Even if you live in WA, you still might not know why we are the luckiest people around. It's not because of our endless natural beauty, beautiful beaches, glorious weather and enviable lifestyle. It is because of what's in the ground beneath our feet; and the effect that is about to have on our property market.
If you accept that the basics of supply and demand are a fundamental driver of our property market, then you should be feeling confident about the future for property in WA. Simply put, more people, earning more money need more housing, yet the current sluggish market is reducing future supply.
There are some key shifts occurring:
1. Level of investment is rising:
WA has only 10% of the population of Australia yet we have by far the greatest project investment expenditure, at $221 billion (source: Access Economics and Delta Investment Monitor). The impact of this is staggering if you look at it per head of population, as it is over $96,000 per person, compared to just over $10,000 per person ion NSW and Victoria. Queensland's projects don't even come close at $32,305 per person
2. Population Growth is following:
The resources boom is fuelling the growth of WA population, ensuring it is higher than any other state (source ABS) at 2.1% p.a.. Queensland comes very close at 2% p.a., but this is largely fuelled by lifestyle seekers and retirees migrating interstate. Even where mining projects are in the middle of the desert or ocean, many support a high level of 'fly in, fly out' workers who still require somewhere to live
3. Supply is constrained:
With very little growth in the market during GFC and beyond in WA, plus constraints on lending from the banks, the number of new developments in Perth is below normal levels. The Perth CBD apartment market would normally see 400 to 600 new apartments each year, yet between 2012 and 2016 the levels will be around 150 to 250
4. Rents are rising:
With less people buying and population rising, the demand for rental accommodation is rising. Properties are receiving multiple applications again and the mining companies are desperate for accommodation for their key staff. CBD vacancy levels are now down to almost 0%
5. Investors are seeing value:
With bargains to be had and rental yields improving almost weekly, investors are finally (slowly) coming out of the woodwork
So there are two occurrences that need to take place before we start to see significant growth again in the property market. Confidence needs to return and sales volumes need to increase to bring down the number of properties on the market. We are currently sitting at over 18,000 properties for sale, whilst a balanced market would be around 12,000.
The question is how much pent up supply and demand is there out there. On the one hand, people have put off moving or buying an investment property whilst the market is shaky, yet on the other how many people would sell if they knew they could. The local press here is reporting that many families are being forced to 'stay together' because married couples cannot afford to separate as they cannot sell the family home! Obviously couples divorcing (and kids leaving) puts demand on housing, alongside the increased demand from population increases.
The bottom line
WA, and Perth in particular, has demonstrated in the past how ballistic its property growth can be, at one point even just surpassing Sydney in its median (unit) price. I know some property professionals are now expecting it to do the same again. For those who have the fortune to live here and about to increase their wealth through property, how lucky can they be!If you would like to discuss property investment or meet with Nick personally, please email Nick directly on nick.shinner@pindan.com.au
