At the estuary of the Swan river in central Perth, bulldozers and cranes are kicking up dust as they work on Elizabeth Quay – a huge A$2.6bn ($2.4bn) development designed to signal to the world that the capital of Western Australia is an iconic and desirable city.
The first public waterfront space will be ready in spring next year, although the entire 10-hectare development could take several more years. When it is finally completed, the ambitious project will include a new promenade with shops, cafés and restaurants, high-rise office blocks and residential properties, and, most conspicuously of all, a flashy man-made inlet – a semi-island redolent of Dubai’s Palm Beach.
Gemma Alexander, associate director of research at the estate agency Savills Australia, admits that Perth’s reputation had stagnated a few years back when some people dismissed it as a “boring” city. “But once the mining boom happened the powers that be clearly thought, ‘It’s time for us to do something different to wow people’,” she says.
Endowed with vast mineral resources, Australia was the envy of the western world for avoiding recession during the global financial crisis. Western Australia’s minerals and petroleum industry has grown by an average 15 per cent annually over the past decade, built largely on exports to China and the strong growth in iron ore prices. In Perth this prompted an influx of interstate and foreign workers, and, inevitably, a boom in house prices and construction.
Before 2003, Perth’s property market lagged behind those of Sydney and Melbourne. While prices nationally began their upward march from the late-1990s, house values in Perth did not begin to rise until 2003, coinciding with the start of the commodities boom. In the three years to 2006, prices in Perth more than doubled, according to the Australian Bureau of Statistics. “Higher sustained commodity prices such as we have seen over the past decade have led to a substantial increase in mining investment in order to increase production,” says Tony Crabb, head of research at Savills Australia. “This resulted, not only in an influx of workers, but substantially higher wages. The combination meant rents rose and the capacity to borrow more increased and sent house prices soaring in Perth.”
According to research by Savills, house price growth has correlated directly with increases in employment directly related to mining. Between 2003 and 2013, direct mining employment in Perth rose from 44,491 people to 101,698, an increase of 128 per cent. During that same period, median property prices rose 113 per cent to an average A$535,000. By comparison, property prices in Sydney grew 30.2 per cent during this same period, rising to a median of $651,000.
In recent years new workers from all over the world (particularly Ireland, New Zealand and England) have flocked to Perth’s central business district, or CBD, and working-class suburbs such as Belmont, Midland and the slightly more affluent Maylands.
Perth’s east and southeast suburbs have been the best performers over the past year, recording house price growth of 9 and 7.8 per cent respectively, according to the Australian Capital City Housing Market Report. In Belmont and Midland, a typical four-bedroom, brick-and-tile house now costs about A$400,000. These suburbs benefited thanks to their proximity to Perth airport, used by many workers to fly north to the mines.
Maylands, north of the river, and where three- and four-bedroom houses cost between A$500,000 and A$600,000, is now the area to beat. Once a gritty urban sprawl, it was last year picked out by Lonely Planet as Perth’s “next big thing”, with a number of “boho” cafés and bars springing up.
The CBD caters to a different kind of market: many apartments in popular locations such as Adelaide Terrace are bought by investors and let out to wealthy bankers and businessmen. Good one-bedroom flats start at about A$400,000. A flat was recently sold off-plan in the CBD for a record A$10.25m. Savills is selling high-rise flats at Riverwood Apartments in Burswood, with one-bedroom units priced from A$390,000. The building is scheduled to be completed in 2016.
The mining and construction booms had less of an impact on the high-end sector, says Alexander, because the majority of extra people arriving in Perth were looking for cheaper accommodation. However, beach mansions in western suburbs such as Peppermint Grove and Cottesloe popular with company executives did enjoy a small boost, where average prices now stand at A$2.5m. Acton estate agency is selling a modern four-bedroom beach house with sea views and a swimming pool in Cottesloe for A$3m.
Over the past year, property prices have started to cool, not only because of the slowdown in Chinese growth, says Mitchell White, an agent at Jones Lang LaSalle, but also as the mining industry moves from the construction phase – which required more workers – to the operating phase. “Engineering firms have been hit hard as projects have been scaled back and in west Perth, where many small exploration companies reside, funding for these companies has dried up and they are downsizing or ceasing to exist altogether,” he says. Average prices across the city have fallen 0.2 per cent over the past quarter, according to RP Data-Rismark, a property analyst.
Property predictions for the next few years are hesitant, in part because things can turn round so quickly in Perth, says Alexander. “The general consensus is that the market will be flat for the next year or so. But as previous monthly drops and hikes show, all it takes is for one company to say they are going to expand somewhere, and prices can jump all over again,” she says.
● The University of Western Australia is popular with students from China, Japan and Malaysia, which has helped to attract property investors to Perth from these countries
● Summer runs from November to April when the average temperature is 31C. In winter, temperatures average between 9C and 12C
● Australia was the only developed nation to avoid a recession. The economy of Western Australia grew 3.75 per cent from 2009 to 2010
What you can get for . . .
A$400,000 A four-bedroom brick house in up-and-coming Belmont, or a one-bedroom flat in the CBD
A$850,000 A large detached home overlooking the river in Maylands
A$2m A family mansion on the beach in upmarket Peppermint Grove