Anyone who has been following the property market here in Perth knows that we’ve been in the doldrums for some time now, but while we’ve been sitting in this quiet phase, indicators are now suggesting that we could be heading towards our next growth cycle.
Why is this important for you to understand this?
Buying off-the-plan requires you to buy at the best time in the market so that you pay the right price, while setting yourself up for the prospect of growth. Because buying off-the-plan means you’re in a waiting period before settlement, timing this kind of purchase can pay off big time if you get this right – on the other hand it, you can literally shoot yourself in the foot if you get your timing completely wrong.
Regardless of whether you’re looking to buy to live in or invest, if you’ve been thinking about setting yourself up in the property market with an off-the-plan apartment, then the following will be of paramount importance to you if you’re looking to understand what kind of market Perth is in today and how to use ‘timing’ to get yourself the best deal and financial gain.
Are there indicators that make ‘now’ the perfect time to buy?
Before you jump into an off-the-plan purchase, how do you ensure that you get your timing right and avoid the horrible BBQ story when you settle on your property. This is where it’s important to understand what property cycles are and how they work.
Let’s firstly address that here in Australia we’re currently living through a global pandemic which has had some obvious impacts on our property markets. The most important thing to understand here is that property is a long-term game and while we don’t know exactly how property will fare post COVID-19, we do know that property has held up well historically in times of crisis and as you’ll see from the graph below, property values in Perth have continued to grow over the last 40 years despite what’s happened in the economy.
Source: reiwa.com.au
Now the first thing to ask yourself is “are we near the top of our property cycle in Perth”? If property has been growing consistently for around 3-5 years, then you know that the market is performing strongly and heading towards its peak.
As you can see from the graph above, Perth has seen negative growth since around 2015 and we haven’t seen a growth cycle since 2007. It’s relatively safe to say that we’re sitting near or at the bottom of our market, which from a property cycle point of view, is the point of maximum opportunity.
For off-the-plan buyers in Perth, this gives you an excellent opportunity to position yourself to do well.
If we could get the perfect scenario to time the off-the-plan market right, at the bottom of the cycle, we’d request:
· Low purchase prices
· The cost of borrowing is low
· Increasing demand to create a strong upswing potential in growth
So let’s take a look at what the scenario looks like in Perth.
What’s happening with Perth’s property market
Over the last month or so, buyers across Perth have awoken from the COVID-19 panic as the volume of high-intent buying activity has been on an upward trajectory since April this year.
The below graph is the new REA Insights Weekly Demand Index that looks at specific buying behaviours to help determine the demand for property across Australia.
Source: realestate.com.au
The surge in buying activity in WA alone has seen 133.1% increase in serious buying activity since the COVID-19 shutdowns - more than doubled!
History is littered with stories of people making incredible financial gains in times of crisis and uncertainty because quite often in times like this, some of the biggest opportunities can be found for those that see it. For example, Sir John Templeton made a fortune during the depression of the 1930’s by purchasing shares for less than $1 and became incredibly wealthy when the industry picked up due to WW2. One of the most severe financial crises since the Great Depression was the Government Financial Crisis but of course it was the counter-cyclic opportunists that moved against the herd and saw incredible gains from an immediate growth period.
Source: CoreLogic
Positive indicators before COVID-19
While we have seen a lot of confidence return back to Perth’s property market post COVID-19 shutdowns, we were also seeing great trends before the pandemic that suggested we were on the road to recovery and potentially our next major growth cycle – which as we saw during our last growth cycle Perth grew by almost 200% between 2001 – 2007.
Here’s what we saw:
Low Stock Levels
According to REIWA, the number of properties for sale in the Perth market back in February 2020 was 12,618 – this was a significant drop from 17,019 recorded back in February 2019. Stock levels today (June 2020) are even lower at 10,892 with all the demand returning back to the market which is 30% lower than what we saw in June 2019.
While we had a pandemic creating unforeseeable trends, Perth has stock that is getting get soaked up rapidly and has been for quite some time now, which tells us that more demand and confidence is returning to our market.
Affordable Property Prices
Perth still remains one of the most affordable capital cities in Australia, unlike an area like Sydney where they’re sitting at the top of the market where the value has already been extracted over their period of growth.
Figures from realestate.com.au and REIWA show that Perth’s median house price is sitting at $470,000 with apartments coming in lower at $378,000.
Source: realestate.com.au
Source: reiwa.com.au (https://reiwa.com.au/the-wa-market/perth-metro/)
It’s never been cheaper to borrow money
As you know, interest rates are at an all time low as the Reserve Bank of Australia helped to offset the impacts of COVID-19 on the market.
This is particularly great news for first homebuyers as it’s made breaking into the market a lot easier. Combine this with low stock levels and the value right now in Perth’s market, it’s easy to see why Perth is the perfect storm for buying right now and why first homebuyers are snapping up some great deals to get into their very own property.
Why off-the-plan makes sense in the current market?
Buying off-the-plan in a recovering market can be a very smart tactic, but as mentioned above, it’s all about the timing!
This type of purchase means that you’re putting down a deposit with nothing more to pay until settlement, which is when construction of the building is complete.
Lock in today’s price
In a recovering market, this gives you many great advantages because you’re buying at a low point in the property cycle. With the median house in Mosman Park currently $1,397,500 (realestate.com.au) and apartments at Fairlight starting from $399,00, you’re able to lock in a price that's just a fraction of that. What’s more, buying off-the-plan means that you’re paying a fixed price on your contract. This means ‘right timing’ and getting in at the right price could potentially put you in a position of seeing some capital gain, if the market improves and the value of your apartment increases by the time settlement comes around. This is one of the major up sides for this type of property purchase because you still only pay the contracted purchase price, while also being able to control an asset with a small amount of money up front.
Pay no more until settlement
As mentioned above, one of the great advantages of purchasing off-the-plan is that you only need to put down your deposit up front and pay nothing more until completion. Once construction starts on the development, typically there will be a two-year construction period – if this is your first property or you’re looking to downsize from one property to another, you’ll find this extra time a huge benefit to get your finances in order. Many off-the-plan purchasers love utilising this time to save and purchase their new furnishings, particularly if you’re having to buy from scratch or needing to downsize.
Buy brand new in an area you love
Buying off-the-plan is a great way to get into an area you love, but possibly can’t afford. For example, an established and affluent area like Mosman Park has a median house price of $1.3M but buying off-the-plan in a development like Fairlight you can get into something brand new from just $399k.
A purchase like this certainly opens the door as an affordable option for many first homebuyers and investors to get into a great area, while providing a luxury option for downsizers looking to have a nice little nest egg leftover.
What opportunities are available to you right now?
We all want a fantastic deal when we buy a property, after all it’s by far of the most expensive purchases we make!
As mentioned above, you get the best deal when you buy at the right time of the market like what we’re seeing here in Perth, but there are other opportunities that allow you to maximise this time even more. Whether you’re buying you’re looking to buy to live in or invest, it helps to use everything at your disposal, including developer incentives and the brand-new government grants.
$25,000 HomeBuilder Grant
This is a limited-time only grant of $25,000 for owner-occupiers to utilise towards the cost of building a new home, substantially renovating an existing home or buying an off-the-plan apartment. With construction estimated to commence in September 2020 (subject to change), Fairlight apartments qualify for this exclusive grant for a very limited time only. Find out more.
100% Off Your Stamp Duty
First homebuyers, downsizers and investors can get access to the exclusive 75% Stamp Duty Rebate Scheme introduced in 2019 up to the value of $50,000. As well as being able to take advantage of this, the developer of Fairlight Mosman Park will cover the remaining 25% to make your purchase 100% stamp duty free. Find out more.
$10,000 First Home Owners Grant
This is a one-off payment of $10,000 to help first homebuyers buy or build a brand-new property to live in. The great news is that you don’t have to go through the hassles of building brand-new because off-the-plan properties fully qualify for this grant. Find out more.
5% Valuation Safety Net
If the current market conditions and abundance of government grants on offer weren’t enough to help confirm your decision, Fairlight Apartments are also offering a 5% valuation safety net. Terms and conditions apply.
When you decide to purchase at Fairlight Apartments your contract stipulates a fixed price. That means if the market increases prior to settlement you will still only pay the contracted purchase price and any capital gains will purely for your benefit. However, if on the occurrence that your settlement price is valued less than your contract price then the developer at Fairlight Apartments will rebate the difference (up to 5%). With this unique incentive in place you can put to bed any hesitations you might’ve had about potential declines in property values leaving you in a tricky situation.
As an off-the-plan buyer, there’s never been a better time in Perth to get a great deal for a brand-new apartment, while also getting access to some fantastic developer and government incentives. The even better news is that at Fairlight Mosman Park you can now get access to up to $85,000 worth of incentives to set yourself up in a great location in one of these stunning apartments.
To see what grants you may qualify for when purchasing off-the-plan at Fairlight, go here.
An area like Mosman Park is perfect for off-the-plan buying due to its locality and amenity which is particularly suited to homeowners looking for the perfect lock and leave lifestyle and investors looking for a quality low maintenance property in a high demand area.
So, with the market in exactly the right spot to make a strategic purchase off-the-plan, all that’s really left is to find that perfect property for you!
To find out more about our range of apartments or what grants are available for Fairlight, contact us right here