In today’s show, together with Damian Collins from Momentum Wealth, we look at the property market in Western Australia. We will check if there is much happening with development and infrastructure in Perth.
 

Transcript:

Kevin:  Let’s take you to another market now, a market that’s there’s a lot of discussion about right now. You’re going to hear from Dr. Andrew Wilson later in the show, too, but I want to take you to Western Australia and talk to Damian Collins, who is a man we talk to whenever we want to know what’s happening in that market.
Damian, of course, is from Momentum Wealth; they’re buyer’s agents in WA. Damien, thank you for your time.
Damian:  Pleasure, Kevin.
Kevin:  Let’s have a look at the WA market, I guess more particularly the Perth market. How’s that looking right now?
Damian:  The Perth market is pretty flat at the moment. In 2012 and 2013, we saw some reasonable rises in the market. It tapered off over the end of 2014, and we’re back to what we consider a balanced market where we’ve got about 13,000 properties for sale, which is around about what we consider balanced.
Overall, the market is flat, but there are some bright spots still out there.
Kevin:  If it has flattened out, as you say, and the equilibrium there with listings is starting to top out, that might augur well for the future, I would have thought, Damian.
Damian:  Yes, it has flattened out. If we start to see listings rise to 16,000 and 17,000, that would be a concern, but at the moment, we’re still looking at small gains. Last year, the market did 4%. This year, we’re not expecting a lot. We’re expecting it generally to be anywhere from 0% to 3%, a pretty flat market overall. If listings do rise significantly, that would certainly be a concern.
Kevin:  What is the feeling like, the mood like there with consumers in that area? Is there much happening with development and infrastructure?
Damian:  Overall, the consumer confidence is definitely down. There’s still plenty of people buying, albeit certainly down on what they were two years ago. There are some few key infrastructure projects going ahead. Certainly, there’s the Gateway project around the airport, upgrading of all the highways and roads around there. It’s certainly making that Forrestfield area and surrounds certainly a lot more accessible. That should be done in the next few months.
Elizabeth Quay, which is in the city, is more a city project, and we have a new stadium, as well, at Burswood. Look. There’s a lot of infrastructure to come over the years ahead. It just depends on how many the state government is willing to invest.
But what we’re seeing, Kevin, at the moment is anything with development potential, that’s where the real demand is. If it’s just a standard house or villa, the market is pretty flat, but anything with development potential, there’s still a lot of activity, a lot of investor interest in those properties.
Kevin:  What about some of the areas that you’re seeing that have showing great potential? As you say, they’re probably surrounded by those that offer development potential, but are there any areas that you can highlight for us?
Damian:  For the last five years, we’ve been following the up-zoning or up-scaling of an area because what we’re expecting in Perth is it’s going to double to about 4 million people over the next 25-ish years, depending on whose forecast you see, so there’s a lot of infill coming. The way our clients have been making money is by getting on the front foot when we know an area is going to be up for proposed rezoning, buying in those areas.
We’re still seeing in Forrestfield, for example last year, even though the overall market did about 4%, a lot of those properties took 15% to 16%. There are still good opportunities even in those flat markets.
If you’re investing in Perth now, that’s generally what you want to target. Certainly, over the next 12 months, that’s where your growth is going to come from – anything that has redevelopment potential even if it’s not now, longer-term. Still, longer-term, the fundamentals are good for Perth over a five-plus-year period. The next 12 months as a general market as a whole is going to be relatively flat.
Kevin:  If I came to you with $500,000 and I wanted to spend it in the Perth area, where would you direct me, and what sort of property should I be looking at?
Damian:  I’d be buying, Kevin, a development potential site in Forrestfield. Forrestfield is one of those areas that’s going to benefit from the Gateway project. All the roads are going to be basically freeways, access right into the metropolitan area. Also, longer-term, there’s going to be a train line out there underground under the railway line. Because of all that, the local council proposed to increase the zoning in a lot of areas, and I still think that’s got some good legs to run over the next 12 to 18 months. That’s where I’d be putting my money right now.
Kevin:  What would I buy in that area for $500,000? How much land would be attached to it?
Damian:  You would get an 800- or 900-square-meter block, and look, it’s only 14 kilometeres out of the city. I was in Melbourne and Sydney recently, and you certainly don’t get anything like that for that sort of price and that close to the city. You get a good 800- or 900-square-meter block only 14 kilometers from the city.
Kevin:  What would the zoning be on that block?
Damian:  Generally, the zonings are now R20/40 or R20/30, so they’re dual zoned. There are certainly additional criteria you’ll need to meet to get to the high zoning, but generally it’s relatively easy. In an R40 site, if you’re allowed to build apartments, that could be six or eight apartments. If you do it as a villa or townhouse, an R40 site would be three villas or townhouses.
Kevin:  In that area, what would be the site cost, and is it calculated on the number of units that I can get on that site?
Damian:  Site costs are not too bad generally in Perth, because most of that area is flat and we’ve got a very sandy soil base by and large for most of metropolitan Perth except the areas that are near the river, where it’s a bit more clay. Site costs are never a huge issue in Perth. You can generally get away for $20,000 or $30,000 a site without too much problem.
Kevin:  Great advice. Damian Collins, of course, is from Momentum Wealth buyer’s agents in WA.
Damian, thanks again for your time.
Damian:  Pleasure, Kevin.