Western AustraliaProperty Report – January 2014

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Western Australia – Property ReportJanuary 2014

National Overview

This quarter we look around the nation to identify affordable properties with the potential to deliver healthy long term gains suitable for first home buyers and also investors. If there is one word that could sum up the key driver for growth, it would have to be ‘infrastructure’. New road / rail links are bringing affordable outer suburbs closer to city centres and employment hubs. New hospitals or tourism precincts are creating jobs. These are valuable factors that will underpin long term capital gains.

ALL ABOARD – NEW RAIL LINKS LET SUBURBS REACH FULL POTENTIALThe inner Sydney property market looks set to be transformed by a number of new light rail systems. Key areas to benefit include the inner west’s Dulwich Hill and Kingsford in the east.

The construction of South West Rail Link is likely to underpin growth in the first home buyer belt of Sydney’s south west, with suburbs like Elizabeth Hills, Gregory Hills and Oran Park well placed to reap the rewards.

For investors with a speculative leaning, suburbs with proximity to Brisbane’s proposed Underground Bus and Train (UBAT) link could offer long term capital growth. The connection is earmarked to run from Dutton Park in the south to Victoria Park in the north, though it’s worth stressing the project is only a proposal at this stage.

ROAD LINKS BRING OUTER SUBURBS CLOSER INThe duplication of Adelaide’s Southern Express Way – due for completion in mid-2014, will vastly improve commuter access to Adelaide’s south. Suburbs like Seaford, Seaford Rise and Port Noarlunga South all offer significant lifestyle benefits and the new road link should bring capital growth to the region.

NEW COMMUNITY INFRASTRUCTURE CREATES OPPORTUNITIESMelbourne’s Broadmeadows is a classic example of an uncut gem for investors. House prices start at the low $350,000s, yet the suburb is located just 16 kilometres north of the CBD. A major investment in community facilities is expected to enhance the area’s appeal.

For investors with a speculative leaning, suburbs with proximity to Brisbane’s proposed Underground Bus and Train (UBAT) link could offer long term capital growth.

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Western Australia – Property ReportJanuary 2014

For investors with a five year timeframe, the additional employment generated by the Queensland’s Sunshine Coast University Hospital (due for completion in 2016) should support property values from Caloundra to Maroochydore.

CONSIDER NEIGHBOURING AREASFaced with affordability challenges, it can pay to look at areas where neighbouring suburbs have experienced strong price growth. This is especially true in the Perth suburbs of Parkwood and Lynwood, which remain priced below $500,000 while adjacent suburbs are commanding price tags in excess of $650,000. When suburbs share the same infrastructure facilities, notably transport links, there’s a good chance that price growth will ripple outwards.

A FINANCIAL HELPING HANDIn a number of locations, first home buyers are being encouraged to consider new builds with the enticement of additional state government support. This is especially the case in Tasmania where the recently inflated First Home Builder is seeing buyer interest grow in suburbs along Hobart’s eastern shore in particular Old Beach, Howrah, Tranmere and Oakdowns.

Brendon HulcombeCEO - HERRON TODD WHITE

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Western Australia – Property ReportJanuary 2014

Western Australia

For both investors and first home buyers, pockets of Perth continue to offer valuable buying opportunities. However a key factor to be mindful of is access to transport links. As Perth continues to grow, transport in and around the city could be a significant contributor to future capital growth.PerthOPPORTUNITIES FOR FIRST HOME BUYERSThe suburb of Victoria Park, situated on the southern banks of the Swan River and within easy walking/cycling distance to the Perth CBD is a location worth considering for first home buyers.

The median house price in Victoria Park has increased by 18.5% in the last 12 months though the median unit price has remained relatively steady. This is largely due to a high turnover of residential flats dating from the 1960s, and it is still possible to pick up 1-bedroom units priced below $300,000.

Many of these older units offer city or river views, and in comparison with suburbs on the northern fringe of the Perth CBD, we believe units within Victoria Park offer value plus growth potential for first home buyers.

In Perth’s northern suburbs, Warwick and Greenwood also offer compelling long term opportunities. Both suburbs are located adjacent to the Mitchell Freeway and are serviced by good local infrastructure. Median house prices are around $546,300 and $532,500 respectively.

While developers have been focussing on suburbs to the immediate south of Warwick and Greenwood, these two locations appear to have been somewhat ignored by the broader market. We consider the fundamentals of these suburbs to be very strong and consistent with what’s required for long term growth.

OPPORTUNITIES FOR INVESTORSRapid expansion is seeing Perth continue to experience ‘growing pains’ – this makes it important for investors to consider locations with access to good transport links as this is increasingly likely to underpin buying decisions and future capital growth.

For buyers in the under-$650,000 price range, two suburbs – Parkwood and Lynwood, offer plenty of potential. Both locations have long been

While developers have been focussing on suburbs to the immediate south of Warwick and Greenwood, these two locations appear to have been somewhat ignored by the broader market.

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Western Australia – Property ReportJanuary 2014

overshadowed by their more popular neighbours – Willetton and Riverton, which are situated in a different school catchment zone. This has seen a significant price gap develop between these adjoining suburbs. Willetton’s median house price for example is $675,000. By contrast, the median house prices in Parkwood and Lynwood are $475,000 and $440,000 respectively.

Along with affordability, Parkwood and Lynwood both offer large allotments, and easy access to local infrastructure, which should support future growth prospects.

South West WA OPPORTUNITIES FOR FIRST HOME BUYERSIn the major towns of WA’s south west, first home buyer activity is generally in the $350,000 to $500,000 price range. First timers in the region tend to face less competition from investors than in the Perth metro area where yields are generally higher. This improves the likelihood of picking up a competitively priced property.

One area that has the potential to experience long term capital growth is the Port Geographe Canal and Marina Development just north of Busselton.

This project has been fraught with issues arising from the massive build up of seagrass on the foreshore – a result of the alignment of hydraulic structures called ‘groynes’ at the entrance to the harbour.

These problems have prevented the development from reaching its full potential, and values have remained well below those achieved for similar developments in Mandurah.

The WA state government is currently in the process of realigning the groynes to mitigate the build up of seagrass. If these works prove successful, values in the development, which is otherwise of a very high standard, could rise significantly over the longer term.

Another option with potential for capital growth are the development blocks (zoned R30) in Busselton. These are currently priced at low values due to increasing development costs and reduced margins. There is a possibility these blocks could increase in value at a higher rate than single residential lots as the south west population expands and economic confidence returns.

OPPORTUNITIES FOR INVESTORSIn the Busselton region the north side of Bussell Highway is highly sought after, and many older suburbs are gradually undergoing gentrification. If the population of Busselton increases – as it is expected to over the next ten years, this area could experience rising values underpinned by its proximity to the beach.

Another location worth consideration by investors is the ocean foreshore in Bunbury. This area has yet to be fully developed and offers the potential for excellent panoramic views with good proximity to the city centre.

In the Busselton region the north side of Bussell Highway is highly sought after, and many older suburbs are gradually undergoing gentrification.

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