PERTH APARTMENTS Residential Apartment Market Overview
Total Page:16
File Type:pdf, Size:1020Kb
RESEARCH AUGUST 2010 PERTH APARTMENTS Residential Apartment Market Overview HIGHLIGHTS • The number of people living in apartments has increased over the past decade, with major influential factors being the convenience of a low maintenance home, close to workplaces and down-sizing. • Research has shown that the rates ($/sqm) achieved in the apartment market have ebbed and flowed with the recent economic activity. Rates have now stabilised at more realistic levels and confidence is returning to the market, reflected in the number of sales and the increase in average rates. • With demand for the Western Australia’s resources set to continue, population growth will be strong. The City of Perth has recorded the fastest growth rate in Australia with an increase of 12.8% over the previous year. • Many local government authorities are developing revitalisation frameworks to create mixed-use communities with linkages to the commercial and employment hub of the Perth CBD. AUGUST 2010 PERTH APARTMENTS Residential Apartment Market Overview Table 1 Key Market Indicators Land Estimated Total Estimated Population Average Median Unit Median Annual Median Rent Area Population Population Density Household Price, Average Change March 2009 Growth from Size (2006) March ‘10* Over 5 Years 2010*^ 2006 to 2009 (km²) (no.) (%) (ppl/km²) (ppl) ($) (%) ($/wk) PERTH METRO 5,423 1,702,500 17.81 319 2.5 410,000 11.7 350 PERTH CITY East Perth 3.0 7,681 26.52 2,560 1.9 535,000 11.0 450 Perth 5.0 3,083 41.88 617 1.8 440,000 7.3 480 Northbridge 1.0 815 11.64 815 1.7 462,500 10.8 440 West Perth 3.0 2,620 12.79 873 1.7 540,000 10.7 463 SOUTH PERTH / VICTORIA PARK Burswood 3.4 1,403 9.70 413 2.0 811,000 6.2 498 South Perth 5.2 12,110 7.15 2,329 2.0 645,000 11.7 370 Victoria Park 2.6 7,870 9.70 3,027 1.9 395,000 13.6 340 FREMANTLE Fremantle 5.6 7,959 6.70 1,421 1.9 440,000 10.3 420 North Fremantle 4.0 2,758 6.70 690 2.1 632,500 7.5 - North Coogee 1.0 - - - - 716,250 - - South Fremantle 2.0 2,981 6.70 1,491 2.2 615,000 9.3 - WESTERN SUBURBS Claremont 5.0 7,321 3.71 1,464 2.1 565,000 14.0 420 Cottesloe 4.0 7,254 2.67 1,814 2.5 750,000 6.8 445 Crawley 2.0 3,058 3.14 1,529 1.8 1,100,000 11.4 388 Nedlands 5.3 10,246 2.26 1,933 2.6 580,000 13.6 410 Scarborough 6.0 13,916 1.35 2,319 2.0 465,000 11.1 340 Subiaco 3.0 8,539 6.55 2,846 2.0 667,500 12.2 475 Source: Knight Frank/ABS/ Real Estate Institute of Western Australia (REIWA) * REIWA figures are preliminary for up to 4 months after end of quarter ^ REIWA does not release figures if there are less than 20 rentals leased MARKET OVERVIEW The strengthening economic environment The Western Australian economy saw high As a result of the demand for housing, the during the last decade in conjunction with the levels of growth during the resources boom median price all dwellings increased resources boom of 2006/07 saw high growth and was cushioned from the economic significantly in the Perth metropolitan area, in the Australian economy. Despite the impacts of the GFC by the continued demand and combined with the availability of funds to Global Financial Crisis (GFC) during 2008 and for its resources. During the resources boom developers many residential projects were 2009, Australia remained resilient throughout high levels of growth in employment and initiated. The prices commanded by this time supported by economic growth in wage levels occurred, fuelling migration, both developers of residential projects were China and the Federal Government’s international and interstate, to the State supported by the boom which covered the monetary and fiscal stimulus policies. which placed increased demand on an under- resultant increased labour and construction supplied residential property market. costs. 2 www.knightfrank.com Private construction levels have since Market Factors recent reports have shown that it now takes decreased in the State with the onset of the approximately 4.6 years to save for a 20% GFC with banks tightening their lending The First Home Owners Grant was introduced deposit on a home (based on the median criteria, thus restricting the ability of on 1st July 2000 to offset the impact of the GST house price of $454,000). Based on the Perth developers to obtain finance to commence on home ownership. In Western Australia, the metro median price for apartments, it would new developments. Higher levels of pre-sales scheme is administered by the State take approximately 4.1 years for the average and lower loan-to-value ratios are now Government and the past 10 years have couple to save a 20% deposit. required on non-income producing property. averaged 1,500 applications per month. The demand for premium apartments in areas According to the Western Australian State With the majority of first home owners along the Swan River and Indian Ocean has Government’s ‘Prospect’ magazine, there is purchasing dwellings in the lower price-range been high in recent years with wage levels more than A$150 billion worth of resource of the market, the grant ensured continued supporting sales prices during the resources projects either committed to or under strength in this area. Combined with the State boom. The GFC saw market activity ease for consideration in the State over the next few Government’s relief on Stamp Duty on those apartments priced over $1 million with a years with the potential to create significant properties sub-$600,000 and interest rate corresponding fall in rates ($/sqm). As employment and growth opportunities. cuts during the GFC, many buyers left the confidence returned to the market during rental market to purchase property. 2009 rates stabilised which has continued Population through the start of 2010. Figure 1 As at December 2009, the Australian Bureau Perth Metro Sales by Price Range Speculative buyers entered the market during No. of Apartment Sales per Quarter of Statistics (ABS) has estimated that Western the resources boom quickly pushing up No. Australia had a population of 2.27 million, a 250 prices of ‘off-the-plan’ apartments to growth of 2.7% over the previous year, the premium levels above that of established 200 fastest rate in Australia. With approximately apartments. The exponential growth in prices three-quarters of the total population, it is 150 seen during this period was not sustainable estimated that to December 2009 the Perth and since the onset of the GFC this buyer metropolitan area has 1.7 million residents. A 100 group has reduced significantly in numbers. straight-line calculation of 3% growth per year should see the population in Perth rise to 50 Sales of ‘off-the-plan’ apartments to investors over 1.8 million by 2012. have always been strong, historically 0 Ma Ju Se De Ma Ju Se De Ma n n p- p- c c - - r r r comprising of around 50% of this market. 0 0 - - - - - 0 0 0 0 0 0 1 8 9 0 8 9 8 9 Net overseas migration has been a key driver 8 9 With the median rental rate having remained of population growth in the state and ($ '000) 500 - 600 600 - 750 750 - 1M 1M + steady for apartments for the past year, accounted for 65% of the growth in Source: REIWA investors will seek to invest in property for the population to December 2009, being 38,100 longer term as the rental market strengthens The rise in property prices during 2006 and persons. Positive net interstate migration was due to interest rate rises and decreased 2007 saw reduced affordability for first home also recorded over this period, with 2,300 owner-occupier affordability. buyers with the median price for dwellings persons moving to Western Australia. increasing by approximately $100,000 over Locally, the City of Perth recorded the fastest this two-year period. To counteract this, the population growth rate both in Western Federal Government introduced the First Australia and Australia, recording a 12.8% Home Owners Boost, increasing activity in the Table 2 increase in population over the year to first home owner market which flowed onto Rental Statistics – Multi Residential September 2009. other sectors. With this boost having ceased March Quarter 2010 as of January 2010, it is expected that a March December Qtr 2010 Qtr 2009 The ABS has shown that the seasonally number of the first home buyers will be adjusted unemployment rate in Western removed from the market, impacting on Median Rent $350 $350 Australia for June 2010 is 4.0% with the activity. Gross Rental Yield 4.4% 4.7% Australian rate being 5.1%. Western Australia Vacancy Rate (All) 4.1% 4.8% has also seen a 6.7% (seasonally adjusted) Interest rate rises by the Reserve Bank have increase in wage growth for the past year. had a bearing upon all purchaser segments of Source: REIWA the market, and with tightening credit conditions and lower loan-to-value ratios, 3 AUGUST 2010 PERTH APARTMENTS Residential Apartment Market Overview Development This has led to a surge in the development of developments being constructed in the Perth apartment buildings in the Perth metropolitan metropolitan area, with many being Perth experienced a major development and area, catering towards different markets and postponed until sufficient pre-sales are construction boom during the 1960’s and incorporating in many instances mixed-use made.