West full of potential

Signs of a resurgence are appearing at the top end of Perth’s property market and more vendors are capitalising on demand from cashed-up investors.

“The Perth property market looks to be moving through the cyclic through, and into the upswing of its cycle. For the past three months, dwelling values have not fallen. Rents are on the rise and employment and migration patterns are slowly improving,” Eliza Owen, CoreLogic’s head of Research.

Price growth in the quarter to January was up 0.4 per cent in Perth, with the top end moving higher with gains of 0.8 per cent. But with confidence and stock levels at lows, it may take a while for the market to take off after five years of declines. Ms Owen believes that sellers are likely to hold off until further price gains are seen and those selling might be because of personal circumstances.

According to an annual survey from property investment consultancy, Momentum Wealth, Property investors are backing Perth as the property market with the strongest outlook. Another significant finding from the survey collected 401 responses from property investors across Australia was that 61% of investors back Perth as best capital city market for three-year growth.

Second to Perth was Brisbane, with 26% highlighting the capital city as their preferred location for investment as the market remained most popular amongst buyers actively seeking opportunities.

Emma Everett, Team Leader of Momentum Wealth’s buyer’s agents, said a combination of affordability, improving rental conditions and positive future indicators are likely behind the uplift in confidence in WA’s property market.

“While Brisbane’s property market has been recording steady growth for some time, continued improvements in rental conditions and a significant tightening of stock in Perth’s housing sector are now driving the consensus that the property market is moving into recovery phase, with savvy investors realising the counter-cyclical opportunities at hand.”

At the same time, longer-term indicators such as rising activity in the mining sector, increased infrastructure spending and early signs of accelerated population growth in Perth are providing healthy indicators for the market’s future performance, with the latter in particular expected to drive higher levels of demand in the medium term
Emma Everett, Team Leader of Momentum Wealth

While sentiment was optimistic across Australia’s property markets, the survey showed that finance remained a barrier to entry for a large proportion of buyers.

This was especially the case in Perth, where 39% of investors highlighted lack of equity or borrowing issues as factors preventing them from entering the market in the shorter-term.

The survey also revealed a strong appetite for diversification amongst investors, with 47% of respondents highlighting a blend of capital growth and cash flow as their preferred investment strategy.

David Ellwood, Managing Director of Perth-based commercial funds management company, Mair Property Funds, said investors are recognising the benefits of commercial property over other cash flow-focused investments.

“With the low interest rate environment pushing returns on interest bearing investments such as government bonds and term deposits below 2%, yield-focused investors are looking towards alternative income-generating options, and with potential yields of 5.5-7.5%, commercial property is presenting an attractive alternative,” he said.

Mr Ellwood says this, combined with the high entry cost of investing in commercial properties directly, could explain growing interest in commercial property funds.

“While investors are seeing the potential advantages commercial property can offer in terms of portfolio diversification and exposure to income-focused assets, investing in these assets directly isn’t always a viable option due to the high entry cost and market knowledge required, which is where pooled investments can present a more feasible alternative,” he said.

“These investments can allow buyers to gain exposure to high-quality assets at a lower cost and with the additional benefit of a professional management team, but buyers still need to weigh up each investment carefully as the risk can vary depending on the investment type and management team involved,” he said.

Overall, the results of Momentum Wealth’s annual survey revealed an increasingly bullish sentiment among Australian property investors, but Mrs Everett advises buyers remain diligent in their investment decisions.

“There are exciting times ahead for property investors in 2020 with a number of markets showing strengthening growth prospects, but careful decision-making and the right advice will be key for those looking to take advantage of market opportunities,” said Mrs Everett.
Source: Pindan

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