FOR the past five years a combination of factors, including low interest rates, the first home buyer’s grant, a poorly performing stock market and healthy local economic conditions have yielded strong growth in the property sector.
In WA, where housing values have experienced strong, consistent growth rather than dramatic increases, it’s predicted this growth will continue to increase at about 10 per cent for another 12 months.
Jaded by underperforming shares and superannuation funds, and encouraged by talk of further interest rate cuts, investors are continuing to place their money in bricks and mortar. Investors now make up 23 per cent of Perth property buyers, according to Real Estate Institute of WA statistics. Two years ago investors counted for just 14 per cent.
Lower end suburbs appear to be reaping the rewards of this greater investment activity and many such locations are experiencing strong growth.
Information from the Valuer General’s Office indicates that, for the past 12 to 18 months, property values in suburbs such as Balga, Armadale and Westminster have increased substantially.
In the 12 months to the first quarter of 2003 property prices in Armadale increased 19.6 per cent. Only two years ago this suburb was lucky to record positive price growth – in the last quarter of 2000 Armadale recorded -4.5 per cent on the previous quarter and in the same period in 2001 it increased 5.9 per cent on the three months prior.
Hegney Property Valuations managing director Stewart Kestel said property buyers searching for affordable housing were driving the growth in low-end suburbs.
Mr Kestel said that while strong capital growth rates had been confined to the western suburbs the lower-end suburbs were now experiencing catch-up growth.
“For example, during the past year, the median house price in suburbs such as Girrawheen, Maddington, Kenwick and Westminster has jumped by nearly 20 per cent,” he said.
Mr Kestel said price increases usually started in the western suburbs and moved outwards in a ripple effect and as property prices increased property buyers moved further out in search of more affordable investments.
He said the reason the low-end suburbs were having large price increases was because they were coming off such a low base.
“Lower priced suburbs east of Wanneroo Road are poised for significant price growth rates, including areas such as Girrawheen, Koondoola, Mirrabooka and Marangaroo,” Mr Kestel said.
“Areas that have consistently shown strong capital growth are located close to the river, city centre, ocean, quality schools and shopping facilities.
“Along the river, suburbs such as Ashfield and Bassendean are still very well priced, whilst the suburbs of Northbridge and North Perth have the potential for strong capital growth in the coming years.
“The ocean side suburbs of Safety Bay and Yanchep are two affordable areas that will benefit from new infrastructure improvements in the coming years.”
Mr Kestel said the soon-to-be-retiring baby boomers would have a big impact on the property market as they were “all about lifestyle” and wanted to live anywhere along the river or coast.
“I think in the future there will be a push in the western suburbs to have higher density housing,” he told WA Business News.
Regional centres experiencing good growth include Broome, Mandurah, Albany and the Augusta/Margaret River region.
Mr Kestel expects towns such as Albany, Denmark, Lancelin and Jurien to grow as they become more popular as holiday destinations.
While the southern coastal locations of Margaret River, Yallingup and Busselton have experienced significant growth, areas such as Toodyay, York, Chittering and Gidgegannup will become more popular for those not attracted to the coast.
“You can buy property in York for a lot less than what you will pay in the Margaret River area; there are undulating hills, it’s nice and green and it’s only one hour from Perth,” Mr Kestel said.
REIWA public affairs director Lino Iacomella said underpinning the strength of the property market was the demographic of those 45 years to retirement age, who were going against the traditional trend of paying off debt, consolidating and preparing for retirement.
Mr Iacomella said this group was instead sinking big money into property and buying or building large houses.
“This group is borrowing in big numbers, spending in big numbers, and they are choosing to spend their money on luxury housing,” he said.
Mr Iacomella said that, unlike generations before them, this demographic usually had double income, no dependents and high assets. As a result they were buying or building their dream homes, which were usually larger and more luxurious.
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