[wa] land prices falling... ???

sorry about the slightly deceptive title ;)


essentially.. what i am getting as i'm receiving quite a bit of email/phone correspondence from agents looking to sell me land at reduced prices.

i've been looking outside of mandurah/bunbury etc and all of a sudden, people are dropping their prices by 10-20k comfortably in some nice spots

to be honest.. i now am unsure which block(s) i want and am slightly disillusioned in regards to whether i should buy as.. if supply in the current state of the areas i'm looking at, outweights demand then why should the price go any higher?

any feedback appreciated...
 
OK my opinion would be a few months ago perhaps the prices in the area you were looking at were a bit over inflated? The prices were being dictated by the supply and the demand for what was available. That was not a normal situation so you can't use it as a benchmark.

Now, the supply is higher, the sellers must compete to secure a sale, so they drop 10-20K off the price. Its not really a drop though is it because the property is only going to fetch what the market is prepared to pay. Demand is lower because people can take their time now with their decision and are not rushing in. They also listen to the media and maybe get cold feet, maybe even invest in the stock market insted. Its lots of reasons.

Bottom line is that property is still best thought of as a longer term option. Whether or not the actual area has got potential to reward you with good CG in the longer term is still something you need to work out based on past performance and current infrastructure and future planning for the area. Chances are if it did well in the past (before the boom) then it will do well in the future.

To know whether you are paying a fair price, just make sure you've got lots of recent past sales evidence for the same sort of land in the same area. That is, stuff that settled last month.

Of course, thats just what I think. :)
 
tizzy- thank you for the feedback..

i've researched the areas quite thoroughly.. and it's still far below what i was expecting to pay for it even 2-3 months ago..
now, i am sure 1-2 years ago this land would've cost about the same price as a coke and chips[slight exaggeration] but the cg should be very strong.

tropic - so far.. 10-20 on 160, 189, 209, 219, 20k on 189, 30k on 249 etc.
 
I think (and know of a few) the speculators that have picked up blocks at say $100 to $180k, with market values late last year of $320k, have thought they will just dump them at $260 to $280k, still make a fat profit and move on. I think it is good for everyone.

unit sites arent showing much profit but i believe the end values of villas needs to track upwards a little yet to reflect replacement values, but will be interesting to see. it doesnt make sense that villas are selling for say $350k when this is below replacement... will just take a while for older stock to work its way thru the system
 
Hi all

I was chatting to my REA yesturday - Perth Market a little strange at the moment - I stress " NO ONE KNOWS WHATS HAPPENING" all are speculating tho, which adds to the uncertainty.

My theory - all the talk of interest rises and boom bust - they seem to be getting bigger headlines - the smaller head lines from them that know say its a revaluating time and the bottom of the boom is not here yet, some are predict a drop in interest rates? Also, the prop grab has stopped - sellers have not caught on yet ( jo blow down the road got $XX so I want $xx but the market is paying less.etc)

All this conflicting info is putting a stall on the market, buyers are hesitant and sellers are tweeking their asking prices, hence the drop in some prices.

If you look on realestate.com at say Maylands apartments, asking prices are all over the place. I believe they will stabilise in the next 3-6 months. The rental market has gone crazy tho - my neighbour had 60 turn up for a home open he had to rent his daughters unit, whilst she is overseas.

I am hearing stories of prop in Mandurah on the market for months with no offers - when you hear the details of the prop and how much they want. You go wow thats to much.

Celeste
 
tropic - so far.. 10-20 on 160, 189, 209, 219, 20k on 189, 30k on 249 etc.
That's a substantial reduction.

Is if fair to say that the price won't stabilise until local, interstate and overseas speculators sell out their holdings?
Should be some nice below replacement properties soon. I quess a replacement value have to to take account of the current land value. So they will go down as well.
 
the 2 tier market seems to be alive and well, multi million $ properties in dunsborough and eagle bay are selling straight away cash unconditional, inner city doing well too. I am seeing a slow down in the construction belt tho... all the spec homes in the outer burbs are slow to sell.
 
tropic- and you make the most important point of all.. when the international/even interstate investors decide to leave.. blamo, everything will drop by a fair %.

this is why i am somewhat befuddled...
i'm trying to build businesses through equity growth in properties...hence, one bad turn in a property/p+land investment and i am back at square one..

i will head down there this week..time permitting and continue to read this forum.. hopefully by this weekend i'd have spent another 200k or thereabouts

aus- so true... everything 750k+ property is being snapped up straight away..
IF ONLY i had that available to me at this in my life, i'd snap up a number of canal properties et all and laugh my way to retirement[again..minor exaggeration :) ]
 
aus- so true... everything 750k+ property is being snapped up straight away..
IF ONLY i had that available to me at this in my life, i'd snap up a number of canal properties et all and laugh my way to retirement[again..minor exaggeration :) ]

Have a look at the canals up in Gold Coast. Some of the older stuff is not exactly flying out the door at a premium.
 
Stock12,

I don't believe property prices are actually falling in real terms in Mandurah or Bunbury. I believe what is happening is that suddenly the boom is over and vendors who were previously asking and getting absolute top dollar for their properties are now having to be more realistic in their pricing. ie. They can no longer ask $10K more for their property than what the identical house next door sold for the week before. There is much more stock on the market and buyers are now able to shop around and compare properties (ie. it is more normal market conditions).

Interesting read in Jan API magazine on WA property market. One expert talkks about a "buyers strike" which occurs when underlying economic conditions are strong, interest rates are still manageable for most people so no forced sales but nobody is buying because rent yields are too low for investors who have entered a "let's just take a deep breath and see what happens over the next 6 mths or so" state of mind. First home buyers are currently priced out of the market but so too are existing homeowners who can't quite afford to upgrade to a better house in the same area despite increased equity through recent CG's in their current property. Many may choose to use some of this equity to upgrade their existing home rather than sell and buy and incur all the associated costs. I believe this "buyers strike" describes exactly the current state of the market in Mandurah (although apparently luxury homes $1M+ are still selling well). The buyers strike will end once rents increase enough to improve yields for investors, wages increase and first home buyers can save a bigger deposit to enter the market etc.

So as for buying in Mandurah, we are very confident in the long term property market. The economic fundamentals for Mandurah are very strong with continuing high population growth over the next 30 years or so. So I don't expect to see any real drop in prices. In fact I believe that although things might stagnate a bit during this buyers strike, 5-8% growth for 2007 is my call and similar rate going forward beyond that time. However, like several of our investor friends, we're just taking a "wait and see" approach. We're currently organising funds for our next pruchase but feeling no urgency. If and when we see the right property at the right price, we'll make a move.

Flatout
 
asdf- true.. but IF i was in the position right now to buy one of the wa canal investment opportunities that are available at this point i can guarantee i could return here within 12 months and show 20% quite comfortably..

flatout- excellent read... the land i am looking to purchase it outside bunbury though, so the stability of the investment is not as strong as your mandurah area..hence my hesitation.
 
asdf- true.. but IF i was in the position right now to buy one of the wa canal investment opportunities that are available at this point i can guarantee i could return here within 12 months and show 20% quite comfortably...

Maybe it's just me, but anytime anyone tells me they can get 20% in a year without value adding like renos or redevelopment or something, I get nervous. Especially in a market that is starting to cool down. I'm not saying it won't happen, but aiming for the averages, as I do, I wonder.
Alex
 
asdf- true.. but IF i was in the position right now to buy one of the wa canal investment opportunities that are available at this point i can guarantee i could return here within 12 months and show 20% quite comfortably..
Are these the Port Bouvard, Mandurah ones or down in Geographe? And will you build on it? At $750k a lot + another $600k min for a double storey house brings me to $1.4M+ for a finished product. Becomes a very niche product then. Or are your prices a lot tighter than that??
 
Hi all

Did anyone see the article on t.v last night about all the richies who can not find anywhere to park their big fancy boats? Apparently Perth has another shortage as well as land - boat parking lots. !!!:D

That's why canal etc properties are selling - they need somewhere to park the boats?

Nothing to do with Interest rate or the economy :D

Celeste
 
Hi all

Did anyone see the article on t.v last night about all the richies who can not find anywhere to park their big fancy boats? Apparently Perth has another shortage as well as land - boat parking lots. !!!:D

That's why canal etc properties are selling - they need somewhere to park the boats?

Nothing to do with Interest rate or the economy :D

Celeste

Didn't see the show but I was talking to a freind recently who is into his sailing etc and he also said that there isn't a boat pen to be had from Hillaries to Mandurah. Other friends recently paid $80K for a private jetty on the Peel inlet. They bought it because it is almost opposite their estuary front block which they will be building on later this year. So for them the purchase was a lifestyle decision rather than an investment but apparently no further private jetties are being approved on the estuary so it will no doubt be a good investment. It is a similar story with canal homes - right around Australia canal developments are becoming a thing for the past. There are a few developments underway now but apparently these will be the last because the environmental impact is too much. If this is true then canal homes will continue to experience very strong CG.

Flatout
 
asdf/alex- with the location and even spending a good 600k on building a two storey those will fetch a good 1.8-1.95mill.

More than a solid investment
sale price calculated based on recent sales[last quarter] + location and land availability.
 
asdf/alex- with the location and even spending a good 600k on building a two storey those will fetch a good 1.8-1.95mill.

More than a solid investment
sale price calculated based on recent sales[last quarter] + location and land availability.

I know nothing about building or development, so bear with me.

The sales price is at a range of 10%. Can it just as easily go 10% the other way? When similar places sold for $1.8 - $1.95m in the last quarter, how much of that was on the basis that the Perth market would keep firing? Is it still doing that now?

Of course, if you have lots of capital and $1.4m investment is just a part of your portfolio, the risk might be worth it.
Alex
 
I just checked the port bouvard website. The number of properties (land and house) for sale have increased significantly since the last time I checked (3 months ago?
 
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