WA will weather 2016 and succeed
Samantha Reece attended the Property Council’s Australian Property Index breakfast held at Lavan Legal’s offices on Thursday.
Speaker Anthony De Francesco of MSCI spoke about the overall Australian market before then breaking down to WA on the basis of residential, retail, industrial, commercial, healthcare and tourism growth.
What was interesting was that from December 2014 – December 2015 all these sectors posted growth across Australia.
In particular Anthony spoke about the increase in overseas investors that were fuelling large asset purchases. He explained that it was Australia’s yield plus the cost of capital, which all contributed towards ongoing overseas investment.
However, looking at a state by state analysis it is clear that WA and QLD are tailing the other states and in particular NSW and Victoria. But it was also noted that just two years ago, it was the reverse.
When the rest of the States were experiencing a GFC – WA was not – but our shortfall was that we didn’t highlight this fact and hence create a mini boom, as the likes of which we have just witnessed in Sydney.
In the commercial sectors Perth is certainly suffering an oversupply. With Prime CBD sites we are seeing vacancy rates sitting at 17% when the average is 7% and vacancies for Secondary CBD sites are sitting at 22% when the long term average is 12%.
However on the upside – the retail sector certainly is showing signs of growth in WA and that is because for so long there have been caps on floor sqm and these are now lifting. As a result the retail sector is playing catch up with the residential population growth we have witnessed over the last 4-5 years. And this population growth is anticipated to continue – albeit at a slower rate.
By far it is evident that residential property growth has significant flow on effects with other sectors – especially in retail with household and white goods – and in the East it is this activity which has propelled the rest of the economy.
In terms of what action can be taken here in WA – it simply is a matter of supply and demand.
As Anthony stated, if there is an oversupply of commercial offices, then consider turning some of these into residential. And that is the key for the next 12-18 months – being flexible so as to ride out this current cycle.
There are plenty of upsides to the WA market and this current status will allow for upgrading of old office stock, introduction of premium hotels (which should attract the overseas tourists) and an expansion of the overseas student market.
The fact is, private enterprise will need to invest, but this is in keeping with our current revitalisation and will certainly leverage Perth even further as a city which has finally found its vibrancy.
Perth and WA have benefited from unprecedented capital investment and now it is essential to keep this wave moving so as to counter balance the adjustments we are witnessing in the mining sector.
But if we all stay focused on action, then this should be an easy task to fulfil.