What’s happening in the Perth property market and is it a good time for property development?
Updated: January 27, 2020
Most people in Australia have a financial interest in real estate. Property development however is not always a word that springs to mind when people think of property investment strategies.
The majority of Australians are familiar with the phrase “safe as houses” meaning many have a significant proportion of their wealth tied up in property. This is either in the family home, investment properties or through superannuation funds. In fact, the enormous total book value of Australian Property means Australians are regularly listed in the top 3 countries for wealth per capita. Most Australians look at property as a long term wealth accumulation strategy, relying on capital growth through a buy and hold model.
Growth in property markets is cyclical however, with most capital cities in Australia experiencing 7-10 years of growth followed by 5-10 years of market retraction. Being in the retraction phase of the cycle of your city puts the brakes on the capital growth strategy.
Property Development, The Alternate Strategy
Property Development however, is much more versatile. You can make money by developing property in the short term at most points in the market cycle. Whilst it is great to be developing in a rising market, you dont necessarily need to rely on on capital growth to create equity uplift, because you are value adding in other ways. It is still possible to make money in a flat market. If you focus on getting the timing right however, you can compound your returns by executing property development and capital growth strategies concurrently if you are heading into a growth phase in your capital city.
The trick is getting into a market at the bottom of the cycle, developing and selling as the market is growing ( rising market) or at the peak. Major capital centers on the East coast of Australia are nearing the peak of the growth phase of the cycle, with Melbourne and Sydney particularly due to face sharp downward market corrections over the coming years.
Perth on the other hand, is coming out the end of its retraction phase, and into the next growth phase of its market cycle.
There has never been a better time from a buy value perspective in Perth . All the correct indicators exist showing the start of the next phase of growth in the state:
- New resources projects in the mid-west and north-west driving unmet labour demand and wages to levels higher than the last mining boom.
- Increased migration (overseas and interstate).
- Rental vacancy rate falling sharply to just over 2%.
- Low interest rates.
- Falling unemployment.
- Low median house pricing against the national average.
- Exceptional affordability index ratings (rent or house price to income ratio).
- Highly competitive building and professional service market, providing value to the property developer.
It is a perfect time to get a property development started in Western Australia. The state is currently headed for a population increase to meet labour skills shortages, an under-supply of housing in key growth areas, and provides exceptional value for money for property acquisition. This is the opportune environment for a property developer to be operating in.
Flynn Subdivision Experts are a professional, family run property development consultancy based in Perth, Western Australia.
We provide all the services needed to help you enjoy a successful property development experience in Perth. We can educate you, find projects and partners for you, perform feasibility studies, handle all the planning and applications, and manage the delivery of a project to completion.
Partner with us, we invite you to enjoy developing property with ease and expertise!
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