While there is still a sentiment of doom and gloom and nervousness about the property market in Perth, you might be surprised to hear that now is a great time for Perth investors to acquire their first, or perhaps their next, investment property. Research from leading Perth property investment consultants indicates market conditions present favourable opportunities for buyers, and here’s why.
Optimum timing for growth potential: Get in BEFORE the upswing
It’s no secret that the overall Perth property market has remained fairly flat over the past year, as the local economy adjusts from the end of the mining boom. However, smart investors will be looking to grow their property portfolios now before the next upswing in property prices kicks off.
So why is now such a great time to invest in the Perth Property market?
Firstly, it’s important to remember that property markets are cyclical and will experience ebbs and flows overtime.
Those willing to buy the right investment property in a flat market, rather than waiting for a booming market, will be better positioned to secure the full capital growth in the next upswing.
Unfortunately, many investors wait until the start of the next growth cycle, and by the time they’ve eventually acquired an investment property, they may have missed most of the capital growth.
Furthermore, buying an investment property in a flat market can deliver a range of other benefits to investors including:
1. More choice
The number of properties for sale in Perth is currently about 14,000, which is slightly above the market equilibrium of 12,000 to 13,000. If you wait until the market heats up, you’ll likely find there’ll be less stock on the market to choose from so take advantage of the extra stock now.
2. Fewer buyers
We’ve seen a significant drop off in the number of people attending home opens since the last market peak in 2014 (however we've noticed a slight increase in activity in recent months). In slower markets, you’ll find many buyers delay their decisions and wait until the market is stronger, so if you buy now you’ll have less competition than in a hot market.
3. New housing supply in Perth has passed the peak
Reported recently was a peak in new housing supply in Perth, boding well for property investors. After a three-year growth in new home building commencements in Perth, hitting a peak in March 2015 at 32,577 properties, dwelling commencements have been on a downward trend hitting a 30-month low of 26,387 in the latest quarter. This is good news for Perth property investors, as the record amount of new housing supply over the past few years has been one of the main reasons for Perth’s sluggish property performance in recent times. With this coming to an end, we expect to see prices on the increase again as early as next quarter.
4. Greater control
As there are fewer buyers and more sellers in a flat market, investors generally have greater control over contract negotiations and can ensure the terms of sale are weighed in their favour.
5. Value for money
When there is more stock on market and less buyers in a flat market, sellers are forced to price their properties more competitively allowing investors to secure a better deal.
Unfortunately, many people don’t invest in flat markets because they’re deterred by the apparent negative sentiment, sensationalist media headlines or uneducated opinions from family and friends.
However, it’s important to remember that property investment is a long-term strategy, which typically requires a 10-year view, or longer.
Therefore, investors need to look at the bigger picture and ignore the short-term distractions.
Perth’s long-term outlook remains positive with a forecast population of 3.5 million residents, which will see the city surpass Brisbane to become Australia’s third largest city, behind Sydney and Melbourne.
As Warren Buffett famously said, 'Be fearful when others are greedy and greedy when others are fearful'.
Those who make the most of the current favourable conditions and invest wisely will be best placed to take advantage of the next upswing in Perth’s property market.
Damian Collins is the founder and managing director of property investment consultancy Momentum Wealth. Offering market leading research and advice on the Australian property market, the company helps clients accelerate their wealth through property investment by assisting them in the strategic planning, financing, acquisition, management and development of their commercial and residential investment properties. Damian has completed a Bachelor of Business at RMIT University and a Graduate Diploma in Property at Curtin University. Damian is a board member of the Property Investment Professionals of Australia (PIPA) and is the Deputy President of the Real Estate Institute of Western Australia (REIWA).
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