After years of record lows, the tide is starting to turn in Western Australia and investors are in prime position to strike, according to Gemmill Homes Managing Director Craig Gemmill.
He said WA had turned the corner, with the economy returning to growth and all signs pointing to a bright future. This change in the outlook has been precipitated by an increase in the rate of population growth in WA.
After a drop of 60,000 in 2015, figures show WA’s population is growing again. Data by commercial real estate services and investment firm CBRE show the state experienced a net increase of 21,000 people in the past 12 months.
The population of the Perth and Peel region in 2010 was approximately 1.65 million. It is expected to exceed 2.2 million by 2031.
Mr Gemmill said this was a marked change from the doom and gloom that existed for the past few years, and he predicted good times for the market.
“This is the first step in the recovery of Western Australia,” he said. “It’s really exciting as there are two real positives that come out of the population growth.
“Existing housing stock gets soaked up. That affects supply and people then go to the next level of pricing or they build. It will really stimulate the market.”
Another significant factor lending itself to the brighter outlook is the sharp decline in rental vacancy rates. Real Estate Institute of WA figures show the rates topped out at 7.3 per cent last July then fell for four consecutive quarters to 3.9 per cent, a level last seen in 2015.
“It has happened so quickly,” Mr Gemmill said.
“Yesterday we were all saying it was all doom and gloom, but vacancy rates have dropped considerably in just a year.
“When people were leaving the state, it became a tenant’s market due to the number of properties that were available.
“Now we’re seeing conditions moving back in favour of landlords, so it is a great time for investors.
“Investors need at least five per cent return. The average now is around five-and-a half per cent. When you claim two per cent depreciation, that leaves a seven per cent return. That’s before investors have even claimed back their borrowing costs.
“So in this market where interest rates are low, you can get a great return of investment.
“We’re going into an upswing in the cycle and it’s a great time to invest in the market.”
CBRE Director of Residential Valuations Michael Valetta agreed the horizon was looking brighter and said recent data showed there was growth ahead.
“An increase in population growth and decrease in vacancy rates present real opportunities for the real estate market,” Mr Valetta said.
“I see great potential in Western Australia. After some lean years, signs point towards the fact we are turning things around.”
CONTACT Gemmill Homes
9263 4444, www.gemmill.com.au.