Roller coaster property ride

After a year of enormous highs and equally dramatic lows across Western Australia’s property industry, landlords will be counting more blessings than most this Christmas.

Perth is now the second most expensive city in the nation in which to rent a house, behind Sydney at $300/ per week; and its commercial office market is giving other cities a run for their money, with premium space now attracting more than $700/square metre.

Facing an affordability crisis intensified by several interest rate hikes, WA’s housing market experienced a correction during the year.

From a March quarter median price of $465,000, Perth’s median slumped to $446,000 in the June quarter before climbing back to $460,000 in the September quarter.

No number of visiting planning experts and urban strategists to Perth this year could have cured the residential market, which plummeted by more than $40,000 during the year in some outer mortgage belt suburbs.

New home sales in WA remained flat at best, signalling a short-term widening of the gap between housing supply and demand.

Housing starts struggled amidst spiralling building costs and labour shortages, falling 5 per cent in 2006-07 to 24,560, according to the Housing Industry Association, with a prediction of a further 11 per cent fall in starts in 2007-08 to 21,920.

Perth’s prestige property market existed in a bubble with a handful of homes vying to break the $16 million residential sale record set by a Mosman Park home in April.

Demonstrating just how much wealth is being created in WA, iron ore magnate Angela Bennett reportedly knocked back a record-breaking offer of $42 million from the Multiplex-backed Roberts family for her sprawling Mosman Park mansion, in the hope that it could fetch more than $50 million.

Cheap property in Perth’s commercial office and industrial sectors became an even rarer commodity during the past year.

The Perth CBD posted the tightest office vacancy rate in 25 years, of 0.7 per cent in July.

House full signs were also erected across many of Perth’s established industrial estates, while businesses found zoned-industrial land hard to come by and Perth and Jandakot Airports extremely accommodating.

Recent figures from Jones Lang LaSalle show the vacancy rate in the CBD fell to a record low of 0.53 per cent at the end of September, but some property pundits suggest the vacancy could now be as low as 0.3 per cent and falling.

The lure of lucrative rental reversions, meanwhile, caused the value of Perth office stock to skyrocket this year, with cashed-up institutional investors ensuring brisk business for commercial sales.

But it appears tenants are finally waking up to the potential vacancy crisis, with corporate heavyweights including BHP Billiton, Hammersley Iron, Macquarie Bank, NAB and Clough locking in substantial office pre-commitments.

Those leasing deals triggered a wave of construction activity, which has the Perth CBD resembling a big building site and eastern states builders eyeing a slice of WA action.