Updated: December 19, 2021
Most people in Australia, including you, probably have some financial interest in property, and for good reason. It is a tried and tested place to invest your money, grow your wealth and achieve financial freedom. Property is statistically a far safe place to have money than the stock market on along running average, and typically rides out the storm much better than stocks in times of economic crisis or instability. In uncertain times like these, it is very important to make informed decisions about where and why you are choosing to invest in and develop property in Australia. If you make the wrong property investment and development decision at the moment, you will lose a lot of money. On this section of the website, you will learn why Perth is a going to be the best place within Australia to invest in and develop property in Australia for the foreseeable future.
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.
To begin with, growth in the property market for each major capital city is cyclical, with most capital cities in Australia experiencing 7-10 years of growth followed by 5-10 years of market retraction. You need to know where in the cycle your capital city is in its growth cycle; it is either in a growth phase headed to a peak, or its at a peak about to head into a value contraction phase to a bottom (loss of value). If you get the timing wrong of when and where you enter the market, you risk loosing money by buying at the wrong moment in the cycle. Most of the east coast capital cities (Sydney, Melbourne, Brisbane) are at or near peak of growth cycle after many years of sustained growth. These cities are looking at moving into a contraction phase by early 2023 as affordability, likely interest rates rises sooner than anticipated, unit oversupply and COVID affected migration trends become major issues. Perth however iscoming out of the bottom of a downward cycle after a near ten year slump, bieng in consistent positive growth territory since november 2019. It is poised to continue an upward phase of growth in the coming years ( having done approx 18% in the last 12 months to november 2021). Perth should recover from any small falls and accelerate into sustained mid and long term growth driven by;
- strong opportunites for overseas migration intake to sustain housing demand- 160 000 migrants are coming to Australia in 2022,
- strong domestic demand for product off the back of cheap credit and exceptional affordability ( Median price for housing in WA approx 550k),
- a strong, diversified and resurgent resources driven state economy (security of supply for asian and global markets),
- huge latent buyer demand with chronic undersupply of current and forecast housing stock levels (less than 6 months supply on market) and artifucially supressed demand with a closed state border. This will all change in the the first quarter of 2022,
- increase in interstate migration to fill the growing needs of an undersupplied labour market.
REIWA tips the WA market to grow another 8-10% in 2022.
Property Development is a versatile and complimentary strategy to simply investing (buying and holding) property in Australia. 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, which is where Perth has been for some time. If you focus on getting the timing right however, you can add value through development and compound the returns by letting the market do some heavy lifting at the same time (capital growth in a rising market).
This is what makes the prospect of getting into property development in Perth at the moment so exciting. Perth is the only capital city in Australia currently coming out of bottom of its cycle, and strongly too. We have just entered the upswing part of our cyclical growth phase. And its never been more affordable and statistically attractive to enter the WA market . The trick then is getting into a market at the bottom of the cycle, and developing and selling as the market is heading to a peak in a rising market.
Now is the time to get in and prepare to ride that wave.
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:
- Surge in land and housing demand forecast by experts off the back of interstate and overseas migration when the WA state border opens in the first quarter of 2022
- Latent undersupply (10 years of poor dwelling commencements and land releases) menaing lagging supply and demand that is about to explode.We are well behind our infill and dwelling commencement targets, lagging 10-20% behind required commencement rate at current migration levels
- New resources projects in the mid-west and north-west driving unmet labour demand and wages to levels higher than the last mining boom
- Supply is well outstripped by demand (undersupply in land, housing and units) reflected in 15% increase in price over 2020- 2021 and 16% increase in rent. Rental vacancy rate has fallen sharply to just over 8500 listings, approximately half of what is required for a balanced market.
- 160 000 migrants in federal government intake for 2022, just 10% of those would consume all the supply in the WA market, meaning continued upwards pressure on house prices
- Most affordable capital in Australia at just under 550k median price (attractive to broad range of local, investor and migrant buyer base.
- Low interest rates.
- Good medium and future employment prospects, with the second lowest unemployment rates in the country.
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 savvy property developer to thrive.
Before committing to doing a development in Perth, many of our customers started by learning the specifics of how to become a successful property developer from us so they dont make mistakes. Spending a bit of time getting the right information, education and guidance from us has given them the developer know-how they needed to make informed decisions about successfully investing and developing in Perth. Developing is slightly different from state to state, and understanding when and where to buy is something you dont want to get wrong, particularly if you are new to the whole process. Get in touch with us today for assistance in startign the next step in your property development journey!