Interstate property investors who are looking for the best place to buy investment property are turning their attention to Perth as they start to find themselves priced out of the eastern states markets, particularly in Sydney and Melbourne.
WA is currently considered one of the best investment property locations in the country and although the Perth property market has slowed since the median house price peaked late in 2014, property investment has remained strong as WA continues to offer better value for money during a time when the median house price in Sydney tops $1 million.
There is currently a $450,000 difference in the median house price between Perth and Sydney and a property which costs more than $2 million in Bondi can be purchased in Cottesloe for half the price.
So why is the west the best place to buy an investment property?
Western Australia was formerly the fastest growing state in Australia as the iron ore boom attracted workers from interstate and overseas. This underpinned the demand for housing but now the mining boom has passed, net overseas migration into WA has fallen from a peak of 55,000+ per annum in 2012 to just under 19,000 in 2014. The high level of construction commissioned during the boom has resulted in more homes currently on the market and created better conditions for property buyers.
There are currently 15,645 properties listed for sale in the Perth metro area compared to just over 11,000 at the same time last year. Properties are also taking longer to sell at an average of 71 selling days compared to just 49 days in September 2013.
Economic forecasters anticipate the housing price dip in the west will continue for the next two years before stabilising and strengthening in 2017-18.
This means if you are a Perth based investor, you can invest now and look forward to capital growth in the years to come whereas if you are an interstate investor, the Perth market may be considered lower risk than Sydney or Melbourne which are expected to suffer a greater fall.
Plus if you are an interstate investor, you need to consider which market will provide better value for money when looking for the best place to buy an investment property.
The option to purchase two new investment properties in WA for the same price as one in the eastern states is definitely a strong incentive or else investors in the east have the opportunity to sell their existing investment property in Melbourne or Sydney now in the peak of the market, pocket the difference and purchase a comparable investment property in the west for a more affordable price. This is particularly attractive for older investors approaching retirement who still want to hold onto a smart investment but don’t want to have all their cash tied up in their assets.
When looking for the best investment property locations, interstate investors are also surprised at how much more affordable it is to secure an investment property close to the Perth CBD. A house can be purchased in South Perth or Leederville for around $1 million and in Sydney it is not possible to find an apartment at that price. Once again it comes back to value for money and balancing risk.
So how will the possible influx of interstate investors looking for the best investment property locations affect the Perth market for local investors?
Thankfully, not significantly.
A little competition is healthy and a growth in the number of interstate investors will provide a small boost to the local economy and support the construction industry whilst providing more quality housing options for the rental market. More supply eases demand and keeps housing prices at more sustainable levels which helps to avoid the frenzied markets (and dramatic booms and busts) which fuels market volatility creating less attractive conditions for investors and home owners.
Put simply, it doesn’t matter if you are Perth investor or an interstate investor – WA is currently the best place to buy investment property in Australia. There is better value for money, more choice, greater affordability and lower risk. Exactly what every smart investor should be looking for.
If you are currently looking for the best investment property locations in Australia and would like some free, expert assistance to compare your property investment options, contact a Property Investment Specialist from Investor Asisst here.