Perth - madness.
- Thread starter Kingbrown
- Start date
Strange times indeed.
I just fixed up my little 2 bed unit in Rockingham, raised the rent and have put in on the market to see if I can get the rather large price tag I want.
The agent says I have no chance of selling it. Then a week later I get 2 offers on it. Neither offer was as much as I wanted but the fact I have had 2 offers in a week tells me there is still some interest.
However there are many more units coming onto the market.
I am no longer fussed if it sells. The rent is $135/month more than the mortgage and I have finally got it in tip top shape
Cant wait for the train line to come in (the unit is 800m from the half finished station) - be interesting to see what effect that has on prices (if any) next year.
<KS>
I just fixed up my little 2 bed unit in Rockingham, raised the rent and have put in on the market to see if I can get the rather large price tag I want.
The agent says I have no chance of selling it. Then a week later I get 2 offers on it. Neither offer was as much as I wanted but the fact I have had 2 offers in a week tells me there is still some interest.
However there are many more units coming onto the market.
I am no longer fussed if it sells. The rent is $135/month more than the mortgage and I have finally got it in tip top shape
Cant wait for the train line to come in (the unit is 800m from the half finished station) - be interesting to see what effect that has on prices (if any) next year.
<KS>
Hi all
Just to clarify something in rewings chart, you do realise that the spike in 88-89 was brought about by the stock market crash. Investors pulled out of the stock market and plunged their money into the property market, increasing values - this happened right across australia, all states at the same time. I believe it then settled back when investors confidence in the stock market was restored.
What I want to work out is - what caused the boom this time? As it was not in all states at the same time, more of a ripple affect.
Any thoughts?
Celeste
Just to clarify something in rewings chart, you do realise that the spike in 88-89 was brought about by the stock market crash. Investors pulled out of the stock market and plunged their money into the property market, increasing values - this happened right across australia, all states at the same time. I believe it then settled back when investors confidence in the stock market was restored.
What I want to work out is - what caused the boom this time? As it was not in all states at the same time, more of a ripple affect.
Any thoughts?
Celeste
Well we're just about to jump in again to the Perth market up to our neck in debt...just like we did 2 years ago....glad we did that.
I reckon the stuff that appeals to us has at least another 3 to 4 years of strong growth. Leasing for our dusty dilapilated warehouses and truck yards is just going nuts.
As an example 7 to 8% nett yields after all outgoings are being achieved.
Positive cashflow vacant blocks of dirt...bewdiful.
Welcome Celeste,
There are many factors contributing, as there were in 1987-89. For discussion on this topic, it might be best if you start a new thread in the "property markets economics" section.
best regards,
This happened to Syd and Melb and to some extent Perth post 2000 as well. The stock market took a slight dip. Now experts are predicting single digit equity growth especially on the back of a tightening environment. Wheres cashed up WA folks going to stick their money? Back into the share market thats done over 75% in 3 years? Thats annualised growth of 25% pa. Equity markets only do 12-15% in the long term. I think bricks and mortar might continue to win out, especially where current equity valuations are sitting.
Surely the same logic applies to property. Long term property only does about 7-10% (a statistic the sharemarket people always cite), lower than equities.
Alex
I hear you AlexLee, thats whats worrying about current WA climate. Could we possibly be coming into 10 years of stagflation? Harry Dent in his latest book seems to think so when all the baby boomers start retiring from 2010-2022. But then theres the China and India factor for our resource companies. Mining sector reckons they will require another 70k workers in next 5 years or something crazy like that in WA.
You would think Syd and Melb is due for a run again just to average the numbers out. But who knows when that will be. Affordability still sucks. We can't all keep buying -'vely geared IPs. NSW and Vic will feel the pinch when RBA goes again in Nov. Potentially throws out any property rally till rates start to fall which the financial markets is not predicting anytime in 07. Maybe mid 08? Its all too confusing really..
You would think Syd and Melb is due for a run again just to average the numbers out. But who knows when that will be. Affordability still sucks. We can't all keep buying -'vely geared IPs. NSW and Vic will feel the pinch when RBA goes again in Nov. Potentially throws out any property rally till rates start to fall which the financial markets is not predicting anytime in 07. Maybe mid 08? Its all too confusing really..
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Dear ASDF,
Care to further elaborate on your line of thinking and its logic, please?
Thank you.
Cheers,
Kenneth KOH
I hear you AlexLee, thats whats worrying about current WA climate. Could we possibly be coming into 10 years of stagflation? Harry Dent in his latest book seems to think so when all the baby boomers start retiring from 2010-2022. But then theres the China and India factor for our resource companies. Mining sector reckons they will require another 70k workers in next 5 years or something crazy like that in WA.
You would think Syd and Melb is due for a run again just to average the numbers out. But who knows when that will be. Affordability still sucks. We can't all keep buying -'vely geared IPs. NSW and Vic will feel the pinch when RBA goes again in Nov. Potentially throws out any property rally till rates start to fall which the financial markets is not predicting anytime in 07. Maybe mid 08? Its all too confusing really..
Given that the last boom was the longest (and biggest if I am not mistaken) I would not be suprised if the downturn was just as long. I still think its way too early - although the supply shortage in the Eastern States cant go on for too much longer.
Its an interesting point - there are large supply shortages in the Eastern States yet prices just wont budge. This implies the same situation could well happen here, even with the high influx of workers.
I read the supply tightness and flat (if not falling) prices as an indication of just how big the hangover is from the boom in Sydney. If rents were to jump to the point where investing in Sydney makes sense again, renters would take a BIG hit. There will be knock-on effects: If someone sees their rent jump 20%, they'll eat out less. The NSW economy is already pretty slow, though you'd never believe it from looking at the bars and restaurants. Funnily enough if you look at the shopping areas in Tokyo for the last 10 years you wouldn't think the country was in recession.
The question is, how much of the Perth boom is built on salaries of workers streaming into the WA (more stable) and how much is from investors expecting the boom to go on? It's like asking how much of the oil price is from underlying demand, and how much from hedge funds buying on momentum? From the recent falls in the oil price, the hedge fund component is significant. Given the number of Perth buyers who are investors (I read 40% somewhere, though I don't know where the source is) it would seem it's significant. If I'm an investor and I'm expecting 30% increases (especially if I'm a newbie) andit doesn't turn out, I'm going to sell and run.
Alex
Don't underestimate the demand for housing. Well paid, in-demand workers are flocking to WA and need somewhere to live. There is good support for the current housing prices. Logic says that super strong capital growth can not be maintained for much longer, but I think there will be enough demand to keep the prices and yields reasonable. So, not strong enough for any short term investors targeting 30% annual growth - who cares about them? - but enough to maintain a good market. The future is looking rosy (at least reasonable, though not 'super boom') for ~5 years from what I hear & read.
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Dear Stretchy,
1. I wonder what is the level of investors' activity during the last boom? REIWA has similarly reported a high level of investors' activities (32%-40%?) in the present Perth Property market boom.
2. I agree with Alex that there is some sort of a "supply tightness" somewhere in the Sydney property market.
3. Beside inadquate rent increase as suggested by Alex Lee, I think that the present housing/land pricing and its housing affordability related issues at the Sydney property market is another major concerns to consider too.
4. ...perhaps, the new immigrants to NSW cannot afford to pay the high housing prices and with more Sydneynites moving out North (to Queensland) and West (Western Australia), perhaps, the underlying demand may not be as strong as has officially been projected... the reduction/fast-disappearing of the Middle Class people in Australia as is happening in many of the other OECD countries, resulting in the "Rich" and "Poor" housing categories/polarisation.
5. We are also witnessing a similar property/housing market situation in Singapore:- only the prestige property/upper end of the property market is actively moving now with large increase in housing prices whose players are mainly the rich foreigners from ASEAN countries as well as the few rich Singaporeans, the usually more active mass market private condominium sector is still "dead/stagnant" with some supply over-hang from the last boom in 1996 though its market sentiments have improved recently, and the biggest market segment where most Singaporeans are living in, the HDB Flats Resale Index is still recording some price falls, even for new HDB flats sales.
6. Unlike previously when many Singaporeans are upgrading their respective class of housing accomodation, today many local Singaporeans are actually doing the reverse:- actively "down-grading" their housing needs from private condo to HDB flat category, from 5-room or bigger HDB flat to 3-room flats etc.
7. In Singapore, it is definitely not a case of housing demand shortage but one of housing affordability/"pricing" related issues for the local Singaporeans and what is deemed to be the "pragmatic" arrangement with respect to housing accomodation, under the present prevailing economic situation.
8. Can this same situation happen to Australia in the near future, too?
9. I would think so ;-though it is probably still too early and pre-mature to make such a conclusion, at this point in time.
10. We will need to further research/study into the breakdown of the various new overseas immigrant's (as well as the local Australian) family background/income earning capacity vis-a-vis the kind of housing that they can afford to "rent-buy", when they first arrive and relocate their families in Australia.
11. For your kind update and further comments/discussion, please.
12. Thank you.
regards,
Kenneth KOH
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Dear Pete,
1. The housing needs for the new migrant workers working in the mines are not as "in-elastic" as the usual residential housing for the average Perthrite family here, as you would want to suggest.
2. While now there is an acute shortage of skill labour in these mines as a result of the recent capital investment to increase the mine's production capacity, resulting in a acute labour and housing shortage in the mining areas, somewhere and some time in the near future, the same mining companies will have to consolidate and retrench some of the excess workers, who would then have to return to their home state one day when the mining boom in WA ( and those in NT and QLD) is no longer there.
3. Consequently, the housing in the mining areas is likely to become "over-supplied" "suddenly" after the mining staff mass retrenchment exercise in due course with the present rate of housing contruction in these mining areas start to gather pace, such that its housing price will have to fall eventually some time in future.
4. This is when/where we are likely to hear the "boom and bust"
stories within the Perth property market in "not-so-near" distant future.
5. As for the average Perthrite family and their housing/land affordability limits, depending on the new permenant immigrants who are prepared to relocate their families to stay long term in WA, I also think Perth is fast approaching its own housing affordability limit, having been the world's 4th most expensive capital city in the world, ahead of Sdyney, on the basis of its present median housing price vis-a-vis its average household income, as one international comparative research studies by Merill Lynch Investment Bank, has shown recently.
6. Please also bear in mind that the investors' activity in the Perth property market has now risen to 32%-40% and this is clearly non-sustainable over the long term period.
7. For your kind update, please.
8. Thank you.
regards,
Kenneth KOH
Tropic - as I stated in another thread, I think you will find that rents have already significantly lifted once landlords have the courage to ask for more $$.
My 4x2 in Rockingham is a good example, renting out with 0% vacancy rate since its completion for $300/week. You could have rented the same house 2.5 years ago for about $200/week. 33% IMHO is a nice jump in such a short period of time.
Once the greater % of landlords follow suit and ask that little bit more then I think we will see rents grow. I read somewhere that 11% of employees in WA derive their income directly or indirectly from the mining industry, which is reflected in the jump in the average WA wage. Thats a lot of money to spend living in a nice house.
<KS>
My 4x2 in Rockingham is a good example, renting out with 0% vacancy rate since its completion for $300/week. You could have rented the same house 2.5 years ago for about $200/week. 33% IMHO is a nice jump in such a short period of time.
Once the greater % of landlords follow suit and ask that little bit more then I think we will see rents grow. I read somewhere that 11% of employees in WA derive their income directly or indirectly from the mining industry, which is reflected in the jump in the average WA wage. Thats a lot of money to spend living in a nice house.
<KS>
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1. I agree with KS.
2. Provided the Landlords collectively have the courage to insist on a rent increase for the growing house prices, the rental growth will not be as good as compared to leaving them passively to the local property management firms to set the market pace, at this point in time.
3. The increase in housing prices over the last few years, has been tremendous but the rental growth increase is still not keeping in pace, though it is already on the increase, generally speaking.
4. I say this in respect to properties located in the Rockingham-Shoalwter suburbs areas
5. For your kind update, please.
6. Thank you.
regards,
Kenneth KOH
Some good comments, as usual, Ken.
I wasn't commenting on workers at mines and it seems that some of your comments are based on that mis-assumption?
Yes, housing affordability can't have much more capacity and abnormally high investor participation is non-sustainable. It is stating the, more or less, obvious.
What does it mean for the future?
I'm predicting that there will be a strong demand for Perth housing for the next 5 years or so. I see this as support for the current high prices - not fuel for galloping 40% p.a. growth, but support for maintaining current prices. So, no bursting of bubbles - and a reason that rents will rise.
What do you think?
regards,
