The Western Australian property market has bounced back to pre-GFC property price levels, according to WA-based brokerage, House + Home Loans/Rate Detective Finance, partly due to valuers 'catching up' with increased market activity.
The recovery applies to both metropolitan and regional prices, however, due to demand driven by the mineral and mining sectors, regional Western Australia has seen additional spikes in value.
Rael Bricker, managing director of House + Home Loans and Warren Dworcan, managing director of Rate Detective Finance, recently evaluated the state of the property market in Western Australia and shared findings with clients and potential investors.
“In the metropolitan areas of Western Australia, house prices are rising steadily and generally exceeding the 2006 levels. Property investors are returning to the market and reaping the rewards. There are four main elements which explain the increasing price levels,” says Bricker.
1. Investors showing more confidence in the property sector;
2. Rental yields exceeding historical levels;
3. Valuation firms responding to the increased values and reflecting these in their reports and
4. Interest rates are at historical lows which, for majority of investment properties, enable rental yields to exceed interest rates.
“Investors are once again looking at property as a solid asset class. In comparison to other asset classes such as shares which experience high volatility, investment property has proved its resilience through many areas of turmoil,” says Bricker.
Warren Dworcan says rent yields are the main driver of the renewed activity in the local property markets, which are exceeding historical levels.
“Due to high demand, current metropolitan rent yields are in excess of 6% - this surpasses the traditional pre-GFC level of 5%. Corporate and fully furnished property leases are experiencing almost unheard-of rent yields of around 7-9%. The unique function of the current markets in mining towns is driving rent yields as high as 15%.”
The fact that the last six to 12 months of increased market activity is finally being reflected in the increased valuations on established dwellings is another major factor increasing investment, says Bricker.
“The increase in the property market is now reflected in valuation reports used by investors wishing to purchase investment properties. In the past year these valuations have not been accurately portrayed. Valuations have caught up to the market, and investors are now tapping into the asset class,” he says.
In addition to interest rates sitting at historical lows, rental yields now exceed interest rates for the majority of property investors.
“It‘s the combination of these elements that explain the increasing numbers of purchases in our market; it is evident that investors are back,” says Dworcan.