WA Perth is entering Boom cycle

1 week is definitely wishful thinking several weeks more likely.
I think I've got off lightly

 

I was investing during 2000-2007 and 2014/15.

If you don't call 30-40% in growth in 12 months not a boom cycle then what is it?

Booms are about supply vs demand, there was a massive thread on Somersoft forum on this and market was going nuts.
A balanced market is around 12000 properties on the market, during 2013/14 stocks went down as low as 7000, not enough supply....BOOM.

The reason the market boomed was because FHB started jumping in, it started sub $500K due to the FHB incentive cut off point, and then developers got in on the act. We also saw rezoning of many suburbs this also created massive demand and markets once again experienced massive growth.

OTP apartments were selling like hot cakes, demand was high and prices just continued to rise. Land and house packages in northern corridor also where investors started building and making money.

Only last for 2 years unfortunately.

MTR

 

I think it was because in 2013/14 "the boom" as we call it in Perth was very isolated. Generally a property boom will affect the whole city, like Sydney or Melbourne currently. The Perth mini "boom" was isolated to certain pockets, and while those experienced dramatic price growth, the market overall didn't.

I was going to auctions in Belmont and Cloverdale at the time. The market peaked in Dec 2014/Jan 2015. I agree with @chesterfield though, the bust was nearly as dramatic.

Take Belmont 'all houses' for example, median house prices
2011 - $435k
2012 - $479k
2013 - $545k
2014 - $585k
2015 - $516k
2016 - $485k
already down 17% from peak... ouch!

And Cloverdale 'all houses', median house prices
2011 - $416k
2012 - $451k
2013 - $505k
2014 - $550k
2015 - $505k
2016 - $460k
down 16% from peak.

The median is way lower than potential development sites. At the peak in Belmont, R20/40 properties were selling for up to $858/m2 (1). The most recent R20/40 development potential property I can find sold was July 2016 for $634/m2 (2)

Cloverdale was similar. At the peak, R20/14 properties were selling for up to $826/sqm (3). Whereas recently, a potential development site sold for $621/sqm (4).

To put that in context, if you bought a 1,000 sqm development potential site in Belmont at the peak, compared to July 2016, you would be looking at $224k negative equity. For Cloverdale, it would be $205k negative equity.

Not good but people on the ground at the time could see the market was cooked long before December 14.

(1) 17 Belvidere Street, Belmont, WA 6104 - Property Details
(2) 113 Keymer Street, Belmont, WA 6104 - Property Details
(3) 164 Arlunya Ave, Cloverdale, WA 6105 - Property Details
(4) 169-171 Williamson Avenue, Cloverdale, WA 6105 - Property Details

 

i think this is what i wanted to say above...if high-hitting investment companies have done their due diligence (which I assume they spend a lot of money on) and are willing to drop big bucks on sites in Perth for "world trade centers" then it has to mean something. surely they have noticed all the empty offices with "for lease" signs throughout the CBD, but they are still seeking approval for development of more offices....*shrug*

 

With a 6 year build time I assume they are working on the basis market conditions will improve.

 

Boom in 2013/14 was a price point, hence high end properties ie $1m+ did not budge.

 

how come there are so many listed properties in perth which seems to be a potential duplex, triplex or multi-unit site? understand there's been recent rezoning changes but still, where is the scarcity!

 

Oversupply and lack of demand is why prices are so low.

 

Where are you seeing these @Hwangers ? I'm genuinely curious as I don't follow all of Perth.
In my suburbs of choice (I follow about 20) there is very very few. In my suburbs those that are still there are over priced and still want the top dollar when the market is much lower.

 

no scarcity, oversupply, and if development sites don't make money/sense why would developers buy them?

 

Belmont, Cloverdale, Queens Park, East Cannington, Beckenham, Thornlie and Gosnells. I have run numbers on a few. None stack up from my point of view. There are two 4 unit sites walking distance from the Gosnells train station. One is $375k. I don't know prices in the area but I am fairly certain that is overpriced.

 

This is the one @Westminster. I have not run proper numbers but it seems overpriced to me


188A & 188B Hicks Street Gosnells WA 6110
188A & 188B Hicks Street Gosnells WA 6110 - Residential Land for Sale #201592274 - realestate.com.au

 

Back to the heading...Perth Boom Cycle..... and this may explain why it wont be happening in 2017.

After the mining boom WA is a state in crisis

We need....jobs

THE SOLUTION

Workforce diversity specialist Conrad Liveris said WA must create 1500 jobs a month to maintain the current unemployment rate.

“WA needs to look at different industries, healthcare creates about 50,000 jobs each year nationally, WA has the capacity to lead on that,” he said.

“It needs to focus on where its advantages lie — agriculture, health, higher education and trade or services.

“Barnett’s tourism push won’t lead to more fulltime jobs, they are likely to be seasonal and part-time.”

 

Side comment, reporters always use seasonally adjusted figures which provide what should be a "smoothed" indication of employment. At the moment, WA is so out of sync with usual performance that IMO seasonally adjusted figures are actually skewing the true view of what's happening. This is why WA's unemployment rate is jumping by huge basis points each month and yo-yoing with SA for highest unemployment (something I believe is truly SA's crown).

That said, WA is still in dire straits on the jobs front. Here is the Original ABS data on which these seasonal figures are based (full time jobs only). WA first then NSW for comparison:

Dec14: 975.5, 2,561.1
Dec15: 948.4, 2,718.1
Dec16: 923.3, 2,652.2

Interestingly:

Sep 2016: 886.2, 2,589.8
Sep 2015: 945.6, 2,615.0

Sep - Dec recoveries:

2016: WA +4.2% NSW +2.4%
2015: WA +0.003% NSW +0.04%

So here are my take-aways:

• Since its September low, WA has been growing in jobs every month (12,366 full time roles per month).
• WA's recent trends are in line with all other states with the exclusion of VIC
• The articles doing the rounds in the media are based on past trends. Use them to judge where we are, not necessarily where we are heading. That kind of behaviour is exactly why the property market got in to the state it is now in.
• Recent increases in the unemployment rate are due mainly to the growing labour force size. This could be a clue from ABS that population growth is recovering.

In 2016, full time jobs have grown 4 months of 12. 3 of those were Oct, Nov, Dec. January always shows job losses in all states, so February will be a good indication of whether this trend continues. I'm reserving full judgement of WA employment until then.

 

We still have highest unemployment in Australia.

The clincher unfortunately is also the fact that rental yields have fallen further from what I heard on media last night. Units hit harder than houses.

Not pooing pooing Perth, as many have mentioned there are bargains, but also pointing out we may be some time off before we see a recovery? What does this mean? We have time because prices may continue to fall.

 

All the inner west coastal suburbs have increased prices.
In 2011 you could buy a Floreat house between 1 mill and 1.2 mill. That's now 1.2 mill and 1.6 million.

If you never bought Floreat in 2015/2016 you lost out on $100k equity.

The next suburbs that are going up in 2017 and they will go up $200k minimum are Karrinyup south, Carine, Trigg, Karrinyup north.

Perth mining projects are recovering, we know this because the mining consultancies are busy since November.
The iron ore mining companies are making so much money because they have paid down debts and they have cut costs and Rio Tinto is selling its NSW coal mines to the Chinese government and will pay down its debts making all their other mines more profitable.

Iron ore stocks will run out quickly and gas price is about to go up in a big way. Food supply to Asia is on the up and WA is unquestionably better positioned then any other state in Australia. Perth is the only rational place to invest.

With coal mines being sold off to the Chinese in NSW plus ports and the best farmland in Australia, NSW is about to get a big fat recession. The NSW government has been able to sell off assets and make money by selling the children out by letting in Chinese millionaires buy Sydney and generate stamp duty. BUT there is no meat in their economy, it's all debt obligations to one another on debt ridden property in Sydney. It's all fart and no crap. It's a sailing ship sailing without a rudder and a lot of fools calling themselves investors blowing into the sails. They believe they are rich and successful and smart because their Sydney property prices have doubled In two years. But just watch as jobs start dissappearing and interest rates rise.

 

pretty much what @Perthguy said! possibly your shortlist is very much whale hunting territory and a different kettle of fish altogether

 

@MTR Do you have a link for the rental yields story?

I'm tipping turn-around the second half of this year. Nothing huge, but enough to get Perth back on the radar. If it does, it will be as a result of excess stock being absorbed and the labour market levelling out.

There are indicators that the population growth rate found its floor in 2016. Dwellings under construction peaked in March 2015 at ~27,000 and as of September 2016 was down to ~17,000 and falling. Despite the wave of 2016 completions the number of listings has remained relatively steady. Number available for rent did go up but have been coming back for a few months now.

Given that completions are likely to come in at around 25-30% lower than last year, supply will be getting absorbed. Based on current dwelling approvals, if the number of people leaving WA returns to neutral then the number of listings should return to stable during the second half of this year. There is a supply imbalance between existing and new build that will likely mean little benefit if any for fringe suburbs, with added risk to them from the new build FHOG.

Agree that investors have some time, but if i were looking at taking a stake in WA i would say the next 6 months will offer the biggest selection of properties at low prices and the best opportunity to lock in a good interest rate. For the risk of 1-2% fall in price, I would much rather be locking in the right property while selection is good.

 

$1 175 000 median price 2008
$1 112 500 median price 2011
$1 138 500 median price 2016

 

Crazy growth!