Show notes – Perth Property Gold Rush – Analysing Western Australia’s Property Investment Surge & Future Risks (Ep. 232)

Episode Highlights

5.02 – Cate kicks off the episode

7.52 – Dave shares some interesting stats about Perth’s historical boom

13.30 – Dave talks us through the the State Revenue and contrasts WA to other states and territories

16.00 – Mike shares his data on WA’s renaissance

18.39 – Teaser for next week’s show

24.58 – What is the outlook for iron ore?

33.21 – And our gold nuggets!

Show notes

In this episode, we’re taking a deep dive into the thriving property market of Perth, Western Australia. Mike shares groundbreaking industry data highlighting Perth’s emergence as a hot investment destination. Join us as we explore the factors driving this market and provide valuable insights for potential investors considering Perth.

Dave’s Overview: Dave kicks things off by discussing Perth’s impressive recent performance in the property market. Perth stands out for its house-to-unit ratio, leading the nation in overall dwelling growth year-on-year. As of last month, it recorded a remarkable 8.8% year-on-year growth, surpassing cities like Sydney at 7.3%. Houses are the primary contributors to this growth, leading the nation with a 9.1% year-on-year increase. While units are also performing well, they rank third after Adelaide and Brisbane. These statistics demonstrate Perth’s robust real estate market.

Mike’s Historical Insights: Mike adds historical context to Perth’s unique status. Being closer to Singapore than Sydney, Perth has often been discussed as if it were another country. Interestingly, during the federation talks in the 1890s, Western Australia, along with Queensland, hesitated to join the Commonwealth due to concerns about autonomy, economic differences, and geographical remoteness. In 1931, a referendum saw 66% of Western Australians vote to leave the Commonwealth, although it didn’t lead to a change for technical reasons. Mike also delves into the state budget and how Western Australia generates revenue, highlighting its reliance on direct state sources, unlike other states.

Investor Activity and Trends: Mike’s data analysis compares Q1 2022 to Q1 2023, revealing that WA has surged from the fourth most popular state for investors to the second spot within a year, marking a 22.49% change in favor of WA. WA represented 9.38% of all residential investor activity in Q1 2022 and skyrocketed to 22.49% in Q1 2023, second only to QLD at 37.97%. However, Cate reminds listeners that the Perth property market remained essentially flat for 14 years, starting in 2007. This stagnant period contrasts with Sydney, where house values doubled.

Population Changes and Property Prices: Mike provides fascinating insights into population changes, noting that Perth experienced a 34% increase in population over 14 years, outpacing Melbourne and Sydney. This dispels the notion that population growth always drives property prices. To put things in perspective, Dave points out that over 35 years until mid-2022, Perth’s houses saw around a 7.3% annual return, comparable to other major cities. However, the mining industry’s significant influence introduces volatility tied to global developments and export prices.

Outlook and Risks: Dave shares his outlook on the mining sector, citing JP Morgan’s recent iron ore forecasts and a potential 10% drop in prices over the next two years due to the Chinese economy’s downturn. The trio expresses concerns for investors rushing into the Perth market without understanding its volatility and drivers. Timing the entry and exit in such a market is challenging, and over-reliance on mining carries risks.

Conclusion: Perth’s property market is experiencing a resurgence, but it’s essential for investors to be aware of the market’s unique characteristics and risks. This episode provides valuable insights into Perth’s property landscape, its historical context, and the factors influencing its growth.