Property investments continue to shine

Overwhelming interest in Western Australian property appears to have pushed the state’s median house price above $400,000 for the first time, and almost doubled the price of land in the year to June 2006.

Preliminary figures set Perth’s median house price at $395,000 in June, representing a 34 per cent rise in just one year and elevating the city to the position of the second most expensive in which to buy a house, behind Sydney.

When REIWA finalises the June quarter data, it expects the median house price to rise to $410,000.

Demand for housing in sales and rental markets was fuelled by increased interstate and international migration, with people drawn to WA’s strong resources-backed economy.

Investors, buoyed by the rosy economic climate, are also choosing to channel their wealth into property assets. This is causing strong percentage price growth, particularly in the upper and lower quartiles of Perth’s residential market.

Real Estate Institute of Western Australia president Greg Rossen said suburbs such as Mosman Park and Dalkeith were doing well, in addition to suburbs such as Orelia and Calista.

“This suggests that those doing very well out of the current economy are grabbing the opportunity to upgrade and buy into premium suburbs, while prices at the other end of the market are being driven by first home buyers and investors keen to get into the market at more affordable levels,” he said.

The median June price for units and apartments was $320,000, a 33.3 per cent price hike over the year sparked by a fall in housing affordability and renewed interest for inner and near-city apartment developments.

Leading the growth across all market segments was land, for which the median price in Perth increased by 48 per cent for the year to June.

The median price for land rose by 20 per cent in the June quarter alone to $215,000.

Regional WA recorded annual price growth of 58 per cent, boosted by strong individual price growth for land in Mandurah, Geraldton and Augusta-Margaret River in the June quarter.

Mr Rossen said overall price signals were flowing into the market.

First home buyer numbers had declined, but Mr Rossen believed WA’s economic fundamentals would still draw population growth, which would maintain housing demand in the face of limited supply.

Commercial markets tightened during the year, plunging available office space to critical levels and delivering the strongest returns to investors on Perth office properties since 1988-89.

Office vacancy rates in the CBD have fallen from 9.5 per cent to 3.5 per cent in the year to July 2006, the latter being the lowest level ever recorded by the Property Council of Australia and causing rents to skyrocket.

Despite a number of major office projects being offered to the market, tenants and financiers have been slow to commit, leaving Century City at 100 St. Georges Terrace (owned by Industry Superannuation Property Trust and Pivot Group) and the state government’s mixed-use development at 140 William Street, the only projects to leave the starting blocks.

Perth’s CBD absorbed 5,322 square metres in the six months to July 2006, contrasting sharply with a net absorption of 51,169 square metres in the six months to July 2005.

Investment returns for the Perth CBD office sector have outperformed the total for Australia by 13 per cent, and contributed to a return of 27.3 per cent in the year to June 2006, of which rent delivered 7.6 per cent.

Property Council of Australia (WA) executive director Joe Lenzo said WA could expect continued strong returns from the commercial property market as the flow of interstate investment picked up.