View of downtown Perth and the Swan River from Sir James Mitchell Park.
The Brexit result in the UK, coupled with additional property taxes levied on foreign buyers in New South Wales and Victoria, are set to attract more overseas money to Perth.
By Romesh Navaratnarajah
Foreign investors are expected to focus their attention on Perth after additional property taxes were levied on foreign buyers in the eastern states, and following the Brexit result in the UK, experts said.
“The decision by the English to leave the European Union has created financial market instability, which will encourage more foreign investors to seek safer asset havens such as Western Australian real estate,” said Paul Curran, Principal of Raine & Horne Rockingham Beach.
He expects to see a slight increase in the number of foreign investors entering the market due to the country’s stability and strong government.
“The combination of a lower Australian dollar (1 AUD = 1.02 SGD in July 2016), property affordability and Perth’s proximity to Asia is already a plus for foreign investors.”
Curran noted that the Brexit vote followed soon after the New South Wales (NSW) and Victorian state governments decided to increase stamp duty charges for foreign buyers.
“It is early days for the Brexit decision, and foreign buyers are just starting to absorb the longer-term ramifications of these additional taxes in the eastern states.”
Specifically, the NSW government imposed a four percent stamp duty surcharge on foreign property purchases that commenced from Budget day (21 June), and a 0.75 percent land tax surcharge on residential properties owned by foreigners commencing in the 2017 land tax year.
As of 1 July 2016, Victoria has introduced a seven percent foreign investor surcharge on residential stamp duty and a 1.5 percent surcharge on some land tax.
Less taxing
The stamp duty for Perth properties is between 3.5 percent and 5.5 percent, which is among the lowest in Australia, said Stephen Ho, Regional Director, International Project Marketing at CBRE. He reckons the market is not anticipating new rules on foreign buying anytime soon.
However, Curran thinks the state government will implement similar taxes if it proves successful in curbing foreign investment. “They take good ideas that work and repeat them,” he said.
For now, he believes the new taxes in the eastern states will encourage foreign buyers to consider properties in prime areas around Perth, which offer quality real estate priced well below the median prices in Melbourne and Sydney.
According to CoreLogic data, the median house price in Perth is AU$506,000, compared to AU$590,000 in Melbourne and AU$782,000 in Sydney.
“Lower prices for apartments have made Perth very attractive,” said Ho, adding that prices of new units have remained steady since the start of the year.
“Lower interest rates are also creating more buyer activity from those who are able to hold over the longer term.”
Restrictions on foreigners
Perth is similar to other cities in Australia where foreigners can purchase only new homes and must first seek approval from the Foreign Investment Review Board. Ho shared that most major banks offer financing for certain projects in the city.
He revealed that foreign investors are mainly looking at projects near the central business district, such as the inner city areas of Northbridge and East Perth, which have the potential for capital growth. Projects in the more affluent suburbs of Apple Cross and Mount Pleasant are also highly sought after, as they are located near established schools.
In such areas, investors can probably achieve rental yields of between 4.2 percent and 5.5 percent, said Ho.
Mega projects
To boost the local economy, the state government is forking out AU$24.1 billion over the next four years to build infrastructure projects, said Ho. This includes the AU$4 billion Perth City Link, an urban renewal and redevelopment project currently under construction.
So far, economic growth is on track, with Western Australia’s Gross State Product at AU$249 billion in the 2014 to 2015 period, the highest in the country. And while only 11 percent of Australia’s population lives in the state, it accounts for 17 percent of the country’s Gross Domestic Product (GDP).
Overall, the country’s fundamentals are sound, said Ho. “Having one of the most diverse, advanced economies in the world, Australia’s GDP growth is expected to continue at a steady rate of 2.5 percent to three percent, making Australia an excellent investment location.”
Going forward, Ho expects future housing demand in Perth to be strong. “The increasing population and declining household size will generate demand for an additional 620,000 households before 2030. This will continue to push property prices up,” he said.
CITY FAST FACTS
(PERTH)
Population: Approx. two million
Total area: Over 5,300 sq km
Currency: Australian Dollar
GDP per capita (Australia): US$52,454
GDP growth (Australia): Up 3.1 percent year-on-year in Q1 2016
Future transport: Perth Airport rail link to be finished by 2020
Median house price: AU$506,000
Distance from Singapore: Approx. 3,900 km
INTERNATIONAL HIGHLIGHTS
Investors looking for quality assets in Perth can consider these two properties, which come with classy interiors and million dollar views.
NEW PROJECTS
Cirque Mount Pleasant
63-65 Kishorn Road, Mount Pleasant, Perth, Western Australia
Type: Apartments
Developer: Kishorn Road Apartments
Tenure: Freehold
Facilities: Heated lap pool, spa, sauna, gymnasium, children’s playground
Nearby Key Amenities: Applecross Primary School, Swan River Rowing Club, restaurants, cafes
Nearest Transport: Canning Bridge railway station
Starting Price: AU$379,000 (approx. S$387,599)
Cirque Apartments is a two-stage development to be built by Kishorn Road Apartments on a 43,572 sq ft site just south of Perth’s central business district. The location is well known for its large houses and has some of the state’s best schools.
The apartments come with 2.8m high ceilings, solid parquet flooring, timber veneer finishes and premium grade V-Zug appliances fully fitted out. In addition, each unit offers spectacular views of the Canning River and the Swan River.
Outdoor resort style facilities include a heated lap pool, spa, sauna, gymnasium, covered barbeque area, cocktail bar, private dining space and children’s playground. This will be the first residential building in Western Australia to achieve a 5-star rating by the Green Building Council of Australia.
4 Kirkwall Close
Warnbro, 6169, Western Australia
Type: Landed property
Developer: Novus Homes
Tenure: Freehold
Facilities: Saltwater pool, double auto garage, ducted reverse cycle air-conditioning
Nearby Key Amenities: Warnbro Sports Complex, Warnbro Primary School, Warnbro Foreshore Reserve
Nearest Transport: Warnbro railway station
Starting Price: AU$1.35 million (approx. S$1.39 million)
This luxury property by Novus Homes sits on approximately 21,958 sq ft of prime land in the beautiful Warnbro Dunes. It comprises five bedrooms, three bathrooms, three separate living areas and a designer kitchen that boasts Tasmanian Oak cabinets and granite bench tops.
The sprawling house provides all the luxuries of resort style living, including modern décor, high ceilings and ducted reverse cycle air-conditioning. It also offers fabulous views of the Indian Ocean from two balconies, one each at the front and rear of the house.
Facilities include a saltwater pool, double auto garage plus additional workshop / store room and ample off-road parking. The beach is only a three-minute walk away, and it is only 45 minutes from Perth’s central business district.
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