How to Read the Western Australian Property Market
In this blog post for April, Ventura iD Brand Manager Kerrian Devlin reveals how investors and developers should look to read the local property market.
How to Read the Western Australian Property Market – by Kerrian Devlin
Most consider the greatest investor in the world as being Warren Buffett. In an interview with Steve Forbes, Buffett discussed the difficulties of knowing when to buy and sell, and stated, “That may seem easy to do when one looks through an always-clean, rear-view mirror. Unfortunately, however, it’s the windshield through which investors must peer, and that glass is invariably fogged.”
Even the greatest investors don’t always get it right; however they do always think long term. Another interesting quote from Warren Buffett is “the more you trade, the more you underperform”.
So when it comes to buying and selling property for investment or a wealth building, the strategy should be a 5-10 year plan.
In Western Australia our gross domestic product growth is almost 5%, which is two thirds higher than the National average per annum. A large contributor to this growth is the Mining Boom that creates jobs and wealth; however our population growth and economy is also faster than any other State with 1500 people per week arriving in Western Australia.
Some statisticians are suggesting that Western Australia could have as many as 4 million people living here by 2050.
With the medium rent in The Perth Metropolitan Area sitting at $470 per week and low interest rates still on offer from Lenders, the First Home Buyers’ market is in a boom despite increases in cost over the past 14 years.
Traditionally when there is a run on First Home Buyers, Investors and Speculators also enter the market putting further pressure on pricing for construction.
Established listings for sale in the Metropolitan Area are the lowest in 6 years. Only 7000 houses are listed for sale which is a 50% drop from 12 months ago. The equilibrium is considered to be 10 000 listings in a normal market.
So the question is how to read the market?
Remember there are no absolutes and that investing still carries some risk, however the indicators on a moving market are:
- The cost of rent verses the cost of a mortgage for a similar product in the same area. When the costs of rent becomes close to mortgage repayments, First Home Buyers are motivated to buy and this may be the start of a boom.
- The number of established listings. When listings are low it generally means there are buyers purchasing, and this puts pressure on the prices, and generally we see an increase in the average home value.
- Demand for rentals. If you’re an investor then you need a tenant to rent your property, and lower vacancy rates means quicker occupancy.
- Demand and Supply. If the population is growing, they need to live somewhere. Population growth stimulates both the rental market which in return helps investors, the ready built market as a percentage of these people are in a position to buy.
All this data is readily available on the internet, and the knowledge to self-assess the market certainly will give you confidence when deciding to buy an investment or enter into a development project.
Disclosure: Ventura iD specialises in unit developments and investing in properties, and have more than 50 dedicated staff to handle projects from concept through to completion of construction. As the leader of this organisation I feel I have knowledge that can help Investor’s and Developer’s make their projects more successful and profitable, however this information should not be taken as specific to your own situation, and read solely as a reference point.