Perth's property market - where is the oversupply?

Discussion in 'Property Market Economics' started by Ross Forrester, 18th Nov, 2016.

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  1. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    That's great news for her - I hope by the time the construction has finished there the market will be doing better and she can sell the remaining 7 at higher prices than today. 12 out of 19 seems quite high?
     
  2. MTR

    MTR Well-Known Member

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    Me too.
    I think what she has going for her is the specification is good and her interior design background she will get the bling thing happening. There are also some apartments down the road and that was her competition, larger developer can not recall the name... Match?? I don't think they are starting to build anytime soon.
     
    Last edited: 29th Nov, 2016
  3. Perthguy

    Perthguy Well-Known Member

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    My old rental in Cloverdale is becoming vacant in December (3x1). After a good reno 2 years ago it was getting $440 pw. Last year we could only get $340 pw. Now it looks like market could be $280 pw or $300 pw if we get lucky. Not ideal.
     
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  4. Ross Forrester

    Ross Forrester Well-Known Member

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    I have a rental in Mt Lawley. It rents for $640 a week. The tenant left at the end of October and the property was vacant for a week and a new tenant came in for the same price.

    So I think that the doom is not really there if you meet the market.

    Admittedly that is a nice house and not an apartment. At the peak we were getting $775.
     
  5. Perthguy

    Perthguy Well-Known Member

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    @Ross Forrester the issue in Cloverdale is that there is a huge oversupply of older 3x1 housing stock. I count 26 today just in Cloverdale. In poor condition the price is $250 pw. Renovated are listing for $350 pw but do not seem to be moving at that price. Too much supply, not enough demand.
     
  6. Ross Forrester

    Ross Forrester Well-Known Member

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    Yeah that sucks to the power of ten.

    I am just so boring when it comes to property. I stay within 5km of the city. I could venture up to Karrinyup as I get closer to the beach. Just really avoid areas that can be redeveloped or added stock.

    I honestly have not driven to Cloverdale for donkeys years so I do not know the area.
     
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  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Everyone needs to remember when you compare today's rates to what you got 2yrs ago the fact that two years ago the price was not normal - it was far above normal and most likely today's rates are also not normal - they are below normal.

    When people compare the peak and now the trough it looks horrible but if you had compared 1 year ago to 3 years ago the numbers are more similar - if that makes sense.

    The normal price is somewhere above what we are experiencing now - it's somewhere around a 3-4% vacancy in my opinion. Across my portfolio I've probably seen a 10-12% fallback in rent from the peak but less than 5% from a normal market.

    Of course there are outliers - such as the pain @Perthguy is experiencing in Cloverdale which may be due to a number of developers buying development sites but not developing as there is an end product glut - so possibly that is causing the holding income houses glut.
     
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  8. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    @MTR your comment reminded me of a Mark Twain quote;

    "There are three kinds of lies: lies, damned lies, and statistics."

    I am quietly confident about Perth over a 20 year time frame. We will see haha!

    Went to a property seminar last week hosted by @Jarrad Mahon and an interesting stat was put forth (let me indulge oxymoronicly :) )

    2006 - Sydney medium 540k / Perth medium 460k

    2016 - Sydney medium 1.068k / Perth medium 512.4k

    Will the gap be filled???
     
    Last edited: 29th Nov, 2016
  9. Perthguy

    Perthguy Well-Known Member

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    It's an area undergoing redevelopment. The upside is being able to build behind those old houses. The downside is the more apartments, units, townhouses and houses that get built, the less demand there is for the older housing stock. The house I mention above will be replaced in the future so it will work out. We will be replacing it with something that is high demand, short supply. (actually, 3 of them :) )

    100% correct. The $440 pw we were getting is well above normal for that type of property in the area. So, for about 4 years we have been getting above normal market rent. Now there will be some time we will get below normal market rent. I believe it will balance out.

    It's not really pain for us because we knew it was coming and squirreled away those extra dollars from the above market rent. ;)

    In the City of Belmont LGA many apartments have been unleashed on the market, they are newer and cheaper to rent than old 3x1 houses. There have also been a number of new 3x2 and 4x2 houses, units and townhouses released. If people are comparing something new to something old and the price is the same or similar, they are going for the new builds. Add to that the people who aren't developing, as you pointed out, and there is now a massive supply of older 3x1s on the market.

    Long term, I think the Belmont LGA has a lot going for it. We just need to ride out this slump for who knows how long?
     
  10. boeman

    boeman Well-Known Member

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    Maybe, if we have another boom, but I doubt it.

    Sydney has jobs and is a desirable place for people the world over.

    Little old Perth had mining construction. Now it is mining production which doesn't need nearly as many people.
     
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  11. Perthguy

    Perthguy Well-Known Member

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    I agree. Well, it better be! :p :D
     
  12. Big Daddy

    Big Daddy Well-Known Member

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    I like the specs and layout. Do you know who the builder is?

     
  13. MTR

    MTR Well-Known Member

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    No, but I can find out for you. They start in February, signage should be at the front when they start.
     
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  14. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    This is what I like to hear. Not enough people put that money away for the rainy day that was going to happen. It's prudent to be like a squirrel and collect your nuts for winter when there is no food.

    Kiddies, prices for property go up and down, so do rents. Do not do your feasibilities based on outliers of statistics, factor in 5-10% of market movement and ensure you can still afford it.
     
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  15. mrdobalina

    mrdobalina Well-Known Member

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    I think they removed the demountable that was used to conduct pre-sales. Does that indicate the project isnt going ahead?

    There are heaps of large multi story development sites around town that are on the market, presumably cos the developer couldn't get the pre-sales.
     
  16. MTR

    MTR Well-Known Member

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    Did not realise the it has been removed. Perhaps you are right they have not been able to get the presales?

    I think my g/friend has taken 2 years? A tough gig at the moment.
     
  17. Shankiedoodle

    Shankiedoodle Well-Known Member

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    wow 2 years to make the sales, thats quite a while to wait. I suppose i can see why apartment prices are dropping
     
  18. charttv

    charttv Well-Known Member

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    would be nice. In technical analysis gaps are almost always filled. not always, but most of the time or so the legend goes
     
  19. MTR

    MTR Well-Known Member

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    Probably wont find any stats on this but I was buying up in Perth boom of 2001-2006/7 and Perth median overtook Syd median for only 3 months was major news, when we were almost at peak late 2006/2007

    No way we are going to fill the gap unless there is another major mining boom.

    Though I think we will see Sydney's median house price fall back in 2017, another predication I am guessing around mid year?? experts saying the same.

    I can see Melb pockets started to do the same.

    Lots of talk at the moment on PC about interest rate rises etc..... this is the beginning I think??
     
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  20. 2FAST4U

    2FAST4U Well-Known Member

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    Free Suburb Profile report for Forrestfield WA (6058)

    Since a lot of you guys don't like statistics I'll give some anecdotal evidence that supports the stats. A friend of mine who lives in Perth purchased a 3 bedroom house in Forrestfield in April 2015 for 485k. The valuation of that property on Domain is now 405k. Looking on realestate.com.au it's pretty clear that I could buy an equivalent house to his for high 300s/low 400s so the desktop valuation seems fairly accurate. As an owner occupier it's possible that he got emotional and paid above market value. However, the house next door to his sold in 2014 for 474k and also has a desktop valuation of low 400's so I'd say that's a 50k loss right there + transaction fees (if he suddenly decided to sell).