How will developments affect Scarborough 2017

Hi guys and Merry Christmas all,

I would appreciate very much your thoughts on the new developments in Scarborough, Perth and how they will impact on house prices. In my understanding the new massive supply of apartments may put a downward pressure on house prices due to over supply however, it seems that also gentrification of the area such as new pool, cafe strip, shopping mall ect. will improve demand.

Our idea is to buy a villa or town house as our budget is 350-390k. We are cautious of buying an apartment due to the lack of land and reduced appeal of the general Australian public (no back or front yard, must be quite in apartment). A house in Scarborough would be too expensive.

 

Any thoughts on this guys?

 

I think scarbs is undergoing a much needed and long awaited renaissance that has a long way to go yet so your idea certainly has merit jmo from a big picture pov

 

Scarborough is an area that has been in my thought pattern for a little while. Hard to say really though. Could it become the Miniature Bondi of Perth? I feel its a great area and is evolving with more eating and drinking venues and the development will be nice however are these big enough drivers for much more growth in the near future?

I am currently considering renting there once my lease of my inner city apartment is up as it will be a nice lifestyle change being by the beach.

For best growth IMO you need to but property with strong owner occupier appeal e.g. a house or decent sized town house which is pricey in Scarborough and obviously being walking distance from the beach is going to be a lot more attractive to renters/future buyers.

Even though it is only roughly 13kms to the CBD it still is a long drive in medium to busy traffic and public transport is still going to take you 45 minutes to the CBD depending on where you are coming from/going to.

So basically for me - more research needed into what the whole master plan has in store and time frames of completion. I don't want to buy and have to wait 5 years to see any form of significant growth while yields are going to be fairly low. Asset selection is key - I wouldn't just go buying anything just because its cheap but I do feel it will be attractive and get some good growth long term - yet as does most property ;P

Would love to hear others opinions on Scarborough also

 

Nice man, I hope you are right. I'm also optimistic about it.

There are some reasonably priced (read 400k) villas in the suburb. Not your preference?

What does everyone else think about it, I would be really keen to hear.

 

When all the developers start building their apartments, wouldn't that drag down the prices in the area?

 

This is what I want to find out. If there is a flood of apartments, how will that affect the price of town house and villas, apart from blocking a view.

 

Its all about supply and demand. However I would be thinking more about the supply/demand of specific product types and/or market segments.

I would certainly not be buying appartments in Scarbs as an investment due to the high supply that is coming on board, however I wouldn't be so concerned about houses (and possibly even villas). Will overall dwelling supply increase: yes. However will the supply of 3-4 bedroom dwellings with a small yard increase: Absolutely not, in fact they are likely to become more scarce as some are knocked down for development sites.

Think about who will be living in/renting the dwelling type you are thinking of buying and then think about whether the supply of new apartments will be competing with your dwelling type to house these people.

The demand side is also interesting. IMO as the upgrades take place and as the population increases the area will become more attractive to people and therefore demand will increase. Will his increase be greater than the supply of new dwellings? I'm not sure. Possibly not in the short term but probably over the next 30yr (not that I would advocate delaying capital growth for that long).

For me the public transport to the CBD issue still needs addressing (light rail down Scarborough Beach road would seal the deal) but I think the area certainly warrants looking into.

 

So theperthurbanist, does that mean that 2 bedroom villas that are within my budget 350K are out of the question as they'll be competing against 2 bedroom apartments?

 

I wouldn't want anything to be 'out of the question' on my advice alone (!) but if it were my money I'd be a whole lot less comfortable investing in a product that appeals to a similar demographic as all those (probably largely 2 bedroom) apartments in the pipeline. Ok villas are not the same as apartments, but unless your villa has a large garden or some other unique selling point they are too close for my comfort.

Worth considering what the price of a new 2bdrm apartment in Scarbs is going for though - I'd say certainly more than $350k, so to some extent you are hitting a different market/price point there. Also worth considering at the same time however is what those same apartments are renting for - because if you are going to assume you are in a different price bracket that means you are basically assuming you will be getting significantly less rent (to see if this is the case compare 2bdrm villa rents to apartment rents in the area). But basically you are either a lower class product attracting a lower rent, or you are competing with apartments that are soon going to have a lot of supply coming on, which may equal lower rents in its own right.

There is certainly more to it than this, but these are just some things to consider.

 

Very nice analysis mate!

Are there any suburbs you think would be worth considering for this price range?

 

I'm actually just about to start looking at Perth again - ask me again in 2 months! Really keen to hear others thoughts also (though I am specifically looking at duplex/triplex development sites).