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12 May, 2016

Market turnaround will reward investors who act swiftly

With Perth’s property market stabilising and industry experts expecting a recovery within the year, shrewd investors are taking another look at the city’s apartment market.

Coming off the back of a sustained period of steady property price increases that coincided with Western Australia’s mining boom, the capital city’s property market has been sluggish this past year. Some sections of the media went into overdrive, reporting the relatively brief and minor market correction as a slump and warning of a “glut” of new apartments in the development pipeline.

But it appears the market is correcting itself. In recent weeks, Real Estate Institute of WA (REIWA) figures have shown that both median house prices and overall median rent actually increased slightly in the December quarter — suggesting the overall property market downturn has bottomed out and conditions are improving.

Market correction sorting out supply

The market has also corrected for that apparent oversupply of apartments, with several larger projects having been cancelled by developers. According to a recent report by PerthNow, more than 500 apartments which were to be built (thereby putting downward pressure on prices and growth) will not go ahead.

The article quotes Colliers International head of residential sales Daniel Crotty, who said the cancellation of projects has helped normalise supply levels. In other words, that market correction is allowing more desirable projects to flourish.

The same report has one leading industry figure saying he believes the market will recover in the next year.

Demand is still high for Perth apartments

So is it time to invest? Well, the signs are good. First, there is still steady demand from investors and those owner-occupiers looking to downsize or move into a more vibrant, urban area. At times the trade has actually been brisk.

People want to live in apartments. A study published in August last year by the Master Builders Association indicated there were some 35,000 apartments in 64 suburbs within 15 kilometres of the Perth central business district. Just 1,425 of those were vacant. That’s four per cent.

The report also found the proportion of people living in apartments in Perth was set to soar within the next five years.

Here’s what Master Builders Association director of housing Geoff Cooper told the ABC:

‘We’re seeing an increase in supply in the apartment market, but we think there is a lot of underlying demand for the product in coming years, which will underpin the demand for new apartments’.

‘Perth has a very immature apartment market and it’s still a very low percentage of overall dwellings, but we think that’s going to grow in the years ahead, so in the next five to 10 years we’re going to see something like 20,000 new apartments in the market.

‘There are a lot more amenities in apartments in Perth — we’re seeing movie theatres, dining rooms and the traditional pools and gyms being offered, people are choosing apartment living’.

More and more people want to live in apartments

Second, there’s the effect of market stabilisation. Here’s what the REIWA said in November:

‘Fewer apartment projects are being launched and this is easing fears that Perth might suffer a glut of apartments, with industry leaders predicting a sellers’ market will begin to emerge in 2016 that pushes prices up’.

At present many developers are still offering the big incentives they introduced to encourage investors during the downturn. As the market picks up, those incentives will begin to disappear — meaning those who delay could miss out.

If you’re looking to invest or you think apartment living is for you, check out Finbar’s Aire development in thriving West Perth. One-, two- and three-bedroom apartments are selling now.