WA Perth is entering Boom cycle

My goal is to accumulate Dev sites and build whilst market is slow and construction is cheaper and faster. I don't mind the small downside risk of a few percent drop (which may be less if you buy well close to city and amenities and good land component). If I can accumulate and build whilst the market is trending sideways for a while then I will accumulate a lot more development sites then i would if the market started to recover quickly. That's the plan anyway. Not sure if that's reality

 

Just being devils advocate.....
What about holding costs with this strategy?

 

We have graphs of House and Units, so your Highgate Apartment will go into Units charts. But I get your point...

I treat the above graph as an index interpretation....more like the All Ords in shares. Basically median is just an index to see where we're at..

If you drill into micro level and look at a particular suburb such as Highgate, yes you will see that sporadic behavior in the charts..

However when the entire Perth is included, it irons our this sporadic view.. Perth is about little less than half of Sydney's sales volume..even that it's few thousands transactions per month...
Say Perth's sales volume was 3000 x 12 = 36,000. If you remove all 25 Highgate sales volumes from Perth's 36,000 sales,it wouldn't provide any kinks in the charts..
Now if you have 100 of similar Highgate suburbs, ie 2500 transactions in a year. Would this affect the Perth's median. I think if they were withdrawn/removed from entire Perth's listing it will definitely, but wont affect so much if they were included in Perth's median on month by month, year by year basis..

 

Plan is to keep everything and only sell when the boom comes around (anytime in the next 30 years will do). I believe holding costs (after they are rented) are irrelevant as it will be cash flow positive( after rates ,insurance,maintenance, and using 10% vacancy and 10% PM fees) to the current low IR environment but his can change if IR increase. Cashflow from our incomes would be enough to cover large IR increases. I would be looking to diversify into other markets as time goes on.

 

Their is a cost associated with cashflow properties - you lose flexibility with your finances and you lose the opportunity to invest elsewhere.

Their is nothing wrong with getting cashflow positive and holding - but if it is only marginally positive and does not increase in value you have wasted your time.

 

Agreed - everything has it's opportunity cost but if you have done your accumulation phase and into the holding phase it's a calculated decision if you want to keep your stock or sell and buy different stock.

 

Agreed - statistics are useful for a high level macro look . When you want to go micro then the story can be quite different - I didn't mean that Highgate skewed Perth's figures just that it highlights how medians can be pushed around in statistics due to the product of the area.

 

I have a better idea, buy new stock from a developer who is offloading/fire sale, I am sure there will or have been some distressed developers in this market. It will require patience but when you consider the risk, time frame, sourcing finance etc. this would be a far easier option.

I know someone who actually did this and purchased 3 townhouses/fire sale some time back not in the Perth market.

 

Thanks. I was considering this but was looking at apartments and not townhouses. Townhouses would be a better option

 

You are right this would be far easier, quicker and less risky. Only problem in my area is that I have identified an under supply in the market. I can't buy distressed of this type of product because no one us building it, hence the under supply. If I go to an area where there are distressed sales, there is most likely an oversupply of that product. It's a conundrum for sure.

 

Well, if you can buy at a price and get a tenant at a rate that means it can carry itself, then it would hardly be a silly thing. When I have looked, nothing cheap in areas I have seen, you would think it was all 50-60% off, but the negativity is probably more in the tenancy issue. Could be free and a bad deal if never rented.

I prefer to go for things in buyers markets, Bris is pretty good too, even if no boom, slow steady growth and can find returns that are pretty good, those that bought 2-5 years ago would already be up quite a bit.

 

Newcastle is going gang busters still and I reckon there is still about one year of steep rises here. There should be 30% growth here in suburbs close to the cbd over the next year.

I was very surprised the RBA kept rates on hold.

 

Wowza..W.A down 3.8% for the quarter

 

Yeah rents are still dropping too... I count myself lucky to renegotiate a 12% drop with my current tenants for a 12-month renewal. PM says vacancies are around 8-weeks. (Bull-Creek/Leeming area)

 

Out of interest what makes you think that?

 

I was there recently and it is hot. My parents sold there's without any advertising and my grandfathers also sold very quickly. Both in Kingston - I looked at buying my granddads but the numbers didn't work. Yields aren't great in Kingston, I'd be looking in the northern suburbs or Launceston for that. Also not cheap enough for my liking - I treat Tassie as a regional purchase so want the buy in to be low.

Now, back to Perth

 

Lets hope that -3.8% is the nadir for W.A

 

Hi guys,

As an East Coaster just wondering what to look out for when making offers in Perth/WA? cooling off periods, going unconditional etc. Personal strategy is trying to go the borderless approach but as each state has their own way of doing things - does my head in...

thanks in advance

 

We use an offer and acceptance with no cooling off. You can have the normal conditions - finance and building and pest - and anything else you need, and can get out with no penalty under these conditions. If you're struggling to settle on time you have 3 days leeway without penalty.

 

There is no cooling off period in WA.

You typically would make an offer on a standard REIWA offer and acceptance form. You would usually make the offer subject to finance and subject to building and pest. You can also nominate days for finance approval and days for settlement after going unconditional for example 21/21. If all that is acceptable the seller will communicate the offer is accepted in writing. Then you organise the building and pest and arrange finance. After finance approval you arrange settlement through a settlement agent. The day or so before settlement you should do a final inspection or pay someone to do it for you. It is important not skip this step.

In each state there is a state government web site with a guide for buyers. It's probably good to familiarise yourself with the steps then ask specific questions to fill in any gaps in your understanding. I say this because I only settled a house in Perth in July but I am sure I have missed some steps.