The outlook for investment properties in Perth is about to be affected by an unlikely source—the First Home Owners Grant. As you probably already know, the recent state budget announced changes to the First Home Owners Grant in WA which came into effect on the 25th September. Changes will see the $7,000 grant payable established homes drop to $3,000 while the grant for a new homes will rise to $10,000.
Leading up to the change we have seen a surge in sales of established property for first home buyers. We are now expecting a surge in land and new home sales, especially in the lead up to Christmas.
The Likely Impact on the Perth Market
We expect to see a surge on buyer demand in the new housing estates in outer areas of Perth where land is available and packages still priced at $500,000 or below. Small infill developments of villas will also be popular in middle ring suburbs that are well located to cafe strips and transport. Above this price first home buyers have to pay stamp duty and it starts to become unaffordable even for a double income couple.
As demand for land to build new homes increases this will make the price of land rise and the waiting time for titles become longer. We expect titled land waiting times to increase to as high as 3-6 months from the present waiting time of 1-2 months, especially in the more popular estates.
I believe all of this will add up to 6-12 months of modest growth in house prices in these new land estates and unit prices in middle ring suburbs .
Construction Time & Cost
Moving into 2014, the amount of building approvals being granted should have a beneficial effect on the construction industry and the economy. As construction rises, tradespeople who are displaced by mining industry labour cuts are projected to assimilate into the construction industry. We expect labour costs to rise, increasing the cost to build a home and hopefully the industry can keep building times the same and not see them blow out.
What Can I Do Now?
We expect prices to gradually rise as soon as the the effects of demand tighten the availability of land, we will likely see the full impact by the second quarter of 2014. This provides a window in the suburbs, especially in the two months before Christmas. Those who purchase land or packages in the suburbs more popular land estates and trendy middle ring suburbs before Christmas should see property values rise well over next year.
If you are looking for investment property in the Perth market, we feel a solid strategy is going to be land and new homes. The projected short-term appreciation will provide a nice boost to the value of your investment portfolio and allow you to obtain better long-term profits.
Our recommendation: talk to a buyer’s agent who knows the Perth market today. A small investor usually won’t buy more than 5 properties in a lifetime. Professionals do it every day. Take advantage of their experience to maximise your investment results.
Jarrad Mahon is the Director of Investors Edge Real Estate, which specialises in investment property. Their buyer’s agents and property managers can take the hassle and uncertainty out of investing in the unique Perth market, while helping you maximise your profits. Call 1300 472 427 for more information or visit their website at https://www.investorsedge.com.au/.