RESIDENTIAL RESEARCH Greater Perth higher density residential development site sales tallied $213.36 million in the year ending 31 August 2015. Despite a slowdown in residential $20.50 million; both projects being development sites sales across Greater marketed in 2015. Other recent major site In the past year, by value, 64.6% Perth, the construction phase is active sales, with potential for higher density in of Greater Perth development with many projects kicking-off earlier Greater Perth, have been listed in Table 1 sites were sold to foreign than scheduled due to the majority of on page 4. investors. apartments selling off-the-plan in the Inner and Middle Suburbs regions. Over the two years to the end of August 2015, the Inner Suburbs region recorded Foreign investors have a the highest volume of residential proposed $1.32 billion Sales Volume worth of development site sales at $275.79 million, residential developments in the whilst the Perth CBD saw $32.90 million pipeline in WA. Sales turnover of major sites, likely for higher density development in Greater in sales. The Middle Suburbs region, Perth, grew substantially over the three resulted in sales in the order of $147.11 Lone person households are years to 31 August 2014 to stand at million over the same time. projected to have the highest $322.23 million, as shown in Figure 1. growth at 3.0% per annum over However, the twelve months to the end There are significant infrastructure the next twenty years of August 2015, recorded $213.36 million projects currently under construction that worth of transacted sales, reflecting the will greatly benefit not only these regions, weaker buyer sentiment in the wider but the Greater Perth area, including Strong pipeline of committed Perth property market. Perth City Link, Elizabeth Quay and the major infrastructure projects new Perth Stadium. The Outer Suburbs across Greater Perth The sales volume achieved in the year to region, which covers both Perth and 31 August 2014 was a distinct Jandakot airports, will also see the Gateway WA project delivered in 2016. Currently there are 4,395 benchmark given the large volume of The region recorded $79.80 million worth apartments under construction sales transacting in that year. The most of development site sales over the same in Greater Perth—led by the CBD notable being the Finbar purchase of the & Inner Suburbs regions. Civic Heart site in South Perth for $27.31 two year timeframe. million and the Mirvac purchase of the Claremont On The Park in Claremont for Average Rates As at the end of August 2015, sites suitable for higher density development Total Residential Site Sales Volume averaged $64,500 (ranging from $35,000 Greater Perth to $120,000) per apartment across Potential Higher Density Development, $2M+ Greater Perth, trending slightly down by 5.1% when compared to the previous Million year. $400 As the Perth CBD becomes a more $300 vibrant place to live and work, inner city apartment living has become a more acceptable and suitable solution for those $200 wanting to be close to the City. Residential development site sales rates as at the end of August 2015 averaged $100 between $90,000 and $120,000 per apartment in the Perth CBD. $0 At the same time, the Inner Suburbs YEAR TO YEAR TO YEAR TO YEAR TO YEAR TO 31-AUG-11 31-AUG-12 31-AUG-13 31-AUG-14 31-AUG-15 region trended from $50,000 to $120,000 per apartment, whilst the Middle Suburbs Director—Residential Research region ranged from $35,000 to $60,000 2 PERTH RESIDENTIAL DEVELOPMENT H2 2015 RESEARCH MIDDLE SUBURBS $147.11 MILLION $35,000-$60,000 CBD $32.90 MILLION $90,000-$120,000 INNER SUBURBS* $275.79 MILLION $50,000-$120,000 OUTER SUBURBS $79.80 MILLION $20,000-$35,000 ANNUAL SALES VOLUME FOR PAST TWO YEARS^ AVERAGE SALES RATE PER APARTMENT^ per apartment. This region includes the JV with HostPlus and Pindan) of 54 suburbs of Rivervale and Burswood Proposed Investment in Residential Bracks Street in North Fremantle for $59 which are earmarked for new apartments Developments million, as well as the sale of 374-396 to come on-line over the next three years. Distribution by Foreign Investors, when Murray Street in the Perth CBD for $30 applications submitted in 2013/14 In the Outer Suburbs region, million to the Fragrance Group, both Billion development sites with potential for $12.0 Singapore based. higher density residential trended from $20,000 to $35,000 per apartment. $10.0 Foreign investors propose to invest $1.32 billion in Western Australia residential Type of Purchasers $8.0 developments, according to the Foreign Investment Review Board (FIRB). As $6.0 An analysis of purchaser nationalities shown in Figure 2, the distribution of across all development sites suitable for foreign investment into residential $4.0 higher density development in Greater developments continues to be dominated Perth, indicated that 35.4% of sales, by by Victoria ($10.41 billion) and New South $2.0 value, were to Perth based developers, Wales ($10.39 billion). Queensland dominated by Pindan, Finbar and The $0.0 follows with $2.81 billion of investment, VICTORIA NEW QUEENSLAND WESTERN Match Group, in the year to August 2015. SOUTH AUSTRALIA ahead of Western Australia which The 64.6% portion of foreign purchasers, WALES comprises a share of approximately 5% included the purchase by Roxy-Pacific (in of total investment across the country. 3 Major Sales—Development Sites With Potential For Higher Density Apartments, Greater Perth Sale Site No. Price Price Sale Address Price Area Vendor Purchaser Apts~ $/Apt~ $/m² Date $ mill m² 54 Bracks St Roxy-Pacific (40%) JV North Fremantle^ 59.00 45,456 N/A N/A 902 Caltex Australia HostPlus (60%) Mar -15 & Pindan Milligan Square 374-396 Murray St & 30.00 3,560 286 104,895 8,427 Georgiou Fragrance Group Dec-14 47-59 Milligan St, Perth^ Claremont on the Park Graylands Rd 20.50 6,555 234 87,607 3,127 WA Land Authority Mirvac Group Aug-14 Claremont^ Civic Heart Mills Point Rd, Mends St & 27.31 7,206 294 92,891 3,790 City of South Perth Finbar Aug-14 Labouchere Rd, South Perth^ Fmr Schweppes HQ Danzone Pty Ltd & 363 Scarborough Beach Rd 23.00 24,500 N/A N/A 939 Asahi Group Jun-14 thru Walters Dr, Osborne Park* Stockhome Pty Ltd Fmr Matilda Bay Brewery Undisclosed 130 Stirling St 39.60 29,170 400 99,000 1,358 McGilvray Family Jun-14 North Fremantle^ Developer The Economy after cutting the rate by 25 bps in May steady erosion of credit quality in home 2015. loan portfolios as investor lending (and The Western Australian economy the rate of growth) rises with interest-only continues to endure the aftermath of a Lending Environment loans and increased use of third-party declining mining sector, a slowing originated lending. The tightened lending Chinese economy and the weaker price With two years of significant capital environment is expected to have some of iron ore, all contributing to the sluggish growth, dominated by the investor market impact on investors, although the Australian economy. Although the in the Sydney and Melbourne property measures endorsed by APRA could be Australian Dollar (AUD) remains low, there markets, a reduced and more responsible negated should any further cuts to the has been good opportunity to attract local lending target was endorsed by cash rate occur. tourism and promote foreign investors Australian Prudential Regulatory Authority into buying new housing stock. According (APRA) in May 2015. Since this time, Employment Growth to the Australian Bureau of Statistics banks have started to reduce their (ABS), growth in Western Australian State maximum LVR’s, introducing new In the Greater Perth region, Final Demand in the quarter to June 2015 variable rates and requiring customers to unemployment stood at 6.4% as at June grew 1.5%, after recording –1.6% in the provide evidence of existing loan 2015, trending 100 bps higher than previous quarter; to a total decline in repayments before being accepted. This recorded twelve months earlier. The growth of 1.8% over the past year. is in addition to applying serviceability Department of Employment have repayment loading buffers to existing projected employment growth in Greater Interest Rates mortgage repayments as part of Perth, by SA4 ABS regions, over the next borrowers serviceability assessment in a five years to November 2019. As more Sustained lower interest rates have higher interest rate environment. These people are trending towards living closer encouraged property investment over overall housing lending standards are to where they work, this longer term recent years, and for the time being, are only part of the concern, with APRA, projection helps to understand where supporting continued appeal into the more recently, commenting on the growth in employment could be mirrored market for those seeking longer term current lending environment; where with new apartment opportunities. Within gains. The Reserve Bank of Australia house prices are high, interest rates are Greater Perth, the North West is (RBA), in September 2015, left the cash low and income growth is subdued. In expected to grow the most (13.7%) and rate at an all-time historic low of 2.00%, addition, the potential for a slow but with the most amount of jobs (42,370). In 4 PERTH RESIDENTIAL DEVELOPMENT H2 2015 RESEARCH $680,000 per apartment) to build, Employment Growth Projections exclusive of GST. Greater Perth, SA4 level Five years to November 2019 Projected Population 15% PIPELINE OF The population of Greater Perth has been North 14% West projected to reach 3.6 million persons by MAJOR PROPOSED 2036, according to the ABS long term 13% INFRASTRUCTURE South West series.