Exciting developments reshaping the Perth City skyline.

PERTH’S resource-backed economy has been badly battered by the commodity boom burst, with overall property prices falling for nine consecutive quarters.

Median prices of apartments were 10.1 per cent off the last peak, and a weak rental market persisted with the median asking rent of apartments in Perth going at A$370 (RM1,200) per week, a decrease of 2.6 per cent month-on-month, resulting in a decline in gross rental yield of 0.8 per cent month-on-month and 0.16 per cent year-on-year.


However, most industry participants think that the worst is over, especially for the apartment sector, and prices are unlikely to fall much more from current levels. This is because the speculative foreign demand that drove up prices previously has largely disappeared.


New launches on the market are now priced and sized to cater to local demand that will help to stabilise the market. Increasingly, apartment living has caught on as more households age. Downsizers from landed houses are also pushing up demand for larger apartments. Especially in the Western Suburbs, projects that cater to local demand seem to have fared relatively better. This movement is benefited by the fact that housing affordability has improved in the residential sector.


There are further signs of recovery as demand for commodities seems to be picking up coupled with new investments in new economic sectors. There are projects worth a total of A$17 billion that are currently developed or being developed, which are expected to add employment opportunities and thus, housing demand. Perth is also expected to enjoy the fastest pace of population growth, alongside rejuvenation of the city, such as at Elizabeth Quay, and an additional A$8 billion of investments are set to be injected into the city by 2020.


Furthermore, the supply is expected to normalise in coming years. Developers have been increasingly selective on acquiring new sites over the past two years. The decline in construction starts and the increase in the number of aborted projects are expected to result in a shortage of supply in the next two to three years. This is seen as a positive for the market which was turning highly speculative and driven by foreign investment demand previously.


In conclusion, the recovering economy, a dwindling supply pipeline and resilient local demand suggest that the stage is set for a recovery of the market. The number of new construction starts has slowed and new launches that cater to local demand are selling.

Aside from this, the market has reverted to serve local demand and the speculative foreign demand has been largely wiped out. In addition, the delay in construction and/or cancellation of projects could lead to a shortage of supply further down the road, and the tight credit conditions presents investor with opportunities to meet the funding gap.

Therefore, this could be an opportune time to relook at the market as sellers are turning more realistic in pricing their assets for sale.

Exciting developments reshaping the Perth City skyline.

**(Story courtesy of Henry Butcher Malaysia)

Tan Kok Keong is chief executive officer of REMS Advisors and Co-founder of FundPlaces, an alternative investment platform for real estate. He has more than 20 years of experience in real estate, equities, funds and in the civil service.

543 reads

Related Articles

Most Read Stories by