WA Perth market 2018

Why do you think those cities will do well for next three years?
The multiple headwinds compounded together in next two three years are equally applicable to non frothy cities,
You are bullish because they are coming from low base? or something more?

 

Low base and economy

 

Adelaide is a truly "time in the market" with its snail pace growth.

Brisbane boom has been coming for 3 years now, it might finally boom or just continue with the slow growth or will reverse in trend.

Perth is an absolute buyers market and associated opportunities.

Sydney - Hold/Sell
Melbourne - Hold/Sell
Adelaide - Buy (Lower risk with low reward)
Brisbane - Hold/Buy - With Melbourne's short lived boom cycle. I am not so sure about Brisbane's future in the next 3 years.
Perth - Hold/Buy - Poor consumer sentiment and prices from 10 to 12 years ago mean absolute bargains to be had. Very low base but economy hasn't turned around just yet. Be greedy when everyone is afraid and all that ...

 

I will still Be backing Melb for long term investment strategy

Perth is very patchy atm
You will need to be adding value tiday in this market imho

 

Patchy indeed.
Outside the 20km radius is still falling.
10km - 20km is a mixed bag. Less than 10km suburbs have been stable with good value buys.

Know a guy who is doing a straight up demo and subdivision in a inner-ring suburb with 20% margin without ever building. That is an exception rather than the rule but goes to show that the negative sentiment is translating into good buys.

I find that the irrational consumer behavior during peaks and corrections is where the opportunities are.

I believe that the correction is proportional to the overshoot above fundamentals during boom times. Likewise, rebound is proportional to the undershoot below fundamentals during bust times.

 

If this holds true for Sydney then it really will be a bloodbath for the next couple of years

I remember a couple of months back posting a graph showing peak to peak median prices for each Perth downturn cycle over the last 30 years. The u-shaped peak-trough-peak curve for each event was remarkably symmetrical. Which suggests we are in for a long and slow bounce back from whenever the bottom of this decline is reached.

 

If you picked the slow horse that's your problem.

Coulda woulda shoulda - you will never know until the race has started and you've dropped your dime.

Why would you willingly pick the slow horse if you knew, anyway?

 

Sydney already down 10% and many are speculating that it'll go down at least 10% more. Many properties more than doubled in the last boom i.e. 100% growth. A 10% loss in values means 20% loss in growth. 20% loss in value means 40% loss in growth. A 25% loss in value means 50% loss in growth. So someone who bought in Sydney in 2011 a property for $500k was valued at $1mil in 2016 and may be valued at $750k in 2021/22. So a 50% growth over 10 years. Still not bad but highlights the importance of buying when no one else is. If the same person bought in 2016 for $1mil, it'll be many years before it bounces back to $1mil so essentially they would have lost money over a decade in real terms.

I am still holding onto one in Western Sydney (doing so for familial reasons). Values are slowly declining and so are the yields. I suspect it'll be a long while before it bounces back to the peak values.

 

Safe to say we in Perth are living through a once in a generation property decline.

Now that 2018 draws to a close, below are my two scenarios for Perth over the next two years - maybe reality will lie somewhere between the two? Anybody else want to have a stab?

BEST CASE:

• Regulators & government encourage a relaxing lending standards in 2019, as a knee-jerk reaction to stop the Sydney & Melbourne markets crashing
• Years of record-low building levels start being felt as a real lack of supply for Perth
• Global economic conditions stabilise, the trade war is recolved, stock markets pick up again, etc
  
• Mining sector activity continues to improve leading to modest state population, employment and wages growth, back to long term averages
• Rental vacancy rates continues to fall, leading to upward pressure on rents
  
• All the above increases housing demand and soaks up the super high listing levels, leading to a rebuilding of confidence over 2019, FOMO on the 'once in a generation' bargains and then good growth for the Perth market commencing 2020.

WORST CASE:

• Falling Sydney & Melb house prices continues unabated, Government & regulators don't or can't react adequately.
• Global market instability continues through 2019
  
• Banks panic, don't pass on any rate cuts and further tighten credit availability
  
• Falling house prices and global economic weakness leads to a national recession in 2019
  
• Mining sector and general state economic conditions start declining again, population, and wages stagnate or decline, unemployment rises.
  
• Rental vacancies fall back to high levels and rents decline again
  
• National housing markets are cooked. Perth house prices continue on their current trajectory, falling a further 10 - 15 % over the next couple of years
• Housing markets across country (incl Perth) don't start recovering until the early 2020's, after seeing huge falls, and countless investors and households economically wiped out.
• We all look back and think "well we should have seen that coming." Martin North is appointed chair of the RBA.

 

Sure, ill gamble.

Mining has a more moderate uptick rather than a boom. Perth flatlines for another 12 months. Moderate recovery and we get 3% a year starting end of 2019. Once the signs of life appear we have a small property boom that is short lived since I still dont think our population forecasts are accurate. Maybe 10$% in 2021

Return to pre-downturn prices around 2022 then 3% continues until something gives.

 

Perth indeed is a once in a lifetime bargain when you consider the fact that the last boom was a mini boom at best. 15% loss in median. Some outer ring suburbs lost more than 30%

I for one am loving the negative sentiment and its effects on short term prices. So much choice, so much value for money and absolute buyers market. Currently shopping for my 3rd purchase in the last 15 months or so. A bit more shopping over the next 12 months and I'll be done with Perth and all you interstate investors can start looking.


Source: How low can you go? Data shows impact of property downturn in your suburb

 

I hear you.
Currently holding out for a little relaxation of lending standards so I can get the credit to pick up something nice.

 

I can live with that.
I think further price declines (maybe only moderate) carrying through to the end of 2019 are inevitable though, with the current super-high listing levels and above average key indicators (employment, wages, population, rental vacancies) likely to take a while to come back to at least 'average' levels.

 

Who knows?
Perth was very much reliant on mining, when that went so did the jobs and people moving to Perth dropped significantly
My guess is Syd probably wont feel the same degree of pain??

 

I keep hearing how some investors in Perth are making 20-30% profit, but no one is posting these deals.

I posted one deal some time back I think about 40% on Development project

would like to see more on this thread

I also think on the flip side there are investors/developers in this market that are not able to sell their developments because there are no takers, or not enough fat in the deals after all costs. A sign of the times. Probsbly why I am not too keen on developing in Perth atm

 

There are a few builders making okay profit by buying established land, subdividing and building.

 

Right, but they have more fat in the deal as we cant build at the same margins

 

Can't post the details out of respect for his privacy. All I can share is that it's a demolition and subdivision (no construction just flipping land with plans from builders) project in a inner ring suburb.

 

Hi John. Are these settled sales and profit is 20÷ before tax after paying GST?
I have seen some of these in good pockets of good suburbs eg Dianella but competition is fierce with multiple offers in the first week.

 

Most people I know aren't planning on selling their projects they are developing at the moment. They are getting in whilst the buying is good but hold for awhile to reduce GST, increase serviceability (via new rental income) and generally wait for less supply/better market.