visit there now with Damien Collins from Momentum Wealth and find out exactly what is happening.
\nDamien, thanks for joining us in the show.
\nDamien:<\/b>\u00a0 Pleasure, Kevin.
\nKevin:<\/b>\u00a0 Now, we have heard that your state, South Australia, and Northern Territory are not faring all that well, but tell us about Western Australia.
\nDamien:<\/b>\u00a0 Kevin, we\u2019re still suffering from the downturn in the mining sector and also the over-building that happened with the first-home owners grant. As everyone would know, obviously, the mining sector has had a downturn, and that certainly affected job security and the wages paid, so people are less confident, and that\u2019s flowing through into real estate transactions.
\nThe other big thing has been the first-home-owners grant, a lot of people went and built, so that\u2019s [0:51 inaudible]<\/b> tenants and so our vacancy rate has gone up to about 6%, so rents have come back because of that. Coupled with the other factor that the interstate and overseas migration has slowed down quite a bit.
\nLook, we\u2019re definitely in an oversupplied territory, not substantially. We\u2019re at about 15,000 properties for sale; a balanced market is about 13,000. The rental vacancy rate is 6%, but having said that, 94% of properties are leased.
\nOverall, the Pearth market is a bit soft, but what we\u2019ve noticed in the last couple of months is that it seems to be bottoming out, if it hasn\u2019t bottomed already, so expect we won\u2019t see any runaway market this year, but certainly we\u2019re at the bottom or close to it anyway.
\nKevin:<\/b>\u00a0 What\u2019s the sentiment amongst investors right now?
\nDamien:<\/b>\u00a0 Still very cautious. Certainly, we have seen some east-coast investors come into our market and have appointed us as buyers agents, so they\u2019re, I guess, seeing from a bit further away, seeing the longer-term prospects, not looking at just what\u2019s happening short term in the market. But local investors are still cautious. There is activity but the headline in the press is the high vacancy rate, rent reductions, etc. Confidence is pretty low, so investors are quite thin on the ground overall generally.
\nKevin:<\/b>\u00a0 What about developers? Are they pretty nervous about the market?
\nDamien:<\/b>\u00a0 Developers are bringing stock to market. Again, with the lack of confidence, they\u2019re finding that people aren\u2019t easily committing to off-the-plan purchases because, again, people think prices may not be much more when they settle in two years. Developers are struggling, and anyone bringing the properties to market at the moment is having a hard time getting them away.
\nSome projects are going better than others, but there\u2019s still activity for development sites. We do buy development sites for clients, and we find that we are often competing because people are looking at projects they buy now and they wouldn\u2019t bring them to market for at least 12 months and the likelihood is in 12 months when they are to market, with all of the approvals and everything else in place, that the market will be a little bit better.
\nKevin:<\/b>\u00a0 What sort of projects are popular or most popular? What size of development are you looking at?
\nDamien:<\/b>\u00a0 Generally, the most popular ones are more the boutique level, so anywhere from your 10- to 40-apartment in the suburban areas, in the areas near the amenities, so near the train stations, the caf\u00e9 districts, in close within that sort of 10 K radius of the city, and where there\u2019s not a lot of other competition and where it blends in well with its surroundings. That\u2019s what people are looking to buy, and certainly, from a rental proposition point of view, they\u2019re the ones that people like to get.
\nNow, we certainly do have a lot of development in around the CBD area, but as you\u2019ve seen with Brisbane at the moment, as we\u2019ve seen in the past in Melbourne, at the moment, and particularly around that Docklands\/Southbank area, it is a lot riskier because of the big risk of significant oversupply when there\u2019s lots of 30-story buildings going up. So generally, most investors who are savvy are targeting the more boutique projects where they\u2019re keeping away from the big areas of oversupply.
\nKevin:<\/b>\u00a0 Damien, where\u2019s the best buying right now in the capital, in Perth itself?
\nDamien:<\/b>\u00a0 A couple of areas that we like, Kevin, are around South Lake, which is on the south side of the river. It\u2019s near Bibra Lake. It\u2019s an area that\u2019s about 18 K south, but it is near the freeway and the train line. It\u2019s generally been considering a lower socioeconomic area. The prices are in the $400,000s for a house, but it\u2019s an area that\u2019s getting rezoning happening that we\u2019re seeing in the market, people looking to redevelop in the area.
\nAnd as Perth grows\u2026 Perth is likely to grow from 2 million now to anywhere between 4 million and 5 million over the next 35 years, so areas like with the amenity there will rejuvenate. It won\u2019t go to a premium suburb, but we expect it\u2019ll move from that lower socioeconomic into something more middle class, and that re-rating we expect would see some good, solid long-term capital growth in an area like that.
\nWe certainly still are buying in Forrestfield with the train line. The market there has come back a little bit, but certainly the longer-term prospects, once that train station\u2019s in place and that whole catchment area in the foothills and into the hills now has a train line, that\u2019ll certainly increase the value of properties around that. We\u2019ve seen in Melbourne and Sydney that properties close to train stations do increase in value quite substantially.
\nKevin:<\/b>\u00a0 Before I let you go, Damien, what about the regions?
\nDamien:<\/b>\u00a0 We\u2019re seeing, Kevin, the Pilbara and the mining towns up north suffering significantly. Prices are down nearly 50% in Karratha, 30% in Port Hedland, and rents are down more than half. It\u2019s pretty tough up there. In the southwest, the market\u2019s doing okay in Bunbury\/Busselton areas, but certainly most people focus in WA on the mining areas, and they\u2019ve come back a long way, but it\u2019s going to be a long time, I think, before they recover.
\nKevin:<\/b>\u00a0 Wonderful insight there, Damien. Damien Collins from Momentum Wealth in Western Australia. That\u2019s the wrap on WA.
\nDamien, thanks for your time.
\nDamien:<\/b>\u00a0 Thanks, Kevin.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

  Next we go to Western Australia where Damien Collins says the market there continues to suffer from the downturn in mining and the over building for first home buyers.\u00a0 Lots of lessons coming from that part of the country. 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