Hi

I’ve been going through a similar exercise re: East Perth, and for what its worth my thoughts are as follows:

1 – As a place to live as an owner occupier its great – especially as the free CAT now extends there-ish so CBD is a jump away. As an inner city lifestyle option it works well for owner occupiers. Personally I find it a bit legoland, and prefer the grunge of Leederville or Highgate, but its a great place to live if you work in the city.

2 – But as an investment you have to focus on the fact you have a product that is being sold to a specific market, and you have to 1) understand that market and 2) see what similar products there are for that market, and this is where this starts to look not so good as an investment as:

3 – The East Perth product – boutiquey urban designed apartments for style conscious younger affluent renters – is now available in lots of inner and near city locations: Subi, Beaufort St, West Perth, West Leederville etc. Also there are a ton of apartments coming on at the Eastern end of Adelaide Terrace (not East Perth but in the orbit for renters). The scarcity factor in East Perth is declining (NB – but hang on: if you have water views, big wrap around balcony, huge rooms etc., then you have a winner. But if its just a box, no doubt a beautiful box, then you have some competition you didnt have a year ago).

4 – The East Perth market – few families, few boomers, young-ish but affluent city workers and very important: mining boom related 2month – 6month white collar blow-ins – has a little more choice than they had before. Especially the last segment. If the Perth mining boom continues then they will be there and we all get rich and fat. If it ends then East Perth and all the serviced apartments from Hay St – Mount St will be very empty. And not a lot around to to take up the slack. Especially if all the serviced apartments in West Perth come on stream.

So – my thoughts are that there is nothing wrong with East Perth, I dont think it will have any price wobbles (some of the new build off the plan is slow though). But you have to decide if you – and your potential renters – would be tempted away to new build in other areas that offer the same lifestyle as East Perth, even though they are miles away.

I think they might.So if you have a unique apartment you can compete easily, if not then you are probably going to compete on price. There are some great yields in East Perth right now – I can’t see these going anywhere but down for a while.

Regards
J

Hi

I think key now for Obs Rise is what happens when the final plans for the 3 blocks on the coast are revealed – the council finally passed an 8 storey limit last week. This means another 3 x 6 x 8 – 10 approx = 160ish high spec units dumped on the market to a finite group of buyers.

Both of the families that own the White Sands and the Luna site have suggested that they are going to modify their envelopes and not build concrete bunkers – ie: they will build to 8 storeys but not cram in a gazillion units.

So – this is bad news for Obs Rise, but probably good news for the Seashells and Sandcastles developments. This is because I think (and this is only a guess) the new builds will be specced much higher than people think and will be pitched againts obs rise, not seashells.

My bet is that in Obs rise In the next 12 – 18 months a lot of the $500k+ units will start to move discretely, and then with a little panic as the off-the-plan kicks in for the new builds. The saving grace here is that if the WA economy keeps pumping then construction costs will keep costs of the new build a LOT higher than retrofit at Obs Rise, so you’ll keep the differential.

Also – when you have the only coastal high rise development for 6000km (there’s nothing higher between Esperance and Broome in WA) then you have to watch how the banks will lend to this pocket.

In South Perth you have $2m apartments flying off the blocks. But getting cashed up boomers to buy in Scarborough? I don’t know. So if they don’t buy will the mums and dads of Perth forsake a towhouse in Sorrento for an apartment in Scarborough? And if they do will banks give them mortgages? I don’t know. But this is key.

So my guess is:

In next 6 months Obs Rise prices will wobble down around 5% – 10%

In 12 months when new build off the plan start Obs Rise prices will take a bit of a hit, no idea how much, but the strata is killing a lot of retirees in there so they will take the money and split.

In 24 months when the drama is all over people will look at it again and think – hmmmm, all 180 new units have been taken up, there is NO where else in Perth you can buy something like this – and they’ll start to go up again.

So – I’d sell now, and buy again in 12-18 months. But if you can deal emotionally with the dip and would have got dinged with the CGT anyway – then hold. Long term they are a good bet.

Regards
J.