Perth real estate is expected to enjoy a return to favour in 2016 thanks to a combination of real estate affordability, continued low interest rates, relatively strong yields, and improved consumer confidence, according to Superbrand Raine & Horne.
Consumer confidence rebounded in Western Australia by 8.4% according to a recent industry report, while compared to other capital city markets such as Sydney and Melbourne, Perth’s median dwelling price of $500,000 looks very affordable, says Craig Abbott, General Manager WA, Raine & Horne.
“Cash-flow hungry investors and self-managed funds (SMSFs) will also recognise that Perth’s gross rental yields for houses (4.1%) and apartments (4.1%) compare favourably against the returns being achieved by investment properties in the southern capitals,” said Mr Abbott.
In Sydney, RP Data reports the gross yield for houses is 3.1%. In Melbourne, gross yields are just below 3% as a consequence of the Victorian city’s recent strong real estate growth surge.
“What’s more, in some regions such as East Perth and Perth, yields can be well above 6.5%, which you just won’t find in many residential capital city markets on the eastern seaboard.”
Raine & Horne North Perth, for example, has listed a 2-bedroom, 1-bathroom apartment at 63/4 Bulwer Street, Perth .
“This is expected to fetch a price in the low $300,000s, and it will rent for $400 thanks to its great views,” said Larry Gallagher, Principal of Raine & Horne North Perth.
Mr Gallagher said a number of factors contributed to Perth and East Perth’s excellent value and income potential.
“Perth and East Perth offer some of the city’s best cafes, shops, restaurants and transport infrastructure,” he said.
Peter Vetten, Principal of Raine & Horne Mandurah, reports that he is fielding calls from interstate investors who have been priced out of the Sydney market.
“I took a call this week from an investor who has $2 million to spend and couldn’t find value in Sydney, so he’s decided to cast his net wider,” said Mr Vetten, who believes the Mandurah market is beginning to strengthen.
“In November, we’ve already seen sales and enquiries jump for Mandurah properties by 5% compared to October, and we attribute this trend to market conditions in Sydney and Melbourne, where affordability remains an issue,” said Mr Vetten.
To illustrate Mandurah’s affordability, Raine & Horne Mandurah recently sold a 4-bedroom, 2-bathroom house at 2 Balmoral Parade, Balls Head for $290,000. The property currently rents for $325.
“We could not believe how cheap it was and with a coat of paint this property could achieve a weekly lease of $360,” said Mr Vetten.
“Investors may need to get their skates on though, as we’re seeing more empty nesters moving to Mandurah for a sea change, although still only a one hour drive from Perth.”
Paul Curran, Principal of Raine & Horne Rockingham Beach, agrees the Perth property market presents some excellent opportunities for buyers and local and interstate investors.
“The one caveat is that rental occupancy rates are still relatively high but with some carrots, it’s possible to attract suitable tenants fast,” said Mr Curran.
One savvy owner, for example, working with his property manager at Raine & Horne Rockingham Beach, decided to offer the first month rent free to attract the right tenant to his property.
“This owner decided to offer 4 weeks rent free, which effectively meant taking an 8% haircut on his annual return,” said Mr Curran.
“On the flipside, we went from attracting very few potential tenants to attracting up to 18 groups to an open for inspection. We had a tenant signed up within 48 hours to a three year lease of $340 a week.
“This is a great return as the property is probably worth $340,000, which is a gross yield of 5%, which is pretty standard for the City of Rockingham.”
Raine & Horne Rockingham Beach is currently offering its landlords with vacant properties some incentives to advertise on realestate.com.au, domain.com.au and reiwa.com.au. It is also giving its landlords two free local newspaper advertisements.