Soarking demands for Perth's northern corridor 

 I must admit I’m a bit of a research junkie. I enjoy nothing better than delving into the numbers and statistics that I know most others find boring, and I particularly love the exciting discoveries you can make.

A couple of weeks ago, my head buried in another stack of research data published by API Magazine, I uncovered something I found quite interesting about the Perth market. As everyone would no doubt be aware, properties are taking longer to sell at the moment. However, there is a very small group of suburbs who seem to be defying this trend. Actually, I’m referring to just 20 suburbs in all of WA which is about 5% of all WA suburbs according to research produced by Australian Property Monitors (data refers to housing sold in the 12 months to November 2010). Properties in these suburbs have average days on market of 40 days or less, akin to what would ordinarily be experienced in a reasonably strong market.

While that’s quite astounding in itself, I discovered two more interesting things. One, almost half of them are all clustered together in the north-western corridor of Perth. The suburbs I’m referring to are Carine, Warwick, Greenwood, Padbury, Woodvale, Craigie, Beldon and Heathridge. Secondly our analysis shows, all of these suburbs have a high demand-to-supply ratio meaning demand is very strong compared to supply.

While these statistics alone don’t necessarily make properties in these areas good investments overall, what they do show is that there are a lot of people wanting to buy in these areas, even in a slower market like now. To have continued demand for your property or the area it’s in, even in tougher times, is of significant advantage to an investor. But why is it that demand is outstripping supply in these areas? And why is this general area apparently doing quite well when other areas in Perth are struggling? While I can’t say for certain, I suspect it’s because these areas possess a number of specific characteristics.

Firstly, all of these suburbs are well-established with most dating back twenty or even thirty years. Consequently as Perth’s grown, they’ve become boxed in by other established suburbs or infrastructure making the availability of land there very restricted. Once land is limited any increase in demand puts pressure on prices and in today’s market, it has served to stabilise these suburbs very well.

For the most part, this cluster of suburbs are also quite affordable with most priced not to far from the median house price of Perth. Beldon, Craigie, Heathridge, Joondalup, and Padbury all have, according to Australian Property Monitors’ data, a median house price of under $500,000. And the other suburbs are not that far off the mark either. In comparison to other suburbs not far from them, these suburbs appear to offer very good value. This level of pricing and perceived value exposes them to a very large pool of potential buyers which helps create consistent demand.

Infrastructure and amenities are also a key feature of these areas. All of the suburbs in this corridor closely hug the Mitchell freeway which is lifeblood of the northern suburbs, offering quick and easy access to and from the Perth CBD whether by car or by train. They have local shopping complexes, two major shopping centers, cinemas, a number of quality primary and high schools and even a university.They also have community centres, sporting facilities and grounds, restaurants and cafes, and numerous parks and even lakes. Whilst most Perth suburbs do well in this department also, these suburbs seem to have just that little bit extra without forcing buyers to have to break the bank.

Although not inner-city suburbs, they are well located with the first of this group of suburbs starting just 11km north of the Perth CBD with the furthest being Joondalup (although this suburb in itself is a satellite city and not just another regular suburb). They all have good proximity to various facilities as listed earlier, but also to many lifestyle aspects. For example, these suburbs are just a short drive to many of Perth’s most popular beaches as well as Hillary’s BoatHarbour, an extremely popular destination to wine and dine, go boating, or have fun with the kids at the protected beach or on one of the many amusement rides.

Probably for many of the reasons outlined above, these suburbs also tend to have wide appeal to owner-occupiers, investors and also tenants. Owner-occupiers and tenants love the location, the amenities and the family-friendly communities. Investors love the price tag, the generally larger lot sizes offering development potential, the ability to add value to old properties via renovations, and limited land availability. Suburbs which are desired by as many people as possible tend to stand the best chance of retaining their value even in difficult times.

The other factor that may also be contributing to the excessive demand is a low turnover of stock. While this is not a feature of all the suburbs, many of them are quite tightly held with owner-occupiers often staying put for many years as do the investors.When you combine that with limited land availability, it’s little wonder that there is often more people wanting to buy than there is available properties.

These characteristics are all important and in my opinion, partly responsible for why these suburbs are seemingly doing well right now. But these characteristics are by no means the only factors one should evaluate to identify the ‘right’ investment. Rather than conclude this discussion with whether these suburbs are actually good investments, I think this situation has instead illustrated an important lesson for all investors. A good suburb for investment is not necessarily one that is in the inner city, beside the coast, or ripe for rejuvenation. That is a far too simplistic view. Identifying suburbs that have real “recession proof” potential involves analysis of a number of factors, just some of which have been outlined earlier. While suburbs good for investment may not score well on every factor, they should tick most of the boxes.

Be aware that choosing the right suburb is only a small part of the research process. Choosing the right property in that suburb is a significant process itself.

Thorough research and careful analysis, not gut instinct, is what will help you identify the best investment opportunities that suit your individual needs.

Momentum Wealth and its affiliated entities are not Accountants or financial Planners. While all information is provided in good faith, you should seek your own independent advice in relation to all matters regarding investing, taxation and superannuation.