An insiders view of Perth

I’ve gained a lot from these boards in the few short weeks I’ve been reading them. I’ve never owned an IP but I have a great mentor whos net worth is about 20M and he’s in his mid thirties. He has shown me some ropes and encouraged me to the take the next step so I’m now about to start building an IP for myself which is really exciting. This led me to these boards and since I’ve received a lot from these boards, and also the PIA software I bought which helped me understand the numbers, I thought I’d write a short passage on the Perth economy and building market from my point of view to give something back to those of you that contribute on the forums.

For those that don’t know (which is probably all of you reading!) I’m a GM of a building company in Perth. We have 2 arms in our building company; One which builds developments and the second that builds upmarket homes ranging from $500,000 - $2M.

My take on the market since the GFC;

1. Luxury home market halted dramatically in the last quarter of 2008 and only started to show recovery in April/May this year. Even still it is flat-lining which isn’t good. The ‘Build Now’ and 'Vote Confidence' campaign in the media along with the pause in negative press in Perth seems to be assisting in the recovery. Small % increases in number of people visiting the display homes but sales numbers are still low. A lot of builders in this market have cut back staffing numbers by way of redundancies.

2. The 1st Home Buyers Market has been consistent due to the FHG however that has now created a shortage of FHO land supply. And yes, people are almost camping out again in-front of land sales offices in new ‘affordable’ subdivisions – a stark comparison to the more expensive subdivisions which are empty.

3. The last 2 months (July/August09) have seen really high sales in the 2nd and 3rd home buyers market (Homes around $225-$300k) with some monthly sales results 3x boom time sales! This is most likely due to the flow on effect from the FHO entering the established market.

4. Construction prices have been reduced however the public isn’t aware that most reductions came through revisions of standard specifications which reduced the ‘quality’ of fixtures and fittings and also a renegotiation with tradesmen on their standard rates to assist keeping them employed through more consistent sales. Steel prices cooled earlier this year but not significantly. I expect building prices are now at their lowest and will start to increase again in coming months as demand for trades increases. Contrary to popular belief, supplier prices HAVE NOT REDUCED. In fact, I have some supplier prices rising on some products by 20%.

5. Land availability – this is a real issue in the west. I’m currently trying to negotiate with a number of land developers for a new display home in future estates however they are struggling with the banks to finance their latest projects due to a number of land holdings that haven’t been moving (a lot of these are in the Southwest where land sales halted). Can anyone say ‘shortage of land’? If these future projects are delayed further (already 6 months behind) we can expect more flyinflyout workers mid-late next year as the resources sector ramps up again (Gorgon) and that will put more pressure on our market.

Anyway, those are just some of my observations over the past 9 months which I thought I’d share with you all. Cheers for the great posts in these forums!
nice one, some good info there.

Looking at subdividing IP2 and building 2 4x2 houses on it in a few years time, so I might pick your brain when it comes closer to the date. The land is on 911m2 within 10mins from the CBD.
great post and nice to hear you are taking the next step Snort

keep us up to date as you progress

I have read that some groups such as The Investors Club and Positive Property are also looking at Perth again
nice one, some good info there.

Looking at subdividing IP2 and building 2 4x2 houses on it in a few years time, so I might pick your brain when it comes closer to the date. The land is on 911m2 within 10mins from the CBD.

Would love to help when you're ready.
Thanks for you post Snort.
It will be nice to have instant market reports of whats going on in your office/company instead of waiting months for them to be released to the media.
I have noticed movement in the market around Mandurah of late. Not that much stock on the shelves.
The New Marina is still a white elephant. Lots of burnt fingers there.
Enjoy the forum
not letting on much are ya? :)

GM of a local building company... you don't write like Jim Ilias or Dale, Mick doesn't type well at all, Reza wouldn't use the word "nope"... are we talking to Ian? Craig? Laurie?

Mr Joe Passione himself wouldn't even bother with a board like this. Do you share office with Nigel Sayers?
Keep shooting BC, your bound to hit something :D

Of course there's a "land shortage", just ask the GM of a building company lol, or REA or developer or a BA etc etc
I look forward to reading your views.
shortages are inevitable when the supply chain on such a long lead time 'commodity' is severely broken and for such a long time... I use the term commodity loosely as each supply is becoming increasingly inferior hence not really comparable, but then again ore grades can vary too. land buyers are in for some pain.
sorry there just aren't many building companies in Perth that do devvies AND large homes and not much in between.

if you come onto a public forum claiming to be a GM of a local building company - then make economic predictions - you would need to qualify yourself and say where you're from IMO. i'm not discrediting or condoning your POV by any stretch either.

after all, i'm Donald Trump's second cousin, but what would i know?