Suburbs on the rise: emerging hotspots in Perth
Perth’s booming property market has been all through the media in recent months, with CoreLogic reporting nine months of consecutive price growth.
In last month’s article we looked at Perth’s top 10 growth suburbs from 2020 and highlighted reasons as to why these suburbs – despite showing strong short-term growth – might not all be considered investment-grade.
This month, we explore a few property fundamentals and factors that help drive price growth, which investors can apply when identifying emerging hotspots that are well-positioned to benefit from strong growth into the future.
Diverse demand drivers
For any suburb to experience growth, there needs to be strong demand from buyers, as it is this competition that acts as a catalyst for price growth. Demand drivers come in many varying forms, and different types of buyers will be attracted to a suburb for different reasons. However, the suburbs that are set to experience strong and sustained growth are those which have demand that is driven by several different factors. This is an important consideration, because if one avenue of demand dries up, growth can continue thanks to the other market drivers.
So, what kind of factors are we looking for when identifying high demand areas?
Local amenity within a suburb is a key factor that can have a strong influence on demand for housing. School zones are a good example of this, with young families paying a premium in suburbs that fall within the catchment zones of some of Perth’s best high schools, such as Rossmoyne, Churchlands, and Applecross. Other local amenities that drive demand include convenient access to shopping centres, as well as natural parklands, the river or coast and open space.
Well-connected transport options are another characteristic that helps to drive demand, especially easy access to public transport corridors. Public transport that offers quick and convenient access to major employment and entertainment hubs can significantly boost buyer demand, especially amongst professionals who work in the CBD. However, while residents who live in outlying suburbs may benefit from the addition of new public transport corridors, this won’t necessarily act as a catalyst for broader demand, and buyers need to be aware of this.
One Perth suburb exhibiting strong demand fundamentals is Bayswater. Located just 6km from the CBD and only 2km from the airport, the suburb is incredibly well-connected suburb that exhibits varied demand drivers that will help to attract buyers.
The State Government’s Metronet railway project will only further enhance the connected nature of the suburb, with Bayswater Station acting as a hub connecting the Swan Valley, Midland, Perth Airport, and the CBD.
Despite its proximity to the CBD, Bayswater also benefits from significant open space and parklands, as well as access to the swan River.
Bayswater is an established suburb that offers bigger block sizes, something that is becoming harder to find so close to the city. Popular amongst professionals who work in the CBD, and also young families who appreciate the natural amenity the suburb has to offer, buyers with the right purchase criteria can acquire a property with strong land value at an affordable price in Bayswater.
Supply is just as important as demand
When trying to identify areas of the market that are showing strong growth prospects, it is vital to look at supply. While demand is most often talked about as a growth driver, supply is a factor that is equally as important.
In order for growth to occur, supply needs to be outweighed by demand. If there is an oversupply of stock on the market, then properties will struggle to increase in value.
Areas set for growth are often tightly held, forcing buyers to compete for the limited stock that is available. This competition amongst buyers naturally places upwards pressure on prices, leading to price growth.
Another element of supply that influences future growth is the level of future stock that can come onto the market. Established suburbs, especially those closer to the CBD, are less likely to suffer from an increase in supply coming onto the market due to the general scarcity of land available. However, this isn’t always the case, as proposed developments and land subdivisions can increase the available stock on the market, something we commonly see in high density areas such as the CBD.
Sitting 11km north of the city and conveniently located at the intersection of several arterial roads, Hamersley is the suburb well-connected to the CBD, airport and beaches. Serviced by Warwick Grove Shopping Centre and Karrinyup Shopping Centre, Hamersley ticks a lot of the demand boxes that buyers look for. Importantly, Hamersley is also set to benefit thanks to tight supply, with only 1.17% of stock currently on the market.
Not only does the suburb have low availability of sales stock, but it also benefits from a lack of proposed development, with only six future lots approved for development. This is a key factor that attracts families who are looking to benefit from the open space and parklands, and importantly, it also means the suburb won’t be facing an influx of new supply in the future.
Gentrification driving growth
Perth’s sprawling nature and vast metropolitan area are two factors that are combining to foster gentrification in suburbs close to the CBD. As trendy inner-city suburbs become highly competitive and expensive, buyers begin to look at neighbouring suburbs that were once considered less desirable. As this wealthier crowd moves in and begins to renovate and develop properties, the nature of the suburb changes and prices begin to grow.
As gentrification can take a long time to materialise, buyers who recognise the signs early can benefit by entering the market before prices begin to rise – positioning themselves to benefit from strong capital growth.
Sitting 12km south of the Perth CBD, Willagee is an affordable suburb that is showing strong signs of future growth. The suburb offers good access to beaches, the Swan River, Perth CBD, as well as some of Perth’s top universities and hospitals. The proximity of the Murdoch health and education precinct makes the suburb a popular choice for workers in those fields.
Willagee has long been the cheapest of the 17 suburbs within the City of Melville, however, wealthier private buyers have entered the suburb in recent years and have begun to undertake renovations and developments – a strong sign of gentrification.
Willagee offers buyers an opportunity to enter the market at a much lower price point than the neighbouring suburbs of Melville ($855,000) and Winthrop ($850,000). Due to strong demand factors and a lack of supply in neighbouring suburbs, the median price in Willagee is well positioned for growth in the coming years.
As a property investor, it is crucial to look past the flashy media headlines about price growth to conduct thorough research before buying property. While short-term price increases capture the attention of the media, it is the fundamental growth factors of a suburb that will determine whether or not it is investment grade. To speak to our team in more detail about where we are seeing opportunities in the current market, please request a consultation via the following form.