PERTH'S STAR STUDDED SOUTHERN SUBURBS

June 2006

Some star studded suburbs in the Perth property market are nestled south of the city in the Kwinana area, according to Perth based buyers' agent, Liz Sterzel.

Sterzel, of Property Wizards Buyer's Agency, says the suburbs of Medina, Orelia, Calista and Parmelia, are the stand-outs in the area.

"These suburbs, which lie north of Rockingham along the coast south of Perth, have been riding high in recent times," she says.

"They are within five kilometres of the ocean, are just 35 kilometres from Perth's CBD, and have been recording excellent growth, with all the signs looking bright for the future."

In the year to March 2006, Parmelia's median house price grew at 30.9% and at 20.5% for the past five years.

In the year to March 2006, Medina's median house price grew at 28.9% and at 22.4% for the past five years.

In the year to March 2006, Calista's median house price grew at 42.9% and at 22.4% for the past five years.

"Growth has been extremely strong and yet, homes in these areas can still be snapped up at very affordable prices, often in the upper $200,000's," Sterzel says.

"With many refurbishment programs, infrastructure and land developments underway, there is a real renaissance happening in the area.

"The surburbs are tipped to continue to perform very well in the years ahead, with the outlook for capital growth very good, so they are perfect buying for investors."

THE AREA

Sterzel says there are many factors making the area attractive for investors.

"It's an ideal location for attracting tenants and so makes for a good investment option," she says.

"Kwinana is close to the ocean, within about five kilometres, is near to major growing shopping centres such as Rockingham City, has good access to schools, parks and recreation areas, lifestyle facilities and transport hubs, and so is very appealing to families.

The Kwinana area is also recording high population growth and demand is high for land.

"People are camping out for land releases and a ballot system is now being used to ensure the allocation system is fair," says Sterzel.
"There are also a number of new, larger homes being built and many people are buying and renovating or upgrading, so there's a bit of a facelift taking place, which is a big positive."

Sterzel says, historically, Kwinana can be likened to Blacktown and Parramatta in Sydney due to its affordability.

"But the big difference is that Kwinana is close to the ocean and that puts it into a completely different category for potential growth," she says.

"Long-term that makes it a much better performing area."

DEMOGRAPHICS

The median age of residents in the Kwinana area ranges from around 30 to 44 years of age, but Sterzel says a change is likely to take place.

"Historically, there have been fewer young families and a larger number of older people in these areas," she says.

"However, new land releases are attracting new younger families and young singles.

"One of our clients, a professional first homebuyer aged 30 who bought in the area, has now decided to live there because of the easy access to the city via freeway and the new railway."

INVESTMENT PROS

Sterzel says future plans for the area act as good drivers for future growth.

"Considerable State Government development in the area is a factor tipped to enhance property values," she says.

"A $35 million revamp is planned for nearby Kwinana Senior High School and the new southern suburbs railway will cut travelling times to the city to less than 30 minutes.

"As part of this, two new train stations, Kwinana and Wellard, are being built."

Sterzel says fresh land releases and redevelopments of older properties which are being made possible by zoning changes are also good news.

"The Town of Kwinana has proposed higher density and pockets of rezoning in the area," she says.

"This will cause major upgrades to housing as developers build new homes amongst the old which will help prices to climb higher still," says.

"The nearby multi-million dollar Wellard Village development, which is one of the first so-called transit-orientated villages built in WA, is having a flow-on effect to surrounding areas, making the adjacent Kwinana suburbs ideal for top investment opportunities.

"The Village incorporates commercial, retail and residential properties all designed around train station to make use of the transport benefits."

Sterzel says another plus for the area is that a major upgrade is tipped for Kwinana Hub shopping centre and deep sewers are expected to be placed throughout Kwinana in the next 18 months.

INVESTMENT CONS

Sterzel says there is a transition occurring in the Kwinana area, but it is still affected by the stigma of being a lower-socio economic area and higher crime rates.

"With property values in the area having grown in recent times a socio-economic change is taking place and the area is being lifted, so we can expect the stigma to disappear over time," she says.

Sterzel says with the area encompassing the Kwinana industrial strip, a number of investors would see this as a negative.

"Its distance from Perth was a negative, but will no longer be an issue once the new railway line is completed and travelling to the city will take just 29 minutes."

She says the other issue for investors to consider before buying is that there will likely be a holding cost.

"However, because of low vacancy rates and higher demand there will be further pressure on rents to rise," Sterzel explains.

WHAT TO BUY

Investors should be chasing value-add properties, according to Sterzel.

"Older properties on good sized lots are perfect for investors wanting to get into the market at a reasonable rate," she says.

"Properties that can be refurbished to add value are ideal.

"We recommend holding these properties for the medium to long term - they will experience further growth towards end of this boom cycle as they are still undervalued and growth will continue as the benefits of various upgrades, redevelopments and the railway link are realized."

WHAT TO PAY

Sterzel says people can expect to pay from the upper $200,000's for single level homes.

In Medina, one of the lower-priced suburbs of Kwinana, prices are in the high $200,000's for an un-renovated house.

In Calista, a premium area of Kwinana, a well maintained, older 3-bedroom, 1-bathroom brick and tile home will start in the low $300,000's.

A new 4-bedroom, 2-bathroom home in Wellard costs between $400,000 and $500,000.

RENTAL RETURNS

Sterzel says the rental yield on properties in the Kwinana area is about 3.5%, with weekly rent averaging about $180.

"There is high rental demand in the area; this has been slowly forcing rental rates up and this is likely to be ongoing," she says.

SUPPLY

Sterzel says with all the positives for the area, stock levels are low.

"What does come onto the market sells very quickly, so investors really need an expert on their side who is watching the market the entire time," she says.

"We're out there all the time, so as soon as properties become available we move like lightning to secure them - but only at the right price.

"Many people who don't know the market are willing to pay way too much, and at the other end of the scale, there are many people missing out because they aren't able to assess, view, research and make an offer fast enough and the market's not waiting for them."