Source: Sasha Karen
Investors can find Western Australia a great place to invest in, and while the state is past the bottom of its cycle, there are still some things they need to navigate in order to make a smart property investment.
With the Western Australian economy predicted to be the fastest growing by 2020, investing into Western Australia may seem like a smart move.
Doron Peleg of RiskWise Property Research, however, claims there is considerable risk in theproperty market.
That does not mean, however, that he believes the market is a lost cause; there are signs to watch out for that would maximise the chance of a successful investment: the creation of a plan for dwelling demand and supply, improving the labour market and to drive up population growth.
“One of the high risks for the property market lies with units in Western Australia due to oversupply and the large number still in the pipeline,” Mr Peleg said.
This oversupply is then aggravated by a declining population; RiskWise cites Population Australia data that indicates population figures in Perth have been dropping ever since the end of the mining boom.
Further, RiskWise states effective unemployment figures are above the 10-year benchmark and mortgage arrears are high, which the company sees as red flags.
In order to alleviate all these concerns, Mr Peleg believes a focused effort on local business investment will help improve the Western Australian economy, which will then funnel through to the property market.
“Clear policies are needed to investigate the benefits of a large-scale innovation fund (similar to that of Advance Queensland) and other incentives for businesses to invest and increase the employment in Western Australia,” Mr Peleg said.
“Further, some of these policies should be investigated and implemented jointly with the federal government.
“An improved economy will support job growth, wage growth and therefore population growth, thereby mitigating some of the effects of oversupply as well as low demand for dwellings and, as a consequence, negative capital growth in the property market.”
Additionally, Mr Peleg said a new plan for demand and supply needs to be instated, with housing policies needing to limit the current number of dwellings, especially units.
In addition, he said a strategic plan for dwelling demand and supply should be implemented. Housing policies should include specific actions to limit the current oversupply of dwellings, particularly units, on one hand, and to ensure the appropriate level of supply in the long term.
“But it’s important to note that supply must be measured and addressed separately for each area (suburb, postcode or SA4) to ensure there is effective long-term planning,” Mr Peleg said.
In the short term, Mr Peleg said there should be continued stamp duty concessions for first home buyers and downsizers as well as more incentives for first-home buyers in areas where housing affordability was not properly addressed, as well as in areas where markets were declining significantly.
Looking further ahead, bringing in a policy similar to the National Rental Affordability Scheme was also recommended, which offers incentives for up to 10 years for offering rental dwellings at least 20 per cent under market rates.
He also said measures should be installed to secure long-term supply of properties suitable for families; three to four bedrooms, a yard, and close to schools and transportation hubs, especially in middle ring suburbs as opposed to unit blocks in inner-Perth.
“Special attention should be placed on a strategic plan for rezoning in key transport corridors and train lines,” he said.