Western Australia’s economy has enjoyed a stellar run on the back of the much-celebrated mining boom throughout much of the 2000s. The state has turned in an impressive economic performance, with government figures showing gross state product increasing by an average of 4.9% per year for the decade 2003 to 2013. The mining boom and economic prosperity in turn fuelled a huge rise in property prices in the capital Perth.
House price boom
According to the Real Estate Institute of Western Australia (REIWA), Perth’s median house price more than doubled over the period 2003 to 2013.
Certain suburbs enjoyed particularly big housing price rises. Data provided by Realestate.com.au indicates that the median house price in Burns Beach rocketed by 89.1% for the period 2009 to 2014. Nearby Yanchep witnessed price growth of 119% for the same period.
While these two suburbs are standouts, price growth in many other suburbs has also been undeniably robust. For example, the past five years has seen median house prices surge by over 20% in Bayswater and Canningvale. In fact, according to data from REIWA, Perth now boasts 200 suburbs where homes are fetching sale prices of over $1 million, up from 122 in 2008.
Changing face of Perth
The new millennium also saw commercial and industrial property boom as miners and mining services companies took over the town. The city skyline changed as new office towers like Brookfield Place, Woodside Plaza, and Bankwest Place went up. Further afield, new industrial and commercial developments have flourished in areas such as Joondalup, Kwinana, Jandakot city and Osborne Park. The industrial property sector in particular was bolstered on the back of limited land supply near the CBD.
The tide now turning
However, the Western Australian economy is now in transition as investment in mining construction winds down. The commercial property sector is currently over supplied. The Property Council of Australia reports to the ABC that Perth commercial rental vacancies have risen to their highest levels in 20 years, 14.9% as at January 2015. Meanwhile 149,601 sqm of new office stock is expected to come onto the market this year, exacerbating the sector’s woes.
Residential prices have also suffered. REIWA data shows that median house prices have actually pulled back over the past year.
The benefits of hindsight
Perth’s property story undoubtedly has some people cursing their lack of prescience. Hindsight reveals that the early 2000s was probably a good time to splash out on a Perth property investment. However, while Perth undoubtedly faces challenges with the state’s transitioning economy, the picture is not all bad.
The WA economy still has good longer term prospects with its resource endowment and proximity to Asia.
In the immediate term, there are bright spots in the residential property market. According to a report in Your Property Investment, properties within an 8km radius are still experiencing high demand. Similarly well located properties with proximity to the river and the beach are performing well. On the other end of the scale, affordable areas such as Lynwood are becoming popular with young families and represent good opportunities for investors. Analysts also expect the commercial sector to pick up by 2020 as Perth’s finance and legal sectors grow, and the mining industry moves into its production phase.
The specialist property consultants at Burgess Rawson can help you spot residential property investment and commercial opportunities in Perth’s transitioning market.