Prime time for investors,
say property valuers
THE WEST AUSTRALIAN MONDAY, MARCH 16, 2009
Kim Macdonald
House prices are expected to stagnate this year, but highly unusual market conditions have led to the best investment opportunities in decades, according to leading property valuers.
Valuations WA and the Hegney Property Group say that even investors without a deposit can reap the immediate rewards of unusually high rental returns in some areas, relatively depressed real estate prices and the lowest variable interest rates since 1968.
Valuer Gavin Hegney said homes in northern suburbs such as Padbury and Craigie returned rental incomes relatively close to weekly mortgage repayments.
A median-priced home of $412,000, which would rent for about $360 a week in these areas, was not far from the $510 weekly repayment on a 30-year mortgage.
Mr Hegney said an oversupply of rental properties in the southern suburbs, because of heavy speculative buying. during the boom, meant that a similarly priced property in this area would rent for only $250 a week.
“It’s an extremely rare time in the market,” Mr Hegney said. “I’ve been working in the market for 28 to 30 years and I’ve only seen it twice before.”
“The best areas for this which come to mind are Craigie and Padbury They have been first-home buyer areas for a long time but this is changing and they are becoming trade-up areas.”
Residex predicts rents will rise another $40 a week in Perth this year. A recent Commonwealth Bank study showed only East Perth units were cheaper to buy than rent in the metropolitan area.
Another nine areas with cheaper rents were regional.
Rob Druitt, from the Real Estate Institute of WA, said property prices were unlikely to pick up until supply returned to traditional levels of 18,500. At present, there were only 16,000 properties for sale.
Mr Druitt, Mr Hegney and Valuations WA senior director Kevin Eaton agreed the middle and upper real estate levels were relatively depressed because many owners were forced to unload debt because of the struggling share market, while the so-called “upgrade market” was too nervous to take on a bigger mortgage.
“We’ll see the share market recover before we see the western suburbs recover,” Mr Hegney said.
Housing Industry Association executive director John Dastlik said demand for blocks of land started to rise several months ago and there were concerns that supply problems would return with normal market conditions, pushing up prices.
The booming flrst-home buyer market appears to have pushed some areas that were previously considered entry level suburbs into the median-price range.
Suburbs that now fain the median price range are Ashby, Beeliar, Beldon, Belmont, Chidlow, Cloverdale, Dianella, East Cannington, Guildford, Joondalup, Kardinya, Mount Richon, Munster Noranda, Queens Park, Redcliffe, Shoalwater, Singleton, Spearwood, Stoneville, Two Rocks and Walliston.
Beeliar couple Joel Walker and Amy Baughn said they chose’to build in the suburb because it was close to the beach and the freeway and it appeared to be a growing area.
Mr Walker said he expected homes in the area would have good resale values because of their attractive designs and the amenities in the area.
Renovation market through the roof
Kim Macdonald
Some builders are dropping prices to win customers as nervous homeowners opt to spruce up their house rather than build a new one, sending the renovation market to record highs.
Master Builders Association housing spokesman Gavan Forster said the drop in demand, with new housing approvals down by 22 per cent in the three months to January had enabled customers to negotiate discounts.
“I’ve had builders come to me and say that they’ve knocked $6000 off a $200,000 to $300,000 price, so they could win the contract,” he said.
Mr Forster said the reduction was coming straight from the builders’ profits, because the price of good tradesmen and materials remained strong, with the exception of steel.
A Housing Industry Association survey shows 40 per cent of builders claim business is poor, while 30 per cent say that it is good or avenge.
But the renovation market is at a record high, remaining close to the December 2008 record of $4.5 billion as an annual moving total, up from $3.5 billion two years previously, according to HIA statistics.
it is expected that after a slight dip during the rest of this financial year, activity will pickup again in 2010-11.
The resurgence comes as home-owners take advantage of the sudden availability of tradesmen. The Austral Bricks report shows build times have halved to 20 weeks, compared with two years ago.
Summit Home Improvements manager Brian Stanley warned that it was possible to overcapitalise on a property through costly renovations.
WHAT THE EXPERTS PREDICT
Inner city: Prices won’t increase substantially until after The Northbridge link and rejuvenation project.
Coastal suburbs: No major increase in price in 2009 but always a safe long-term investment, particularly homes with water views.
Northern suburbs: Excellent rental returns; best place to buy an investment property;price not expected to increase substantially in 2009 but will increase before the southern suburbs.
Southern suburbs: Oversupply of rental properties. Prices will not increase Until after the northern suburbs.
Western suburbs: Low activity, no change in 2009. but a safe long-term investment.
Eastern corridor: Most parts to stagnate but the Hills area to enjoy a recovery by the end of The year, due to limited supply and steady demand. Mandurah area: Expected to stagnate after massive price drops over The past year.
Mandurah area: Expected to stagnate after massive price drops over the past year.
