Perth land prices most affordable nationwide – but lack of variety is our downfall
Samantha Reece, Director of PropertyESP recently attended the UDIA lunch with Colin Keane of Research 4 and then participated with the panel discussion alongside David Cresp (Urbis) and Gavin Hegney.
Certainly Colin’s presentation was somewhat telling of Perth’s current status for land sales.
While Perth peaked in 2013 with 1078 lot sales per calendar month. In 2016 our underlying demand for land is now 637 lots per calendar month and actual sales are 478.
However there are a number of reasons why we are having this reduced success rate – and it is primarily to do with population.
First of all, Perth’s demand for land is driven predominantly by employment. For every 100 people employed there is the direct correlation of 38 lot sales. This ratio in Sydney is 17 lots to every 100 people and in Melbourne 26 lots.
To broaden our market we therefore need to consider a number of options - including net migration with emphasis on education, temporary work visas and holiday visas.
Nationally 56% of land sales are non-local demand. In Perth it is 16%. This means that 84% of our land purchasers are based locally.
Perth therefore needs to emphasise our market and attractive lifestyle in order to trigger interstate and foreign investors and certainly consideration needs to be given to delaying the State Government’s foreign buyer’s tax, as this could further reduce demand.
Tourism is also a key player with our land sales growth.
Nationally 50% of short term visas are for holidays – in WA our rate is 11%. As Colin stated we need to grow our portfolio of tourism experiences and hence concepts such as gondolas connecting Elizabeth Quay and Kings Park no longer seem so farfetched.
Perth has well recognised tourism sites such as Rottnest Island, Kings Park, Elizabeth Quay and Swan Valley. But now what we need to do is make these experiences deeper and more impressive so as to drive tourism spend to our state in preference to others.
Immigration also catalysts further population growth and so attracting students to WA for education purposes will undoubtedly attract their families. The same can be said for immigration as a whole.
But there were two final gems of knowledge.
Firstly that WA has the cheapest land in the nation at an average price of $225,000 compared to Melbourne $272,000 and Sydney $423,000.
But while this is positive news, it is our stagnation in the small block sizes ie 450sqm that is killing the market and hence we also need variety of lot sizes to cater to all demographics.
And secondly, WA needs variety across a number of realms – our economic basis, our population and our supply of housing options.
Undoubtedly WA needs to grow its global handshake.
While Government has reduced the FHOG and other such stimulants, what its core focus should now be, is to attract and then retain people.
As such, while the Government may be initially focused on servicing WA in regards to Metronet etc, its top priority should be to work with private enterprise, on ways to boost WA and its profile.
Major events, stimulating tourism sites and golden education opportunities are the ingredients that will return WA to a stronger population market – and one that will help the economy overall.
Perth is experiencing a period of disruption – and that is going to definitely also going to affect the land sector. The question is – are you prepared?