During our recent vacation in Perth, we dropped by to visit our relative’s family who had been staying there for longer than a decade.
They lived in a nice southern suburb 20 minutes’ drive from the Perth CBD. It was a quiet and friendly neighborhood with residents from middle or upper middle class. The houses were all single-storey detached with big front yards and back gardens.
Drove around the area and you could find parks, playgrounds and a small shopping centre with a supermarket and McDonalds. Above all, it’s near a prestigious secondary school.
The built-in area of my relative’s house was approximately 3,000 sq ft. It’s spacious, bright and cozy. They bought it at over $300,000 and market value has since increased to $650,000.
“Our house is old and nothing to see. Let me show you the brand new ones. It’s just five minutes’ drive away.”
A home heaven in a new suburb
In this new residential area, there were six to eight streets full of display homes (Australian show houses). Each house was built by a different developer with totally different look-and-feel.
Although we saw parked cars on both sides of the streets, there were not many buyers on a Sunday afternoon. Most of them were young couples or families with small children.
Compared with my relative’s suburb, these new single or double-storey detached houses were built much closer to each other. There were so many houses that it could take a few days to view all of them. We were at a loss where to start and had to rely on our relative to help us pick a few.
“Go inside and take a look. You can change the design, layout, materials and landscaping. Everything, including the asking price, is negotiable.”
The developer’s consultant stationed inside the house greeted us warmly. After that, we were free to explore the place on our own. What followed was an eye-opener for me:
– An enclosed garage with auto-door to park at least two family cars;
– A big open kitchen with working station in the middle and a side room to store cookware;
– A suite used as a guest room and a theatre room in the front part of the house;
– Three children bedrooms with each two times the size of a master bedroom in our new Singapore condos; and
– A spacious living and dining area overlooking a 400 sq ft alfresco for gardening and BBQ parties.
The above was de facto for all houses regardless of entry-level or luxurious type.
Single-storey basic houses were selling from $148,000 while high-end double-storey houses were asking for slightly above $400,000. Prices already include the cost of land.
Since I conducted training classes in my How To Buy Good Quality Properties 1-Day workshop, I couldn’t help but commenting each house based on fengshui of external environment and internal layout, pointing out which houses are wealth accumulating or draining and with Sheng Qi or Sha Qi.
“Pick the type of design you like. Just add a bit more if you want them to do the renovation. You can choose to build it in one of the streets here, or ask them to build in another location.”
“In the past, it takes longer than a year to build a house. Now with prefabrication, the developer can deliver in 12 weeks. If you prefer WYSIWYG, you can also buy the display home … Go see that one. I think you’ll like it.”
“This design has a wine room opposite the dining room to store your wine collection.”
“The three bedrooms shared their own activity area. So kids won’t go to the living area and leave some private moments for the parents.”
I found my way to the huge master bedroom on the second level. On the left was a functional walk-in wardrobe big enough for a fashionista’s collection. The right side led to a spacious attached bathroom designed to enjoy a greenery view while taking a bath. The toilet was on the other end of the bedroom.
“Last year my sister bought a similar one at $600,000. That’s crazy! Now prices have come down to $400,000. SGD and AUD conversion is now almost 1:1 right? Why don’t you also buy one and you two can be neighbors?”
Facts behind owning a piece of Australia
The product looks good. What about the return?
1. Property taxes for non-residents
The Australian government taxes non-residents both rental income and capital gain, both at 29 to 45 percent. Owners are subjected to a 50 percent reduction of the taxable gain if the asset is held for at least 12 months.
Depending on the property type and location, there may be an annual land tax.
2. Foreign ownership of properties
Foreigners cannot buy established residential dwellings, except uncompleted properties and vacant land. All foreign ownership of properties must apply approval from the Foreign Investment Review Board.
The government is very strict in imposing penalties to foreigners breaching this law. Have you read the recent article in The Business Times about Australia forces sale of 16 foreign-owned properties?
Seven of the force sale properties were bought by the Chinese, with the rest owned by nationals of Britain, Canada, Malaysia and Papua New Guinea. The owners were also fined.
What’s going on in Western Australia
1. Recession since 2015
With the declining commodity prices, there is a recession going on in Perth since 2015.
In the CBD and inner-city district of Perth, ‘for lease’ signs on the windows of empty offices and shops are everywhere.
Unemployment rate now stands at 5.7 percent. It can go up to 25 percent in suburbs with mining as a major industry. More than 20 percent of Uber drivers used to work in mining.
2. A gloomy housing market
Perth’s vacancy rate for rental properties reached a 20-year high last year. It is now 5 percent and at its highest since December 1995. Rental rates have dropped 13 percent. Rent in Western Australia’s most expensive suburb Peppermint Grove has declined 24 percent from $2,000 to $1,525 a week. The median weekly rent in Perth is $420 for houses and $395 for units.
It is a tenant’s market. Tenants keep breaking leases to move to better places. Landlords lament that it is difficult to get tenants for viewing.
Sounds familiar for Singapore landlords?
In Perth, there are more home sellers than buyers. Many are moving away from Western Australia to other parts of the country or back to where they come from.
Last quarter, 17.9 percent of houses and 30.2 percent of units are selling at a loss – the highest level since September 1996 for houses and since 1994 for units. It’s because the Australian economy didn’t really hit by the 2007 financial crisis.
Western Australia properties selling at a bargain, anyone?
What about other parts of Australia
Foreign buyers continue to pile into Australian properties in the city areas of New South Wales and Victoria. Property prices are still going up, though at a much slower rate.
Last month Smart Property Investment highlighted “the two markets most in trouble” and likely to suffer a hard landing once this property cycle goes from boom to bust.
They are apartments in inner-Melbourne and Brisbane, especially suburbs like Newstead, Bowen, South Port, Fortitude Valley, Towong, West End and Hamilton.
In particular, off-the-plan property investors are warned that “they could be in for a nasty surprise”. It may not be a total collapse of housing prices, but a likely price decline of 10 or 15 percent.
If you are going after properties in Australia, better do your sums and make sure that you have the holding power even under the worst scenario.
Do you have the guts?
Our Spore Developer, Fragrance Group develops one condo at Perth CBD. A one-bedder cost less than S$400k. It is about 400sf. One minute walk to MRT station.
My relative told me that in Perth only the young singles and old couples stay in condos. The latter can’t stand the noisy parties on weekends and subsequently move back to stay in houses or granny flats (houses customized for the elderly).
There are many new and completed condo projects in the CBD. Make a trip there and buyers are spoiled with choices.
Our Spore Developer, Fragrance Group develops one condo at Perth CBD. A one-bedder cost less than S$400k. It is about 400sf. One minute walk to MRT station.
My relative told me that in Perth only the young singles and old couples stay in condos. The latter can’t stand the noisy parties on weekends and subsequently move back to stay in houses or granny flats (houses customized for the elderly).
There are many new and completed condo projects in the CBD. Make a trip there and buyers are spoiled with choices.
Hi Vina,
“Single-storey basic houses were selling from $148,000 while high-end double-storey houses were asking for slightly above $400,000. Prices already include the cost of land.”
I have a friend living in Perth area and his experience is that these prices are too hard to believe, for people on the ground.
Apartments go for $320,000 odds, Lot 500 Carville Way Baldivis going for $150,000, Single story 100 Apsley Road Willetton $600,000, Proposed Lot 3 Nicholas Street Rossmoyne listening to offers above 650,000.
Perhaps the deals you reference is really really rare deals.
You have to look at which suburb. Prices of mature suburbs for upper middle class with good amenities and good schools are around $650,000. Houses in the most expensive suburbs for wealthy families are above $1 million.
The new one that I went for viewing is mainly targeting first-time buyers and young families. The entry level houses use cheaper building materials to construct. It has a promotion sign outside that said “From $148K” to attract low-budget buyers.
Hi Vina,
“Single-storey basic houses were selling from $148,000 while high-end double-storey houses were asking for slightly above $400,000. Prices already include the cost of land.”
I have a friend living in Perth area and his experience is that these prices are too hard to believe, for people on the ground.
Apartments go for $320,000 odds, Lot 500 Carville Way Baldivis going for $150,000, Single story 100 Apsley Road Willetton $600,000, Proposed Lot 3 Nicholas Street Rossmoyne listening to offers above 650,000.
Perhaps the deals you reference is really really rare deals.
You have to look at which suburb. Prices of mature suburbs for upper middle class with good amenities and good schools are around $650,000. Houses in the most expensive suburbs for wealthy families are above $1 million.
The new one that I went for viewing is mainly targeting first-time buyers and young families. The entry level houses use cheaper building materials to construct. It has a promotion sign outside that said “From $148K” to attract low-budget buyers.
I’ll say Caveat Emptor to any foreign investor from S’pore!
Perth has a very narrow industrial base eg. basically commodity driven on Agri-business, Mining & Resource extraction. It’s is basically an Emerging Market play ie. dependent on emerging & industrializing markets to buy their primary resources & agri-products eg. iron ore, minerals, dairy, lamb & beef products.
Perth is a lovely place to migrate for those who want a slower pace, a lifestyle which allows you to own a cheap car (not an expensive lease as in S’pore) & a relatively large home for the money! But it’s not a great investment market!
Having said that, Perth has the potential to expand upwards compared to Sydney or Melbourne which are mature property markets & both are further down the land intensification route. But Perth is also a Boom-&-Bust town & it is currently in a Bust mode! Next, look at the location – some places are notoriously bad; frequent house break-ins, regular drunken weekend youth parties & the worst, Indigenous (polite term for Aboriginal people) – you would’t want them prowling around your neighbourhood at night!
The heavy reliance on commodity industries is always a double-edged sword. Australians relocated to Western Australia 7 to 8 years back because of the boom that led to high employment there.
Like any state in Australia, there are good and bad locations and the locals are all aware of them.
Agree with you that it’s not the right time to buy into Sydney and Melbourne. When you buy near the peak of the market, it can take really very long to see prices recover again.
I’ll say Caveat Emptor to any foreign investor from S’pore!
Perth has a very narrow industrial base eg. basically commodity driven on Agri-business, Mining & Resource extraction. It’s is basically an Emerging Market play ie. dependent on emerging & industrializing markets to buy their primary resources & agri-products eg. iron ore, minerals, dairy, lamb & beef products.
Perth is a lovely place to migrate for those who want a slower pace, a lifestyle which allows you to own a cheap car (not an expensive lease as in S’pore) & a relatively large home for the money! But it’s not a great investment market!
Having said that, Perth has the potential to expand upwards compared to Sydney or Melbourne which are mature property markets & both are further down the land intensification route. But Perth is also a Boom-&-Bust town & it is currently in a Bust mode! Next, look at the location – some places are notoriously bad; frequent house break-ins, regular drunken weekend youth parties & the worst, Indigenous (polite term for Aboriginal people) – you would’t want them prowling around your neighbourhood at night!
The heavy reliance on commodity industries is always a double-edged sword. Australians relocated to Western Australia 7 to 8 years back because of the boom that led to high employment there.
Like any state in Australia, there are good and bad locations and the locals are all aware of them.
Agree with you that it’s not the right time to buy into Sydney and Melbourne. When you buy near the peak of the market, it can take really very long to see prices recover again.
From a historical perspective. in 2006 the median price of house in Perth is slightly higher than Sydney and Melbourne. Buyers are queuing to get in. Yes it is possible.
Now median price of Sydney house is 40% higher than Perth and Brisbane. Buyers in Perth have disappeared.
Which is a better place to buy? Rental return in Sydney is 2.9%; Brisbane 5% and Perth 3.5% despite downturn.
A tale of many cities
It is all about cycles affected by the economy and boom and bust of the major industries. Property is also a cycle. So catch it when it is low and when you see positive factors coming on their way.
From a historical perspective. in 2006 the median price of house in Perth is slightly higher than Sydney and Melbourne. Buyers are queuing to get in. Yes it is possible.
Now median price of Sydney house is 40% higher than Perth and Brisbane. Buyers in Perth have disappeared.
Which is a better place to buy? Rental return in Sydney is 2.9%; Brisbane 5% and Perth 3.5% despite downturn.
A tale of many cities
It is all about cycles affected by the economy and boom and bust of the major industries. Property is also a cycle. So catch it when it is low and when you see positive factors coming on their way.