Updated: May 4
Thinking about whether you have missed the boat with buying that investment property, well maybe not. While capital growth rates for the first 4 months of this year were going gangbusters clearly that rate of growth isn’t sustainable and what we are seeing generally mirrors what’s happened in the past as well. A rapid start followed by a catchup phase and then progression in a steady trend for an extended period.
This doesn’t mean that there is no longer capital growth to be had, it's just that its returned to a more sustainable level. For example, according to Core Logics rolling 4 weekly change in in dwelling values, Perth’s spectacular growth for the first 3 months of 2021was around 2% per month and this has now returned to around 1% growth per month. That’s still a very attractive 12% annual equivalent and on the median house price right now in Perth ($490,000) that’s a very attractive $59,000 in growth in a year
There are a number of factors that play into this change in the level of growth, which include:
End to the Government Stimulus
The Governments Covid19 stimulus package of $25,000 from the Federal and $20,000 for the WA State governments both ended on 31st December. This is in itself will have bought a lot of fence sitters into the market, in fact there were enormous numbers jumping onto this cash splash but all were new home builders. Initially, this impacted land values mostly followed by building prices but also got people thinking about property and getting off the fence and into the property game The numbers involved were so large that Perth virtually ran out of land supply and people still looking to buy land in January, February were buying blocks that will not be available until September 2021 or even longer. Building prices have also jumped because of this level of demand combined with shortages in labour & materials so the natural progression for the people who had made the decision to get into the game to look at the established market
More Sellers in the Market
Buyers aren’t the only ones watching the prices going up. People who have been languishing for the last 10 years with stagnant or dropping values and are watching their rents dropping by as much as d 30% over this same period have seized the opportunity to cash out their properties. This has seen more seller in the market and with more supply the market and motivated sellers the rate of growth in the established market is starting to come back a bit. Buyers now have more options and as a result, are being more selective and negotiating more strongly.
More housing Supply on the way
While the government stimulus might be finished the activity it stimulated will begin to come into the supply chain over the coming months. This has also taken a lot of the lower end market buyers out of the market as they have git their Aussie Dream all on underway were talking ere about 1st home buyers mostly
Diminishing population Growth
Australia did experience some of the highest levels of population growth in its history in recent times, thanks mainly to the impact of Covid19 across the world sending most Aussies living abroad back home to Ozz. This has now slowed dramatically, and our national borders are now effectively closed to new immigrants until this pandemic is back under control throughout the world. In Western Australia, though the position is quite different. State Government and the larger mining companies and contractor firms have moved to protect their industries and business from any adverse Covid19 impact by introducing a policy of WA domiciled employees. At the time of writing it's understood that the exception to this is for specialist workers and shut down operations but shutdowns too are starting to follow this trend. This has seen many eastern states residents having to relocate to WA to retain their high paying FIFO Jobs and gave rise to scenarios where Agents were selling properties sight unseen to eastern states buyers who were making their buying decisions from the images in online advertisements… crazy stuff. So as a result some states in Australia are now experiencing negative population growth and this might even result in those states seeing their property growth also turn negative but no so in Western Australia. When the data for the other states start to filter into the market you can bet that the investors in these states will be paying close attention to the high rental yields, strong population growth, low unemployment rates and high relative incomes that are all working together to maintain capital growth rates in Western Australia.
Employment & Income Strength
You’re in FIFO so you can see it first hand, jobs, jobs & more jobs and pays are going up as well. Last year Western Australia’s unemployment rate was the highest in the country at 6.7% but now, only 4 months on, it's amongst the lowest in the land at 4.8%. WA also has the 2nd highest level of participation with more people in the state working per capita than all but the NT The impact of this is that people looking for greener pastures will be relocating to Western Australia, in numbers, to take up the positions on offer. Large employers are actively marketing for new employees on the east coast to fill vacancies here in WA, paying relocation costs and all manner of incentives to get them here. So unlike other Australian states where the population growth has stalled or is going backwards Western Australia is going gangbusters. This will impact house prices, availability of land to build new homes and more importantly the cost to build new homes as labour and materials costs escalate. Building still seems to be the best option in terms of price point and delivery of capital growth but the tipping point will come again when the availability of existing stock and the price point of this same existing stock will become more attractive to home buyers
Why Choose and use FIFO Consultants
FIFO Consultants is a division of the GR8 Corporation that includes GR8 Property and affiliated with FIFO Financial Planning, FIFO Taxation & Accounting and FIFO Financial Planning. We are experts in taxation especially as it impacts on property investment and are available to discuss your requirements and suitability for taxation minimisation, whether this is achieved through investment in property or some other mechanism. Speak with FIFO Consultants before you speak to the real estate agents to avoid making a costly mistake with regard to the taxation implications. The right advice could possible generate for you an additional $15,000 each year.
If you’re interested in taking advantage of this property boom, and it is a boom, FIFO Consultants has available a very limited number of investor specific lots, designed to maximise your tax position and rental yields and starting from a very low $385,000. This package will provide the owner with an additional $100 per week in their hand tax-free, subject to what marginal tax rate the owner is operating in. you will require a permanent full-time position of employment or casual or more than 6 months with the same company, you will need around $45,000 in savings or equity in other property and lastly, you want to find a way to convert your hard work and long times away from home into a plan to allow you choice on when and where you work.